Apr 2009 09

Grasping The Public Sector Pay Nettle6


Thick gloves required

We've blogged public sector pay many times, including the issue of those portly moggies snuggled up in Town Halls and quangos throughout the land.

This week the TaxPayers' Alliance published the latest Town Hall Rich List. Despite our slumping economy, the number of council officials earning more than £100K pa has increased again, to 1,022. And that excludes the value of their index-linked final salary pensions.

We've also just had an extraordinary insight into the staff bonuses now routinely paid by many of these same councils.

According to C4 News, the top bonus paying council is Birmingham, which last year shelled out nearly £10m on them. And C4 almost got an answer to the age-old question of how many council workers it takes to change a light bulb – Sefton Council apparently paid a £21,000 bonus to a highly productive "senior lighting operative". Nice work if you can get it.

As BOM readers will know (eg see this post), public sector bonuses are an expensive farce. Across the whole public sector, we reckon they cost us well over £1bn pa (5.8m employees with an average bonus of c£200 pa). And it's £1bn down the drain.

Because unlike bonuses in the private sector (which can have their own problems – as we've seen), public sector bonuses cannot be linked back to some clearcut measure of success like profit. Instead, they are paid out on the basis of individuals meeting one or other wibbly set of Commissariat targets. Such targets rarely have anything to do with satisfying customers (for a classic example, see this post on the £36,000 bonus paid to the head of the dysfunctional Learning and Skills Council; he got the money because he had supposedly "met all his objectives"; yet last month he suddenly "resigned" for running an organisation so hopeless it's managed to bankrupt half our further education colleges).

Still, the landscape is changing. When the TPA first started scrutinising public sector pay, it took no end of flak for picking on people who are supposedly poorly rewarded relative to the private sector. But with private sector pay now heading down, there is an increasing demand that public employees should share the pain (eg see Camilla Cavendish in yesterday's Times).

Let's remind ourselves of some facts. The story up to last April (the ONS's latest Annual Survey of Hours and Earnings) was that overall public sector pay compared well with the private sector (figures relate to full-time gross pay, including bonuses):

  • Average pay – £582 per week in the public sector, compared to £574pw in the private sector – so the public sector was marginally ahead
  • Median pay – £523pw public sector, compared to £461pw in the private – so the typical public sector worker was 13% ahead
  • Pay increase since 1997 – median pay in the public sector had increased by 49.6%, compared to 48.8% in the private sector – so once again the public sector was marginally ahead

But that was only up to last April. Since then, the public sector has stormed ahead. Here's a chart showing the astonishing increase in average public sector earnings relative to private sector earnings over the most recent 12-month period:

The reason for the increase is that while private sector earnings have gone down by over 1% – reflecting pay cuts and the shredding of bonuses – public sector pay is still merrily bounding ahead by an average 4% pa.

And it's no good arguing (as eg Polly Toynbee does – see here) that this is simply correcting for some longer-term public sector shortfall built up during the boom. We can see that by looking at the same chart stretched out over the last decade:

So overall, public sector employees did not fall behind during the go-go years.

Yet now, their earnings apparently remain immune. The pain is all being heaped on the private sector.

No wonder people are talking of "pay apartheid", and calling for Labour's three-year public sector pay deals to be reopened: with the country facing an unprecedented squeeze, this is an unfairness too far.

Taxpayers should insist on these deals being renegotiated. With the public sector pay bill running around £160bn pa, a 2-3% pay uplift costs us £3-5bn. And it's cumulative – after three years, the additional annual cost is running at £10-15bn. Or 3-4 pence on the standard rate of income tax.

It's yet another nettle for George Osborne to grasp on Day One.

Let's hope he's got thick gloves.

And let's hope he and David Cameron have got A Plan for dealing with the inevitable public sector strikes (see this post).

