In defence of paying local government Chief Executives what they’re worth…

Important disclaimer: itsmotherswork is not a local authority chief executive, nor ever likely to become one! itsmotherswork has worked in the private sector, and in central and local government and as a volunteer for a 3rd sector orgnisation engaged in public health work.

On Question Time this week, Janet Street-Porter got a round of applause for demanding that local government chief executives should take a 20% pay cut across the board. I wonder what she is paid, and what she does for the money? We don’t know of course, because that information isn’t made public. But local government senior managers’ pay details – personalised, by name – are published. Not with any information about what they do, or how that compares with the pay of senior staff in other organisations or sectors to see if the rates are fair. Just enough information, in fact, to fuel the politics of envy and not enough to enable a voice of reason to be heard.

Hmmm.

Before I weigh in, let me clarify what I’m not trying to defend:

  • Chief Executives who implement pay freezes or cuts for lower paid staff, but don’t submit to the same themselves.
  • Chief Executives who implement new costs or charges for their staff (e.g. changes to mileage rates & other arrangements) without also accepting that these should apply to them too.

If there are examples of those behaviours out there, I’d be glad to hear of them. I’ll join the chorus of shouts of ‘UNFAIR!’.

I’m also not trying to defend any Chief Executives who are incompetent or underperforming. When a person isn’t doing their job adequately, this should be reflected in their remuneration – up to and including being sacked on the grounds of poor performance. Nor am I defending any individual example of unfair pay that a reader of this blog may be experiencing in their current work. All local government staff (in fact all workers in any sector) should be paid what their jobs are worth.

But there are a couple of general principles around pay that I think it’s worth defending. These are:

  • Not all jobs should get paid the same. Some jobs require more skills, more experience and have greater accountability and a broader span of control than others. Differences in pay between jobs, where those differences are reasonable and proportionate, are fair.
  • There’s no reason why public sector managers should be paid less than their private sector counterparts for work of similar scale and complexity.

Pay differentials

To take the first point – pay differentials: What is a reasonable ‘pay differential’ between the highest paid and lowest paid workers in a workforce?

Well – Will Hutton’s ‘Fair Pay Review – Interim Report’ (*) proposes a pay differential no greater than 20:1 in public sector organisations. People might want to argue the toss about this ratio, but for today, let’s accept it as a reasonable place to start, not least because the pay differential for FTSE 100 CEO’s median earnings compared with UK median earnings was 88:1 in 2009, and that for the FTSE 250 38:1 for the same period.

Lets have a look at some information about Chief Executives’ salaries:

http://www.sustainablegov.co.uk/local-government/procurement-finance-local-government/local-authority-chief-executives-average-earnings-reach-147934

This article (Feb 2011) shares some salary information for the highest and lowest paid local government Chief Executives. The highest paid was the CEx of the London Borough of Wandsworth; paid a total of £299,925, including a £54,000 bonus covering an 18 month period. The highest paid female Chief Executive at Essex County Council was paid £237,000. By contrast, the lowest paid chief executive (West Somerset District Council) had a total package of £62,261.

This suggests two things to me; first, that Chief Executives are definitely not being paid more than 20 times the lowest paid in their workforces. The very highest – the Wandsworth salary – if divided by 20 would give a full-time salary lower than the minimum wage. As far as I know, no local government organisation is breaching minimum wage legislation in the pay of its workforce. Again, if there’s evidence out there of such a breach, I’ll join the protests in an instant.

Second, the salaries appear to be in proportion to the scale and complexity of the Chief Executive’s role. It would be strange and worthy of comment if the Chief Executive of a small, west-country district council commanded the same salary as the Chief Executive of a London Borough – but nothing odd like that is happening. Big counties and complex London boroughs demand greater leadership and management skills and the relevant knowledge and experience to cover a wider brief than district councils. No surprises there.

Comparison with the private sector

So let’s take the second principle: are local government Chief Executives earning more than their private sector counterparts. What are these Chief Executives actually in charge of?

Wandsworth is the largest inner London Borough. The council employs over 6,000 FTE staff. It provides the following services (among others I’ve no doubt forgotten to list):

  • Services to older people and those with sensory disabilities
  • Services to adults with mental health problems or learning disabilities
  • Children’s social care, including child protection & safeguarding.
  • Support for ‘looked after children’ including arrangements for fostering and adoption
  • Integrated youth services
  • Teenage pregnancy prevention
  • Support for 14-19 learning
  • Support for care leavers
  • Support for schools and school improvement
  • Services to ‘narrow the gap’ in attainment for young people in vulnerable groups
  • Management of the council’s housing stock including repairs and lettings.
  • Warden services for sheltered housing
  • Provison of housing advice
  • Support and management of homelessness
  • Provision of libraries and arts facilities
  • Provision and maintenance of parks, open spaces and other leisure facilities
  • Maintenance of cemeteries
  • Street cleaning.
  • Waste management and recycling
  • Licencing and management of street trading
  • Development management / planning
  • Maintenance of council buildings, highways etc.
  • Enuring food safety, envionmental health, licensing trading standards, pest control
  • Ensuring community safety in conjunction with police, fire and other services
  • Managing parking policy and enforcement.

