David Cameron has signalled his determination to end uniform pay for public sector workers despite fears staff in the Westcountry could see their pay cut.
The Prime Minister indicated schools, hospital, prisons and other state employers should be given local "flexibility" to award salaries they deemed appropriate, rather than abide by national pay bargaining.
Mr Cameron also appeared to back moves by 20 NHS trusts across the South West, including those running Plymouth, Exeter and Taunton hospitals, to remove themselves from being pegged to national rates – which has been dubbed a pay "cartel" by unions.
His comments to regional newspaper journalists on the first day of the Conservative party conference in Birmingham came amid a blitz of announcements, including promises of a council tax freeze and capping regulated rail fares to ease the pressure on hard-pressed family budgets.
A £170 million package of road improvements was also unveiled, including schemes across the region to mitigate traffic pinch points. Mr Cameron said the theme of conference policies is to support people "aspiring".
Chancellor George Osborne has been criticised by unions, Labour MPs and many Liberal Democrats for commissioning an independent analysis into aligning public sector pay to local circumstances, including private sector wages. State workers in low-paid areas, critics argue, would effectively see their pay cut.
While uneasy with "regional" pay, Mr Cameron pointed to Labour introducing "local" rates. He told reporters: "I think what the last Government did was look at the idea of highly local pay, particularly in the courts service, and I think that understanding that there is a case for flexibility within a region – you might find that there's a particular need for staff retention in Leeds or something like that ... I think flexibility in pay and allowing institutions to have flexibility in paying and recruiting and retaining people ... is where we should be looking."
Asked whether he was against the South West Pay Consortium looking at pay and conditions in the NHS – which critics say will put the "region" on a different scale from, say, the South East – he said: "I think it's a matter for those NHS trusts themselves. I think we should be allowing organisations greater flexibility in pay in terms of what is necessary in order to retain, recruit and motivate their staff.
"Obviously there are national pay norms that they can opt into, but I think allowing institutions local flexibilities … it's a matter for those trusts."
At their conference, Lib Dems voted unanimously against local pay deals, underlining a coalition split. Former Armed Forces Minister Nick Harvey, Lib Dem MP for North Devon, told delegates the proposals risked "shafting the poor areas". Proponents say it is unfair public sector workers in expensive areas get the same wages as those in poor parts of the country.
The Government also used Tory conference to announce it would be extending the council tax freeze for a third year in a row while rises in regulated rail fares would be capped at retail price inflation (RPI) plus 1%.
But the £270 million of funding for local authorities that agree to hold council tax will mean authorities only get the equivalent of a 1% increase from Whitehall.
Previously a cap – taken by all councils in the region bar South Hams and West Devon last year – was rewarded with a grant equal to 2.5%. Councils who do not take the cash and want to impose a hike above 2% will have to put the decision to a local referendum. Previously the referendum threshold was 3.5%.
Meanwhile, Foreign Secretary William Hague demanded a "new settlement" with Europe.
He said the debt crisis gripping the eurozone showed he was right to campaign to keep Britain out of the single currency in the late 1990s.
And he believed tackling the root causes of the crisis would offer chances for the UK to forge a new deal with the continent.
He said: "In our party we are looking towards the establishment of a new settlement in Europe and that will in time mean, just as it will for other nations of Europe in or out of the eurozone, a big choice for Britain which must be a real choice for Britain and which will require the fresh consent of the British people."
Today, Chancellor George Osborne will outline £10 billion of extra welfare cuts, but also commit £1 billion of funding for science research.