Secrecy: The first hurdle to jump to tackle public pay

This week’s report from the Institute for Fiscal Studies revealed the political parties’ manifesto plans do next-to-nothing to tackle the UK’s massive spending deficit.

Even the Liberal Democrats, who were credited with being the most upfront about the scale of the task ahead, have only managed to identify 25 per cent of the savings needed to get our finances back on track – and have identified just £3bn of public sector pay savings.

Cuts will have to be much deeper, IFS director Robert Chote bluntly points out.

Job Cuts

Small steps have been taken. In the pre-budget report the government announced plans to cut £100 million over the next three years from senior civil servants pay.

Much of this saving will have to come from job cuts, but as the number of senior civil servants has ballooned 37 per cent since 2000, the civil service as a whole has actually shrunk – suggesting there is perhaps more scope for senior cuts than might first be thought.

But this token move is merely the tip of a very large iceberg.

The next government will have to be a lot more ruthless, cutting as many as half a million public sector jobs over the next five years, according to stark research from the Chartered Institute of Personnel and Development.

Even ring-fenced departments will find they are not immune to the fall of the government’s axe.

Freezing pay

In the run-up to the election all parties have concentrated on shaving the £157 billion public salary bill through pay freezes.

Alistair Darling announced a one per cent cap on public sector pay rises next year. In some sectors, such as local government and senior civil servants a freeze has already been implemented this year.

The Tories too have pledged to halt salary increases for all but the lowest paid government workers.

Such moves, they predict, could save as much as £3.4 billion.

A hard task

However, even instituting pay freezes may not prove straightforward, requiring the government to circumvent long-term contracts with fixed yearly salary increases.

The government was able to break a three year seven per cent pay agreement with the senior civil service when they froze their pay earlier this year. But cutting further could prove more troublesome as unions – still strongly represented in the public sector – get involved.

At the Bureau of Investigative Journalism we have been looking into senior government workers’ pay but the results so far show little evidence of any cuts. Indeed, the vast majority of top civil servants have enjoyed generous pay increases.

The wrong target

It is not just the matter of basic salaries that the next government will need to address.

In a sop to the public all parties have hit out at huge City bonuses, suggesting there should be caps. Sadly this will do nothing to ease our public deficit. Quite the reverse as the revenue’s tax returns could also shrink without the supplementary income tax take bonuses bring.

And bonuses aren’t only a matter for the private sector.

Performance related incentives have become a cornerstone of all government pay policy at a senior level.

With the public perception of bonuses severely tainted by the City, the subject is an easy target. One that the Liberal Democrats have jumped on, stating ‘there will be no big bonuses and no big pay rises for people at the top.’

But such a sweeping move risks going too far, experts warn.

Duncan Brown from the Institute of Employment Studies points out that in many cases bonuses are a good way to pay people. They are non-pensionable and there is some evidence to suggest that a lump sum can be more motivational than spreading this amount across the year.

Keeping mum

The problem is the avoidance of the subject. We have found a marked reluctance to disclose any details of bonus payments, even when asked under Freedom of Information legislation.

Within the police, for example, only a handful of forces have been prepared to provide details of such payments made to their chief constables.

Journalists have been trying to obtain the information for at least 18 months. The issue is now with the Information Commissioner, who despite tackling many requests spreading back over a year has still not made a decision.

Small change

It’s not as if these are vastly inflated figures. The maximum bonus for police workers amounts to only 15 percent of a chief constable’s basic pay, peanuts to a banker.

For some public workers such as hospital consultants extra payments make up a larger part of their salaries, sometimes as much as two thirds of their package.

As we start to focus on our public sector pay bill, it’s time for our public servants to own up. If employees have earned their bonuses, there is no need for secrecy. If not, then they too should be in the firing line for cutbacks.