Public Sector Executive Pay and Governance

Part of the debate – in the House of Commons at 7:37 pm on 15th October 2014.

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Photo of Andrea Leadsom Andrea Leadsom The Economic Secretary to the Treasury 7:37 pm, 15th October 2014

I sincerely congratulate my hon. Friend Mr Amess on securing this debate. He is clearly incredibly passionate about the subject and I agree with the quote he gave from Lady Thatcher at the start. In fact, I would add:

“The larger the slice taken by government, the smaller the cake available for everyone.”

My hon. Friend is right to highlight the important point that at a time of austerity the Government need to be committed to taking as small a slice as we can for ourselves.

As a Government we do, of course, greatly value the very important work that senior managers and executives perform in the public sector. I am sure my hon. Friend will agree that the rewards we give them should reflect the work they do, not least because we need talented individuals in those jobs. However, I am very sympathetic to his cause. The examples that he has given of high pay will lead many, including me, to question the fairness of so many in just one county earning as much or more than our own Prime Minister, who I am sure nobody in this House or, indeed, the country would argue does not do an extremely demanding job.

Of course, we live in difficult economic times. There are few households in the country that have not been affected by the financial crisis. Government absolutely cannot be profligate when our citizens are having to make difficult spending decisions themselves.

My hon. Friend has raised a number of important points, including pay in the public sector and its link to performance, especially in the NHS, and the excessive use of middle-management jobs and consultants. I want to address each of those, but before I do so, I want to say that I am aware that my hon. Friend has raised with Monitor, the regulator for health services in England, a number of issues relating to the South Essex Partnership University NHS Foundation Trust. I assure him that I will make sure that what he has said today is passed on to the Under-Secretary of State for Health, my hon. Friend Dr Poulter to review. This Government take allegations of abuse of the system extremely seriously, so we will make sure that these matters are examined and that we get an answer.

Public sector pay restraint is one of the many difficult choices we had to make to help to put the UK’s public finances back on track. Of course, we expect senior public sector managers and executives to lead by example. For the senior civil service, pay is set by the Government within nationally determined pay scales following recommendations from the independent Review Body on Senior Salaries. Like all public sector workers, senior civil servants have therefore been subject to pay restraint. Their pay was frozen in 2010-11, 2011-12 and 2012-13, and it was subject to increases of just 1% in 2013-14 and 2014-15. The number of senior civil service bonuses has also been reduced by two thirds, cutting the bill by £15 million.

For all Departments and public bodies where appointments are made by Ministers, any salary over the Prime Minister’s salary of £142,500 and any bonus arrangement over £17,500 must be approved by the Chief Secretary to the Treasury. Those measures have reduced the number of individuals earning more than £150,000 from 372 in 2010 to 243 now, which is a 35% reduction. That has been accompanied by greater transparency, as the Government have increased public scrutiny of senior salaries. For executive pay in the wider public sector, the Review Body on Senior Salaries makes recommendations on the pay of judges, very senior managers in the NHS, senior members of the armed forces, and police and crime commissioners.

At this point, I will say a little more about NHS organisations. The position depends on whether such organisations are NHS or foundation trusts. NHS trusts are subject to supervision and performance management by the NHS Trust Development Authority, whose responsibilities include appointing chairmen and non-executive directors, agreeing their remuneration and influencing decisions on executive pay. Very senior managers in the Department of Health arm’s length bodies received no pay increase in 2014-15, and their pay will be frozen next year. NHS foundation trusts have greater autonomy over their affairs. They can make their own board appointments and determine their own pay, but they are expected to take full account of Treasury guidance, as well as the state of the trust and market pay for the role.

As part of its regulatory function, Monitor regularly assesses trusts’ governance and financial risk through its risk assessment framework. Where a foundation trust provides poor-quality care or fails to meet national waiting time requirements, it is likely to open an investigation into the trust. Specifically on pay, Monitor does not set executive or non-executive pay at foundation trusts—that is the role of the board remuneration committee—but it does have powers. For example, if it considers board remuneration to be excessive, the governors can remove the chair and/or the non-executive directors responsible. I understand that, to date, Monitor has yet to take serious action against any individual trust. I assure my hon. Friend that I will urge the health team to investigate exactly why that is, and that I will get an answer on that point.

Let me turn to the excessive use of middle-management jobs. Public service is an honourable activity—whether someone does it as a volunteer or a paid private sector employee, theirs is a high calling—but public service must at all times emphasise the service, not the bureaucracy, which means emphasising front-line staff, not the officials and managers. The Government have introduced significant reforms regarding the number of senior staff employed across the public sector and their pay. Since 2010, overall numbers of senior civil servants have been reduced by 13%, and the senior civil service pay bill has been reduced by 18.5%. Specifically, the NHS now has more than 7,400 fewer managers and more than 12,500 more clinicians than in 2010. All Members will be glad about that. The savings from administration costs arising from the reforms to the NHS from 2010-11 to 2014-15 are expected to free up at least £6.4 billion for patient care.

We have slashed the amount of money that is spent on central Government consultants from £1.2 billion in 2009-10 to £0.3 billion in 2013-14. At the same time, we have introduced a consultancy controls process, which ensures that any spend on a central Government consultant that exceeds £20,000 and lasts for longer than nine months is approved by the Minister for the Cabinet Office and the Chief Secretary to the Treasury. The amount of money that is spent on consultants in the NHS has also decreased during this Parliament from £636.9 million in 2009-10 to £584.7 million in 2013-14.

We are not complacent. I hope that I have illustrated to Members that we have taken enormous steps to improve the fiscal restraint among senior bodies. We have done what we can. That Government have in place effective controls over executive pay and governance. I hope that I have assured Members that we do not spend taxpayers’ money in an excessive or frivolous manner.

Through our policies, we are ensuring that we protect taxpayers’ money, because we will never go back to the bad old days when money was no object.

Question put and agreed to.

House adjourned.


George Morley
Posted on 18 Oct 2014 4:36 pm (Report this annotation)

Following the Margaret Thatcher quote, I would ask why then do the government continue through the inclusion of clause 20 in the latest Pension Act and the continued imposition of regulation 3 in the Benefits Uprating deny the ex-patriot pensioners in certain random countries their pension indexation ?
The countries where most of these pensioners are living is in the Commonwealth which is no surprise but it is a divisive, undemocratic, discriminative and irrational policy that has no place in this country in the 21st Century.
All of these words have been used by politicians to describe this immoral policy.
As with slavery and votes for women change must take place and even the gays got justice because of discrimination but not the pensioners yet. WHY?