Related Posts

  • Hardeep Singh

    As people are loosing their jobs by NO FAULT OF THEIR OWN along with the frightening threat of eviction does the public sector think that those people are grateful for bloated public services? That would be the last thing on their minds. What’s needed is for everyone to pull together after all we live in an integrated society/economy and what someone else does or doesn’t affects everyone else. The public sector needs to embrace a more pragmatic approach with a little less of the political posturing, the nation simply can’t afford it.
    I note Mr. Denham’s usual article par excellence (did I spell that right?) but must emphasise the point of employee attendance which seems to be missing. It’s no good coming in late and leaving early as I rightly observed when our company had to share an office building with the local council for just over a year. They talk about increased bank regulation yet the public sector has almost none, why? How can that be justified? Why can’t we cut the burden of non-jobbers in the public sector payroll most of them are just not good enough I really cannot understand how they get hired in the first place. Once again it’s real money, if only you could visualise the respective homes in that area that fund individual posts, I wonder who you personally fund?
    Strikes are inevitable after all the public sector is a union stronghold and what else can a union do other than issue a call to walk out? I doubt they’re interested in productivity or better service for the paying public. According to the union only their members are hard working individuals are unclassified because they’re not members. The only other industry I know of where you get no say in a service you don’t want nor require is a protection racket run by mobsters. Just think about that for a moment not so far fetched is it. Now revert back to the poor hapless person having lost their jobs and the feeling of dread and horror at facing their family that evening, the look in the eyes of their children old enough to barely grasp the gravity of the situation but young enough to be frightend. Do you think that parent/guardian is going to be thinking “at least we still have the oversized public sector even though there’s a threat of loosing my family”. For too long the phrase set in stone was the cold hearted right, the misery merchants (anyone who’s not Labour) and now that things are happening for real and not in idealogical coo-koo land everyone can witness how arrogant and self appointed the so called caring left really are. People loose their jobs yet the fat porkies in public sector quangos and local government couldn’t care less even gangsters have more respect than that.

  • http://www.businessesforsaleonline.com James Robinson

    1 April 2009
    The G20 leaders gathered in London today, oddly April 1st is known to all UK citizens as April Fools Day.
    Will the gathering announce a meeting to determine just who is the April Fool, them or us?
    With their 1st class menu, hotels & travel arrangements added to security at such levels for 20 individual’s crime would be eliminated in society if the taxpayer was given the same protection, the fool is quite obviously the electorate/taxpayer.
    Menu for the Great & Good (or G2) only another 18 G’s to go (if only they would).
    1. Soup of the day: That in which they have landed the taxpayer/electorate.
    2. 1st Course: Bulls+!t Pate & Waffle
    3. 2nd Course: More of the 1st
    4. 3rd Course: Global Sound Bites/Nibbles
    5. 4th Course: Something Fishy
    6. 5th Course: Brown’s Blunder Burger, no chips (had them a long time ago)
    7. 6th Course: Pizza the action
    8. 7th Course: Hot air dried Rhubarb
    9. 8th Course: Fudge Cake (no option)
    10. 9th Course: Hard cheese (final communiqué to the taxpayer)

  • Steve Robson

    Hardeep
    Perhaps they get hired in the first place because they can use punctuation properly and write understandable reports, apparently unlike some in the private sector.
    Can one of you prejudiced chaps also explain to me how you square the fact that many of the top graduates aim for the Civil Service fast Stream with your rather ill informed belief in the superiority of private sector employees. My probably equally prejudiced view is that it is certainly not the brightest or most able graduates who head for the private sector, but rather those whose daddy’s earn the most and who went to the most expensive schools. Then its straight into the City, unless of course they get a job with the TPA first. Self replicating conservatism (and Conservatism)!
    Steve

  • Jen Cook

    I’ve complained to my Councillor about the council’s non-compliance and would urge everyone to do the same.
    A related issue – the EU is advising its porkers as to how to avoid disclosure under FoI, as Open Europe reports:
    “Commission advises employees on how get around Freedom of Information
    EUobserver reports that new rules on public access to EU documents have prompted the European Commission’s DG Trade to circulate a memo warning officials to be careful about what they write in emails and advising them on how to narrowly interpret requests for information. The memo, circulated to employees of DG Trade, said “Each official must be aware that all his/her documents, including meeting reports and e-mails can potentially be disclosed. You should keep this in mind when writing such documents…Don’t refer to the great lunch you have had with an industry representative privately or add a PS asking if he/she would like to meet for a drink.”
    As a way of avoiding officials having to blank out parts of documents they release to the public, the transparency guide suggests writing two accounts of meetings, a “factual” or neutral one that can be released to the public and a more “personal/subjective” one with assessments and recommendations for follow up that need not be disclosed.”
    http://euobserver.com/9/27935/?rk=1

  • http://www.carmarthenplanning.blogspot.com jacqui thompson

    Speaking from Carmarthenshire, six senior employees earn over £100k, one over £150k. £1.8m was paid out in bonuses and they have spent £1.2m on self promotion as well as losing £4m in Icelandic banks. These are staggering figures considering this is a rural, generally low paid population of just over 170,000 people. That makes a rough cost to a family of four of £200 per year. Astonishing.

  • David

    Mike, has Dr Crippen pointed this one out to you yet?
    http://nhsblogdoc.blogspot.com/2009/04/nhs-consultants-secret-pay-rises-brown.html