Annex A
This Annex sets out various methods
of setting public sector pay.
CENTRAL GOVERNMENT POLICY AND PRACTICE
The Ministerial Sub-Committee that
considers public sector pay in the round is the Sub-Committee
on Public Sector Pay (PSX(P)) of the Ministerial Committee on
Public Services and Public Expenditure. Its terms of reference
are "To consider public sector pay and pensions policy and
proposals for pay and workforce reform; and report as necessary
to the Committee on Public Services and Public Expenditure".
It is chaired alternately by the Chancellor of the Exchequer and
the Chief Secretary to the Treasury. Working to this Ministerial
Sub-Committee is a Committee of civil servants from across Whitehall,
the Public Sector Pay Committee (PSPC), also known as the "Pay
Gateway", established in 2005 to provide advice to the Chief
Secretary on all significant public sector pay decisions.
The PSPC "sets common objectives
for pay across government and ensures that pay awards and pay
systems are evidence-based, consistent, and financially sustainable
over the long run".[232]
All independent review body recommendations are considered by
this Committee. In addition, according to Civil Service Pay Guidance
for 2009-10, "High level information on payments to Chief
Executives of NDPBs will be scrutinised by the Public Sector Pay
Committee (PSPC) on a post-hoc basis to ensure that they are properly
justified".[233]
What is unclear is the extent to which the PSPC, despite its nominal
role across the public sector, can influence pay decisions in
local government, public corporations, and Foundation Trusts,
where Ministers have no formal role in the pay-setting process.
SENIOR SALARIES REVIEW BODY: SENIOR
CIVIL SERVANTS AMONG OTHERS
The Senior Salaries Review Body (SSRB)
is one of a number of pay review bodies set up on a (generally)
non-statutory basis to provide independent advice to Ministers
and others on pay in different parts of the public sector, and
particularly to provide annual recommendations on pay levels.
The SSRB provides independent advice to Ministers on the remuneration
of:
- holders of judicial
office;
- senior civil servants;
- senior officers of the armed forces;
and
- other such public appointments
as may from time to time be specified - a subset of very senior
managers in the NHS were recently added to its remit.
Other review bodies consider the pay
of the armed forces, doctors and dentists, school teachers, prison
staff and the police.
There is no independent review body
providing advice on the pay, pensions and allowances of other
executive posts for which Ministers have responsibility. These
include the Chief Executives and other senior executives of NDPBs.
The SSRB has ten members, appointed
following advertisement and a selection procedure supervised by
the Office of the Commissioner for Public Appointments. Members
have a wide range of skills and backgrounds, including business
and HR, and two are specialist labour market economists. The
secretariat is provided by the Office of Manpower Economics which
is staffed by civil servants.
The Review Body provides advice only.
Final decisions on pay for the main categories are taken by the
relevant Ministers, including the Prime Minister. Not all of the
recommendations of the SSRB for 2009-10 were accepted by Ministers
in 2009, with increases for the senior civil service, judiciary
and very senior NHS managers limited to 1.5%, set against recommendations
of 2.1%, 2.6% and 2.4% respectively. The SSRB's recommended 2.8%
increase for senior military personnel was accepted in full.
NON-DEPARTMENTAL PUBLIC BODIES
Responsibility for pay arrangements
for senior staff at NDPBs also rests with Ministers, but instead
of there being an overarching pay advisory body, the main advice
that these Ministers receive comes from the non-executive board
of each NDPB. The members of this board are appointed by the relevant
Minister. In a minority of cases, NDPB staff are civil servants,
for whom civil service pay arrangements apply. In the majority
of cases, the NDPB board will make recommendations on pay for
senior executives, along with pay for other staff, generally via
a remuneration committee. Although each NDPB's annual pay remit
is subject to approval by the sponsor Department, and in some
cases also by HM Treasury,[234]
it seems that in practice most of the work on setting pay is taken
at NDPB board level. Pay for NDPB chief executives is explicitly
the responsibility of the sponsor Department,[235]
but again, in practice, much of the work in determining chief
executive pay seems to be carried out by individual NDPB boards,
with little obvious intervention from sponsor Departments, at
least until recently.[236]
The logic here appears to be that different
NDPBs recruit their senior staff from very different markets;
the pay an NDPB offers needs to reflect the relevant market; and
the NDPB board is better-placed than a large Government Department
to make an initial tailored judgment on the pay levels they need
to offer to attract and retain suitable people.
According to the memorandum we have
received from the Government, HM Treasury asks to be consulted
by the sponsor Department in particular scenarios:
- where proposed
remuneration packages for new Chief Executives are significant
or potentially repercussive.
- where proposals to increase the
remuneration of an existing Chief Executive beyond existing uplift
arrangements are significant or potentially repercussive, and
- where other executives are to be
paid the same as, or more than, the Chief Executive.[237]
But as the Government memorandum makes
clear "Unless there is a new appointment or restructuring
of an existing post, HMT does not currently monitor remuneration
of NDPB Chief Executives (or those paid the same or more) and
departments establish their own monitoring arrangements."
In other words, there is no central overview of senior executive
pay at NDPBs.
PUBLIC CORPORATIONS AND NHS FOUNDATION
TRUSTS
There is even greater delegation of
powers to set executive pay at public corporations and NHS Foundation
Trusts. For these organisations, pay is generally set by the boards
of those bodies themselves, without the need to consult with or
seek the approval of Ministers (except where Government holds
shares in a corporation).
