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John O'Connell: Taxpayers cannot afford to pay these massive salaries
THE outlook for pay in the public sector is bleak. The European Commission says Britain has the second highest budget deficit in the EU, which isn't just a temporary result of the recession: public sector borrowing has sky-rocketed and will continue to do so according to Treasury projections. Public expenditure will have to be cut to help correct the deficit.
The severity of the crisis means that there will have to be tough deals for public sector workers. The TaxPayers' Alliance advocated a public sector pay freeze and a cut in executive remuneration in a recent report with the Institute of Directors, How to Save 50bn. We saw all parties gravitate towards these proposals during the party conference season, with a particular focus on reining in executive pay. George Osborne promised that under a Conservative government anyone who is to earn more than the Prime Minister will have to have their pay signed off by the Treasury. More recently, Harriet Harman blocked the proposed remuneration package for the new boss of the now infamous Equality and Human Rights Commission. Vince Cable, the poster boy of the financial crisis, has said that pay restraint should start at the top.
The TPA's Public Sector Rich List 2009 will help to inform this debate. As we limp out of recession, our comprehensive audit reveals that last year at least 806 public sector executives earned more than 150,000. Our recent groundbreaking work on the semi-autonomous state – read quangos – has helped to facilitate a bigger survey than ever, but nonetheless the estimate is still a conservative one.
The executives in this year's list managed a 5.4 per cent pay rise, which is particularly pertinent when frontline workers across the public sector face having their wages frozen to help ease the public debt. In Yorkshire, chief executives at two NHS Trusts received pay rises of 7.6 and 8.2 per cent respectively. The chief executive at Yorkshire Forward – the regional development agency charged with improving economic competitiveness – enjoyed an increase of 6.2 per cent.
Reining in this culture of guaranteed pay rises and bonuses among public sector executives is an enormous task, but one that must be tackled head-on, now. Our Public Sector Rich List is the only document that collates high earners in the public sector, and one gets the distinct impression that no politician has a grasp on the true extent of top brass pay.
Sometimes public sector officials deserve to be well paid. Yet the taxpayer – the shareholders in the public sector – must be in a position to judge this for themselves. Too often they are unable to.
The murky grey areas of the semi-autonomous state mean that quangos decide the pay for their staff. In fact, it is usually decided by small committees, which sometimes involve the executives themselves.
They will say that they have to be involved in setting pay for the rest of their staff, but the process is devoid of any regular, robust parliamentary or public scrutiny. Too many bodies simply get a free hand, while Ministers can point to their "arms-length" nature in order to deflect any blame. It seems that to tackle pay, politicians will have to get to grips with the size and scope of the state itself first.
This year we've include the executives from the banks who have come under state control, namely RBS; Northern Rock; Lloyds; and Bradford and Bingley. The TPA was able to gather information on 30 individuals from these banks but one suspects there are a few more that could make our list.
We've also recently heard about the 1.5bn bonus pot at RBS. It is unjust that a bank that had to be rescued by the public now sees fit to continue paying the bonuses of the good times.
The state-controlled banks have to show more discipline and humility; handing out big, taxpayer funded cheques to bankers will not speed their recovery, nor hold them in good favour with the public. This bank needs to move as quickly as practically possible back in to private control and at the least expense possible to the taxpayer.
The next Government's main priority will be tackling the fiscal crisis. To do this, returning the banks to private ownership and getting tough with executive salaries have to be major parts of a more detailed plan.
Whether you're a banker or a quangocrat, taxpayers cannot afford to pay these massive sums, and it would be wrong to demand restraint from ordinary workers while those at the top get richer.
John O'Connell is a policy analyst at the TaxPayers' Alliance.
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