Magazine article Public Finance

The Price Is Right

Magazine article Public Finance

The Price Is Right

Article excerpt

How much should top public servants get paid? Do they deserve to reap large financial rewards or should the 'psychic returns' of public service suffice? Are public sector 'fat cats' worse than private sector ones and, if so, what should be done about it?

Last week, official statistics collated by The Taxpayers Alliance, a low-tax campaign group, kicked off a media debate about public sector pay rates. The research showed that some senior executives in the public sector now earn more than £500,000 a year, with pay increases well above inflation.

On average, the 171 people on the list received a rise of 8.4% between 2005 and 2006.

As well as sparking questions about the use of taxpayers' money in general, the figures also made waves with lower-paid public sector workers, who have been told by the chancellor that their pay rises must remain below 2%.

So, first off, is it 'fair' that top public servants should be paid such high salaries? Or to put it another way, which gets to the crux of the real argument, is it 'fair' that anyone is paid more than a million pounds?

The simple answer is 'yes', if they produce results of commensurate value. Too often, public support for high salaries is eroded because executive remuneration seems to reward failure rather than promote success.

If we are planning to start running public services in a more independent and business-like fashion, as the government now seems to want, then the right incentives must be in place for highly paid executives to deliver high-quality services, and to suffer financially if they do not meet expected standards.

As Peter Riddell rightly argued in The Times last week, the market for top executives is imperfect in both the public and private sectors and often reflects many other issues to do with public image or lack of transparency over pay deals. This needs to be looked at further to make sure high pay reflects genuine value for money and not simply cronyism.

Yet salaries and other compensations are not the whole package either. If we are going to have a sensible debate about public sector pay and about keeping costs to taxpayers down, we should also look further at working conditions and quality of life.

Any highly paid job comes at a high personal price - usually long hours, constant availability via e-mail and mobile phone and extra-curricular engagements in the evenings and at weekends. …

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