Corin Taylor: Public Sector Rich List 2007

Corin Taylor, Research Director of the TaxPayers' Alliance, reveals this year's public sector rich list and explains the reason for it. The full list can be downloaded here.

In November 2006 the TaxPayers’ Alliance produced the first ever list of the most highly paid people in the public sector.  Now the time has come to repeat the exercise and so in the second edition of our annual Public Sector Rich List, we reveal 300 public sector executives receiving remuneration packages of at least £150,000 a year in 126 government departments, quangos, other public bodies and public corporations.

Trawling through the annual reports and accounts of these public bodies to dig up salary, bonus, benefit and pension details of public sector executives is an interesting, if often depressing, exercise.  We do it for two main reasons.

Firstly, people and organisations that receive large amounts of taxpayers’ money should be accountable to the public they serve. Taxpayers should be able to judge for themselves whether the remuneration of senior officials represents good value for money.  In an ideal world the remuneration packages of public sector staff (at the very least senior staff) would all be made publicly available in the same place on an official website.  People are unlikely to begrudge reasonable salaries being paid, but would be right to disapprove of average pay rises of almost 13 per cent, and right to question whether the 10 most highly paid public sector executives are really worth 400 nurses, police officers or soldiers. 

In the US such transparency is fast becoming the norm.  The salaries of all state employees are available on the Iowa state legislature website for the public to view.  Missouri will follow suit in January 2008.  In Kentucky, Michigan, Oregon, South Carolina, Vermont and West Virginia, databases of state employee salaries are also publicly available, hosted on local newspaper websites.  “Google government” can and should extend beyond public contracts and individual items of expenditure.  After all, it’s our money.

Secondly, we have no problem with people in the public sector being paid well for good performance.  For example, Vanessa Lawrence, Chief Executive of Ordnance Survey, is widely considered to do a good job.  Ordnance Survey, as a Trading Fund within the public sector, relies entirely on receipts from sales and licensing and actually makes a profit for the Exchequer.  But in far too many cases senior public sector officials are being paid over the odds for dreadfully poor performance.

Take Sir John Gieve.  He was moved from the Home Office to the Bank of England following the scandal over missing foreign convicts and severe problems with the department’s accounts.  As Deputy Governor with responsibility for the financial system's stability he then presided over the first run on a bank since 1866.  The Treasury Select Committee Chairman accused him of being “asleep in the back shop while there was a mugging out front” as he admitted he had not read Northern Rock’s interim accounts before the crisis.

Or consider the 2012 Olympics.  Senior staff at the Olympic Delivery Authority and the London Organising Committee last year shared bonuses totalling almost £500,000, despite the budget for the Games rocketing to £9.35 billion in that very same year. 

Perhaps even worse is the package awarded to Sir Peter Spencer, Chief of Defence Procurement at the Ministry of Defence.  Fourteen crew died when a Royal Air Force Nimrod spyplane crashed over Afghanistan earlier this year.  Had a long overdue replacement been in place they may well have survived.  Despite this failure Sir Peter Spencer is paid more than 11 times the salary of an Army private and more than the initial award of £152,000 offered to Ben Parkinson, a paratrooper who suffered 37 injuries following a land mine explosion in Afghanistan, including the loss of both legs.

Three things would make a good start to resolving the problem of overpaid and under-scrutinised public sector executives.  Firstly, pay rises should be closer to the national average of 4 per cent, especially when compared with the 2 per cent target (which we wholeheartedly support) for the rest of the public sector.

Secondly, senior public sector officials should be properly accountable for performance.  By all means pay well for good performance, but poor performance, as in the private sector, should be met with swift dismissal.

Thirdly, there should be a major improvement in the corporate culture of the public sector because people desperately want better government.  Accountability to taxpayers as shareholders in and customers of public services should be the norm.  Such an atmosphere would encourage efficiency and a healthy open relationship between public servants and the public they serve.  Concrete measures should be adopted such as disclosing all remuneration packages on a central website and allowing taxpayers to veto pay rises (using a similar mechanism to the electoral recall process in California) if they think they are undeserved.

Comments

[1AM]

You make two points, one of which is fair I think, the other less so.

