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Squeezing top pay out of the public sector

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Steve Bundred’s announcement of his intention to stand down next year as chief executive of the Audit Commission will trigger a search for a replacement that is likely to tell us much about the pressures now bearing down on top pay in the public sector.

In the 18 months since the banking crisis began to provide evidence about massive pay and bonuses within the finance industry, the spotlight has gradually shifted to top public sector earnings.

The Parliamentary expenses scandal has reinforced the public’s anger about ‘snouts in the trough’ in both the private and public sectors. The TaxPayers Alliance has highlighted chief executives’ pay in local government, alleging they are too high and rising too fast.

Councils are hurtling inexorably towards a period of massive public spending cuts. There will be demands for across-the-board pay freezes

Tony Travers, Director, Greater London Group, London School of Economics

Regardless of the fairness of this shift in focus, there is no doubt council chiefs are now in the front-line of attack in an increasingly Maoist approach to high pay. Politicians, attempting to appear decisive, have been ready and willing to attack the pay of public sector executives.

John Healey, when local government minister, promised legislation to require councils to reveal ‘spiralling’ chief executive pay. Only last week Harriet Harman said the pay packages of senior public servants had “got out of hand”.

Ms Harman went on to state that the prime minister’s pay of £197,000 might be too high a benchmark for top public servants. Against this background, it will be fascinating to see what level of salary will be on offer to the next Audit Commission chief executive. The media have already given publicity to the £212,000 plus pension contribution that is currently paid for the role.    

If the Maoists – led by government and Opposition politicians – have their way, the next head of the Commission will be offered a pay package, including pension contribution, of £175,000 or less.  Otherwise, the government’s strictures on the subject will be seen to have been mere crowd-pleasing.  An example will have to be made.

Most existing senior council chief executives would then find themselves forced to take a pay cut if they were to apply for the Audit Commission job, as would many figures from the private sector. Perhaps a different field of candidates will emerge from that which would normally have been expected. Senior local government figures, sniffing the revolutionary wind, may accept the need for restraint.

Councils are hurtling inexorably towards a period of massive public spending cuts. There will be demands for across-the-board pay freezes. Chief executives and their senior colleagues will have to handle a fractious workforce. Against this background, it is hard to believe chief executives appointed from now on will not be offered pay packages below those made in 2007 and 2008.

It is curious and, in many ways, unfair that crises in the banks and Parliament should put such pressure on local authority officers. But life, as we all know, is rarely fair.        

Tony Travers, Director, Greater London Group, London School of Economics

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