MPs vow to get tough on 'fat cat' salaries

Published on Sunday 20 December 2009 22:17

A TOP Pay Commission should be set up to investigate "fat cat" salaries in the public sector and name and shame organisations that pay too much to senior officials, a committee of MPs will say today.

The House of Commons public administration select committee said a growing gulf between the salaries of council and quango chiefs and the average earnings of their staff was not "sustainable or desirable" in a time of recession.

In a report to be published today, it recommended the publication of the pay of all public servants earning more than about 100,000.

But the committee dismissed calls to cap public-sector pay at he 198,000 level of the Prime Minister's salary as "little more than a political stunt", which would be unlikely to deliver better value for money to the taxpayer.

Any highly paid public servants who failed to perform effectively "should face the very real prospect of losing their jobs without any kind of generous pay-off", said the report. But the MPs said it would be "particularly damaging" if talented managers left the public sector because of pay reductions that were modest in comparison with the savings they are able to deliver for the taxpayer.

The MPs blamed soaring senior salaries in public bodies in part on "contagion" from the private sector, where massive rises for top executives have become the norm over the past decade.

And they warned that measures to rein in public servants' pay would be effective only if they were matched by similar restraint in the private sector.

Communities Secretary John Denham last week tabled regulations to require local authorities and other public bodies to reveal the names and salaries of an estimated 300 top staff earning more than 150,000.

Conservatives have said they would give the Chancellor of the Exchequer a veto over any public-sector appointment with a salary higher than the PM's.

The moves came amid widespread concern about the generous pay rises that town hall chiefs have secured for themselves while lower-earners have endured much tighter settlements. Today's report will say that the creation of a Top Pay Commission would ensure greater coherence to the setting of senior salaries across the public sector.

The commission could produce principles and benchmarks to guide pay-setters and launch investigations where they were breached. And it could name and shame public-sector organisations paying "excessive" salaries to top officials.

Committee chairman Tony Wright said: "Set against the stratospheric pay increases seen at the top of the private sector over the last ten years, the public sector has got excellent value from many of its top people. However, we do not believe that the ever-growing gulf between average earnings and top pay is sustainable or desirable – especially in a time of recession.

"Our Top Pay Commission would ensure that public-sector pay-setters would have to justify top pay deals and set them in the context of pay at lower levels and the state of the public finances."

The report identified weaknesses in current arrangements for public-sector pay-setting, warning of a perception that some public servants have been rewarded for failure.

Pay has been driven up because parts of the public sector are competing against each other for a small number of experienced executives, rather than nurturing talent within their own ranks, found the report. Public bodies should do more to ensure talent was promoted from within and failure was not rewarded, said the cross-party committee.

"We believe that our proposals will save public money and restrain executive pay across the public sector," said the report. "More importantly, they will ensure that, where large salaries are paid, they are seen to be achieving value for money."