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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