Top Pay in the Public Sector - Public Administration Committee Contents

Annex A

This Annex sets out various methods of setting public sector pay.


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.


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.


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.


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 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.


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.


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]


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.


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.


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, 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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Prepared 21 December 2009