OTHER NHS BODIES
Other NHS bodies have less independence
from central government. The SSRB advises the Department for Health
on pay for chief executives, executive directors (except medical
directors), and other senior managers with board level responsibility
who report directly to the chief executive, in Strategic Health
Authorities, Special Health Authorities, Primary Care Trusts and
Ambulance Trusts. The pay of other staff within these organisations
(apart from doctors and dentists) is set according to the Agenda
for Change pay scheme, the maintenance of which is within the
overall responsibility of the NHS Staff Council. Pay for doctors
and dentists is set by the Department of Health, on the advice
of the Review Body on Doctors' and Dentists' Remuneration, which,
like the SSRB, is staffed by the Office of Manpower Economics.
SCHOOL HEADTEACHERS
Pay ranges for headteachers and other
senior staff at local authority maintained schools are set by
the Secretary of State for Children, Schools and Families, on
the advice of the School Teachers' Review Body, again staffed
by Office of Manpower Economics civil servants. Governing bodies
of foundation and grant-aided schools have much greater freedom
in setting starting pay for their senior staff.
SENIOR POLICE OFFICERS
The salaries and allowances of police
chief officers are set by the Home Secretary on the recommendation
of the Police Negotiating Board, a statutory review body, with
an independent Chair and Deputy Chair, and a membership made up
of representatives of Government, police authorities and chief
police officers, and of the police staff associations. If the
parties fail to agree, the matter can ultimately be referred to
arbitration by the Police Arbitration Tribunal , which operates
under the auspices of the Advisory, Conciliation and Arbitration
Service.
Local Police Authorities, made up of
local councillors, magistrates and independent members (recruited
from the community), are responsible for appointing chief constables
and other senior police officers. While they have no discretion
over salary, they have reportedly offered substantial additional
payments to successful candidates, such as for relocation costs,
school fees, and retention payments.[238]
Police Authorities also set the pay of their own chief executives;
reportedly, this is often at the same level as for an Assistant
Chief Constable.[239]
LOCAL AUTHORITY EXECUTIVES
Individual councils—generally
the locally elected politicians themselves—are responsible
for setting the pay of chief executives and other senior staff.
As the Local Government Association has explained to us, there
is
a voluntary arrangement whereby
all but around 10% of councils take part in national negotiations
through Joint Councils involving the recognised Trade Unions.
The JNC is a collective bargaining mechanism that agrees a national
annual basic pay increase and some other core terms and conditions—particularly
the disciplinary process for Chief Executives. The individual
salary level to which any national increase is applied is set
entirely at local level, based on an assessment of the size of
the job and relevant market comparators. The way in which pay
is adjusted each year is also a matter for local discretion.[240]
In other words, while there is substantial
co-ordination between councils on annual increases in pay, starting
pay remains a matter for each individual council.
The LGA has also "advised councils
to set up independent remuneration committees to oversee the process
of setting top pay and reward packages. … preferably with
representatives from outside the council".[241]
We have no evidence on how many councils in fact have such remuneration
committees.
APPOINTMENT AND REMUNERATION OF
PAY-SETTERS
Chairs and board members of NDPBs and
public corporations are appointed by Ministers as public appointments,
following fair and open competition processes. Their remuneration
varies from unpaid, to modest, to high, and their duties are generally
part-time. The following examples give an idea of the range involved:
the Boards of Trustees of museums are generally unpaid; the Chair
of UK Sport is remunerated at £38,817 per year for a commitment
of 2-3 days per week; while the Chair of Ofcom receives around
£200,000 per year for a commitment of 3 days per week.
Individual Departments are responsible
for determining the levels of remuneration paid to public appointments
for which they are responsible. The Government has explained the
rationale behind this as follows:
public appointments vary greatly
in terms of roles, responsibilities, profile and importance. It
is important that Departments have flexibility to determine an
appropriate level of remuneration based on what can be very particular
circumstances.[242]
Departments are bound by the general
principle that they must ensure that any remuneration offered
to a public appointment is "appropriate, affordable and provides
value for money to the taxpayer". They should also "adopt
a consistent approach in the levels of remuneration offered to
public appointments for which they are responsible". However,
within these bounds, Departments have put in place different internal
procedures to determine the remuneration for public appointments:
Some Departments, for example,
have issued general guidance to officials, but allow decisions
on remuneration to be made on a case by case basis. Some allow
flexibility but require senior level oversight and "sign-off".
And other Departments have set specific benchmarks or ranges to
help inform the levels of remuneration set for all their public
appointments.[243]
Chairs and non-executive members of
NHS bodies other than Foundation Trusts are appointed by an NDPB,
the Appointments Commission, on behalf of the Secretary of State
for Health. Their rates of remuneration are set by the Department
of Health. Pay for non-executive directors at Foundation Trusts
is set by each Trust's Board of Governors, a majority of whom
are elected from among patients and the local public.
EXCEPTIONS: HOUSE OF COMMONS APPROVAL
Primary legislation provides that the
salaries of the Information Commissioner and Chair of the Electoral
Commission are subject to approval by the House of Commons.
232 HM Treasury, Convergence Programme for the United
Kingdom, December 2006, Para 6.8 Back
233
http://www.hm-treasury.gov.uk/d/civilservicepayguidance010409.pdf,
accessed 9 December 2009 Back
234
Civl Service Pay Guidance 2009-10, Box 5.A Back
235
Civil Service Pay Guidance 2009-10, para 10.1 Back
236
Q 191 [Tim Melville-Ross] Back
237
Government written evidence Back
238
The Times, Secret pay deals give top police thousands extra, 6
July 2009 Back
239
Minutes of the Human Resources & Staff Liaison Committee of
Dyfed-Powys Police Authority, 18 May 2009 Back
240
LGA written evidence Back
241
LGA written evidence Back
242
Government written evidence Back
243
Government written evidence Back
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