One of the great things about politics is that sometimes really dumb ideas just won’t go away. One of these, right now, is that no one in the public sector – including the NHS – should be paid more than the Prime Minister. This zombie last surfaced back in 2010, just after the last election.
Now it is perfectly possible to believe – as I do – that one of the more corrosive things that has happened to society in the past couple of decades or so is the huge acceleration of pay at the top away from pay at the bottom – and indeed away from pay in the middle.
In 1999, the chief executives of FTSE 100 companies were paid on average 69 times the average salary – not the salary at the bottom, the average salary. By 2010 that had risen to 145 times. This differential has, almost without doubt, carried on increasing since.
Mechanisms – including remuneration committees – that were put in place to relate pay to performance have achieved exactly the opposite. It turned out that those on them had their own self-interest in pay inflation. So they created an arms race to the top.
As the Hutton review on fair pay in the public sector set out in 2010, there has been a similar, though far, far, less dramatic, acceleration in pay at the top of the public sector.
That has been a response to similar pressures in the private sector. But also to the fact that if public and private sector pay become too disconnected, then, eventually, recruitment will suffer – despite all the ‘doing something valuable’ attraction of public sector jobs. That will happen at all levels, from the porter to the paediatric nurse to the surgeon to the chief executive. Which is why gradually getting out of the recent NHS pay restraint is both necessary and very tricky.
It is also true – as Jeremy Hunt, the Health Secretary, pointed out in his recent letter to chief executives that revived the Prime Minister’s pay rate as the benchmark – that ‘off-payroll’ employment, ‘retire-and-return’ packages and arrangements that allow people to set themselves up as tax-advantaged private companies when in fact they do not employ anyone, have been abused. This has provided ample ammunition for the Taxpayer’s Alliance and the Daily Mail to attack public sector ‘fat cats’.
It is also worth noting that there might just be a link between the way that these practices have become more common at the top of the NHS and complaints at last week’s NHS Confederation annual conference that the service has lost the ‘social compact’ with some of its staff. Staff may work three days a week in an NHS trust, then two days for an agency at a far higher pay rate, despite the fact that they recognise the problems this brings for other staff and for patients around the continuity and safety of care. But if similar behaviour is happening at the top of the NHS, why be surprised if it then happens lower down?
All that said, it remains the fact that the Prime Minister’s salary of £142,500 as a benchmark for top public sector pay is a dumb one. For a start, it has been subjected to its own, politically driven, devaluation. It was (and technically still is) just over £198,000. Gordon Brown voluntarily dropped it to £150,000 as the recession hit in 2010, and David Cameron voluntarily lopped off another £7,500. Good politics. But not necessarily the way to run the public sector.
And the package is in any case much more than the £142,500 salary. Add in Number 10 Downing Street, Chequers and the pension and it was worth a minimum of £580,000 a year in 2010 – and that estimate comes from an official government report by Will Hutton.
Even allowing for generous public sector pensions, it is highly doubtful whether any public servant reaches that sum on an annual basis – although a few people brought in to the public sector for their particular skills have got close.
Add in the fact that there is no job specification for the Prime Minister, no shortage of applicants, no market or recruitment process other than the party’s voting system, and that the skills needed to run a political party and a government are very different to those needed to run a large local authority, the Bank of England, a police force, or the Department of Work and Pensions, and the comparison collapses. It does so equally for those who head a large NHS trust, are responsible for commissioning billions of pounds of health care, or are overseeing either of those. The need to balance competing objectives, to deal with a far wider range of independent professionals – each with their own sense of duty and responsibility – than in almost any other walk of life, and to cope with the inevitable emotion that health care generates, makes senior jobs in the health care sector among the most challenging – and rewarding – in either the public or private sectors.
There is, of course, and always will be, a debate about just what the pay for top public sector posts should be. But that debate should not start with, let alone end at, the Prime Minister’s salary. As the Hutton report observed, the comparison is both ‘invalid’ and ‘profoundly flawed.’
It is, however, also worth recalling that back in 2010 at a time when excess private sector pay was again hitting the headlines, Richard Lambert, then the director general of the Confederation of British Industry, commented: ‘If leaders of big companies seem to occupy a different galaxy from the rest of the community, they risk being treated as aliens.’ That applies equally to those in senior NHS positions.