Fat Cats, Fatter Cheques

How much should senior public sector workers earn?
The National Assembly's Public Accounts Committee have
investigated the processes at work behind the decisions.
(Pic : Wales Online)

How much are senior public sector staff worth? If you believe populist stories in the press, then you'll probably think "not very much at all".

Last week, a report was launched (pdf) by the National Assembly's Public Accounts Committee into the thorny, often heated and sometimes controversial issue of pay and benefits for senior management and officials – also touched on by Glyn at National Left.

The Committee made 23 recommendations, summarised as :

• The Welsh Government should use local government reorganisation to set out a consistent approach to senior management pay, including a clearer definition of what a senior position is and the expected remuneration.
• Returning Officer fees should be published alongside remuneration details.
• Guidance should be issued to remuneration committees so that their information is easy to find, is open and transparent.
• Training and guidance on remuneration arrangements should be consistent across the public sector as well as bodies that receive substantial public funds (i.e housing associations).
• The Welsh Government should remind local authorities of the importance of monitoring officers.
• Public organisations should set out their approaches to performance related pay and internal talent management.
• An annual report should be published on remuneration by every public organisation, including details about salaries, pensions, benefits in kind, severance packages and other assorted fees.
• All public organisations should be required to publish a pay policy statement, and publication of pay policy statements should be a condition for non-public sector bodies to receive government funding.

Senior Public Sector Pay in Wales

Andrew Davies, Former Labour AM and Chief Executive of under-fire Abertawe Bro
Morgannwg LHB. Salary : £200,000 The First Minister. Salary : £132,000.
(Pic : NHS Wales)

At the end of March 2014, 29.6% of people in Wales were employed by the public sector compared to 23.2% across the UK as a whole, therefore the issue of senior management pay in the public sector has an added importance here.

The pay figures for top-earners are pretty inconsistent. For local authority chief executives, salaries ranged from £109,000 to £195,000; while for local health boards it ranged from £120,000 to £200,000. The Public Services Ombudsman was paid £135,000 in 2012-13, while the Permanent Secretary to the Welsh Government (the most senior civil servant in Wales) was paid £160,000.

In 2013, the ONS's figures on public sector pay showed that once personal and organisation characteristics are taken into account, mean hourly pay was 2.3% higher in the Welsh public sector compared to the private sector. Across the UK, the private sector only paid more in Scotland, London, East and SE England.

These figures are, however, misleading. The public sector only pays more than the private sector amongst the bottom 50% of earners. Public sector pay is actually considerably less than the private sector amongst the top 10%.

Public bodies are required to report senior staff pay, but it varies depending on which organisation. Some have to report it as set out by statute, others have to adhere to various accounting codes, or only have to report the pay for people in certain positions.

This inconsistency across the public sector results in situations where someone could be earning more than £100,000, but as they're not defined as "senior staff", the duty to record this is rendered moot. Witnesses also said there's a lack of clear policy on senior pay, with remuneration bodies focusing on what the salary should be, not what services are worth.

Consistency & Transparency

There were concerns over the size of severance agreements and the
fact some employees who take them end up being re-employed.
(Pic : Wales Online)

The Committee say they were concerned about further inconsistencies. Pay for local authority chief executives is banded based on the population of their respective authority, for example, even though they mainly do the same job. Similarly, an example's given where Bridgend College briefly had two principles during a handover period and this pushed reported executive pay upwards.

There was little support from witnesses for banding pay across the public sector as a whole due to the variety of jobs and the different recruitment markets – local authorities largely recruit from within the UK, while universities recruit internationally, for example.

Some witnesses did believe that pay could be banded within sectors – as already happens in some circumstances, like the NHS – though there were concerns that some people could be underpaid based on what their role is (i.e. chief executive of a difficult to run urban local authority) and others overpaid (i.e. chief executive of a stable, wealthy local authority with a small population).

In terms of transparency, the Committee believed it would be useful to bring together all of the information and publish it in a single place – as the Auditor General did back in February (pdf).

