EXAMINATION
OF WITNESSES
(QUESTIONS 280-298)
MR BILL
COCKBURN, MR
MIKE LANGLEY
AND MR
KEITH MASSON
18 JUNE 2009
Q280 MR
PRENTICE: I do not think he is
a figurehead either.
MR
COCKBURN: Quite
honestly, whether you have an easy job or whether you have a hard
job earlier, people might say to Sir Alex Ferguson, "You
have got a really easy job because your team keeps winning",
but how often is it the excellent chief executive might make an
organisation feel easy and be successful simply because he is
brilliant at it? We are more concerned with what is his weight
of responsibility, what is his accountability?
Q281 MR
PRENTICE: I recall John Browne
when he was Chair/Chief Executive of BP. He got paid some eye-watering
sum of money, and he readily conceded that he did not need the
money himself, but he got paid those millions every year because
it was necessary, in the salary hierarchy, for him to get that
money.
MR
COCKBURN: Yes.
We have not quite reached that level with our pay review remit
yet, but the principle of relating salary to real responsibility,
objectively based, and the other considerations that we take into
account to set the tone: that individual is a leader of that whole
organisation and, if his leadership is not measurable or has any
influence whatsoever, he should not be there, quite frankly. That
is why you are there: to provide that leadership, the drive and
the motivation from all of your team to produce at the end of
the day. Our people, 8,000 of them, are responsible for billions
of pounds of public expenditure, so it is right that we aim to
get the best quality leaders to oversee these vast sums.
Q282 MR
PRENTICE: We are, theoretically,
responsible for some awesome spending, if you go down that road,
but can I ask you about private and public sector comparability.
I have in front of me a note that we got from Sir John Baker,
Chair of the SSRB until 2008, and he said in his note to us that
comparability is not necessary for recruitment and retention of
good people in the public sector, as witnessed by the huge discrepancy
there already is between private/public sector remuneration at
the moment, and that is your line, is it not? You pay the most
modest amount that you can get away with in order to get those
famous good people you talked about a few moments ago?
MR
COCKBURN: Yes.
I think, in general, that is right. At the end of the day, you
have got to make sure you have got people of the right ability.
We are not saying you should employ second-class citizens to run
the public sector. I think we have got people who, in ability
terms, would be a fair match for anybody outside. We are very
fortunate that we have people to apply for these jobs who are
not solely and exclusively motivated by these high awards, and
although you hear of these multi-million packages, very few people
actually get them. Even in big private sector organisations, and
I used to be a board member of BT, the vast majority of BT's executives
were not earning these eye-watering amounts of money the top guys
were. Therefore, if you look at the quality of the people that
come in, even with the salaries that we offer, which in general
terms we are proud of, we do not consciously underpay, but at
the top levels there are, undoubtedly, people employed in the
public sector who, if they chose, would be very marketable in
the private sector.
Q283 MR
PRENTICE: We constantly hear this.
MR
COCKBURN: It
is true, and some of them do actually leave to do this. Thankfully,
though, we have got a sufficient number that stay and we have
got a good flow in each year of talented people. If we do need
to pinpoint individual expertise, we will pay a premium rate for
doing so, and we do not have to do that too often, but we have
the flexibility to do it if we need to in the interests of the
taxpayer and public sector performance.
Q284 MR
PRENTICE: One final point, if
I may. You recommended a 2.8% increase for the senior military,
and the judges and all the other people were getting 1.5%, something
like that.
MR
COCKBURN: Although
we recommended 2.1.
Q285 MR
PRENTICE: You did.
MR
COCKBURN: But
they got 1.5.
Q286 MR
PRENTICE: Why did you recommend
that 2.8% to the military: because they have got nowhere else
to go, have they?
MR
COCKBURN: It
was a particular issue, because there were problems of differential
between one star and two star. The one stars and the rest of the
Army are subject to their own pay review body and the very senior
military are covered by ours. What had happened was there was
a compression of differentials and there was a real danger, and
we saw evidence of it, that there was no pay incentive for brigadiers
to become major generals because the pay difference was so—
Q287 MR
PRENTICE: That is surely not about
pay, is it?
MR
LANGLEY: There
are two things about the military. One is that because a lot of
the defence contracts have been sent out to tender, some of these
top guys and girls are working alongside defence contractors who
do similar sorts of job who are actually earning quite a lot of
money, and, therefore, there is a secondary market, if you will,
for senior military, and that is a very important issue.
MR
COCKBURN: That
was a wrinkle that we needed to sort out, and that was a way of
doing it, but, in general terms, if you look over time, they have
not consistently done better than the rest. This was really fixing
a problem that you have to do from time to time. In the same way
with judges, every few years we do a more fundamental review of
judges' pay and, where they have fallen behind, there may be a
catching up necessary to do this. In the same way as when we look
at MPs each Parliament there is a kind of catching up process
once a Parliament.
