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Hutton wants brighter spotlight on bosses pay

Robert Peston | 00:00 UK time, Tuesday, 15 March 2011

Will Hutton was asked by the prime minister and chancellor last May to make recommendations that would promote greater fairness in public sector pay, by "tackling disparities between the lowest and highest paid in public sector organisations".

The executive vice chair of the Work Foundation was recruited to look at whether limiting the pay of top public servants to a maximum multiple of typical or median public service pay would be a good idea, and if so whether a multiple of 20 would be appropriate.

Strikingly, Mr Hutton - a campaigner over many years for a more egalitarian distribution of income - has come down against the imposition of any cap on pay in public services.

Has he had some kind of Damascene conversion to the idea that an increase in public-sector productivity requires the entrenchment of a new plutocratic class of bureaucrats?

Actually it doesn't look as though he is panting to push up the remuneration of permanent secretaries, local authority chief executives, and senior health service managers.

In fact the reverse is probably true.

What his research uncovered was that public servants don't earn as much as 20 times median pay (which is just over £25,000 for the economy as a whole). A typical NHS hospital chief executive, for example, earns 12 times the "bottom of the workforce pay spine".

So there is quite a risk that if a 20 times limit were put on their earnings, the pay of the boss class in the public sector would almost certainly ratchet up to new highs, rather than falling.

To put it another way, 20 times the median would be the new inflated going-rate. And that might not please most of you at a time when something of a squeeze (ahem) is being imposed on the public sector by the government.

But can four-star generals and the men from the ministry breathe a sigh of relief that they can carry on regardless in respect of the way their pay is set?

Probably not.

Hutton wants the publication of a fair amount of salacious detail on individual public servants' pay, or what he calls "the full remuneration of all executives, alongside an explanation of each role and of how executives' pay reflects performance".

This should be made available through a standard online template so that the rest of us can "analyse this data and thus have the information to hold public service organisations to account".

To put it another way, it should become much easier to see how and why those who generally earn somewhere between £130,000 and more than £200,000 for running hospitals, local authorities, Whitehall departments and so on are paid what they're paid.

What's more, even though there wouldn't be ceilings on pay, each public service organisation would publish top-to-median multiples every year - which would then form the basis for fair pay reports by the Senior Salaries Review Bodies.

Hutton also wants the pay of those who run the public sector to rise and fall annually depending on their performance. He proposes that a proportion of senior public servants' basic pay would only be handed over if they met objectives that had been set for them.

Hutton describes this arrangement as the imposition of "basic pay at risk", rather than a further institutionalisation of a bonus system - although the concept does rather waddle and squawk a bit like a bonus.

Whether or not it is a bonus by another name, smelling more or less sweetly, critics will allege that the idea of public service - of going the extra mile for citizens and taxpayers simply because it is the right thing to do - would be further undermined.

Meanwhile there will be others who will attack Hutton for a different reason. They'll say that the brightest and the best will be deterred from working in the state sector, because a media obsessed with the pay of public-sector executives will hold them to account in a way which doesn't happen in the private sector.

Which in a way is a great paradox.

Because those who run huge companies listed on the stock market are arguably subject to less oversight of remuneration by their respective owners than those who run local authorities (for example) are by the press.

The most explosive growth in pay over the past decade has occurred in the private sector - and that growth in pay since 2000 or so has been almost completely uncorrelated with share price performance, or rewards for the owners.

Today the remuneration of the typical FTSE100 chief executive is over £3m - and much higher for bank chief executives - equivalent to more than 120 times median pay, compared with an estimated multiple of 48 times in 1998.

Which brings us to the proposal by Hutton that will induce a fair degree of queasiness in boardrooms. He recommends that PLCs should track and publish their respective top-to-median pay multiples - and he suggests that the government should commission annual fair pay reports on big private businesses.

The harrumphing that it's no business of the interfering nanny state what the boss of Tesco or Vodafone earns may be audible from the moon.

Will Mr Cameron and Mr Osborne switch on that bright new spotlight on the pay of private-sector chief executives? Their LibDem colleagues are bound to want them to do so. But Tory backbenchers will argue that it's for shareholders, not ministers, to decide whether such information should be disclosed.

Some will certainly be watching the reaction of Mr Cameron and Mr Osborne as a test of what they mean when they say that "we're all in this together".

Comments

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  • Comment number 1.

    Another fine example of just how little Cameron et al understand about public services. Honestly - where do they do their research - the Daily Mail?

    This review was instigated to provide justification for a groundless prejudice. Now that it has failed to give the government the ammunition it desired, I fully expect it to be quietly shelved. After all, there is no way on earth that Hutton's recommendations on private sector pay disclosure will be countenanced. That might expose the remuneration committee game for what it is - a mechanism for a small circle of senior directors to continually ramp up exective pay and bonuses based on tenuous comparisons.

  • Comment number 2.

    problem being its the productive private sector that pays the wages of the public sector not the other way round

    its public sector pay and public sector expenditure (lets not even mention public sector pension liabilities) that is the cause of the deficit, its that area that needs spending capped

  • Comment number 3.

    Will Hutton is absolutely right.

    Openness and transparency are the fundamental attributes of a fair and equitable society and we need much much more of this from all private companies, not just public institutions. And not least do we need a lot more of it from those bankers who, in addition, benefit from this ridiculous public guarantee that we appear to be giving them, completely free of charge.

    The introduction of 'limited liability companies' in the mid 1800's as a result of the huge number of failures of railway companies and the consequent lack of willingness of investors to risk any further monies at all in the industry for fear of being completely 'cleaned out', was a really great innovation.

    But this was done as part of a bargain.... that you have to tell us more about your company and publish your accounts so that we can see what you're betting, the value of your business, and importantly how much money you are making or losing, and in return we will limit your liability so that you can contain your losses.

    This suddenly meant that people would again take bets on business investment, which is vitally important in any economy.

    Disclosure of financial information into the public domain promotes much greater competition in an industry. So customers benefit. It's that simple.

    So what on earth do the people of the UK have to fear from legislating for more of it?

    Absolutely nothing at all.

  • Comment number 4.

    Openside150- it distracts fromt he thread we are dicsuiing but we are going to ahve to go through this againa rent we?

    Bank bailouts at RBS, LLoyds and Northern Rock have to be and are fully included within the public sector finances -


    http://www.statistics.gov.uk/articles/nojournal/nrandboe_article.pdf

    http://www.economicshelp.org/blog/uk-economy/uk-national-debt/

    In 2001 National debt was 29% of GDP. Now it is 65% (£900Bn excluding bank bail out costs: £2.3 trillion with). It will rise to near 100% and then fall again... What has caused this increase? Oh look it balloons when the banking crises started.

    The cost of servicing the debt before banks/casinos banjaxed the world economy in the UK is actually very small BTW (2% of GDP).

    International comparisons are also interesting - Japan = 194% of their GDP, Italy over 100%, US = 71%.

    Looking at history is also insightful. National debt in the UK has been higher for every year from 1900 (when recording series shown began) until banks were irresponsibly deregulated in the 70's/80's. It peaked at around 250% of GDP after WW2.

    There isn't really a public sector debt problem. Nor a general taxation issue. The Coalition cuts don't really get to the heart of the matter and are an idelogically driven attempt to perpetuate the current system whilst siphoning off more money to big corporations and bankers.

    Public borrowing is useful if it leads to faster growth and productivity where the investment pays for itself from higher tax revenue at a faster rate than the interest payments.

    Cutting the hell out of the public sector leading to higher unemployment, lost tax revenue from lower wages and living standards, business failures are not a good investment for UK citizens even if they do make big business happier as they lower wage demands and give them plenty of opportunity to secure profit from taking over some fo the roles the state used to fullfil.

    That and the £1.5trillion bailouts for the banks are also wastes of money. To see bankers trouser this money when it should be used for public sector investment is criminal.

    The real issue behind the long term growth of public debt is the way the financial system works eg. fractional reserve banking with leverage ratios of 20:1. The fact the Government cant print its own money but instead has to pay bond vigilantees interest on needed investment (effectively promise of revenue from future taxation and productivity improvements) effectively siphons off benefits of productivty growth from the british public and gives it to institutional funds, hedge funds and investment bankers.

    We are not all in this together

    conclusions of the report from which I took the figures (independent IFS)-

    http://www.ifs.org.uk/publications/4822

    1. The spending pattern under Labour Government 1997 to 2007 was identical to the Thatcher Government 1979 to 1989.

    2. The Labour Government left public finances in a better position than they had inherited AND more of the money was spent on investment rather than frittered on day to day running costs.

