Treasury plans to introduce “local pay” in the West Midlands could cost the region £1.2 billion a year, trade unions have warned.
And the proposals, which are expected to mean cutting or freezing pay for some public sectors if they go ahead, could actually lead to the loss of more than 11,000 jobs across the West Midlands.
The figures were published in research commissioned by the TUC into the Government’s plans to impose local pay deals on public sector workers.
Ministers argue that reforms may be needed because pay in the public sector is currently higher than pay in the private sector for people with similar qualifications and responsibilities.
It means that private sector employers struggle to recruit staff, according to George Osborne, the Chancellor.
And ministers highlight studies by think tank the Institute for Fiscal Studies, which found that men working in the public sector in the West Midlands are paid on average seven per cent more than men in similar roles in the private sector – while women receive a 15 per cent pay boost.
The difficulty, according to the Treasury, is that public sector wages are usually set nationally and are based on conditions in the labour market in the wealthier south east region rather than the North or Midlands, where salaries in the private sector are lower.
Although Mr Osborne has not specified exactly how he plans to narrow the gap, in practice the only way would be to cut public sector pay or to freeze it – which would mean a cut in real terms – until the private sector caught up.
The Treasury has asked a series of independent pay review bodies to consider whether change is needed and will make a decision based on their findings.
But a study by left-wing think tank the New Economics Foundation, commissioned by the TUC, disputed the claim that public sector workers were paid more.
In many cases it was impossible to make a realistic comparison, because public sector workers such as midwives or police officers simply had no private sector equivalent, it said.