Analysis: Bureau investigation sparks debate on public sector pay

Philip Johnston, writing in the Telegraph, argues that Public sector salaries should be based strictly upon performance.

Imagine the scene in the director general’s office at the BBC when the producers of Panorama unveiled the schedule for last night’s programme: executive pay in the public sector. “They’re going to do what?” explodes Mark Thompson (£838,000pa).

“Are they mad? There must be more important subjects for our flagship current affairs programme to be tackling?” “Yes,” his equally appalled deputy Mark Byford (£488,000pa) agrees. “Surely the Lib Dem conference is far more interesting.”

But Panorama – or more specifically the Bureau of Investigative Journalism, which operates out of London’s City University and did the research – came up with plenty of startling information very much in the public interest, not least the revelation that 9,000 public sector employees earn more than the Prime Minister, and 38,000 are paid above £100,000.

This number is far higher than had previously been realised.

The BBC alone has 331 managers earning six-figure salaries (though, belatedly, pay cuts and a four-year freeze have recently been imposed).

Now, the use of David Cameron’s salary as a benchmark for public sector pay may not be altogether fair.

After years of prime ministerial parsimony exercised by his predecessors, he does not take the full whack to which he is entitled.

According to the Senior Salaries Review Body, a proper emolument for the PM should be about £200,000.

However, in the aftermath of the expenses scandal, Gordon Brown reduced the salary to £150,000 – a sum Mr Cameron inherited on taking office.

The Coalition then announced a five per cent cut in all ministerial pay, thereby lowering Mr Cameron’s pay still further to £142,500, where it is to be frozen for the duration of the Parliament.

Historically, the prime minister was paid far more than today. In the late 18th century, William Pitt’s salary was £5,000 – equivalent to about £600,000 today.

The PM’s salary remained at £5,000 until 1937, whereupon it was raised to £10,000 – worth about £500,000 today.

Over the ensuing years, its real value has declined. In 1962, it was £14,000 (£200,000 in today’s prices); and even as recently as 1972, Edward Heath’s £20,000 income was worth the equivalent of almost £200,000.

So capping public sector pay at the level of the Prime Minister’s salary may be neither realistic nor advisable.

There will be some senior managers in charge of big departments and massive budgets who are worth far more than £142,500 (a sum that may be less in real terms than a top mandarin was earning 40 or 50 years ago).

Still, these will be few and far between. Something has clearly gone seriously awry when pay for the top five per cent of earners in the public sector has risen by 51 per cent in the past 10 years. How has this happened?

The boom in public sector employment has been one of the more notable social changes of recent years and the salaries have grown along with the jobs.

Labour created hundreds of thousands of new posts, often to carry out functions that were not needed, and in the process spawning dozens of new agencies and bodies that cost a fortune to run.

Moreover, whereas work in the public sector used to be less well paid than in the private sector – a shortfall made good by greater job security and an enhanced pension – senior public servants now earn salaries that would not look out of place in the corporate world: today, they get both the salaries and the perks.

According to Panorama’s researchers, nearly 6,500 NHS staff are paid more than the Prime Minister, including two GPs earning about £475,500 a year each.

In education, 385 teachers earn more than £100,000; and 2,013 working in the judiciary are on six-figure salaries. Local councils employ 362 people paid as much or more than Mr Cameron.

Even the head of the soon-to-be-abolished Audit Commission, the body that supposedly monitors the value-for-money performance of the public sector, is on £218,000 – and that was going up to £240,000 until Eric Pickles stepped in with a veto.

These high salaries have helped create an unhealthy “them and us” situation, with many in the private sector feeling that they are paying for generous remuneration and pension packages which they no longer enjoy themselves.

Even more galling is that we were told that public sector bosses deserved high salaries to stop them leaving for (or to attract them from) the private sector, and to ensure the best people are running our services.

Yet, while the costs have gone up, we have not seen a commensurate improvement in services or in efficiency.

Dave Prentis, the leader of Unison, the giant public sector union, said: “There will be many more in the private sector who earn much more than this.”

But that is not the point; and it loses sight of the ethos of service that used to be the principal motivation for people working in the public sector – and still is for many of them.

Nobody denies that many senior public sector jobs, especially in medicine, are difficult and require skills that need to be properly remunerated.

But the same is not true for managers; and a system that generously rewards failure can never be justified.