    This is pretty horrific as Thatcher had a windfall from North Sea Oil which she wasted and she and Major sold off everything in sight through privatisations.

    The state of public services was a wreck that had to be fixed by labour.

    Hence, the findings from the British Attitude Survey showing record approval of the way the NHS is being run and the quality of its services in 2010. From the Times-

    "We have more faith in the NHS than we have had for 20 years, which the report attributes to higher spending that has led to improvements in staffing and waiting times. One in two people (51 per cent) are “very satisfied” or “quite satisfied” with the NHS, up 17 percentage points since 1997. Dissatisfaction is at its lowest level since 1984: 30 per cent, down from 50 per cent in 1997. Those who had actually used the NHS were more likely to be satisfied than those who had not".

    The ConDem abomination are perpetuating giant lies about the state of public finances and their causes. As usual they are using it as an excuse to smash the NHS, privatize schools and run the country back into the ground.

    As for confounding deficits and public sector debt, investment in public sector is pure sense if it is invested and tax revenues rise faster than without investment due to increased productivity.

    None of this really matters though anyway as the real issue is the distributional impact of the current government plans. They will get creamed at the next election, if they last that long, as all of their plans only benefit big business and the banks. the impact of everything they are doing on 95% of the population will be detrimental and people will not put up with it.

  • Comment number 5.

    With executive pay increasing by 55% this eyar the gap at the top is increasing.

    Permanent Secretaries command responsibilities at least as large as FTSE100 CExs yet their pay is only a tenth.

    If the civil service wants to recruit somebody from outisde for one of these roles they can only appoint somebody from much lower down the foodchain in a private sector outfit.

    This means we dont have people with real experience of top flight management.

    This cant be good for public services.

  • Comment number 6.

    All this user's posts have been removed.Why?

  • Comment number 7.

    The uber rich and the bankers of this world have taken over our media. They control the funding and system of patronage - non executive directorships awarded to politicians after leaving office - and lobby continuously to ensure the tax and business regulatory system stays the way they like it.

    They way they like it is screwing everybody else over whilst they can avoid any tax or social responsibilities. That's the real reason this country is going down the pan decade after decade with under-investment in public services, crime endemic, huge public sector debts, unemployment etc.

    Banks and multinationals do not pay workers in the country enough to live off so the government is forced to top up the wages of the working poor with tax credits and other benefits.

    Insufficient money is provided to governments so that education and public services can be properly run to eradicate unemployment.

    With wages set so low, economic migrants from the third world can compete with our indigenous population for the low skill and low quality work available.

    Right here is a sign the tax system isn't working properly. Employers are allowed to freeload their responsibilities onto the middle classes and those that run their own businesses.

    This breeds resentment amongst the middle classes that is inappropriately directed to public sector workers, immigrants and the unemployed.

    Why should the uber rich pay more? The uber rich enjoy the fruits of increased productivity that their workers and the public services of this country provide for them without paying sufficient wages or taxes. The modest taxes that we do levy are avoided by numerous routes using the dishonest banking system to launder money gained from exploiting workers in the developing world or exploiting workers in the UK.

    This money is hidden away in trusts and tax havens in the Cayman Islands, Jersey, Switzerland, etc. Using clever tricks such as the dishonest transfer pricing techniques the uber rich insure that they pay insignificant or no VAT, CGT or corporation tax.

    This is ridiculously unfair and it is obscene to see the top 1% of the World owning over 40% of the worlds wealth. Let alone the arguments about unfairness- how is it fair that some companies (e.g. banks and huge multinationals) don't have to pay tax but others do (e.g. small and medium sized business)?

    How can the smaller companies compete and eventually take business from the multinationals when they start with this type of disadvantage?

    Demand a clampdown on tax avoidance by multinationals and then they wont be able to pay their senior employees obscen rates and the public sector wont be forced to copy them.

    Demand an end to busienss financing political parties. Demand an end to Murdoch et all "owning" the media.

    Demand fairness.

  • Comment number 8.

    All this user's posts have been removed.Why?

  • Comment number 9.

    'it's no business of the interfering nanny state what the boss of Tesco or Vodafone earns'

    I agree.

    I don't care what the boss of TesFone earns, they can pay themselves whatever they like, however all earnings greater than 20 times minimum wage should attract 100% tax

  • Comment number 10.

    I think its time we realised that the institution of banking is inextricably linked to the state. It is within the public sector.

    Therefore apply the same rules before people really start getting angry.

  • Comment number 11.

    Have to love the "I want what they're getting even though"

    Most work harder and longer than me
    Most are better at what they do than me
    Most took personal risks that I didn't

  • Comment number 12.

    #6. SimonTeller wrote:

    I've never seen why anyone should be fobbed off with a penny less than [the mean wage]. Nor why anyone should get a penny more.

    Have you really thought this through?

    Are you really saying that everyone should earn exactly the same?

  • Comment number 13.

    Will Hutton has done nothing to enpower the public to reduce executive pay to within reasonable levels of those in their departments, a total waste of his £180,000 salary.

  • Comment number 14.

    I rather suspect the whole debate above will be overtaken by events in the coming days and weeks.

    The economic impact of the japan earthquake is still climbing and is poorly understood as yet in an interconnected global market. Loss of confidence in general not being the least of it.

    The situation in the middle east continues to fester, perhaps the various monarchys will get the upper hand, in which case the resentment will move underground and be manifested as terrorism.

    which ever way you look at it it is only a matter of time before the next economic crisis hits and there is nothing left in the fiscal locker that i can see.

  • Comment number 15.

    If we cap the pay of senior public servants then we must cap the pay of private sector executives, including golden parachutes, platinum payouts and offshore share options. One sided debates conducted using emotive arguments based on public ignorance are not the way forward on the issue of remuneration for those at the so-called 'top' of any organisation.

  • Comment number 16.

    The enterprise is strong in this one but needs more discipline I say, must learn the ways of the source and tread wisely indeed. This sector is weak and is not paying it's dues and the master is not pleased with this, make an entry in the ledger for this young disciple and let loose the hounds that keep the a tight control upon all of our secret affairs then find out what they desires and assist them we will.

  • Comment number 17.

    I thought it was 20 X of the lowest wage/salary not the median! Tying remuneration to 'performance' is wrong and ultimately counter productive particularly in the public sector. It distorts management activity, it is inflexible - objectives need to change at very short notice often, it often amounts to a contest of who is good at writing a fancy narrative and can distort how boards relate to the leading executives, it places a premium on commercial behaviours above the public service vocation/ethos. Think again Hutton, just ignore him Osborne.

  • Comment number 18.

    If a public body exceeds its targets then bonuses would be good but then the Daily Mail reader would complain and the government would change the targets so bonuses would not be paid.
    Would it not be better to give the public service staff an amount of time in which no change of targets and management so they can just get on with the job?

    In the olden days staff had pride in the job why not regain that?

  • Comment number 19.

    Pay to be linked to meeting targets? I thought this Prime Minister had made it clear he thinks targets don't work in the public sector. Is this another U-turn?

  • Comment number 20.

    Private sector pay is a matter for the shareholders

    Surely we aren't going to lose track of that principle

  • Comment number 21.

    We Need a National Maximum Income set at twenty time National Minim Pay!

    All of the arguments against such a system deployed by Will Hutton are overcome with this system enforced through the tax system. Will Hutton is just defending the indefensible differentials in our society. These have dramatically increased under Labour (aka the more tory party than the Tories) it now falls to the more liberal tory party (the Tories) to do something about the situation to prevent social cohesion breakdown - it is vital that we just don't talk about being in it together , but are manifestly in it together and anyone who will not agree should be encouraged to leave.

  • Comment number 22.

    There is a fundamental difference between pay discretion between the private and public sector - one effects shareholders, who if they take issue can raise it with the company, the other directly concerns how every individual's tax contributions are spent. I simply do not believe there is an argument to say that the same rules apply - in my local authority area the level of renumeration received by the current chief executive has almost doubled compared to how much the previous holder received, at the discretion of the Council's cabinet office. Moreover this was done at the height of the recession and justified by arguing it was to hire someone 'special to steer us through these difficult times' - I'd point out that his wage also increased by 50% from his previous position at another local authority. 'Difficult times' means delivering cuts - he will leave this post this summer taking the political baggage with him into retirement. The reason I point this out is that it is not simply about the outrageous money - which understandably people object to in relation to banking pay - but it's the fact that that single wage equates to an entire service delivery team of 10 officers. This directly effects the provision of services in a local authority area which is a political matter and one that quite rightly the general public have a vested interest in.

