Why high pay in the public sector can be offensive

I don’t mind people earning big sums in a competitive private sector company which is thriving. After all, we as consumers can decide whether we want to spend our money with that company, knowing that some of it goes to the high pay of the executves, or not. We have choice.The CEOs of successful companies drive down total costs per unit of output, innovate to create better products and services and offer us good deals.

I do mind people in the public sector “earning” salaries well into six figures when we have no choice, and when their jobs are not comparable to the risk taking revenue seeking jobs in the private sector.If we decline to pay them we go to prison for failure to pay a tax or public sector sector charge.

Today we read in the Sunday Times that so-called Chief Executives of Councils get high pay in part because a company wholly controlled by the Society of Local Authority Chief Executives and Senior Managers sells advice on how much to pay to Councils! Apparently Chief Executive pay in Councils has risen by a stunning 34% in just 4 years, compared to 16% in the private sector.

I have written before about how so called Chief Executives in Councils are not CEOs in the private sector sense. They have no responsibility for winning revenue, the difficult task most private sector CEOs have to concentrate on, and they make a very poor hash in most cases of controlling costs and raising efficiency, preferring instead to recommend Council tax rises every year. They have not heard of the need for cost down which has dominated private industry for the last decade, because unlike the private sector there are no Chinese competitors to Councils. No wonder many of us are fed up with the high salaries of Council CEOs when they serve us so badly and just push up the Council Tax remorselessly.

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28 Comments

  1. Ian Jones
    Posted January 4, 2009 at 10:09 am | Permalink

    I believe the excuse is that this salary is needed to attract the best quality of CEO. It would be interesting to know how many have come from the outside rather than the local council merry-go-round.

    Unfortunately with Labour came the attempt to measure the value of public services on a monetary basis by applying “value” to its social outcomes. This is obviously very subjective and funnily enough can be used to defend the high salaries in both local and national Government.

    At least its an easy target once the Conservatives are in power, the unions will not defend them!

  2. Jeremy Poynton
    Posted January 4, 2009 at 10:21 am | Permalink

    John,

    Local councils badly out of control. Powys, I gather, has over 1000 employees earning > 30k.

    My partner, who owns the house I live in with her, cannot afford to save for a pension for herself, yet I gather from 20 to 40 per cent of council tax goes towards council workers pensions.

    That is grossly unfair, and must be addressed.

  3. Brian Tomkinson
    Posted January 4, 2009 at 10:42 am | Permalink

    Local councils are further examples of the economics of the madhouse in this country. The pay and titles of their executive officers and councillors have risen in inverse proportion to the service they provide to the council taxpayers. The Council CEO was previously the Town Clerk and the councillor now called Executive Member Housing and Regeneration was previously Chairman of the Housing Committee. These high-faluting titles naturally demand much higher pay for all, including councillors! To add to this ignominy, the council taxpayer is faced with the propensity for these same councils to continually add to their payroll yet more highly paid advisory (non)jobs. Are Conservative councils taking any real action to remedy this abuse of the council taxpayer?

  4. Stuart Fairney
    Posted January 4, 2009 at 10:49 am | Permalink

    Might I suggest mandatory sunset clauses for all Quangos? here is a list of said bodies, correct as of May 2008

    http://tpa.typepad.com/bettergovernment/files/080515_structure_of_government_1_unseen_government_immediate_release.pdf

    The waste is simply staggering. Bravo for highlighting the issue. However the real test will be how many of these non-jobs are abolished. Even Labour pre-97 talked of a “bonfire of quangos” That was just talk of course

  5. Mark Wadsworth
    Posted January 4, 2009 at 11:10 am | Permalink

    Yup, there are four angles to this:

    a) The super-quangista, like council ‘Chief Executives’ or Trevor Phillips, who are on £100,000-plus.

    b) The rank and file quangista like 5-a-day-advisors, climate change officers, street football advisors, half a million pen pushers in NHS and so on (of which there are two or three million). They don’t earn particularly big salaries, but they do nothing of any value to anybody whatsoever.

    c) Average salaries for ‘proper’ civil servants like teachers, coppers, nurses (who number about one million out of eight million taxpayer funded jobs), I don’t think their salaries are excessive, it’s difficult to say what the ‘market rate’ is for things controlled by The State as there are no private sector comparatives for policemen. There are another three or four million taxpayer funded jobs who may or may not be doing something useful, it’s hard to tell.

    d) Pension arrangements for public sector workers, which are totally extravagant in terms of early retirement and generosity.

