NORTH EAST business leaders have warned the Conservatives that their Chancellor’s regional pay plans will devastate the local economy if they get the go ahead.
As the Tories gather in Birmingham, small and medium-sized firms from across the North East have signed an open letter uniting against George Osborne’s plans to limit public sector wages outside London and the South East.
Employers such as Paul Callaghan, head of Sunderland-based software firm the Leighton group, said the regional pay plans risked watering down the spending power of thousands of customers and hindering the economic recovery.
Mr Osborne announced last year he was considering moves which would see teachers, nurses and council workers paid less in the North than those doing the same job in the South, defending his moves by claiming the higher public sector wage made it difficult for private sector firms to recruit talented staff.
Those plans have since been widely criticised, with Hexham Tory MP Guy Opperman becoming the first in his party to speak out against them, alongside attacks by the Liberal Democrat Business Secretary Vince Cable.
In their letter 10 regional firms, from engineers to pub bosses and skills training groups, argue that the pay proposals would make even growth harder to achieve. “The spending power of our customers has an impact on our companies’ success and how many people we can employ,” the business leaders say.
“It is in this light that we urge the Government to reconsider its proposal to introduce regional or localised pay for the public sector.
“This policy risks weakening consumer confidence and demand even further, undermining regional growth and making it harder for the UK economy to get back on its feet.”
They add: “There are many things ministers could do to support economic growth, such as bringing forward much-needed investment in infrastructure.
“Now is a time for the country to unite and focus on growth, not risk a divisive and harmful policy such as this.”
Among the others who have put their names to are John Finley, managing director of Durham steel firm Finley Structures, and Rob Yorke managing director of Teescraft Engineering.
In July this year, unions warned that research had shown some £761m could be taken out of the regional economy if the Chancellor went ahead with his regional pay plans.
The new letter comes as Prime Minister David Cameron was challenged on the regional pay issue.
Asked on the BBC to explain how it would impact on hospitals in the South West, the Prime Minister said the Government was looking at more localised models, a defence used by the Treasury when dismissing claims of regional pay differences.
Mr Cameron said: “I don’t see this an issue of regional pay, it’s local pay.
“There may be parts of a region where it is difficult to recruit locally and we need to look at local pay issues there.”
And he insisted: “This whole debate has not been conducted properly.
“It is not about regions, it is about very local issues.”