    In the exact same way that every other local authority employee is bound into a pay framework normally based on pay grades and that these are immovable, so too should the pay of a chief executive be set at an acceptable level. I'm not arguing that this should be set at a national capped level - I'm pretty sure there are fundamental differences between the scale and budget sizes of different local authorities which have different demands - but if an LA agrees to say £150,000 for chief executive pay, then they should not double that packet a year later to hire someone else, and that should remain fixed in the same manner as every other employee.

    To argue that this is about attracting talent is absolutely absurd and I challenge anyone who argues this to provide some evidence where a public sector chief executive has been given huge renumeration and justified it through exceptional performance. In the instance I quoted above, where the Chief Executive of my borough council almost doubled his pay, how can there possibly be an argument that would say this is justified? Did his talent/abilities double in effectiveness to warrant such an increase? I have not seen any proof, other than an ability to take a knife and begin slicing away cuts from the Council's expenditure.

    You want further proof that talent actually has very little to do with it? Here's a passage from the Spectator:

    "There will be no pay cut, you can be sure, for Ian Coucher, chief executive of Railtrack, who was paid £1.244 million in 2007-08. That was a 51 per cent increase on the year before and included a £306,000 bonus in spite of the fiasco of overrunning engineering works in January 2008 which caused havoc on the West Coast Mainline. There will be no pay cut, I bet, for David Higgins, chief executive of the Olympic Delivery Authority, whose £624,000 pay packet in 2007-08 is itself one of the reasons the bill for the Games just keeps soaring. There will be no pay cut, either, for Kim Ryley, chief executive of Hull City Council, who was paid £213,162 in 2007-08 — a year when thousands of the city’s residents were left mopping up thanks to flooding from inadequate drains."

    http://www.spectator.co.uk/essays/all/3367806/want-a-big-bonus-get-yourself-a-public-sector-job.thtml

  • Comment number 23.

    All UK bosses - private or public - are overpaid. Private sector bosses have long lost touch with the salary reality of their employees. But at least in the private sector there are shareholder pressures to control salaries, except in banking and finance where it appears to be total coordinated gluttony in a minimally productive sector where the interests of those working in it has long displaced the interests of customers. But returning to public vs private what are the pressures to control salary in the public sector? Media?
    The study is misplaced - much better to look at what skills, experience, and function you have to have to make £100k in the private sector inc bonus versus the equivalent - including the now totally unequal pension benefits - in the public sector. And while at it please also look at skills, experience and function you need to make a £100k inc. bonus in banking and finance. I suspect that really would be a sickener.

  • Comment number 24.

    #21

    Why is a national maximum wage necessary?

  • Comment number 25.

    Three people were sat around a table with a plate of twelve cakes in the middle. One was a CEO, the other two were just middle class workers - one worked for the state and one for a private firm. The CEO took eleven cakes and told the private sector worker that the other worker, the greedy state worker, was 'after his cake'. This is not to say we are not most of us greedy. It is just that some are more greedy, MUCH more greedy, than others. If you think that this government is really going to alter the pay of the 'top people' then you may not be greedy but you are so wrong. So very, very wrong. It will have to be done another way.

  • Comment number 26.

    Salaries should be capped ... definitely must be capped... they may be able to earn x times more in the private sector ... that is not the point.

    The point is that the public sector ... are 'serving the public' ...they are public servants and so paying them what the public can reasonably afford is part and parcel of what they as public servants can reasonably expect to be paid.

    Public servants like £600K pa Andrew Marr ... need to stop comparing themselves with the private sector ... they are not in the private sector.

    Can this start by knocking a couple of hundred grand a year off Marr's gross over-payments?

  • Comment number 27.

    As usual, arguments for 'dragging down' high pay rather than ensuring that those who are paid less get at least enough to live on. It is ridiculous that anyone who is in full-time employment, however unskilled their job, should need to have their wages topped up by state handouts.

    Regarding all the 'performance related' stuff - who is going to judge? And will politicians receive a penny if such a measure comes in?

    And as for 'industry standard' pay, the British Computer Society has developed a complex model of job roles within the computing industry which allows you to equate quite disparate positions in terms of responsibility, skill required and so on - perhaps this needs to be 'borrowed' and extended across all trades, and then used as a basis for deciding what a fair wage is for various jobs.

  • Comment number 28.

    The idea that top pay should be performance related is, in the public sector, dependent hugely on the performance areas being monitored. It depends on the competence of those making the judgements - i.e. those who assess the chief executive.

    I know of cases of huge performance related wage rises based on no major improvements in the fundamental performance of public sector agencies, and in some of these cases I, and others like me, can only assume it's because those doing the assessing don't really know what they are doing.

    Relating pay to performance is absolutely no panacea. And when some chief executives get major major pay increases, without improving the fundamental performance of the oprganisation, at the same time as other public sector workers receive no, or a fraction of a % increase in their salaries, then it demoralises the workforce.

    Cheif Executives should get the same pay increases, or freezes, that other public sector workers in their organisation get. When they operate incompetently they should be sacked. Simples.

  • Comment number 29.

    Speaking of public sector pay...how much are you and your mates on Robert?

  • Comment number 30.

    I want Hutton to say to the higher paid public sector greedies ... stop whining and comparing yourselves with the private sector ... you are a public servant ... Do you get it?

    I don't think that Hutton understands this, either ... which is very worrying, indeed!

  • Comment number 31.

    Surely Hutton has got it spot on with this report. Were he saying simply what is popular in his review, he'd have imposed a cap purely for the political capital.

    However, it seems to me that a thorough investigation has been undertaken which reports the facts. The cap clearly wouldn't have worked and it is entirely plausible that such a measure would indeed cause a rise in the pay multiples.

    I fail to see much more anyone could ask for than to improve transparency in the complicated public sector, to provide at least a measure of accountability.

    As for the private sector, it makes its own money. The public sector is funded by the private sector - this is not a criticism, but it is a fact. It doesn't mean the public sector should be regarded throughout as a burden, but we must recognise that the money funding it comes from private sector taxes, and considerable borrowing. As lovely as it is to give jobs to everybody who needs one, that money is not generated in the sector that spends it, and as such relies on the private sector as much as those who need the services rely on those services.

    A little bit of realism would be nice. The highest public sector office should be the PM's office - I fail to see how any other public sector administration position can justifiably earn more than Cameron.

    If public sector service really is undertaken through this romanticised idea of contributing to society (as opposed to the private sector being purely about private interests), then why such a renumeration? If it is for the love of the job, does that not count a little bit towards job happiness? We're not talking about front line people here, but the ones paid to make decisions.

    The fact is public sector workers of all kinds still want to earn the money to provide themselves with a lifestyle they aspire to. Let's not forget that when we talk about the love of public service.

  • Comment number 32.

    Micky @25

    Who baked the cakes, though?

  • Comment number 33.

    • 21. At 08:56am on 15th Mar 2011, John_from_Hendon wrote:
    We Need a National Maximum Income set at twenty time National Minim Pay!

    All of the arguments against such a system deployed by Will Hutton are overcome with this system enforced through the tax system. Will Hutton is just defending the indefensible differentials in our society. These have dramatically increased under Labour (aka the more tory party than the Tories) it now falls to the more liberal tory party (the Tories) to do something about the situation to prevent social cohesion breakdown - it is vital that we just don't talk about being in it together , but are manifestly in it together and anyone who will not agree should be encouraged to leave.

    - Once upon a time there was kingdom filled with blind people. One man had one eye and was made king. The king could see where food was for it to be harvested and when enemies attacked he was able to direct his forces effectively. One day his subjects started to talk. They agreed it was unfair that he had more than them, that he had the ability of sight. So one day when he was addressing them in the foundry, they held him down whilst one put a red hot poker to his eye (appreciate this took quite a while and a few of the conspirators got a nasty burn but bear with me on this one). Now, everyone was blind and everyone was happy as they had achieved equality. However, they all starved to death.

  • Comment number 34.

    And if more public services re to be run by private companies (as the Government appears to want), will their Chief Executives have their pay limited as well?

  • Comment number 35.

    It has to be capped!!! If it is based on performance we all know that they'll all just wing it to get excellent reviews whatever their performance. Look at what happened to the pension schemes. Public sector managers on final salary schemes getting golden pay rised a year or so before retirement. I think most people are sick of propping up a badly managed, over-payed managment layer in the public sector. As an external contractor I've come across many a public sector 'manager' and to be frank, they would never survive performing as they do now if they where in a private firm. About time the "public", who these managers work for, set the salary of the public sector jobs and gave them what we think they are worth? Maybe if performance pay is the answer, the general public take a vote on what they think their performace is and pay them accordingly!

