Private sector pay in the UK, as elsewhere, is subject to regional variations – reflecting differences in the cost of living as well as the supply and demand for similarly skilled labour. This is not the case in the public sector.

Ten pound notesAs a result, in some of the country, public sector pay is perceived as uncompetitive, and attracting and retaining staff becomes harder. Therefore, creating efficient pay systems that neither under- nor overpay public sector staff is crucial for the provision of high-quality services.

Researchers at the University of Aberdeen’s Health Economics Research Unit (HERU) have developed a model of the causes of local variations in pay competitiveness and shown the impact of these variations on health and teaching services.

“Setting pay is always controversial, but it’s important we construct pay systems that are efficient as well as fair - that’s what our research has tried to do”
Professor Bob Elliott

Recommendations arising from this research have changed the way funding is distributed to Primary Care Trusts in England and Wales; the adjustment for excess costs in the resource allocation formula for health services in Scotland; and the structure of regional pay for doctors in the UK. The evidence also underpinned proposals by the Chancellor of the Exchequer in 2012 to introduce local pay for health service and teaching professionals in England.

Find out More

  • Professor Bob Elliott's biography and publications
  • Health Economics Research Unit
  • Elliott RF, Bell D, Scott A, Ma A, and Roberts E. 2007. The pattern and evolution of geographic wage differences in the public and private sectors in Britain. Manchester School 75(4), 386-421
  • Elliott R, Sutton M, Ma A, McConnachie A, Morris S, Rice N and Skåtun D. (2010). The role of the staff MFF in distributing NHS funding: taking account of differences in local labour market conditions. Health Economics: 19, 532-548