Bernard Ingham: We must shed light on the murky business of bonuses

SO the Government is to take a hard look at its bonus schemes. This reminds me that in 1966 I produced a plain man’s guide to payment by results (PBR) under the tutelage of Professor Hugh Clegg, the celebrated industrial relations expert.

It was published by the old Prices and Incomes Board, for whom we both then worked, and secured a wide circulation. PBR was then as problematical for the Government’s restrictive incomes policy as executive bonuses are today for the concept that “we are all in this [the economic mess] together”.

Even to this day, I retain three clear principles about PBR schemes – define clearly what you are paying for and how much; you don’t pay something for nothing; and never forget that PBR schemes decay with age.

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About 20 years later, I came to be partly paid by one. During the Thatcher years, it was decided to motivate civil servants with filthy lucre. Superficially, there was a perfectly reasonable case for it. Some civil servants undoubtedly earned their keep far harder than others.

In my old Department of Energy, for example, there was no comparison between the workload and wear and tear on the under-secretary responsible for the coal division, with Arthur Scargill around, and me as head of the energy conservation division, trying to persuade you all to save energy.

Let’s reward the tough jobs.

In No 10 they decided that I, as chief press secretary, ought to be incentivised. So I was given a bonus, subject to annual review. I have no recollection of how much it was – so it wasn’t much of an incentive – or what it was paid for unless it was for not falling asleep on the job. They kept paying it until I retired.

They might not have bothered because in those days the chain of command was clear – my name was on it – and my performance was subject to twice-a-day scrutiny by political correspondents and round-the-clock criticism by Tory MPs who always blamed presentation when things were not going right.

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Some of them would not have paid me in washers while I wondered how the hell they had ever got selected as candidates, let alone elected as MPs.

In short, my No 10 incentive scheme broke every PBR rule in the book. This brings me to the Government’s pre-occupation with public and private sector bonus schemes. None of us knows what they are being paid for, though every week we see eye-wateringly high rewards.

We haven’t a clue whether we, as taxpayers or as private sector shareholders, are paying people for something they don’t deserve.

It most certainly means that we have no idea whether, over time, rewards have become at best loosely connected with performance or at worst just routine handouts.

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Crucially, it also means we cannot measure whether the reward is commensurate with the return. Put more brutally, we have no means of knowing not just whether the bonus scheme is worth the candle but whether the benefits – savings, profit, orders, jobs etc – secured by the person receiving the bonus are being fairly shared.

Current bonus schemes are all too often a cosy, clandestine arrangement between the well-heeled, which the poor bloody infantry are expected to fund.

But that is not the worst of it. The very obscurity of these so-called PBR systems encourage lavish rewards in the City and generally the widening gap between average employee and executive pay.

They are further confirmation that cost control in the public sector is rudimentary and that rewards in the private sector have lost touch with responsible management that accepts some obligation to the society in which it operates.

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I am as surprised as I am depressed that the Commons’ Public Accounts Committee has not so far been noisily gnawing at this bonus bone. But since it hasn’t, I had better tell you what I would do about it.

First, I would require the criteria for and amounts of every bonus to be paid by the taxpayer to public servants – local and central – to be registered publicly with Parliament and audited annually by a special all-party Parliamentary (Lords and Commons) bonus review committee.

Second, I would require a similar public register to be kept by private companies for shareholders, plus independent monitoring.

Only then would I expect the lessons I learned about PBR in the Prices and Incomes Board to bear fruit. Forty-five years of paying taxes is a long time to wait before knowing whether you are getting value for money.

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