  • Comment number 36.

    What happened to the we are all in it together. Surely the CEO of say Birmingham is happy to cut his care workers shift allowance so that they take home £15,000 instead of £17,000 but still have to work nights they it would not hurt him to take say a 10% drop. He will still be able to feed his family and take holidays whilst the care worker will find it very difficult to do the first and the second is out of the Question the way prices have risen.

  • Comment number 37.

    I was glad to hear Robert Peston say that the multiple for public service ceo's to lowest paid workers was a good bit less than 20. In a working life in private companies and academia I have been found it difficult to understand or see any relationship between executive pay and performance or ability. This is not really surprising since progress in an organization is as much due to being in the right place at the right time and knowing the right people. I have known many clever and hardworking people around me who have not progressed up the executive ladder. In fact the success of an organization is at least as much due to these unsung heroes as to any scintillating strokes of genius by the ceo. We all know of colleagues who spend more time getting to know the right people and saying the right things than actually doing a good job. This of course defines the art of success in politics and explains why although perhaps well-meaning, politicians of all parties seem to have difficulty in solving the nation's problems.

    Why pay people over £100,000/year when they don't actually need that sort of money to lve a happy and contented life

  • Comment number 38.

    2. At 00:51am on 15th Mar 2011, openside50 wrote:
    problem being its the productive private sector that pays the wages of the public sector not the other way round

    its public sector pay and public sector expenditure (lets not even mention public sector pension liabilities) that is the cause of the deficit, its that area that needs spending capped

    Oh look - a Daily Mail reader comment - buying completely in the Cameron and Clegg "anti-public sector" spin - not based on fact, just put out there to manipulate the guilable.

    What is worrying is how the Government sees fit to demonise all those in the public sector, without understanding that a large chuck of this country (the electorate) work in public sector. Work hard. work long hours. are committed to what they do.

    Interesting some "external contractors" come on here & berate the public sector - the same people they so often under perform against their contracts, taking considerable money out of the system & not delivering, happy to milk the public sector for all its worth.

    Not nice being generalised about is it?

    Cap pay in the private sector, cap footballer pay, cap public sector - why are people so jealous of those that do and have achieved?

  • Comment number 39.

    It is not desirable to introduce a cap on public sector, or indeed private sector, pay but it should be under the control of voters. In the private sector you are not forced to pay for the goods or services offered unlike in the public sector where you are given no choice but to pay up at gun point or be dragged off to gaol. All chief constables and council ceo's should be elected directly by voters, for a fixed term, who would choose what salary to offer for the post. If pay was halved you would still have the same choice of employee.

  • Comment number 40.

    6. At 01:35am on 15th Mar 2011, SimonTeller wrote:
    What's all this median nonsense? The number you want is the mean. Across the whole economy. I've never seen why anyone should be fobbed off with a penny less than that. Nor why anyone should get a penny more.


    Are you crazy???

    A brain surgeon working 80 hours a week getting the same as a burger flipper... where is the incentive to excel?

    If you turn around and tell me 'for the greater good' then I want to know why you are limiting it to the UK, why not the whole world, in which case I expect you to be giving a HUGE amount of your wealth to charity as over 80% of the global population live on less than $10 per day.

    The capitalist system isn’t perfect, far from it, but it reflects the imperfect race we humans are.

    As such, I want to pay top civil servants good competitive salaries, pay peanuts, get monkeys. If you where a talented manager would you rather work;

    a) work in industry and get a possible £1-2million.
    b) work in the civil service and get a fraction of this, have people constantly complaining about you for their own poor life decisions (it’s not the top earners stopping the average person earning more ...)

  • Comment number 41.

    Maximums, caps, bonuses- these are all 'fluff' around the most basic thing- truth and the visibility of the truth.

    The simple fact is that most people don't know what their council chiefs are getting paid. They also don't know what their neighbouring council chiefs are getting paid.
    Most shareholders don't know what the board are getting paid, they certainly don't know what the boards of similar companies they don't hold shares in are getting paid.

    As soon as the above is addressed we will start to get a clear picture. Right now it's about as clear as a fog bank!

  • Comment number 42.

    The Institute of Directors used to have a simple index of earnings of directors (some public sector but mainly private). When I retired as a director in local government, I managed just over 1,100 staff and an annnual budget of £300 million. The average IOD director managed 36 staff and a budget of £6 million, but "earned" five times what I was on. Pay at the top in local governement has leapt since then, but still not so as to remove that imbalance.
    It is interesting that the 20 times mark would not hit the public sector. Perhaps Mr Peston could ask Eric Pickles for a response on that point!

  • Comment number 43.

    A radical revision of the public sector wage system is long overdue. The government's recent efforts to persuade senior public-sector staff to take voluntary pay cuts have failed – miserably. Instead, essential front-line services are being slashed. As the only organisation capable of making the necessary changes, the government should now impose reality in the levels of pay that senior staff in the public sector receive. If they are really serious about rationalising public sector pay, they have a simple solution: set reasonable levels of pay in the public sector and enforce compliance by using the income tax system.

    The pay levels of all jobs funded with public money, down to a certain level, should be set centrally. Sensible pay scales should be developed for senior positions. Initially, these might be based on the pay scales of people doing jobs of comparable importance in the armed forces - it might be felt, for example, that the head of the BBC warranted pay equivalent to a lieutenant general; the CEO of a medium-sized city might be considered worthy of the same pay as a brigadier and the head of a moderately important quango, that of a lieutenant colonel.

    Compliance could be ensured simply and efficiently, by charging everyone income tax at a rate of 101 per cent on all pay, bonuses and benefits paid directly or indirectly from the public purse above the level designated for his (or her) primary public sector job. Draconian? Maybe. But the present system is corrupt and radical change is necessary to stop the abuse in it that is now endemic.

  • Comment number 44.

    Divide and rule.

  • Comment number 45.

    Public sector pay - paid for by tax payers (money you pay, not by choice via tax/NI/VAT for a good/service)
    Private sector pay - paid for by earnings (ie money you hand over by choice for a good/service)

    If private sector mgmt increases pay & you aren't happy with it, you can choose not to use that company in future for their services...if enough do that and their earnings/market share fall, then usually the mgmt are changed.

    If public sector mgmt increase pay - you can't change your provider for their services (refuse collection/teachers/hospital staff) unless you move into another Council.

    This is the fundamental difference & why the Public sector mgmt should be accountable for what they get paid.

  • Comment number 46.

    Private companies that get much or most of their business directly from taxpayers - such as outsourcing companies, education consultancies, certain transport companies etc should have their executive pay scrutinised and limited. So should bankers whose organisations are owned, or largely owned by the taxpayer.

    After all, they are simply public sector companies that are privately owned.

  • Comment number 47.

    Link all wage negotiations (benefits and pensions rates too) to the level of money supply. Ignore the inflation figures as such.

  • Comment number 48.

    I think Will Hutton has found a satisfactory middle ground for the moment.

    All public sector and limited liability companies should have to publish the multiple v the median takehome pay (ie to include all bonuses and valuations of options etc).

    This not only provides relativity between salaries in an organisation and between organisations - but will also ensure that the Executive don't always take the 'screw-em' approach to their lower-mid level staff.

    Implement this data requirement - monitor it for 3 years - then review and take from there.

    I am not opposed to enforcing maximum multiples but I would rather hope that the 'market' would use the data to self-enforce pay discipline amongst the Executives and Boards in this country - even though - given historical evidence - that may be optimistic.

  • Comment number 49.

    We need a proper Constitution.

    In countries that have them, public servants work significantly for the patriotic *honour* of serving the values enshrined therein, and the social standing that gives them, rather than cash. That's not to say they are underpaid by any standard though.

  • Comment number 50.

    Anything they can do to put the spot light on is positive.
    In a private company you have shareholders potentially looking at pay to keep it reasonable. But when its public money and someone hands you a budget, there is little reason for someone to be careful with it. Its that old chesnut, if you have budget at the end of the year spent it quick on all new council vans.
    If someone could work out how we stop councils spending everything they can, make them feel a responsibility for public money when they set salary levels that would be a huge step.
    But its like turkeys voting for christmas. If you have a great pension, holidays and salary why would you rock the boat and stop someone elses pension? All that would happen is people would hate you, you would either lose your job or promotion opportunities (manager not performing as nobody wants to talk to them) or the spotlight will then fall on your salary and pension.
    So public sector setting public sector is a no no.

