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Local pay: an urban myth?

London staff would benefit if national pay scales were scrapped - but it may never happen, say Warwick Mansell and Ian Nash.

HAT is the Government's real motive for trying to dismantle the 15-year-old national pay structure?

Radical proposals put forward by ministers to the School Teachers' Review Body earlier this term throw up this question, but leave it unanswered. So sceptics have suggested the real motive for change is simple: to reduce the pay bill.

Of course the Government would deny this. It puts a seemingly compelling case for change. Because of huge differences in the cost of living across the country "the standard of living that can be enjoyed on an average teaching salary varies substantially".

This is uncontestable. Even with the inner London allowance of pound;3,105 and the outer one of pound;2, 043 teachers in the capital know their wages will not go anywhere near as far as their colleagues' in Wales, or the north or south-west of England.

A teacher's salary of pound;26,000 may support a family of five in Cornwall but it will barely keep a single Londoner solvent.

Those calling for more flexibility in pay say that the clear disincentives to work in London and the South-east are damaging schools. Vacancy rates are higher in high-cost areas as teachers move out, an analysis by Andrew Oswald, professor of economics at Warwick University, reveals.

Moreover, private firms can offer up to 50 per cent more pay to employees in London, making leaving teaching an attractive option.

Professor Oswald says inspection reports show that the proportion of poor lessons is highest in inner London and lowest in regions where it is cheap to live.

All this, he argues makes the current pay structure indefensible. Why not have regional pay scales, with teachers across an area of the country paid broadly the same rates?

This, however, is not what the Government wants. Rather than setting regional rates, ministers have opened up the possibility of every school paying a different rate. They want to let heads set pay rates. If they were struggling to attract staff, they could then offer significant recruitment incentives.

The Government says regional pay scales would be "insufficiently finely-grained" - schools a few miles apart could have very different recruitment problems and need to pay different rates. But Professor Oswald finds that argument hard to swallow.

He says: "In reality, pay varies by region. It would be quite enough to go down to the county level in giving local bodies control over salaries."

The policy, then, stands open to two accusations. Firstly, critics say, it shows a dogmatic adherence to what has become a core principle: giving heads more power to control their school, including pay and conditions of staff.

More damagingly the unions point out, it is a way of trying to scrap national pay bargaining to reduce the wage bill.

But it is not immediately clear that local pay would cut wages. Even the unions' own submission to the review body this year raised the spectre of schools entering bidding wars for teachers, thus actually raising pay.

But sceptics point to the experience of further education colleges. Since incorporation in 1993, both sixth-form colleges and the FE sector have had the ability to set pay and conditions.

The sixth-form colleges did not take up the opportunity, preferring to stick with the stability of a national structure. But the FE colleges did, and, in relation to teachers (see box, below), pay has plummeted since.

College employers banded together in what is now the Association of Colleges to negotiate pay with unions. They tied "improved" pay and conditions to "more flexible" contracts.

But in practice, pay plunged relative to schools as the Government squeezed funding. The FE funding council was given an annual sum to cover all costs from pay to spending on new buildings. Distanced from the pay issue, successive ministers absolved themselves from blame when negotiations failed.

When money finally arrived under New Labour, the cash did not always make it to colleges. This year, the Government increased the funding of the Learning and Skills Council - the new body overseeing FE - by 6 per cent, but only 2.5 per cent of this was passed to colleges. So, while schoolteachers got a 3.5 per cent rise, lecturers were only offered 2.3, resulting in the biggest-ever national FE strike.

This points to other problems with the Government's position. It is meaningless to give heads the power to pay staff more, if this is not backed up by extra funding.

In its review of local authority funding, which reports this month, the Government is set to recommend that councils in high-cost areas should get extra money to pay staff more. But individual schools will not be singled out for extra funding.

Ministers will argue that, increases in schools' core budgets set to rise by 3.5 per cent a year to 2006, give heads plenty of cash to fund higher salaries.

But the unions argue that in a world of where every school can pay differently, teachers' wages will be subject to the "vagaries of school budgets". And so this has proved in FE, where a significant minority of employers do not even pay the nationally-negotiated rate.

Popular schools with many pupils would have an advantage over those struggling to maintain rolls, they argue, polarising standards still further as good teachers are poached by the most successful schools.

Unions also argue that the existing powers schools have to vary pay are not being taken up. Minister David Miliband disclosed earlier this year that only 3 per cent of eligible schools have used the ability they have to offer pound;5,000 a year extra to teachers as retention bonuses.

Some question whether the Department for Education and Skills' heart is really in the proposals. The move to local pay appears to be driven by the Treasury. In the summer's spending review, Gordon Brown called for "increased flexibility at local level" over pay across the public sector, to address recruitment problems.

In addition, the DfES's own evidence to the STRB puts forward a list of reservations. It argues that "national pay scales have value in promoting the profession to potential entrants".

The Government would need to monitor the system to ensure that bidding wars did not drive up pay, the DfES says.

So when will local pay happen? Not in the near future, it seems. The idea is a longer-term item for consideration by the review body. Although it will give its view on the issue this year, it is unlikely to be implemented straight away.

And, given schools' reluctance to take advantage of pay "flexibility", the appalling state of college pay, and doubts at the DfES, there must be a chance that local pay will never happen.

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