Public Sector Pay (Hansard, 26 October 1998)

§ Lord McIntosh of Haringey
My Lords, yes, we have already done so. The comprehensive spending review published in July set spending limits for departments for three years and proposed new terms of reference for the pay review bodies to ask them specifically to consider recruitment, retention and motivation, the department's output targets for the delivery of services, the department's three-year expenditure limits, and the Government's inflation target. Those considerations will also be relevant to other pay settlements in the public sector.

§ Lord McCarthy
My Lords, I thank my noble friend for that Answer. Does he agree that the key to any long-term strategy for public sector pay will consist of 1687 getting rid of the endless series of short-term fixes which have been applied to it ever since 1983? I refer, for example, to the differential availability of pay reviews, where some workers are completely excluded; the anomalies, the inconsistencies and the fragmented forms of performance-related pay; the lunacies in local bargaining; the vagaries of competitive tendering; and the wholesale importation of people from outside the organisation who know nothing about the fancy rates of pay. Until the Government grasp and deal with the previous government's short-term attempts to solve the problem they will not have a long-term strategy.

§ Lord McIntosh of Haringey
My Lords, my noble friend is a world-renowned expert on these subjects and I yield to his expertise. I had hoped that he would recognise that I described a substantial move away from the short-termism of which he complains. The whole basis of three-year planning, which will be updated from time to time, is to ensure that departments, which will have responsibility for budgets, and employees have a longer term horizon in which to look at pay awards.

§ Lord Razzall
My Lords, does the Minister agree that at an inevitable consequence of staying within the previous government's spending plans for the first two years of government serious pressures build up in the public sector? Is the Minister prepared to make a statement to reassure in particular nurses and teachers that their voice will be heard before further damage is done to their morale?

§ Lord McIntosh of Haringey
My Lords, the Government do not apologise for their prudence in sticking to existing expenditure plans for the first two years. I did not notice the noble Lord's party adequately recognising the way in which that abstinence made it possible this summer to have the sensible and widely welcomed comprehensive spending review. As regards the build-up of pressure in the public services, of course it is the case and of course it is an inevitable consequence. That is why we are looking at a three-year horizon for pay awards in the future.

§ Lord Tebbit
My Lords, so does the Minister give an undertaking today that there will be no phasing of awards in the public sector; that there will be no shilly-shallying; that the money will be paid up; and that there will be plenty of it to do all those things which he used to press the previous government to do?

§ Lord McIntosh of Haringey
My Lords, the Labour Party indeed pressed the previous government to move away from staging. I did not notice the noble Lord giving any particular support. Of course, we want to move away from the staging of pay awards. If the pay review bodies propose affordable solutions we will move away from staging as rapidly as possible.

§ Lord Dormand of Easington
My Lords, in spite of what my noble friend the Minister said in his Answer, does he agree that a long-term strategy in the public sector would be greatly influenced by a long-term 1688 strategy in the private sector? Indeed, there appears to be no strategy in the private sector because from 1994 to 1997 top-salary directors had an increase of 53 per cent. I am aware that the Government are making an effort, but does my noble friend not agree that a strategy must be expedited if proper and just action is to be taken?

§ Lord McIntosh of Haringey
My Lords, I admire my noble friend's restraint in avoiding use of the phrase "fat cats". As he well knows, under existing company legislation we have no power to intervene directly. However, he is right in saying that bad examples from the boardroom make the achievement of sensible pay settlements in the private and public sectors that much more difficult.

§ Lord Campbell of Alloway
My Lords, can the Minister tell us that in this general strategy the nurses will be treated as a special case? If something is not done the position could be very serious.

§ Lord McIntosh of Haringey
My Lords, as I said in answer to a previous question, one of the issues in the terms of reference of the pay review bodies will be the recruitment, retention and motivation of staff. That applies at least as much in the National Health Service as anywhere else. As regards whether departments will succeed in achieving their financial objectives over a three-year period for the improvement of services, which is their first responsibility, and yet have money in order to give greater awards to nurses, it is a matter for them. I hope as much as the noble Lord does that they will be successful.

§ Lord Newby
My Lords, does the Minister accept that having a coherent strategy over three years solves no problems; it depends on the strategy? Secondly, will he accept that during the past 20 years the differential in pay between the public and private sectors has moved consistently against the public sector? Will he further accept that if the public sector—the welfare state—is to meet the level of services to which he referred it will not happen in a box separate to that amount of pay but can happen only if teachers and nurses are adequately paid, not least in order to enable the Government to deal with the severe shortages which are appearing in both those areas?

§ Lord McIntosh of Haringey
My Lords, the noble Lord is right in saying that of itself a three-year settlement does not cure all the other problems. No one ever claimed that it did. As regards the disparity between public and private sector incomes, the noble Lord will be aware that the Office for National Statistics has been required to look again at the figures it produced. Our interim conclusions appear to be that the difference between the public and private sectors was not as great as originally appeared. We have set up an independent inquiry under Sir Andrew Turnbull and 1689 Professor Mervyn King to look into how it was that estimates had to be corrected. That will be conducted by an expert outsider, Mr. Martin Weale.

§ Lord McCarthy
My Lords, does the Minister agree that the questions he was asked focused once again on short-term problems? Does he agree that one thing the Government could do would be to announce the universal availability of pay review? Will they do so today?

§ Lord McIntosh of Haringey
My Lords, I am not responsible for the questions I am asked. I can only answer them as best I can. My noble friend's suggestion about wider applicability of pay reviews is very interesting and we shall take it into consideration.