    I just want to know why the careers advisors couldnt have told me to get a job in the public sector. I know some, like teachers have a stressful life these days. But when the unpromoted lowest achiving teacher gets 21k a year index linked pension and complains?! Many people don't earn that. And I would have to put in £20k a year for 35 years to build the 700k pensions pot required for an index linked 21k a year pension. But a teacher would not consider that their 33k ordinary teacher salary is really worth 55 to 60k with pension.
    I'd live like a king on 21k pa index linked, once the house is paid off what else are you going to do with it? The idea you can get two thirds of salary is way too high, half would be generous. How does a system work where people are paying taxes and earning an average 27k pa, and the average pension is 25k? Without even considering the cost of the NHS and benefits without corporation tax it could never come close keeping afloat even with huge borrowing.

  • Comment number 51.

    Why should public sector pay be so high? Do I have a choice of local authority? No. The private sector has to compete to survive, they deserve higher salaries because its a much tougher environment when the customer has choice.

  • Comment number 52.

    42. At 10:44am on 15th Mar 2011, bernardcrofton wrote:

    "It is interesting that the 20 times mark would not hit the public sector. Perhaps Mr Peston could ask Eric Pickles for a response on that point!"

    It's simple: the private sector earns its own money, and spends the money it has earnt and retained in profit. The public sector is funded through tax money that whether you like it or not, the private sector has a reason to feel some sort of rights of ownership to.

    As others have said, you need to stop equating the public and private sectors. The sources of money are different, and that difference is significant.

  • Comment number 53.

    Isn't this just another method of supporting the age old issue of bonus pay related benefits, for fast short term returns only, with no thought of longer term costs. I would suggest after 30 plus years in the nhs, and having some responsibility to implementing at least 5 different white papers, often to be re looked at and changed after a 4 to 5 year or each political party change, this is the main problem, for the NHS failures.

    Definatly from a clinical perspective these influences were a night mare to manage, and often promoted a high level of distrust and discord promting the sincere lack of duty of care the system now experiences.

  • Comment number 54.

    1. I am sick of hearing comparison made with the PM's salary: town house, country house, vehicles, servants, holidays abroad, all free as long as he is PM. Afterwrds millions to be made from public speaking and consultancy.
    2. I think that bonuses should only be paid for exceptional service, beyond the remit of the job, and not built into the system.

  • Comment number 55.

    Let us assume we are in temporary straitened circumstances. Rather than go through all this aggro that we know will not come to anyhting, it would be far more simpler to just apply the following rule - all public & civil servants have pay cut of 10%, but nayone with pay in excess of GBP100k takes a 50% cut in anything in excess of GBP100k.
    That shares pain and deals with a large chunk of expenditure in the public sector - it's simple and fair.

  • Comment number 56.

    leng @53

    I hate to be funny about this, and your point is well noted and I agree, but if I were to type with the same clarity, grammar and spelling as you have just now, I wouldn't be able to keep my job. I must say, that is slightly concerning given you say you've had responsibility 'to' implementing at least five white papers.

    As I say, I don't want to have a go, but I do hope that's not the general command of English employed throughout public sector management.

  • Comment number 57.

    54. At 11:22am on 15th Mar 2011, Tancredi wrote:

    "1. I am sick of hearing comparison made with the PM's salary: town house, country house, vehicles, servants, holidays abroad, all free as long as he is PM. Afterwrds millions to be made from public speaking and consultancy."

    Yes, because he's the PM. Are you suggesting that council bosses (for example) deserve higher salaries to make up for the fact that they aren't the PM? Well...I'm not the PM either. Can I have £200,000 a year for my job?

    "2. I think that bonuses should only be paid for exceptional service, beyond the remit of the job, and not built into the system."

    Bonuses can be cut far more easily than salaries can. That's why they're popular, if used correctly - the problem is they haven't been. They do have their advantages, though.

  • Comment number 58.

    When are this governement and all the public sector bashing commentators above going to reallise that, just as was the case with the world banking industry, the public and private sector are also inextricably linked. Yes the private sector pays taxes which cover most of the cost of the public sector. But don't forget those employed in the public sector then pay tax on those earnings effectively giving the money back.
    Then with the rest of their earnings the public sector employee spends;
    a large proportion on a mortgage with the private banking sector,
    then a large proportion in private sector supermarkets,
    then a large proportion in buying, maintaining and fuelling a car etc, etc.
    When the cuts put 250,000 public sector employess out of work and on benefits then the private sector will lose out on many of £m per month of spending, the benefits bill raises by many of £m and the economy then stalls again. Nobody wins!!

  • Comment number 59.

    earth calling planet utopia, earth calling planet utopia.........Just who decided 20 times the bottom pay is acceptable - 9 or 10 maybe, anymore and there is no repeat no justification. "the brightest and the best have no incentive. HA HA HA HA How about 2 million unemployed , incentive enough? And last but not least that catch all phrase of responsibility - tell me who makes the most important decisions, the corner newsagent putting his house and savings up as security to fund a business to feed his family or this surreal level of management in both sectors who know regardless of the outcomes their padded troughs have set them up for life - don't make me laugh anymore please! Let all these high flyer's debunk to Zürich or wherever they think their talents will take them, if they really believe in supply and demand they will know that our public schools are churning out suits that want to sit on a gold plated toilet seat. The fog of self importance just surges on and on and on....

  • Comment number 60.

    You see private companies slashing jobs all the time but do you see the pay of their executives being cut - answer no, they dismiss employees to ensure the company's shareholders dividends are kept high (no doubt this ensures on the Exec's already obscene bonus's) and dumps the employees onto the Unemployed statistics, only for us the Tax Payer then to give them Benefits of some description - so in reality we ( the tax payer) are paying for a certain percentage of this dividend ... can we as a country continue to do this ???

  • Comment number 61.

    45. At 10:52am on 15th Mar 2011, jason wrote

    You didn't see Dispatches last night did you?

    Look up Serco and Capita - private companies, public sector service, yet thier CEs are paid millions - every penny off the taxpayer.

  • Comment number 62.

    And while I'm ranting, how about this for a bonus system as well - DO YOUR JOB AND YOU GET TO KEEP IT! Why are incentives required so that people will do what they signed up for!?????? (unless you are selling on the doorstep of course)

  • Comment number 63.

    I believe that if you make a company alot of money then they are quite within their rights to pay you what they think you're worth. If the person in question works for the public sector then they are answerable to the people who pay their wages, you and me. The thing I cannot understand and can't tolerate at all, is paying huge salaries and bonuses to those that underachieve. The very reason they get paid these sums is because they're meant to be good at what they do. If they aren't they shouldn't be in the positions they're in. Surely rewarding failure is not the right way to do things, no matter what sector you're in?

  • Comment number 64.

    Why is everyone so subsumed with envy ? This is now a national obsession with knowing what everyone else is paid or has in the bank - get over it!
    Everyone gets the same services and state pension but pays differing amounts in tax and NI - and its the taxes that are paying state wages for gods sake !!!!

    People earning £12k pay £1,105 in tax and £691 in NI a year - 9% tax and 6% NI - this is less that the UK minimum wage of £1,138.54 a month !!!! or 15% of earnings
    People earning £25k pay £3,705 in tax and £2,121 in NI - 15% tax & 8% NI = 23%
    People earning £50k pay £9,930 in tax and £4,260 in NI - 20% tax & 9% NI = 29%
    People earning 10x min wage - £137k pay £47,170 in tax and £5,125 in NI - 34% tax & 4% NI = 38%
    People earning 20x minimum wage - £273k pay £114,145 in tax and £,492 in NI - 42% tax & 2% NI = 45% earnings

    13 hospital staff on 25k make the same contribution in taxes to the govt as one 10x min wage manager.. despite earning 5.5x more, each worker takes home 20k compared to the 85k the manager gets (4.3x)

    The only legal barrier to higher paid jobs is relevant experience and qualification - anything else, gender, ethnicity, sexual preference is rightly protected by law so if you are so obsessed with earning more then go and do something about it

    If the 26 million people working in Britain all earnt £25k we would only generate £151billion in income tax and NI a year - not the £250 BILLION (bbc) that does come in - so maybe STOP BELIEVING THE PRESS about tax dodging, stop lambasting those earning more than you, stop bashing bankers and bonuses and be happy you live in a society that is willing to support everyone via benefits and progressive taxation healthcare, education and social services for all

  • Comment number 65.