  6. D MCGREGOR
    Posted January 4, 2009 at 11:21 am | Permalink

    Very glad to see you return to this issue. These “executives” need executing in a financial sense as they are the benchmarks that all other council workers are remunerated from. A bit of uncertainty in the public sector at this point would not go amiss.

  7. APL
    Posted January 4, 2009 at 11:22 am | Permalink

    Roll local government orginisation back to the pre Heath model.

    2) What I really wanted to ask was: Are we in a position at this moment to judge the success of Tony Blair’s peace mission to the middle east. Should he too be paid according to results?

    Given that he has in public admitted that his governments economic performance was “luck”. Can we now discount Gordon Brown’s claim to have i) abolished boom and bust, ii) Saved the world [banks]?

    http://www.dailymail.co.uk/news/article-1103861/Labours-boom-years-luck-Browns-economic-expertise-says-Tony-Blair.html

  8. Christine Melsom Isitfair
    Posted January 4, 2009 at 11:49 am | Permalink

    We must, of course, add to this indecent salary, the equally indecent pension. A Chief Executive on £200,000 pa has a whacking great £36.500 added to his pension fund.

  9. James
    Posted January 4, 2009 at 12:35 pm | Permalink

    Our council is to be part of a Unitary authority this year. It was mooted as saving the local taxpayers millions of pounds each year and would cost in total £19 million for the changeover.
    A few months down the line and the redundancy payments alone stand at £22 million and rising.
    IT has cost £500,000 for a new logo, and the CEO salary has been decided at just short of £250,000 (and no doubt perks on top) This of course qualifies what the lower management structure pay levels will be.
    Our local council had the lowest tax of those areas joining this new authority and we have been advised that our tax will have to rise 6%+ as part of an equalisation process.
    Unitary Authority= One Big Con Trick (at least in my opinion)

  10. Acorn
    Posted January 4, 2009 at 12:43 pm | Permalink

    JR, if you were currently back in one of your old jobs of running a big corporation, you would no doubt be looking at ways to reduce the fixed cost elements of that business. UK plc has a large fixed cost base that is the public sector.

    You would be looking at all the corporate edicts you had sent down to devisions and deciding those that could be rescinded, permanently or temporarily, that would save large chunks of operating cash. It appears that our government has not learnt this simple fact.

    It appears further that this recession will have no impact on the public sector what-so-ever. Its share of spending will rise as GNP falls and the government will issue more of its IOUs to cover it. Paying government employees to go into Jaguar showrooms to buy a new XF with an IOU backed by current and future taxpayers, does not strike me as an efficient way of stimulating the economy.

    Have a look at this link, particularly the last paragraph which highlights the large difference between speculation money flows and that required for global trade. The quantities handled by the Deposit Trust and Clearing Corporation (DTCC) in 2007 were $1,860 trillion and the World GNP was nearer $54 trillion. (The US GDP was around $14 trillion). Now that’s what I call a bubble. Is the DTCC the true master of the universe?

    http://www.financialsense.com/fsu/editorials/2007/0226.html

    http://en.wikipedia.org/wiki/Depository_Trust_&_Clearing_Corporation

  11. Jeremy Poynton
    Posted January 4, 2009 at 1:17 pm | Permalink

    Quangos. Yes, indeed.

    Didn’t someone say “No taxation without representation”? Quangos are like a giant leech at the heart of the client state, sucking the blood of those who do productive work.

