The plush lifestyle enjoyed by senior Northern Ireland civil servants will be history if proposals on pay parity with Britain are accepted, a leading economist has warned.

Dr Graham Gudgin, an economic adviser to Secretary of State Owen Paterson, said lower house prices and recreation costs leave graduate-level public servants with much more disposable income — often spent on holidays like cruises.

Mr Paterson said the 41.5% difference between a public sector and a private sector wage in Northern Ireland — an average of £29,000 for public sector workers compared to £20,000 in the private sector — “shows the task we have in helping to revive the private sector”.

His comments came after Chancellor George Osborne announced a review into whether public sector pay rates could be set locally, which could, over time, mean a pay cut in real terms for up to 230,000 public sector employees in the province.

Cambridge School of Business fellow Mr Gudgin, a former adviser to ex-First Minister David Trimble and member of the Northern Ireland Economic Reform Group, said: “We are probably talking about graduates, people like doctors, school teachers, senior civil servants.

“Historically, they have received the same pay levels as people in England, apart from London.

“But because of lower house prices and lower costs of recreations — it is cheaper in Northern Ireland to be a member of a golf club or sailing club — these people can have a relatively high standard of living.

“They have therefore much more disposable income to spend on foreign holidays, for example, such as cruises.”

But Dr Gudgin stressed his comments were “off the cuff” rather than scientific.

“Now we have this proposal to bring in regional pay rates,” he went on. “It is not something a Labour Government would do but the Conservatives and Liberal Democrats seem determined to press ahead.”

Jim Caldwell, of the First Division Association, which represents senior civil servants, said they “may or may not” have more disposable income, but it was not the case they are paid exactly the same as their counterparts elsewhere.

He said the FDA met Finance Minister Sammy Wilson several weeks ago but no progress has been made. Mr Wilson’s department said it could not comment. Brian Campfield, general secretary of the biggest Civil Service union, the Northern Ireland Public Service Alliance (Nipsa), said the “spectre” of regional pay showed the Westminster Government “is not listening”.

He said apart from a two-year pay freeze, public sector pay is to be limited to a 1% limit on pay increases for a further two years and Mr Osborne also raised the spectre of regional pay being introduced with an assessment of regional pay levels between the public sector and the private sector.

SDLP leader Alasdair McDonnell, meanwhile, asked Mr Paterson to accept proposed changes to public sector pension contributions will have an even more severe impact in Northern Ireland.

Mr Paterson replied: “People are living 10 years longer, and that has put huge pressure on the cost of pensions, which is up to £32bn across the UK — an increase of a third over 10 years.

“Lord Hutton, who used to sit on the Government benches here, came up with a sensible report (on pension reform), and I appeal to all those in Northern Ireland in trade unions to continue discussions with the Government because our offer is extremely fair.”

Background

Chancellor George Osborne has announced that public sector workers will face a cap on pay rises and may also see moves towards localised pay deals. One option being examined is the introduction of regional pay zones — with five pay bands at a national level — which could mean geographical pay variations across the United Kingdom.