    Will Hutton has written extensively on the corrosive effect of wide disparities in pay and rewards. The multiples between CEOs and their lowest paid workers has ramped up since since the '90s, firstly in the private sector and then in the public sector. This coalition of the right probably thought that Hutton would provide them with ammunition to further attack the public sector. To use a favourite Cameron word, fairness requires some measure of constraint on executive pay, especially at a time when the majority of the workforce are facing pay freezes, pay cuts, redundancies, short-time working.
    Private sector executive's are payed £millions, not because they are worth it but because they can. I have never seen a CEOs salary increase or bonus reduced or denied by shareholders. The small shareholder may complain but the institutional shareholders(who are playing the same game themselves) always vote it through.
    Remember when Barings Bank went bust, it was sold for a £1 to a German bank. The directors of that failed bank still received their £multi-million bonuses.
    We have never been in this together.

  • Comment number 66.

    58. At 11:34am on 15th Mar 2011, Chippy136 wrote:

    "Yes the private sector pays taxes which cover most of the cost of the public sector. But don't forget those employed in the public sector then pay tax on those earnings effectively giving the money back."

    Which begs the question, what's the point?

    Secondly, that doesn't negate the idea that the public sector is paid for entirely by the private sector and borrowing - just less of it when you take off taxes.

    "Then with the rest of their earnings the public sector employee spends;
    a large proportion on a mortgage with the private banking sector,
    then a large proportion in private sector supermarkets,
    then a large proportion in buying, maintaining and fuelling a car etc, etc"

    All with money that came from the private sector in the first place.

    Thanks for playing.

  • Comment number 67.

    #53
    Totally agree with your statement, it should be an All Party committee that deals with the NHS this would have some continuous plan to run it. The NHS is the "jewel" of our society and needs long term direction. We should never allow the NHS to become a "Political Football" for any party to try and score Political or philosophy points over.

  • Comment number 68.

    The multi million salary, bonus and retirement packages paid to these high earners, can never, in the wildest scenarios be justified or earned.

    If a person is paid a high salary and bonus, this has always been understood to be for hard work, and results that benefit everyone in their area of responsibility and organisation as a whole.

    Clearly this is not the case at present, with these greedy people exploiting their situation as fully as possible in return eg The expense saga !

    I think that all concerned in our failing coalition government, should take a deep breath, stand back and askk just where are we heading ?

    We were promised many things at the election - we have received nothing !

    There is still no credible,believable,achievable , trustworthy " Business Plan " to rescue our deteriorating economy and with the budget imminent then perhaps we should all " Beware the ides of March " - are rapidly upon us.

    There is certainly much much more pain and anguish to come - but as events continue to clearly demonstrate : - The Rich get richer and the Poor get poorer - Nothing changes or will change now !!

  • Comment number 69.

    We hear that civil servants are paid less than their private counterparts but we've heard very little on other benefits and even less on overall productivity.

    While I don't pretend to know all the details of civil service benefits I am confident the average government employee is permitted a far greater number of sick days than their private counterpart. And, to a great extent, those sick days are all used each year. That alone means the average government employee works 3-4 weeks less than a private employee.

    With respect to productivity, I appreciate it is difficult to compare public and private production rates but it is not so difficult to compare hours per week, number of employees to gross revenues and even the establishment of production targets and goals. In all cases I suspect public employees fall well short of private demands.

    It isn't enough to simply measure take home pay packets, we need to know we are getting good value for our taxes. It is time to compare time on the job and productrion rates not just salary.

  • Comment number 70.

    When I take my retirement benefits from my personal pension, if I purchase an annuity and include my wife, my income will be a heck of a lot lower than buying an annuity in my name only. The public sector pension does not take into account the age of the spouse and therefore the liability is almost unlimited. Initial Pension benefits for public sector employees should be based on the employee only, if spouses benefits are to be included, the age of the spouse should determine the level of income to that retiring employee.

  • Comment number 71.

    As the senior public servant in the UK, the PM should be the highest paid. All others, whether they be civil servants or council heads sould get less, although I'd allow them to have less than the PM's allowable salary, given that some PMs haven't drawn all of it.

    That would bring the bill down a bit.

  • Comment number 72.

    ~61
    The answer is easy .. these companies pay their staff buttons to do this work, often these people are the ones which us the Tax Payer give them the form of Tax Credits, because these companies do not pay their staff enough in the first place ...it also ensure that the Companies Investors are given a dividend every year - so once again we the Tax Payer are assisting the Company to make profits ...

  • Comment number 73.

    for the tory,putting hutton in charge of the public sector pay review,is like putting the fox to gaurd the chicken coup.but,after the initial shock is he onto something. he wants transparency in the pay awards along with increases linked to performance
    also a cieling set for pay,surely that is on the right track to fairness, methinks. good ideas on the private sector too.publish and be damed or show your equality to the people,maybe this will help in bringing back some respect or shame,to the powers that be.well at least it's a start....

  • Comment number 74.

    The top end of the private sector is desperate NOT to have any moral accountabiltiy to the community and societies they exist in.

    Whilst no-one is suggesting big business should not be permitted to make healthy profit. They refuse to understand that in our existence the human 'soul' balkes at immoral levels of pay and remuneration in a sea of struggle.

    Why, of why will these big institutions give honest transparent information on executives pay?
    Only one conclusion - they would be ashamed of the true figures.

    Is there a case for a campaign to avoid, boycot or otherwise fill the media sphere with true PR that shows them in a fair light (ie. immoral)?
    Oh I forgot - the main media sphere is already controlled by the brainwashed.

    Perhaps if we show that greed is becoming more unacceptable and more on a par with international arms dealers.

    NO - to fractional credit banking
    NO - to greater than 5 to 1 leveraging
    NO - to secluded data wielding

  • Comment number 75.

    The notion Hutton puts forward is right. However, it is sensible to define what the earnings of those at the top of the organisation are relevant to the general cohort.

    This would clearly evidence companies whose Directors earn more than the majority are worth.

  • Comment number 76.

    "Hutton wants brighter spotlight on bosses pay" is the title of RPs blog.

    There has been an increasing attack via government and media on public sector workers.

    Let's not forget that public sector workers pay income tax, Council Tax, NI and spend in the private sector, just like anyone else. Many private sector jobs rely on public sector spending too.

    To those who bang on about the private sector supporting the public sector - get real? The symbiotic relationship between all 'ordinary' people employed in any occupation, whether private or public, are inter-dependent.

  • Comment number 77.

    As mentioned on BBC2 Newsnight last night, the pay of private companys directors etc who take over public services is not even mentioned by government when government Ministers attack public sector management employees.

    AS reported last night on BBC2 Newsnight outsourcing companys like SERCO & Capital run a lot of public services and make vast profits via essentially paying slave wages to ex-public employees who are sacked & then the only hope for work is by taking pay cuts & working for these companys. The top directors earn £millions in salarys and bonuses etc for basically doing public jobs which this government is attacking high earning public employees.

    I have been "really really" angry at receiving so many "threatening" and "bullying" letters each year to pay BBC licence fee, especially when I always pay long before its due. I even at one point was a year and 4 months in advance and "still" received a "tirade" of payment reminders and what will happen if I do not pay.

    It is thus NO coincidence that I learnt last night via BBC2 Newsnight that BBC licence fee is run/operated by Capita.

    I have had dealings with Capta previously, demanding payment for a credit debt which was long paid and they just wouldnt accept it, even though I provided over the phone the details which they could and did verify over the phone but they still continued with "scripted" demands & wanted me to contact in writing and provide loads of evidence.

    As with so much government statements of party political "propaganda" moral intent, "little" moral improvement "if any" will come of this because its standard proceedure to "smash, bully and attack" lower paid workers into accepting LESS than "any" such similar action taken against the upper hierachy of public or even private executive management office.

    This, is basically just a pretentious propaganda experiment and will come to little/nothing and is just a pretentious deceit which is being used to further justify attacking, bullying lower earners who will ultimately be the ones who "suffer" declining wages and entitlements.

    In so many similar "previous" instances, even in government/MPs etc, top hierachy have taken a slight knock in salarys, but ultimately these have been "more than fully clawed back" by future rises/increases, which resultingly and evidentially/factually helped to create even great imoral disparity of earnings between lower & top hierachy.

    There is this standard proceedure which enables bonus payments etc by doing "nothing".

    It's by circumstantial outcomes which create a natural decline of standards or whatever & then upper hierachy gain huge bonuses etc when the natural balance re-bounds and thus creates that which kicks in bonus payments.

    It's a ploy which has been "fully" utilised in banking and even British Airways and many other companys.

    Due to economic recession, income has dropped for many companys, and many of these have demanded lower wages etc from lowly workers, such as pilots & cabin crew & others etc.

