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Written Statement - The independent Office for National Statistics research on regional public sector pay

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Jane Hutt, Minister for Finance and Leader of the House

Last week (22 November) the Office for National Statistics (ONS), the key independent producer of official statistics in the UK, published research into the extent of differences in pay between the public and private sectors across UK regions and countries, including Wales.

The evidence issued by the ONS is consistent with that submitted by the Welsh Government to the Pay Review Bodies.  In particular, the ONS states that there is "no definitive estimate" of the public-private sector pay gap, as there is no single appropriate method for making such an estimate.  This suggests that the case for introducing regional or 'local, market-facing' public sector pay is deeply flawed.

The other main findings from the ONS report are also similar to those from our own research; for example the evidence from both the ONS and the Welsh Government finds that the public-private sector pay gap in Wales is comparable to, and insignificantly different from, that found in most other UK regions and countries.  In other words, Wales is not an 'outlier'.

In addition it is again found that the public-private sector pay differential tends to be greater for lower paid employees.  Thus the introduction of regional pay in the public sector could hit hardest those on the lowest earnings, something the Welsh Government would find totally unacceptable.
The ONS also reports estimates for the current differentials between public and private sector pay that are much smaller than found in nearly all of the previous studies, and certainly smaller relative to those submitted in the evidence by the HM Treasury.  This reflects in part the fact that ONS has been able to make allowances for a wider range of factors affecting pay (including in some models the size of organisations).  The fact that any remaining public-private sector pay gap is reported is very likely to be related to the current stage of the economic cycle, with private sector pay having been severely depressed for several years.  It is therefore questionable whether any meaningful long-run gap would be found in a study covering a more extended period.

The ONS does not look at the differences in the public-private pay gaps between men and women.  However, our evidence suggests that part of the overall public-private sector pay gap is also due to women being paid relatively more in the public sector.  This is particularly the case for poorly paid women.

Therefore, taken in the round, this new research confirms our view that regional, or 'local-market', public sector pay policy would not only be misguided; it would also be unfair.  It would target women and the lowest paid workers, exacerbating pay gaps between men and women.  The Welsh Government makes no excuses for trying to protect the low paid and promoting equality by reducing, not increasing, the gender pay gap and I call on  the UK Government to immediately withdraw any suggestion that it endorses such a misguided and flawed policy.

The ONS report is available on its website.