2 Scope of the report|
The man on the street has no idea
where the public sector begins and ends, and the reason these
stories build up so much steam is that people are shocked when
they find out that these people are getting paid with taxpayers'
money. (TaxPayers' Alliance)
8. One of the most basic difficulties
when starting to look at top pay in the public sector is definitional.
As the above quotation shows, there is a lack of clarity about
what constitutes the "public sector". Indeed, the quotation
itself conflates the concept of the "public sector"
- a definition that can be based on ownership or on function -
with "people [who] are getting paid with taxpayers' money".
The evidence we received shows that these two things are not always
the same. Certain parts of the private sector rely heavily or
entirely on taxpayers' money, while not all public sector workers
are paid with taxpayers' money.
9. For example, some areas of the public
sector contract work out to privately owned businesses and pay
them with taxpayers' money. Some of these businesses survive almost
entirely on such contracts. As Tony Travers of the London School
of Economics told us:
There are now, because of successive
governments' policy, a significant number of companies that are,
for want of a better word, 'parastatal'; that is, they only exist
because the public sector buys services from them. Answering the
question of whether some of those companies are really in the
private sector, when they get 100% of their work, let us say,
from the public sector, is a very, very awkward one. Public-private
partnerships have made this a very murky piece of territory indeed
to say where the public sector ends and the private sector begins.
10. There are also parts of the public
sectorOrdnance Survey and the Met Office, for examplethat
operate on a commercial basis and raise money without any direct
recourse to taxpayers' funds. Another example is the Financial
Services Authority, which performs a public function, but is established
as a private limited company which raises all of the funding it
requires from the companies it regulates.
11. There are other parts of the public
sectorOfcom, for examplewhich depend in part on
central government funding and in part on funds raised from the
sector in which they operate. Similarly there is question of comparison.
When are we talking about pay, should a public sector, taxpayer
funded body such as Royal Mail be compared with the public sector
at large, or its private sector competitors? The FDA trade union
has expanded on this confusing situation in its written evidence
[there is] substantial room for
debate about how wide to extend an inquiry into senior public
sector pay given the ambiguous status of universities, the need
to consider whether the BBC should be considered within the framework
of the public sector or the wider private sector media industry,
and public utilities such as Network Rail and the Post Office.
There are also organisations such as those delivering the 2012
Olympics which are clearly public sector bodies but for which
the Government appears to have explicitly used only the private
sector as the comparator in setting salaries.
|Case study: universities
12. The Committee of University Chairs (CUC) was keen to stress in its evidence to us that universities were "not-for-profit private institutions" outside of the public sector which "should not therefore be compared to schools, FE colleges, or indeed any other quasipublic organisation". They also pointed out that "on average, 40% of university revenue now comes from non-state sources".  This of course presumably means that the majority of their revenue comes from state sources. As it happens, this ratio of state to non-state funding mirrors almost exactly that at Ofcom, an avowedly public-sector organisation.
CUC's position was disputed by the Director General of the Society of Local Authority Chief Executives (SOLACE), who told us that University Vice-Chancellors "really are in the public sector". The FDA trade union perhaps most accurately described universities as having an "ambiguous status".
13. There are parts of the public sector
which receive none of their income from tax revenues; equally,
there are parts of the private sector which receive all or nearly
all of their income from public sources. In addition, there are
organisations which to some eyes fall within the public sector,
but not to others. Public private partnerships and the nationalised
banks only add to this complexity. If "getting paid with
taxpayers' money" is the main concern,
why should the remuneration of senior executives at National Savings
& Investments, a public body, be considered in a different
framework from that at Royal Bank of Scotland, a publicly listed,
but now largely taxpayer-owned, company? To take a different sector,
why should remuneration at British Waterways (a public corporation)
be considered in a different framework from that at Network Rail
(a company limited by guarantee, the debts of which are underwritten
by the government, and which is funded by the Government), or
from that at Tube Lines (a private limited company carrying out
work contracted entirely from the public sector)? We are not seeking
to suggest that people in these organisations should be paid the
same, but it does seem perverse to consider the pay of some of
these people without any reference to the pay of the others, simply
because of formal status issues.
14. The first
obstacle to coherence in setting public sector pay is confusion
about what constitutes the "public
sector". It is clear that there are many people who are paid
with taxpayers' money who are not in what is traditionally considered
the public sector. Similarly, there are people who would be regarded
as being in the public sector who are not paid with taxpayers'
money. When we launched this inquiry, we made clear that we would
focus on civil service posts and on public appointments made by
Ministers and by the Crown. These posts are indisputably within
the public sector, and remain at the centre of our inquiry. However,
the fact that boundary lines between the public, private and third
sectors are blurred rather than clearly demarcated means that
it would be not only wrong but impossible to look at public sector
pay in isolation from pay elsewhere in the wider economy.
10 Q 17 [Ben Farrugia] Back
Q 17 [Tony Travers] Back
FDA written evidence Back
CUC written evidence Back
Q 192 [Millie Banerjee] Back
Q 1 [David Clark] Back
FDA written evidence Back
Q 17 [Ben Farrugia] Back