    Thing is, income will "naturally" increase just as the recession reverses and more people can afford holidays etc. But top managers/directors/executives have adjusted their salarys so that these "natural" rises will result in them receiving "huge massive" bonus payments and £millions in shares etc, even though they have done "absolutely nothing" to earn them, and other workers will remain on lower wages with NO prospect of such massive rises to bring them back to previous levels of earnings.


    Just look at the "differences".

    Top hierachy so often state, and those who support them, that they could simply "withhold their labour" and just walk away and go elsewhere if they are not continued to be paid "obscene" and "imorally" high salarys & bonuses.

    LOL

    As a result/consequence of attacks and damage to lower and even medium earning workers wages and resulting in lost jobs lost jobs resulting in threats by "unions" to withhold "their" members labour, unlike government actions against bankers and high executives, all government does is "threaten" to "impose" new laws and regulations to "prevent" and "restrict" ordinary workers from withholding their labour.

    Lets have a look at the factual reality.

    Unions were previously quite out of hand, making demands and threats and constantly striking beyond reason and threats/damage to our nations economy, but the factual reality is that now it is the upper management who make such threats, especially banks and international businesses who basically relatively act like pirates. They don't mind relatively keel hauling the lower ranks and in any event of rebellion they can simply just jump on a plane & escape with their "pieces of eight".

    Whereas it was unions holding the UK to ransome, "NOW" it is the upper hierachy elements of both private and public entitys.

    We have factually come in a full circle and UK is now more like 19th century Britain than with an advanced moral and more fair 21st century.

    Evolution of moral justice and fairness in UK is long dead. RIP

  • Comment number 78.

    The problem that is sneaking by quite nicely at the moment whilst you all bicker amongst yourselves is that the young people of today are reading into these stories on a daily basis.
    If you were a talented young graduate coming from university at the moment armed with a Phd or similar would you even entertain the thought of working in the public sector. I certainly would not, especially with the constant hammering it seems to be getting from disgruntled private sector workers and the government itself. This in turn means that no one with any talent will end up working for/running the public sector. I have friends still at university and when asked if they would work in the public sector they chuckle and say I must be joking. The word has got out that anything public is 'the' job to avoid, especially with many lucrative private sector options available both here and abroad. The pay is rubbish, the pension is about to be destroyed,the flexi options are a joke (just an excuse to work more unsocial hours for 'no' benefit),even on call has just taken a hit and is not worth doing - though sadly you are forced to. Public sector work is now the most unattractive option to the young people of today which will leave us in an eventual dilemma as who will take the reigns when no one wants the job?

  • Comment number 79.

    There needs to be a common sense check and this report is not it.

    There is absolutely no need to pay senior public workers the size of salaries they are paid.

    Many public organisations are monopoly buyers and many of the senior executives have much lower transferrable values outside of the public sector. So why do we pay them so much.

    I believe it is partly through the fallacious belief that senior public workers should be paid comparably with top private sector executives. This idea was humoured and encouraged by the last government but it has very little economic merit.

    Clearly Hutton's report does not challenge this underlying and misplaced rationale.

    Unlike the recent report on pensions by Lord Hutton, this report is a waste of time and completely misses the basic economic point.

  • Comment number 80.

    76. At 12:10pm on 15th Mar 2011, corum-populo-2010 wrote:

    " Let's not forget that public sector workers pay income tax, Council Tax, NI and spend in the private sector, just like anyone else."

    Yes - with private sector tax money. That's the bit you're not getting; the money is taken out of the private sector, put into the public sector, then spent back in the private sector. All the taxes paid came from the private sector in the first place, so it's an irrelevance - the public sector isn't doing a favour to the private sector by spending its money for it.

    Again, this is not to say the public sector shouldn't exist, and doesn't provide valuable services - it does. The problem is it is entirely reliant on tax money and borrowing, so it has a limit to how large it can become. We've hit that limit hard.

    "To those who bang on about the private sector supporting the public sector - get real? The symbiotic relationship between all 'ordinary' people employed in any occupation, whether private or public, are inter-dependent."

    Sorry, that's just not true as much as you'd like it to be. For a pregnant woman, the child's life is dependent on the mother - but not the other way around in normal circumstances. The public sector is reliant on the private sector, but the private sector does not need the public sector in the same way. The public sector can help the private sector in improving the health of the labour force (for example), but it is not reliant in anything like the same way.

    The public sector improves welfare, and that is its main goal. That doesn't make it reliable.

  • Comment number 81.

    64. At 11:44am on 15th Mar 2011, J wrote:

    13 hospital staff on 25k make the same contribution in taxes to the govt as one 10x min wage manager.. despite earning 5.5x more, each worker takes home 20k compared to the 85k the manager gets (4.3x)
    ........................

    Which only serves to prove the contempt that the 'establishment' have for lower paid workers in terms of pay levels and how excessive are the privileged payments that are made to themselves... if only in terms of disparity.

    No wonder Hutton, himself, does not ... 'Get It'

  • Comment number 82.

    Why does the private sector get pulled into every review of the public sector? The private sector is just that, and it is the shareholders that the bosses answer to. These people work for the company, the shareholders, not the public – but their pay must be reasonable and not excessive (however not all bankers are earning millions and the public sector need to look at average pay and perks excluding the the top 5%)!

    Let’s get one point clear. The public sector bods keep going on about how they could earn more in the private sector so they deserve what they get....well if you can earn more in the private sector why don't you go and work in it?

    I am expecting responses along the line of serving the public and wanting to add to the community...rubbish. Those in the public sector who can earn more in the private sector do move.

    The reason why those in the public sector stay and not move to the private sector 'where they could earn more' is because that is a total LIE.

    There are very few jobs in the private sector that would pay as well, let alone better as the public sector. I believe Mr Preston has already reported recently that if the private sector worker wanted a pension pot like the public sector worker their individual fund would need to be £250,000! That is without talking about all of the extra perks like 12 months maternity leave, holiday, bonuses....all without being that answerable for their performance and having job security.

    Lets get honest over public sector pay....it is so out of control in 30 years time will are going to have a two tier community. Those who worked for the public sector with higher average earning and gold plated pensions and then the rest of us with did not earn as much and could not afford to save for a pension as out taxes were out of control having to pay for the public sector pension liabilities!

    Get real. This is what we need to do with the public sector.

    10% pay reduction for anyone earning over £45k
    25% pay reduction for anyone earning over £100k
    IMMEDIATE implementation of the Hutton report of average salary pensions with a cap of £15k A YEAR.
    Pension contribution increase of 4%.
    Immediate implementation of perks such as 12 months maternity leave to apply to the private sector.

  • Comment number 83.

    62. At 11:42am on 15th Mar 2011, mr beige wrote:
    And while I'm ranting, how about this for a bonus system as well - DO YOUR JOB AND YOU GET TO KEEP IT! Why are incentives required so that people will do what they signed up for!?????? (unless you are selling on the doorstep of course)

    ======================================

    So, do you agree that bankers & stock/investment gamblers who work for banks and the top hierachy of executive management should also be "grateful" for their jobs & not moan & threaten to abandon their position if threatened with pay/bonus restrictions or does your comment just imply that lowely underdogs should be grateful for the odd choccy drop and bare bones with a bit of marrow inside, dropped down from the top hierachy table of greedy gorge-ers.

    The human species is driven by incentives and has been for many many thousands of years.

    The main incentive is to increase prosperity to enable and increase ability of survival and maintain existance.

    From gathering more nuts than were needed in a feeding session and burying them/storing them to growing/harvesting more crops and collecting more firewood than was imediately needed.

    Incentives are the MAIN driver of human evolution and existance.

    The rewards of incentives are huge. Even in old times if you collect firewood for 2 days, then you do not need to collect for the 2nd day, hence incentives also create and provide much greater freedom.

    The "more" money you have, the greater your freedom, the less restrictions to choice and travel and even greater affordability and access of health/medication etc.

    Incentives are an "endemic" part of human nature.

    The incentive of education is to achieve greater income and status.

    The incentive of less waste & polution is to implement a more healthier and sustainable environment.

    DONT "dis" incentives, because they are a main driver of human existance and evolution and should NOT be restricted to just those at the top of the attrociously imoral hierachy pyramid system which the whole world economic and financial system is based upon.

  • Comment number 84.

    As per Dispatches we are heading inexorably for public services oligopoly between Capita, Serco and G4S. Instead of paying £200,000 for a council chief exec we can pay for CEO share options and bonuses instead. Look forward to emerging efficiencies of fewer people being paid less to do the same amount of overall work - result, piles of rubbish, no-one answering council phones, schools not getting maintained etc etc.

    But heh, just keep chanting Public bad Private good Public bad Private good (you've got the hag of it)

  • Comment number 85.

