Brown warned over pay divide

Gordon Brown has been given stark evidence of the growing wage divide in London and the South-East between private sector workers and teachers, nurses and social workers in the public sector, who are losing out by at least £2,400 a year.

As teachers prepare to go on strike in London tomorrow over their London allowances, the Chancellor and his Treasury team are examining ways to introduce more flexibility into the pay structure, which would help boost wages in areas of Britain which find it hardest to recruit staff.

A confidential paper prepared for ministers states: "In areas of high average wages ( London and the South-East) gross weekly pay is higher for workers in the private sector.

"The situation is the inverse in the rest of the country, where average pay in the public sector is higher. The pattern applies to both males and females."

However, ministers will be wary of giving the South-East a substantial pay rise, because unions would accuse them of subverting the national pay bargaining system for the public sector. There would also be concern that staff could end up leaving the North to work in London, attracted by the higher wages.

But ministers are in no doubt that something has to be done to boost recruitment levels, with hospitals and schools in London under greater pressure, relying increasingly on freelance agency staff to run services because of the lack of permanent workers.

The booming property market in recent years has also made it impossible for public sector staff to get a first foot onto the housing ladder.

The average male public sector worker earns £200 a month less than the private sector. For managers, the pay gap is even greater. A manager in the South-East is paid an average of £530 a week in a hospital, school or council while a business manager would receive £780.

The typical pay gap between a provincial town and an inner-London borough is between £1 and £1.50 an hour, according to the leaked documents.

The Treasury is looking at the way some supermarkets operate flexible pay schemes to keep their staff, giving them the ability to adjust to the labour market.

For example, the Reading branch of Safeway, which initially fell into the outer-London pay group for staff, was moved into the inner-London pay zone in order to combat recruitment problems.