£210m saved in regional pay rates shake-up won’t be swiped from Stormont by the Treasury
Northern Ireland will be able to keep any cash saved by introducing regional pay rates for civil servants employed by Stormont departments, the Treasury has said.
The statement confirms what Owen Paterson said in Thursday’s Belfast Telegraph — but contradicts Finance Minster Sammy Wilson’s claims that all the money saved would be sucked out of Northern Ireland’s economy.
If the proposals — which aim to reflect the different costs of living across the UK — go ahead, it will mean pay freezes for staff in areas where there is a large pay differential with the private sector.
With civil servants here paid 12.3% more on average than those in the private sector, Northern Ireland’s pay “premium” is well above the UK average of 8.3%, Treasury documents revealed on Thursday.
Mr Paterson stressed that the changes will not be imposed on Northern Ireland’s departments. However, the Executive will have no influence on changes made to the wages of local staff in the Ministry of Defence, the Border Force and HMRC, which are reserved to Westminster.
A Treasury spokeswoman said devolved departments, like health and education, would have the final say on whether to set up local or regional rates.
Funding will still be calculated in the same way, based on budgets elsewhere in the UK, so there is unlikely to be an immediate reduction in the block grant, she said, adding that any savings can be spent on services in Northern Ireland.
The Treasury’s response to a consultation on the changes, published on Thursday, said: “The public sector pays more than is necessary to recruit, retain and motivate staff in some areas.”
It argued that higher public sector salaries are “crowding out” private firms, which struggle to recruit.
This week the Chancellor accelerated the switch, giving departments where national pay freezes have ended the go-ahead to backdate any changes to this year. They include staff working in the Border Force as well as in devolved areas like job centres, vehicle licensing, and the departments of business, local government, culture, and environment.
On Thursday Mr Wilson was not available to reply to Mr Paterson’s interview.
However, Mr Wilson was interviewed on the BBC’s Hearts And Minds show about the Budget.
He told Noel Thompson that in the past “the Executive were offered a poisoned chalice, namely, you negotiate the wages of your own public sector employees down and you can keep the money”.
He predicted that if he had accepted that offer, the block grant would eventually have been reduced later.
In a seeming contradiction, Mr Wilson added that he had reduced some wages by withholding bonuses without suffering a cut in the grant.
Westminster proposes introducing regional pay for civil servants to bring them more into line with local private sector wages. That could mean pay being frozen for public sector workers. Finance Minister Sammy Wilson says that this is a way to take money — up to £210m —away from Northern Ireland. However, Owen Paterson has said that Stormont could keep most of the savings.