Q288 CHAIRMAN:
Your point Mike though, I think, goes back to what we were talking
about earlier on. It is the fact that, as you say, we have put
bits of the military into market-facing situations. Nobody, when
we were doing that, thought about the consequences in terms of
having to produce market-facing salaries, but you are saying that
is exactly what is produced by it.
MR
LANGLEY: As
you quite rightly said, the military in the past thought there
was nowhere to go: "I will just carry on until I get to my
retirement age and I will have a reasonable pension and, if I
am lucky, I can get another job", but now they can see that
they can get another job, and at the age of 50, maybe, they think,
"Here is a job that I can do quite easily for the next 15
years." The other thing that is very important about the
top military is that when they are promoted to the first rung
of our remit group they have to accept that they will not necessarily
carry on to retirement age, that they are only guaranteed one
term.
Q289 MR
PRENTICE: What is a term?
MR
LANGLEY: Two
or three years in the next job, and after that job is finished
there may not be another job for them. So the people who are in
the rung just below say, "Look, if I take this job with a
very modest pay increase, I may have another pip on my shoulder
but I may actually be curtailing my potential earnings from 10
years to three years."
CHAIRMAN: Okay.
Q290 KELVIN
HOPKINS: You made a point in your
recent answer that there are people in the public service who
do not work for money; as long as they are getting paid reasonably
they work there because they are committed to public service.
Are you not bringing into the public service the values of the
private sector, if you like, where it is all about money and profit,
and is this not inappropriate? Is it not necessary that we perpetuate
this enormously valuable sense of public service? I know many
people who want to work in the public sector because they believe
in public service. They want decent pay, but they are not there
for high salaries and bonuses.
MR
LANGLEY: That
is absolutely right, provided the differential between what they
are paid in the public sector and what they might potentially
earn somewhere else, whether it is in the private sector or the
wider public sector, is not too great. I think the people that
we talk to when they come to visit us and give evidence are people
who really enjoy their jobs. They find them very interesting mostly,
some of the senior civil servants we talk to have very, very interesting
jobs, they move from one department to another very often and
so they have a wide sense of job responsibilities that they can
get without moving outside the organisation, and as long as the
discount, the pay discount, the benefit discount for doing that
job is outweighed by the job interest and the public sector ethos,
that is okay, but if it gets out of kilter, if the potential outside
becomes too great, then they will go.
Q291 CHAIRMAN:
Are local authority chief executives a category that you might
take under your wing, do you think, properly?
MR
COCKBURN: We
have not been invited to look at them in the past, but back to
an earlier question, if you are saying, "Would it be appropriate?",
insofar as they seem to be looked at on an individual basis rather
than a collective basis, if we were asked to look at it, obviously,
we would look at it.
Q292 CHAIRMAN:
My question is you are not empire builders, you have not identified
other bits of the public sector which you think should probably
come within your remit, but you are open to invitation?
MR
COCKBURN: Yes.
Q293 CHAIRMAN:
Finally, transparency. Presumably we are moving to a situation
where the presumption should be that all publicly paid people
have transparent salaries, are we not?
MR
COCKBURN: Yes.
Q294 CHAIRMAN:
And you are in favour of them?
MR
COCKBURN: Yes.
In fact, actually permanent secretaries' pay is published, military
pay, our pay.
CHAIRMAN: Our
pay!
MR PRENTICE:
Our fees are in the public account.
CHAIRMAN: Our
allowances, unfortunately.
Q295 MR
PRENTICE: Before you finish with
this transparency of pay and so on, do you think there is a ratio,
perhaps, between the lowest paid person in an organisation and
the highest paid person in an organisation that would work, or
would you not go down that road at all?
MR
COCKBURN: I
would not. It is very arbitrary. In some cases there may be a
good reason why. I think you could have an eye on it. There might
be pressure for private sector committees to display such information
in their report and accounts each year just to show this up.
Q296 CHAIRMAN:
Thank you for coming to see us. It is nice to meet the people
that set our salaries, more or less, and we have learnt a lot
from you.
MR
COCKBURN: Ten
to 15% is what we recommend.
Q297 CHAIRMAN:
The problem is, with the best will in the world, if you come forward
with a proposition in the next period of time to increase MPs'
salaries by 10 or 15%, you will be laughed out of court, will
you not?
MR
COCKBURN: We
have said so, of course, in the past and you have not accepted
it.
Q298 CHAIRMAN:
Thank you very much for this morning.
MR
COCKBURN: It
was a great pleasure.
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