The future of the public sector has become a tale of two Huttons. Last week, John Hutton
disclosed his pension plans and today Will Hutton’s submitted his final recommendations on pay. He makes six substantial points.
1). He has resisted calls to link senior public sector pay with the Prime Minister’s. He told broadcasters this morning: “I think the Prime Minister’s is a completely arbitrary salary. He took a pay cut in the first place and there’s no shortage of people coming forward to be Prime Minister. There’s no problem of recruiting and retaining a Prime Minister. If you’re trying to hire someone to do child protection services in Haringey… You have to pay to get the talent and if you want child protection done well then you’ve got to pay the skilled people to do it.”
2). Rather, he emphasised the need for the public to understand why officials are so well remunerated and see why. He wrote in the Guardian: ‘There needs to be a new settlement between the leaders of our public sector and the taxpayer – a recognition that good work deserves good rewards, but similarly bad work deserves penalising. And to do all this there has to be a radically new framework in which senior pay is explained and justified. There needs to be a charter for transparency and embrace of performance.’
3). He has resisted temptation to cap pay multiples, saying that it would counter-productive to the cause of fairness. He argued: ‘Although my starting point was to look at capping top executives’ pay at 20 times the lowest-paid person, I came to the view that this simple ratio, which looked like introducing fairness, paradoxically produced the opposite. Large and complex organisations might have lower pay at the bottom than simpler ones – so you could end up with the top executive in the bigger organisation earning less than his peer running a smaller one. Every manager would be affected, and the bigger organisation unfairly penalised. Arbitrary caps make no sense.’
4). But examining multiples does have its uses. Transparency in this regard would show how specific organisations were changing over time across the whole public sector. He said: ‘But pay multiples remain a great way of monitoring and tracking what goes on in organisations over time; if they rise or fall they are a signal of pay developments that need explaining and justifying. I propose that every public body in Britain should annually publish the multiple of the pay of its chief executive to the most representative worker – the worker whose pay package is in the middle or the median. On top the senior salaries review body should annually collate these reports into an annual fair pay report. Any citizen in the UK could then see what any senior public executive earns, how it is justified and make comparisons.’
5).Performance related pay in the public sector has been a goal of successive government. Hutton says that bonuses should be replaced with an ‘earn back’. He explains: ‘ Every public sector leader – and the leadership team – should place at least 10% of their base pay at risk to be earned back by meeting performance targets. If they want to be entitled to any bonus, they should place a similar proportion of their base pay at risk – no better signal that they are committed to performance.’
6). Finally, he suggested that pay in the private sector by subject to the same scrutiny: ‘Nobody should object to high pay if it is genuinely deserved. The public sector – crucial to our civilisation, to economic growth and social solidarity – needs to embrace a framework that endorses such principles. Let the spotlight then turn on the private sector. Fairness, after all, is a universal principle.’
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