This is a complex, busy, vital, high-stakes organisation. It takes pride in operating with low council tax; it is characterised as an excellent authority, having collected 86 Charter Marks. Its Children’s Services function (the bit I feel really passionate about) is rated as performing ‘excellently’.  

County Councils are huge and complex. Essex County Council is part of a two-tier local government structure, so doesn’t cover the full range of services provided by a metropolitan borough or unitary authority. But those services it does provide must cover a much larger geographical area. Essex County Council employs 43,000 staff. This is another big, complex organisation. The Chief Executive of Essex County Council is – not to get too technical about it – a big job. The typical operating budget of a Shire County is £850million (ooh, by coincidence, the equivalent of the RBS bonus pot!). Page 50 of Hutton’s report helpfully maps the pay-scales of Chief Executives of private sector organisations with a turnover similar in size to this operating budget. We know our Essex County Council CEx earns £237,000. Chief Executives of comparator organisations earn in the region of £600,000.

So it doesn’t seem to me that Chief Executives are overpaid in relation to their counterparts in the private sector either. If anything, their pay seems to be rather adrift considering the scale and complexity of their overall remit and the probable consequences of any failure to deliver.

But surely the job satisfaction of public service is its own reward?   

Yes – to a certain extent, this is true. Not everyone is financially motivatated, which is just as well. There’s not a lot of profit to be made out of child protection, securing accommodation for the homeless or treating mental illness. Nor should there be. But recruiting and retaining high calibre leaders and managers in an environment where executive reward is increasing at a faster rate than pay for non-managerial work will always be a challenge. The job satisfaction of being responsible for making real and positive differences in the lives of people and whole communities can be immense. That job satisfaction is reduced every time someone derides your sector as lazy or inefficient, calls your job a ‘non-job’, or implies that the public sector is a drain, rather than a vital contribution both to the wealth creation of the country and to the maintenance of a civilised society. Will Hutton’s report gives short shrift to this idea that public servants should be paid less than workers in the private sector because of the warm, fuzzy feeling engendered by all this wonderful public love:  

“Public servants’ sense of public duty should not be exploited in an effort to avoid paying fair reward”.

I’m not arguing that local government Chief Executives should be paid as much as top-level bankers (heaven forbid!), or television ‘talent’ or premier league footballers, just that they should be paid what they’re worth, and people should stop calling them fat cats while they’re busy doing their utmost to ‘deliver more for less’.

But…but…they’re paid more than the Prime Minister!!

Ah yes. That old red herring. Using the Prime Minister’s salary as a benchmark for public sector pay is one of the biggest bogus arguments there is.

43% of local government Chief Executives earn more than the Prime Minister. That means that the majority of them earn less. But is it really a scandal that 43% of them should earn more? No.

Again, the Hutton report is strong on this point, p56 demonstrating the full value of the PM’s remuneration to be higher than the headline figure usually quoted, that there’s no shortage of applicants for the post, no job description and no market or recruitment process.

But even if the PM’s total remuneration were as low as the usual headlines suggest, I would still say that Chief Executives in big local authorities should earn more. The Prime Minister is not responsible for ‘delivery’ of anything. He is responsible for promoting ideas (not neccessarily his own), and for generating a sufficient level of public interest and support in those ideas to secure his election. Upon election he and his government are responsible for telling others: ‘make it so’. The doing happens elsewhere.

One of the main locations for the ‘doing’ – particularly now – is local government. In the face of a miserable financial settlement local authorities are being asked to maintain public services with diminishing resources and increasing levels of need. Doing this at all will require very sound leadership and management skills throughout the organisation, including at Chief Executive level; doing it well will take excellence. In any other sector a revision to the job spec that made it more challenging would usually lead to a pay increase – not a flurry of name-calling and brickbats.

If you want to make a local government comparison to the Prime Minister’s role and pay scale, have a look at the pay of Council Leaders. These are the local political equivalents of the PM and his cabinet. If a Council Leader is paid more than the Prime Minister then I think that’s worth a second look. Meanwhile, let the Chief Executives get on with the business of ensuring that life is liveable in our cities, towns and shires. If they and their workforces manage to achieve this, despite all the obstacles currently being put in their way, perhaps we may one day grudgingly accept that they are paid what they are worth, and worth every penny.    

 (*) The Hutton report here: http://www.hm-treasury.gov.uk/d/hutton_interim_report.pdf

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s