At the moment, again there's an inconsistency of reporting as some FE colleges and universities rarely published their remuneration reports, and in some cases those reports were inaccurate. There's also an issue with the terminology itself – most people don't use the term "remuneration", but "pay" – making it more difficult to find this information if it's buried in reports.

One particular area the Committee were concerned over lack of transparency was "benefits in kind" (i.e car allowances, grace and favour residences), where there's a need to disclose such details in some parts of the public sector, but not in others.

With regard returning officer fees, there's another glaring lack of transparency and inconsistency. Returning officer fees varied from just over £2,900 in Anglesey to £24,200 in Cardiff. There's a lack of guidance on whether returning officer fees should be disclosed as senior pay, and the Committee believe that merging the role of returning officer and chief executive – adjusting remuneration information accordingly, as done in Swansea - is "best practice".

More topical was the focus on exit packages, with concerns from witnesses about the levels of these packages and the fact some staff were taking these packages then being re-employed. The Committee say, "the practice of paying off members of staff should be highly transparent".

Advice & Guidance

There were concerns that recruitment consultancies like Hay Group
were too dominant in terms of hiring and advising on salaries.
(Pic : Public Service People Managers Association)

The ONS describe the process of comparing public and private sector pay as "not straightforward" as there are a number of factors which affect how much someone earns regardless of sector – like age, qualifications, skill levels and whether they're in full or part time work.

The Taxpayers Alliance suggested in their evidence that it's "unhelpful" to compare public and private sector top earners as those in the private sector have to deal with profit and loss as well as losing business to competitors. It was also questioned by the Committee whether it's useful to compare salaries between Wales and England due to different policies.

Remuneration committees usually decide how much senior managers get paid, but there were concerns there wasn't enough input from the private sector and wider civil society, as these committees are usually made up of public sector personnel. It's also believed such committees needed better training, so they can set salaries based on "wanting best value", not the market average.

In terms of appointments, the use and role of recruitment consultancies was questioned – especially the dominance of Hay Group – which results in an over-reliance on external advice and from a single source.

Alternatives

Performance-related pay – Some sectors and public bodies use this, like Finance Wales and the higher education sector. However, there were worries over whether such schemes really motivate workers, and how difficult it was to link success to certain individuals. Although there were question marks over the widespread use of performance-related pay, there was some support for using it for the most senior positions, but done in a way which ensures senior staff aren't "rewarded for failure".

Internal talent development – This is also known as "promoting from within". Training people within the organisation instead of being reliant on external appointments will ensure a strong career progression and ensure senior managers know how Wales works.

Mo' Money, Mo' Problems

Has the time come to start training junior civil servants to climb the
ladder instead of recruiting externally for senior positions?
(Pic : azfoo.net)

As National Left said last week, the issue of remuneration for senior officials has been pushed to the fore not by this inquiry, but by the goings on in Caerphilly and the Wild West.

The key word flagged up throughout the report is "inconsistency".

I certainly believe senior executive pay should be banded within the public sector, based on a principle that people with similar roles and responsibilities should be paid the same. Running a small local authority like Blaenau Gwent, for example, is arguably no more or less difficult than running Cardiff. Even if there are unique challenges in both, they usually balance themselves out.

In terms of alternatives, I'd be in favour of talent development within organisations, and I mentioned creating some sort of "Civil Service Academy" back in 2012.

We have something you could call a "Taff Ceiling", where you don't often see Welsh people reaching senior positions across the Welsh public sector as a whole. Experience is often valued more than talent and potential in Wales; so organisations like local authorities prefer to bring in someone with a proven track record elsewhere, instead of identifying talent and promoting from within – presumably because it's cheaper than consistently funding training for ladder-climbers, or they're just wowed by CVs with swanky addresses on them.

At points this inquiry report reads as though it's been hijacked by the Taxpayers Alliance. Nobody likes to see people at the top of the public sector feeding at the trough at everyone's expense, but at the same time these are often highly-demanding, highly-stressful roles where you have to pay the best to get the best.

Unfortunately (for senior managers), Carmarthenshire and Pembrokeshire have done a lot of damage to the latter assumption.