Review of bonuses in public sector launched

Treasury Chief Secretary Danny Alexander and Cabinet Office Minister Francis Maude have written to all Government departments asking them to examine their reward structures.

The process is intended to ensure that in future only “genuine excellence” is recognised, after it emerged that up to a quarter of officials automatically qualified for payments.

The move comes as the Government prepares to authorise payouts expected to be worth more than £500m for bankers at RBS.

A public outcry has already forced chief executive Stephen Hester to waive his £963,000 bonus, while Network Rail bosses also recently gave up entitlements.

Mr Alexander said the review would ensure there was no suggestion of “rewards for failure” in publicly funded bodies.

“The idea is to look at the levers government has, to make sure that the remuneration rules are fit for purpose and command public confidence,” he said.

“This is not about getting rid of performance pay. It is about making sure that performance pay is there for genuine excellence and not just run-of-the-mill performance.”

The process is likely to lead to fewer, smaller bonus payments at bodies with some element of public ownership, such as Channel Four, Royal Mail and the Met Office.

It could potentially also lead to changes at the BBC, which is currently seeking to appoint a director-general to replace Mark Thompson.

“The departments will need to apply their own judgment on which bodies to include in the audit but where in doubt, will need to include bodies that are likely to attract public comment.”

Deputy Prime Minister Nick Clegg said: “What we’ve said is there’s a number of organisations and quangos which aren’t actually part of the Government but they do nonetheless rely on money from the public purse.

“I think it’s quite right for us as a Government to say this is public money, this is taxpayers’ money, and we want to make sure the way people are paid in those quangos, in those organisations, in those arms’ length bodies, is done to the highest possible standards.”

He added: “I don’t think anyone would be shocked with the idea that if you do a good job you get a bonus.

“I think what people really find unacceptable and I do too, is the idea of huge rewards for failure or for just basically doing a normal job.”

Prime Minister David Cameron’s spokesman said: “It’s a perfectly sensible thing for the Government to do, to look at the arrangements in place for arms’-length bodies and make sure they are the right arrangements.

“Clearly there can be opportunities for changing these arrangements.”

Comment: Page 10.