Leading Article: Wage flexibility can pay off

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THE Government seems to have weakened in its determination to impose a pay freeze on public sector workers. Increases will be permitted, but only if funded by 'efficiency savings'. Welcome though any flexibility is, it amounts to little. Most staff can expect reductions in the real value of their pay. An unwillingness to set aside extra funds even to keep wages level with inflation will produce great bitterness. It could mean that salaries will be maintained only at the price of job cuts. Most seriously, ministers may, through their intransigence, be forced to partially disregard the advice of pay review bodies covering health professionals, teachers and other civil servants.

Ignoring these cumbersome wage-setting bureaucracies may seem like an ideal way to freeze the public sector pay bill, clamp down on government spending and so prepare the way for pre-election tax cuts in 1995-96. Kenneth Clarke would win plaudits, especially from the Tory right, for bashing public sector workers and discrediting a centralised pay system that is anathema to free marketeers, particularly at a time of low inflation. With no shortage of potential staff, ministers could point to pay discipline achieved at little cost to the public. They might also reckon that trade unions and professional bodies, tamed by recession and restrictive legislation, will do no more than shout in protest.

Yet for all the short-term advantages to the Government, ministers should think carefully before following such a course. Pay review bodies have largely kept the peace over recent years and have successfully regulated salaries with some semblance of fairness. They have allowed staff, notably nurses, to forgo strikes in the belief that their employers will not take advantage of their good faith.

There is an argument for gradually abandoning centralised wage setting where public sector workers could easily seek alternative employment in equivalent private sector jobs. But in many areas of public service the Government is virtually a monopoly employer and staff have little opportunity to resist abuse.

A pay freeze - whatever small amounts become available from efficiency savings - would be particularly cruel for low-paid workers upon whom April's tax increases will bear most heavily.

None of this may worry Mr Clarke, who has shown little sympathy for the pleading of the public sector. But the Government should beware of hubris. True, it has in recent years been able to have its way over public sector pay. But the same was the case in the early days of the Callaghan government. Denis Healey's memoirs recall with regret how government confidence later led to an excessive tightening of wage controls and so to Labour's fatal 'winter of discontent' in 1978-79.

Ministers would be wise to avoid similar arrogance. A certain flexibility in providing more funds, in addition to any released by 'efficiency savings', would be a small price for keeping faith with Britain's public servants.