Top Pay in the Public Sector - Public Administration Committee Contents

1  Introduction

1. Public sector organisations need to be able to justify how they spend public money—particularly where relatively large sums are paid to individuals as salaries. Public sector pay and reward, particularly at the top, have been the focus of acute media and public concern for some time now. Headlines in national newspapers focusing on "bloated"[1] "fat cats"[2] running public services and the need to "crack down"[3] on their pay have become commonplace. It is no coincidence that this concern has come to the fore in a time of recession.

2. We were keen to establish the extent to which this public concern is justified, overall and in individual cases. It was striking during our inquiry to see the difference between the views of campaigners and journalists on the one hand, who tended to regard senior figures in the public sector as overpaid, and pay experts, who often took an opposite view. We have looked not just at absolute levels of reward, but also at how these levels are set, and what account needs to be taken of pay levels outside the public sector.

3. It is clear that there is no consensus on the issue of top pay and reward in the public sector. Commentators and experts have markedly different views on the issue: the commentators considered the experts to be part of the problem, while the experts considered the commentators to be ill-informed.

Scope of the Inquiry

4. Our experience and interest in this area stem from our work in examining the civil service, public appointments and public bodies. As we made clear when we launched this inquiry, our focus is on civil service posts and on public appointments made by Ministers and by the Crown, including to non-departmental public bodies (or 'quangos' as they are commonly known). Our remit does not cover those public sector appointments which are the responsibility of the devolved administrations in Scotland, Wales and Northern Ireland, although the Scottish Government's approach to executive pay is an interesting point of comparison, and we are aware of recent work by the Finance Committee of the Scottish Parliament in this area.[4]

5. We have also taken account of practice across the public and quasi-public sector more widely, including local government, the National Health Service, and public corporations. However, as we explore further below,[5] the boundaries of the public sector are not clear.

Conduct of the Inquiry

6. In the course of this inquiry, we took evidence from three panels of witnesses: one made up of commentators,[6] one of pay and recruitment experts,[7] and one of public appointees with responsibility for setting pay in specific public-sector organisations.[8] We have also taken evidence on this and other subjects from representatives of the main civil service trade unions.[9] The twenty written submissions included the views of pressure groups, consultants with experience of public sector pay, and public sector employers and trade unions. We asked for and received—after a considerable delay—some factual information from the Government. We have also benefited immensely from the expert advice of Steve Tatton, the editor of Executive Compensation Review at Income Data Service (IDS), and are grateful for assistance from the Committee Office Scrutiny Unit. We would like to thank them and all those who submitted evidence for their efforts.

Structure of this Report

7. The first chapter of this report addresses the question of what constitutes the public sector. The following chapter looks at some ways of benchmarking executive pay in the public sector. The third chapter addresses the relationship between reward and performance in the public, whilst the fourth and fifth chapters examine the processes for setting executive pay in the public sector and their transparency.

1   Eg The Times, 10 July 2009; The Sunday Times, 28 June 2009 Back

2   Eg The Times, 10 July 2009; Mirror, 8 July 2009; Daily Star, 6 July 2009; The Sun, 22 May 2009; The Daily Express, 27 April 2009; and many more Back

3   Eg The Daily Express, 27 April 2009 Back

4   Fourth Report, 2009 (Session 3) Back

5   Chapter 1 Back

6   David Clark, Ben Farrugia, Tony Travers and Polly Toynbee Back

7   Peter Boreham, Hamish Davidson, David Evans and Christopher Johnson  Back

8   Millie Banerjee (Ofcom), Tim Melville-Ross (Higher Education Funding Council for England) and Dr Anne Wright (National Lottery Commission); Bill Cockburn and Mike Langley (Senior Salaries Review Body) Back

9   Public Administration Select Committee, 2009, Civil and Civil and Public Service Issues, Evidence taken before the Public Administration Select Committee, HC 352 Back

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Prepared 21 December 2009