Why do 9,000 people in the public sector earn more than the prime minister’s £142,500? It would be good to get the Public Accounts Committee, whose role is to scrutinize public spending for value for money across government, stuck into this question. I’m not so much worried by the gradual erosion of any public service ethos, depressing though it is. I’m concerned that government departments cite market rates for executive talent as justification for exorbitant public sector salaries.
This is dumb for lots of reasons. But the main one is that private sector executive pay is a racket that is long overdue reform. Cosy and self-serving remuneration committees commission rubber-stamp reports from pliable external remuneration consultants, who in turn benefit from a permanent upwards ratchet effect in corporate pay. That is why the payment of rewards for failure remains the single greatest weakness of corporate governance regimes in developed economies. Private sector pay is all too often ludicrously out of step with performance, extravagantly inflated and layered with complexity. The public sector will not embed a performance culture in government departments by following that broken model.
Yet Francis Maude, the Cabinet Office minister in charge of driving down the public sector pay bill, will find the robotic remco culture embedding itself in the public sector hard to eradicate. I saw this for myself this week in the PAC hearing on railway overcrowding. I asked the rail regulator, Bill Emery, why he allowed the former chief executive of Network Rail, Iain Coucher, to pick up a cool £1.2m last year, a sum that made him the highest paid public sector worker in the land, even though commuters had seen little improvement to one of the most overcrowded and expensive rail networks in Europe. A matter for the remuneration committee, the regulator said, even though he is the one person the taxpayer can hold to account for the governance shambles at Network Rail.
Sure, it’s true that some of these 9,000 jobs are very complex. But they are not 10 times more complex than running the entire country and overseeing £700bn of annual government expenditure. It’s possible David Cameron is underpaid, of course. But it’s much more likely that the taxpayer is being taken for a ride as the public sector copies the worst aspects of private sector corporate governance. It’s time for the PAC take an interest.
Jo Johnson, a former editor of the FT’s Lex column, is the Conservative MP for Orpington and is a member of the PAC.
Jim Pickard
Kiran Stacey