  12. ken from glos
    Posted January 4, 2009 at 1:20 pm | Permalink

    You are correct and it cannot go on.Take my case.I worked for Government for over 30 years and reached a middling rank.Not too high or not too low.

    I am on a pension well in excess of £35k, Iget a winter heating “allowance” and dont pay N.I.C a tax in all but name.

    My neighbour, a wealth creator, will have to work until he is 69 to build up a decent pension.I “retired” at 49.Enough said.

  13. chris southern
    Posted January 4, 2009 at 1:31 pm | Permalink

    The system needs overhauling in such a big way that it isn’t funny anymore.

    beurocracy is crippling this country in a mountain of unfair (and i would go as far to say as unlawfull) tax.
    people in the public sector shouldn’t get a bigger pension ontop of a far larger salary.
    we should go back to the days of politicians in general of gaining only a small expense package, that way they need an income from another line of work (their own business for example) which would ensure they have experience of the outside world.
    it’s no surprise that things don’t run well at all when you have people with no clue about the real cost of things running the show.

    cut direct tax and replace vat etc with sales tax like it used to be and see howcarefull politicians become with their reduced funds (whilst banning them from bringing in extra taxes to create revenue for their own little expirements!)

    The Victorians were far smarter whe it came to managing money than modern parliment, and private business even invested into various schemes as a way of helping the society they had got rich from.

  14. Matt
    Posted January 4, 2009 at 2:36 pm | Permalink

    My take is that council’s are too big and complicated – maybe they should just concentrate on the basics that we expect from them and abandon their high objectives…
    The rot started in the mid 1960’s when councillors were able to claim expenses – the expenses started to get out of hand and the type of person attracted to stand for the council changed, more careerist types.
    They wanted to build an infrastructure.
    We had some councils declaring their area a “Nuclear Free Zone” (Newcastle in the 1980’s)
    Delivering works of art – free art galleries – at least free to the visitor – Then supplying subsidised transport to the galleries.
    Employing management consultants, image consultants, advertising agencies.
    The basic chores seem to be considered too boring. I’m sure that you could cut significant sums from their budgets without public suffering.

  15. Derek W. Buxton
    Posted January 4, 2009 at 4:14 pm | Permalink

    Fine words, I just hope, in vain I suspect, that the “conservative ” party can take the requisite actions. If that is, they can win the next election I fear though, that this is rapidly disappearing. After the complete shambles that Brown has made of this Country, Cameron should be streets ahead but he isn’t. All potential conservative voters must be asking what is wrong,…………. everything as far as I can see. The Loyal Opposition is a paper tiger, useless for anything. Oh, I forgot, they like “windmills”, God help us.

  16. StevenL
    Posted January 4, 2009 at 4:18 pm | Permalink

    It’s the ability to write page after page of prose, day in day out, without actually saying anything meaningful or making yourself either coherent or comprehesible that makes these people worth £150k plus a year.

    It must be, they seem to do little else.

  17. Deborah
    Posted January 4, 2009 at 4:36 pm | Permalink

    SOLACE advises that these salaries are needed to attract the best quality of CEO. It also recommends interim managers who cost about £250K a year to tread water whilst the new overpaid executive is recruited.
    In my experience as a local councillor, the cost of the executives far exceeds what the private sector would pay for the quality of the personnel.
    Meanwhile the Council Leaders appointing these CEOs, who should be looking for value for money, have vastly inflated their own allowances in recent years.

    It is an absolute scandal.

  18. mikestallard
    Posted January 4, 2009 at 5:10 pm | Permalink

    Let’s widen this out.
    To pay for these very expensive people and their pensions, Gordon Brown is having to borrow more and more money. As you so rightly said, he is endangering the entire country.
    There are even more, I understand, in the Euro-gravy train. they are utterly unproductive and need weeding out urgently to save the pound.
    So I am disgusted with the fact that our local County Council (Conservative, please note) has several of these fat cats and one of them actually has the cheek to live in the antipodes.
    If something is not done and that eftsoons or right speedily, more and more people who feel the recession coming on will be queueing up to join them.