    This morning on BBC Breakfast Will Hutton claimed that Public sector Managers are often paid 1/2 that of the equivalent in the Private Sector.
    So lets look at the example of the Council chief of Suffolk,a fairly quite part of the country who earns £245,000/year and let's presume she has the qualifications and appropriate management skills to do the job.
    Now let's double it to £490,00/years which Will Hutton claims the equivalent of the Council chief in the Private sector earns.
    Outside the banking I would like Will Hutton to give us 2 or 3 examples of what these Managers in the Private Sector,and which sector, do for their £490,000/year and indeed ascertain whether it is equivalent or not

  • Comment number 86.

    I think public sector bosses should have their pay capped in exactly the same way as the bosses of the outsourcing companies they have to use have their wages capped. The more you don't hit targets, the more you get paid.

  • Comment number 87.

    Hutton is off track if he thinks going into bonuses or de-bonuses is the correct way forward.

    Why complicate a very simple matter. Senior public sector workers are paid too much. Simple as that.

    There is no economic or market justification for comparing their pay with senior private sector executives. I speak from experience as a private sector manager that most 'executives' in the private sector don't receive anything like the salaries paid to even middle ranking public sector execs.

  • Comment number 88.

    The fundamental flaw in Hutton's proposals relates to bonus payments/"earn back" related to performance targets. Unlike the commercial sector, where performance targets can be relatively easily measurable, in the public sector, esepcially at senior levels, this is more difficult. There are several risks: 1. target setting: targets are easily achievable, so everyone gets a bonus. 2. nature of targets: only measurable targets are chosen, so performance is distorted to achieve those targets, which may not be the most important part of the job. 3. measurable targets: how do you measure performance in advising Ministers or managing your immediate juniors? This comes down to opinions & value judgements, which by definition are opaque. Who takes those decisions anyway? If you are the Permanent Secretary in the Ministry of Silly Walks, presumably the Secretary of State would take the decision. But (a) does the Secrettary of State know enough about the management of the next level of staff (or about management at all?)? And how keen will the Secretary of State be to deny a bonus to the person on whom he/she relies for advice? Years of target setting have shown some improveemnt, but when serious money hangs on the achievement of targets, the pressure on to achieve them is immense - and there is ample evidence to show that inappropriate targets are chosen largely because they are measurable and performance distorted to meet them. For example, if achieving a particular project by a particular date is my target, I'll do anything to achieve it, possibly at the cost of decent management of my staff (coaching, advising, etc) because that can only be subjectively measured & isn't therefore part of my performance target. I'm oversimplifying, but you can see the point. There is virtually no evidence that performance bonuses have had any effect on improving overall performance in the public sector for 3 reasons: 1. for most people they are far too small to make a difference 2. the negativity from those who fail to get a bonus outweights the muted pleasure of those who get one and 3. it fits badly with a culture of serving the public & the public service ethos generally.

  • Comment number 89.

    66. At 11:46am on 15th Mar 2011, Marnip wrote:

    "Whats the point?"
    You make my point beautifully, thankyou.
    You cannot separate public and private sectors.
    The majority of public money is spent on salaries. Of those salaries the employee is then taxed for income, NI, VAT, fuel duty, council tax etc to the tune of circa 35% (as with private sector employees too). This means the public employee effectively gives 35% of their salary back to their employer, the state. Again, as you say, what's the point?
    Philosophically there isn't one just as philosophically whats the point of you, me or bees, for that matter. We are alive, and the only point of life is to make more of the same, life! But whilst alive we are best filling our time, as with bees, in a cohesive, cooperative society. Our cohesive, cooperative society needs teachers to nurture the young, nurses to tend to the sick, police to tackle the wayward. In short the public sector which has to be paid for by taxing everyone.

  • Comment number 90.

    The key problem with boad-room pay and bonuses is that there isn't much downside to it.

    Now if we had a system where every company employee* who earned more than, say, £1m had his name entered into a computer program, and the computer randomly selected one name every month and handed it to a state-sponsored assassin, this would even up the cost-benefit equation considerably.

    I know it's probably too much to hope for, but it has a certain appeal, don't you think?

    * Note that I say 'company employee' specifically to exclude company owners who have created enormous value, and also novellists, sportsmen, film stars, etc, who generate their income from pleasing people. Obviously we'd need to set the inclusion conditions quite carefully to catch the undeserving rich.

  • Comment number 91.

    What everyone has overlooked is that during the past few years public sector "fat cat" pay has rocketed. Some of them have had pay rises of around 70 per cent. What have they done to deserve it?

  • Comment number 92.

    So why not cap it at ten times the average rate instead of twenty?!

  • Comment number 93.

    Ever heard the phase '(s)he's worth ten of you'. I've never thought everyone should be paid the same, otherwise there is no incentive to get qualifications and work hard. But a factor of 10 should be enough incentive. I reckon the idea of capping public sector pay at £140 000 or about what the prime minister gets seems sensible - its a bit over 10 times the minimum wage for a 40-odd hour week. I'd also cap payment to consultants/lawyers etc that the tax payer pays to that amount too.

  • Comment number 94.

    #79 Bradford makes a common point - but what he fails to understand is that successive Governments wanted to open up senior posts in the public sector to competition with executives from the private sector. If you set up an open competition for a post - say of Finance Director in a local authority - you will have to set pay at a level that will attract suitable private sector candidates. However, if someone from the public sector applies & is the best candidate, they have a reasonable claim to be paid at the level at which the post was offered. The dirver of these pay increases has been almost entirely this determination by all recent Governments to bring private sector executives into the public sector. This was (a) to improve effectiveness & efficiency and (b) to acquire skills which the public sector lacked, (e.g in the Civil Service in finance, HR, IT, programme management). But these skills don't come cheap. But there are public sector skills that are actually difficult to replicate in the private sector. the number of private sector imports who have been successful policy advisers to Ministers, for example, can be numbered on the fingers of one hand. Though I entirely accept that it is we taxpayers who are paying these salaries, if senior salaries aren't competitive, good graduates won't join the public sector - and if you don't think it's much good now, see what happens when you pay peanuts & attarct only monkeys. (In fact the public sector has had to put up with the meddling of politicians for 20 years in a form of maoist revolution which means they have been swamped with initiatives/transformation/change/modernisation/etc programmes every 18 months on average, most of which have had virtually no impact on the service which they provide to the public. Virtually all are dedicated to serving the public & getting good value for the taxpayer. I fear that we take the probity, professionalism & dedication of our public services almost wholly for granted. Too many people just see cost and not value.

  • Comment number 95.

    With failing public services, what have the "fat cat" bosses done to deserve pay rises of around 70% over the past few years?

    Little wonder that the majority of the electorate choose not to vote.

  • Comment number 96.

    People in the private sector can earn what they like. They create wealth so fair enough.

    However...public emplyeees are cosseted and ergo not exactly in the real world, and I pay for them. That includes the banks owned by the taxpayer.

    They should not be earning (sorry, I meant "getting paid") anywhere near the money they are doing.



  • Comment number 97.

    Hutton is clearly in a different economic reality to most British people.

    It's like New Labour and their complete lack of understanding of money, where it comes from and its value.

    As a taxpayer I despair.

  • Comment number 98.

    #2. At 00:51am on 15th Mar 2011, openside50 wrote:
    problem being its the productive private sector that pays the wages of the public sector not the other way round

    its public sector pay and public sector expenditure (lets not even mention public sector pension liabilities) that is the cause of the deficit, its that area that needs spending capped

    ----------------------

    Why do so many people think that the Private sector is automatically productive where the Public sector is not, as this is simply not true.

    Just one example: Doctors and Dentists treat patients both on the NHS (Public Sector) and in Private practice (Private Sector). More often than not they are the same people. Does that mean they are more "productive" in Private practice than on the NHS - I don't think so. I would suggest that in this case the opposite is true.

    Also while spending in the Public Sector was high and went some way to causing the deficit we now have, bailing out the Banks following the crash in the Banking and Finance Industry (Private Sector) which caused the recession worldwide, also had an effect on the UK deficit.

  • Comment number 99.

    If public sector bosses could earn so much more in the private sector, why don't they move?

    Just sayin'

  • Comment number 100.

    The justification for local authority CEO remuneration based on budget is bogus. Basically CEO's manage the board which should be responsible for strategic decision making to determine future service provision.

    Most local authorities have similar portfolios delivering similar services. Whether the board is planning and delivering services to 100s or 1000s of service users should not matter. The only difference is scale not difficulty and therefore salaries for CEOs and senior managers should be more or less flat across the country.

 

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