Firstly, you argue public sector pay should be better linked to performance. I think this is fair, though sometimes it is hard as civil servants are constrained by the competence (or otherwise!) of their minister. So any judgement should be over consistent performance not the last year or even couple of years.

Secondly, you argue that public sector pay rises for senior management should be 'closer to the national average of 4%'. Why on earth would this be the case? Senior management are not comparable with the national average. The alternative jobs for them would be lawyer, a banker, working in management consultancy. Their pay is linked to these relevant alternative - and the reason pay is shooting up in the public sector is that these alternative careers are becoming more and more lucrative, which has a knock on effect on the public sector senior management pay.

One final point is that the pay rises in the private sector are also seen by a large majority in the public (including, according to opinion polls, by Conservative voters,) as often not reflecting reality, particularly when people have such absurdities as 'golden handcuffs', where having screwed up and been dismissed, an incompetent CEO or senior director collects an absurd amount of money on the way out.

So one way of fixing this problem other than imposing some kind of pay freeze in these areas (which will just see idiots running major departments and will make it impossible to get good talent from the private sector in when necessary) is to fix the problem of private sector pay at the top not being linked enough to corporate productivity. Fix that and make public servants responsible for performance and you tackle the problem.

Imposing some kind of 4% pay rise as an average ignoring any kind of incentives or relevant market information is a Bennite solution to a very tricky problem.

[Tony Makara]

"right to question whether the 10 most highly paid public sector executives are really worth 400 nurses, police officers or soldiers"

Very true. There is the question of opportunity cost here, especially when it comes to the BBC and characters like Jonothan Ross receiving 18 million pound contracts. That 18 million pounds could have bought so much more in terms of value for money.

It is clear that the public sector has become bloated under the Labour government and that the taxpayer is funding a breed of super rich state functionaries. The future Conservative government must set up a troubleshooting body whose only remit is to scour the public services, to look for waste and greed, and eliminate it. Public services must be pruned as a service to the taxpayer.

[Richard]

COMMENT OVERWRITTEN BY THE EDITOR.

[Anon]

"The alternative jobs for them would be lawyer, a banker, working in management consultancy."

In recent years there has been a bidding war between local authorities, aided and abetted by the senior management who stand to gain. Unfortunately, although these highly paid directors and chief execs consider themselves comparable to lawyers, bankers etc. frankly many are not in the same league - they have limited skills and their only qualification is experience of local government.
Historically, local authority employees were paid modestly but provided with large pensions. Now many senior execs are overpaid AND receive gold-plated pensions - and if their incompetence leads to "redundancy" they get golden handshakes to avoid any risk of industrial tribunals.
It is a scandal.

[Beekeeper]

Well done on picking this up. It is good to see such a well researched piece coming out from some other source than the Left. What none of the apologists for the rates of pay in the so called Public Sector ever take into accountis the job security of that these people have compared to the Tax paying sector. When did we last see a whole swath of civil servants actually loose their jobs rather than be just shuffled around. Whatever happened the Fatty Prescott's squad of limpets in the Office of the Deputy Prime Minister. Are they out looking for work, have they had to go to a job with a contributions based pension? I doubt it.

I look forward to seeing more research of this quality.

[Mike A]

"you argue that public sector pay rises for senior management should be 'closer to the national average of 4%'. Why on earth would this be the case? Senior management are not comparable with the national average."

This is a fair point.

On the BBC, if we were running a nationalised football team, we would find we had a choice between getting the talent in for the right cost, or getting relegated.

Similarly, some of the "talent" at the BBC, given the growing importance in a digital age of the content (rather than the distribution channels), we should expect spectacular increases in top-end wages.

[Jane Marks]

An excellent piece of research, clearly presented - I hope it will be produced annually.

The comparisons you raise are valid.

[Adam in London]

Another week, another shoddy TPA Report. We see the implication that NHS Chief Executives ought to paid in line with the starting salaries of nurses (much like the Socialist Workers Party policy of everyone taking a workers wage presumably). No attempt is made to compare pay to these public servants peers - for example how do BBC and Channel 4 execs compare to ITV, Sky, and Channel 5 execs? Instead we have highly misleading national averages. And then to top it all off we have the Environment Agency castigated for failing to do enough about flooding when the Environment Agency has spent the last decade castigating the government for not spending enough money on flood defences.