  19. Alan Wheatley
    Posted January 4, 2009 at 7:16 pm | Permalink

    The recent BBC Radio 4 programme More or Less cited an interesting example of the difference between mean (average) and median when applied to populations, in this case pay. They said that comparing pay in the public and private sectors, if you take the mean the private sector get more, but if you take the median the public sector get more. The explanation is that the distribution of pay in the private sector is skewed by a relative small number of people earning very high salaries.

    This seems to me to undermine the oft stated argument that public sector workers are entitle to better benefits (such as pensions) because their pay is less than the corresponding workers in the private sector.

    • bill
      Posted January 11, 2009 at 3:39 pm | Permalink

      Brilliant !

  20. mark
    Posted January 4, 2009 at 8:24 pm | Permalink

    Yes, it is about that time of year when we start to ponder on whether our council tax will go up or down this year…and then we wake up from our daydream with a start, realising that council tax has only ever gone up year on year. And when we have low inflation or even deflation, will it still go up? Or will most of them rush through as big a rise as possible this year, in the fear that they may have to consider deflation as a possibility?

    And why do we see rises year on year, when our bins are emptied less often, and the rat population seemingly increases?

    I would like the chance of a choice to choose what parts of my council tax go out to private tender. In other words – where I could choose to pay privately for uncompetitive services currently provided by the council…and yes, council bigwigs are paid far too much, for jobs which virtually do themselves anyway. Guaranteed income, guaranteed customers, but no efficiency savings, ever – at least not in our local left wing shambles.

  21. Bazman
    Posted January 4, 2009 at 10:04 pm | Permalink

    Private car parks with automatic bollards for counsellors. The costs must be thirty thousand plus for the bollards. Why should they be taken seriously?

  22. Adrian Peirson
    Posted January 4, 2009 at 10:08 pm | Permalink

    The Fabian Socialists are coming for the Middle Classes now, they do not believe in Private Property, well not for us any way.

    http://adrianpeirson.spaces.live.com/

  23. Bazman
    Posted January 5, 2009 at 9:15 pm | Permalink

    Nice one Adrian! I always wondered how those buildings next to the world trade centre were dropped so fast. Ain’t possible. Take a look.

  24. Mr R Drake
    Posted January 6, 2009 at 5:53 pm | Permalink

    As being Head of public protection in a very large council in a southern Borough I can say we earn every penny as hard working individuals I start at 9am every day five days a week right through to 4pm with only one hour for lunch, I only get the standard 28 days holiday a year unlike school teachers who achieve over sixty days! my salary is half of some of my Senior colleagues earning six figure sums and unlike many so called CEO’s of private company’s our vehicles only get changed every eighteen months & as my title says without professionals like me there would be no one to protect the Public!!!

    Mr R Drake

    HEAD OF PUBLIC PROTECTION

    Reply: Thank you for your interesting email! So that’s a 6 hour working day then. I don’t know of many private sector CEOs that just work 30 hours a week.

  25. Magelec
    Posted January 10, 2009 at 5:36 pm | Permalink

    Isn’t it about time that all public employees, civil service, local councils, NHS, Police, Fire, all quangos etc. are put on a money purchase pension scheme as most private company employees are?

    • Alan Wheatley
      Posted January 11, 2009 at 8:30 am | Permalink

      A very good point.

      Implementation needs to be coupled with a decision on the amount of the employer contribution.

  26. Christine Melsom Isitfair
    Posted January 11, 2009 at 11:53 am | Permalink

    I suggest a flat rate rise for all state employees. Give the inflation rise to the lowest paid and the rest receive that amount. It will save millions, not just on salaries but on pension contributions.
    Thoise working in the private sector are not expecting large (if any) rises this year – the public sector must pay their part.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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