House of Commons - Local government Chief Officers' remuneration - Communities and Local Government Committee

Local government Chief Officers' remuneration - Communities and Local Government Committee Contents

2 Remuneration: the data

What are senior council staff paid?

3. The median annual salary for a County Council, Metropolitan or London Borough Chief Executive ranges from £174-£184,000, with a Unitary Council Chief Executive receiving around £157,000 and a District Council Chief Executive some £114,000.[4] (See figure 1 below). Salaries vary for different individuals however, with some close to the quarter of a million pound mark. Median salaries for the next two tiers of staff below Chief Executive are £112,000 and £77,000.[5] In addition, benefits such as pension contributions have traditionally boosted the total value of packages significantly.[6] For example the Chief Executive of the London Borough of Wandsworth receives a total package of around £274,000, including pension contributions of some £43,000.[7]

Figure 1 Local government Chief Executive remuneration 2012-13 (local authorities' figures in £000s)[8]

Source: IDS Thomson Reuters

4. It is important however to put these pay rates in context. Comparisons are often drawn with remuneration for senior jobs in other sectors and in other parts of the public sector. Salary levels for local government sector senior posts are significantly lower than those in the private sector,[9] and indeed lower than those in some other parts of the public sector, such as academia. Even taking account of enhanced pension provision, packages remain much lower for a top council post when compared to the packages on offer for top private sector staff.

Figure 2 Annual remuneration of Chief Executives in the public sector

Source: IDS Thomson Reuters, Third Sector, Review Body on Senior Salaries (based on 2012-13 figures and where not available on 2011-12 or 2013-14)

Has senior council officers' pay been rising?

5. Local government Chief Officers' remuneration rose significantly in the decade up to 2009, with Chief Executives' median annual earnings going up by some 75%. This increase was almost twice as high as that for other full time employees across all pay grades and sectors.[10] Other parts of the public sector also saw significant salary increases, some at a much faster rate than their local authority counterparts. For example NHS senior manager salaries doubled in a decade. However, as figure 3 shows, these steep increases have now ended and overall senior public sector salaries have plateaued.

Figure 3 Indexed median pay of selected public sector senior executives 1999-2012

Source: IDS Executive Compensation Review

6. Some 75% of council Chief Officers have their pay rises determined at national level,[11] by one of two Joint Negotiating Committees (JNC) within which staff representatives and employer representatives negotiate an annual pay settlement.[12] Neither JNC has awarded a pay rise in the past four annual settlements.[13] Council involvement in the JNCs is voluntary and 53 English councils choose not to participate and instead determine pay rises locally. These councils have also on the whole awarded no pay increases in the past few years. The latest data published by Income Data Services for the year to the end of March 2013 shows that for all jobs at Chief Executive and senior director level,[14] in all types of local authority, median salary increases were zero. More than half of all senior officers received no increase that year and many councils, such as Doncaster Metropolitan Council and the London Borough of Harrow, cut salaries.[15] Some individuals have received a salary increase but in most cases these have reflected an increase in responsibilities following a re-organisation or an incremental increase on an established pay scale.

7. Although across the country there is now a clear pattern of pay restraint, some isolated cases have attracted negative publicity. One example is Rochdale Borough Council. Councillors last year proposed raising the Rochdale Chief Executive's £130,000 annual salary by £40,000, on advice from the Hay Group during a re-evaluation exercise which suggested that £170,000 represented a mid-market rate for the job.[16] The exercise took account of a reduction in the number of senior posts following a re-structuring which would save several hundred thousand pounds in overall salary costs.[17] Subsequent public concern at the proposed level of salary increase for the Chief Executive led to a meeting of the full Council rejecting the proposal in favour of an increase of just 1%.[18] Following May's local elections, Rochdale has a new Council Leader. The then Chief Executive, Jim Taylor, has also moved posts, to become Salford City Council's most senior officer at a reported £150,000 per annum.[19] He told us that his move was in part driven by salary considerations, although there were many other factors such as the challenge of the role.[20] Rochdale councillors agreed in July to advertise the Chief Executive post at a salary of around £130,000.[21]

8. There has been pressure from some commentators for the historic pay rises awarded over the first decade of the century to be reversed. Witnesses such as the TaxPayers' Alliance, whilst recognising that senior pay had not increased "since the economic crisis hit",[22] told us that there remained "huge public concern" at the number of staff paid "very high salaries that put them in the top 1% in the country" and that "escalating costs of Chief Executive positions over the past decade, without parallel improvements in services of efficiency, have done much to undermine the public's faith in local government".[23] In 2010 and again in 2012 the Secretary of State for Communities and Local Government, Rt Hon Eric Pickles MP, was reportedly "furious" at senior pay rises, called on senior council figures to volunteer for pay cuts.[24] The Department for Communities and Local Government's 2012 50 Ways to Save publication suggested that:

We asked Paul Martin, Chief Executive of Wandsworth Council, if he would take a pay cut—he declined to answer directly but his Council Leader, Councillor Govindia, did not support the idea since the public would not accept that a cut of, say, £20,000 would be enough and there would be a "race to the bottom".[26] Graham Farrant, the Chief Executive for both the London Borough of Barking and Dagenham and Thurrock Councils argued that taking a pay cut might not represent the "right leadership" since good people could be lost.[27] However, some senior officers are indeed taking pay cuts.[28] Furthermore, research published by the Local Government Chronicle shows that many newly appointed Chief Executives are taking salaries starting on a lower rate than their predecessor. There were dramatic decreases in pay levels for the most senior staff appointed between 2011 (when new staff received 19% lower salaries than their predecessors), up until 2014 when decreases stabilised.[29] Nonetheless, there continues to be negative press coverage of senior council salaries with even 1% rises depicted as unjustified during an era of constrained budgets.[30]

9. Although not based on systematic data, the evidence we received indicated that, whilst there are exceptions in some areas for senior roles in services such as Children's Services,[31] councils are not having significant difficulties in recruiting and retaining good senior staff at the remuneration levels currently being offered.[32] However witnesses cautioned that pay freezes could reduce councils' ability to recruit and retain good managers.[33] The Local Government Chronicle's findings that salary decreases have now plateaued may also suggest that a floor could now have been reached below which it may be difficult to recruit good people.[34] There has been criticism in the press of interim managers, such as Somerset County Council's Director of Children's Services, being paid at significantly higher rates than those paid to permanent employees in posts of the same or higher seniority and through arrangements which minimise the tax payable by the officer.[35]

10. It is unacceptable for senior figures to be handed significant increases simply for doing their jobs, particularly when council budgets are squeezed and other employees are subject to pay freezes. However, whilst data bears out the headlines highlighting steep rises in senior council remuneration in the first decade of this century, for the past four years there has been pay restraint by councils of all types and in most places. Those few councils bucking this trend stand out all the more. We welcome the restraint now being exhibited by the vast majority of councils and by the national negotiators.

11. This restraint indicates that locally democratically elected representatives are being sensitive to the public mood. Where this has not happened, there has been swift, strong and effective challenge from local taxpayers. It is encouraging that, in isolated cases where excessive rises have been proposed, local communities such as Rochdale have acted through the arrangements in place to stop them. However, councils and decision-takers at local and national level, including the Joint Negotiating Committees, must be vigilant that changing economic conditions do not stoke pressure for increases in future whilst ensuring that remuneration remains sufficiently competitive to attract and retain high quality senior managers. Furthermore, councils must ensure that they obtain good value when recruiting interim managers or consultants to cover hard-to-fill posts temporarily, and that the public purse is not adversely affected by the use of payment methods designed to reduce the tax paid by the officer. We make recommendations below on the framework of checks and balances to give local communities the necessary assurances on this.

4 Source data: Income Data Services Thomson Reuters Back

5 "Town Halls continue to squeeze top pay", IDS Thomson Reuters, 23 April 2014 Back

6 Although, as noted by the Association of Local Authority Chief Executives, the value of pension benefits has decreased and the cost of pension contributions has recently increased "thus there are a significant range of pressures on the top earners in local government, above and beyond the erosion of basic pay levels". Alace (COR 11) paras 6.2-6.5 Back

7 London Borough of Wandsworth, Statement of Accounts 2012-13; see also oral evidence from Wandsworth Chief Executive, Paul Martin and Leader of the Council, Councillor Govindia, Qq189-239. This session also took oral evidence from Camden Chief Executive, Mike Cooke, who is in receipt of a lower remuneration package. Back

8 Remuneration includes salary, fees and allowances, benefits-in-kind and bonus. Fees include fees payable to a Chief Officer acting as a Returning Officer, for example, which are in part set nationally and part locally. Back

9 Median salary for a County Council Chief Executive is £182,000 compared to total earnings of £1.3 million for a FTSE 250 company Chief Executive. KPMG, Guide to Directors' Remuneration, p 21 Back

10 Income Data Services Executive Compensation Review data Back

11 Q412 Back

12 There are two separate national Joint Negotiating Committees (JNCs) for the grades of staff pertinent to this inquiry- the JNC for Chief Executives of Local Authorities and the JNC for Chief Officers of Local Authorities. Staff side for the Chief Executives' JNC is represented by Alace whilst on the Chief Officers' JNC this role is undertaken by the GMB and Unison. The employer side of both committees comprises councillor representatives from the LGA. Back

13 Alace (COR 11) para 6.1: "Nationally, local authority chief executives and chief officers have not had an annual cost-of-living pay increase [over the past five years], and many of the additional remuneration components [...] have been cut to reduce costs". Back

14 Chief Executive, tier 1 and tier 2 level-see footnote 2 above for tier definitions. Back

15 "Town Halls continue to squeeze top pay", IDS Thomson Reuters, 23 April 2014 Back