There were two articles in The Sun the other day on public sector pay. One was headed ‘£240k boss search axed’ and was a reference to the fact that the Government has vetoed the proposed salary package for a new Chief Executive of the Audit Commission.
The other much more substantial article was over the LGA’s search for a Director of Communications on £124,000 a year.
(As someone who receives a shilling or two from both organisations I must declare an interest.)
Meanwhile Nick Clegg has been applauded by the Daily Mail for his comments on public sector pensions, calling them ‘gold-plated’ and ‘unfair and unaffordable’.
The standard comparison when it comes to public sector pay is with the salary of the Prime Minister. In the case of the Audit Commission this was debunked on the BBC by leading private sector accountancy commentator Emile Woolf.
Woolf: ‘I would have thought that the £240,000 package was on the low side for the responsibility he has.’
Eddie Mair from the BBC – ‘But if the most important person in the country (Prime Minister) can scrape by on £160,000, why not the head of the Audit Commission?’
Emile Woolf – ‘The PM enters into public life knowing he is not doing it for the money.’
In fact Prime Ministers often end up as rich as Croesus after leaving office and it is usual for those making comparisons to ignore (as Mair did on the BBC) Camernon’s salary as an MP and the benefits in kind provided in the form of two sets of free accommodation.
The comparison made this week by The Sun is altogether more challenging. That paper claimed (but I cannot vouch for the figures) that the commander of British forces in Afghanistan earns just £109,000.
So what can the justification be for the six figure salary for a Director of Communications? The only answer must be: the market. But labour markets are notoriously uncompetitive, not least because of employment laws.
Perhaps the rule in both public and private sectors needs to be that if you have a high salary you are expected to perform. If there is no performance then you go.
And public sector pensions? The typical council employee pension is less than £5,000 a year.
Bluntly politicians and the press are hitting the wrong targets. We have much more reason to be angry about the salary paid to the CEO of BP and even more so about the bonuses paid now and in the past to the bankers who set about destroying our economy.
It is because of these people, so far relatively unscathed, that we have to worry about the public sector pay bill.
The little people (using BP’s terminology) continue to give sterling public service for which they are often paid a pittance.
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7 Comments
The public sector in the main are well paid, have strong employment protection, and appear once against immune from the general economy, those I meet at work have seen a long and prolonged attack on their earnings and conditions over the last few years.
The chancellor had the opportunity to actually cut public sector pay and he should have done so, its pitiful to hear representatives of the public sector, claim they are picked on, when those of us in the commercial world have had pay cuts lost jobs and of course in most cases no employment protection, what so ever after 13 years of Labour.
Many hundreds of thousands work for agencies and would love to have the stability the public sector have.
I couldn’t disagree more strongly with this and I think the piece highlights very much the lack of comprehension coming from the public sector. There is no way a director of communications for the LGA is worth £124,000 or even half that. The market doesn’t require it. We’ve spent a massive amount of money on the public sector and instead of services what we’ve got is very high salaries for people in nice comfy offices doing nice comfy jobs. It’s got to stop. It’s not about protecting the poor. If you want to protect the poor, stop them being taxed to pay for a state sector much of which has a totally warped view of its value to the rest of society.
The whole debate about public sector salaries is skewed by the reasonably high salaries in a relatively small number of senior people. In my experience the vast majority of public sector salaries are on the low side, compared with the level of responsibility. The balance is a reasonably good salary scheme, and quite a lot of job security. The last point is something that we in the private sector don’t have. Even if a role is made redundant the individual just gets re-deployed elsewhere in the public sector.
With respect to the senior role in Afgh, that’s probably a fair assessment of although it’s worth highlighting that Armed Forces salaries are recommended by the Armed Forces Pay Review Body. AFPRB recommendations may or may not be implemented by the government, and frequently under the previous regime they were staged or reduced. Military Salaries also include something called the ”X-Factor”, to reflect the fact that one is frequently expected to deploy overseas. I would say that military salaries are about 1/3 greater than equivalent Civil Service salaries.
What I’ve found interesting in the last few weeks has been the representation of interim fees as salary. Jobs that have a fixed contract, and the individual filling the role will see about 50% of the headline figure. The media play on these are misinformation and a very poor standard of profession of conduct.
And public sector pensions? The typical council employee pension is less than £5,000 a year.
Yes, but the “typical council employee” is not a typical public sector worker! Everyone knows that binmen have low pay and so low pensions. What about the typical NHS pension? (Which incidentally is mandatory to take on retirement, even if you have another job after the retirement age. This has happened to my Mum, who was told that she wasn’t allowed to defer her pension even though she was only 60 and took up a new job on leaving the NHS!)
The rate at which the taxpayer will soon be subsidising public sector pensions is not acceptable – they should be funded from contributions like occupational pensions (though not necessarily switched from defined benefit to defined contribution/money purchase).
@Alastair: in fact, when doctors and senior teachers are factored in (let alone GPs!) there are a lot of highly-paid people in the public sector, not just a few. To some extent this is a natural result of the public sector having a higher proportion of highly-educated employees than the private sector.
If this and other factors such as age and gender are taken into account then the salary premium of the public over the private sector (that the Daily Mail has been screaming about) shrinks to 2% for men and 7% for women, see slide 13 of this IFS presentation (pdf). (In fact the presentation as a whole is a good read and has some useful diagrams.) Slides 19 and 20 also show that public sector pensions are relatively more generous, even when compared to DB pensions in the private sector (which are more secure for employees than DC funds, since the employees take the risk of financial fluctuations).
The main issue with public sector pensions (as indeed all state pensions), is that they are paid directly from government tax revenues. Consequently, as pensioners live longer and increase in proportion to those working to pay government tax revenues, then if things don’t change, tax revenues paid by the working will have to go up. I think currently the ratio is something like 4 workers per pensioner, but its going to rise to something like 2 workers per pensioner.
You can see where this is going.
In the longer term, final salary pension schemes are unsustainable, and there has to be a change towards (i) longer working lifepsnas, (ii) asset-backed schemes and (iii) average rather than final salary values.
This latter point actually can be beneficial, as it does away with the relentless drive towards upping salary towards retirement, whereupon the pensioner falls off a cliff. With average salary, people can taper down towards retirement, seeking less reponsibility, but working longer, or going part time. This eases the transition towards retirement and allows people to perhaps offer their time and experience voluntarily on a part-time basis to all sorts of charitable or other orgnisations, who would benefit greatly from this.
Why should anyone but shareholders of BP be concerned about how much they pay the CEO? How would cutting banker bonuses help reduce the public sector bill? There would just be less income tax paid meaning the public sector would have to shrink further.
At the heart of this is the gulf between the rich and the not so rich leading to a stressed society. Every argument I hear from the well-off is no different from the arguments provided by the slave traders as they defended their industry and source of income.