News story

Councillors should use new powers to tackle 6-figure pay packets

Local Government Secretary Eric Pickles announces new transparency rules for local government pay and employment practices.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

notes and coins

Local Government Secretary Eric Pickles is today (20 February 2013) prying open local government pay and employment practices as he unveils new transparency rules for 6-figure salaries.

Severance pay-offs are to be democratically approved and there are changes to regulations on the dismissal of senior officers. Both measures are designed to offer maximum value for money for the taxpayer.

The government has identified tackling excess pay for senior officers as one of 50 ways councils can make sensible savings to help tackle the inherited deficit and reduce public spending by councils which is currently at £114.5 billion in 2013 to 2014.

The Localism Act’s pay accountability measures have increased accountability over local decisions on pay and reward, particularly senior pay.

However, ministers are concerned that not enough councils have used this as an opportunity to review their pay arrangements or to demonstrate how they are protecting the interests of local taxpayers.

As councils prepare to approve their pay practices for the coming year, Mr Pickles has written to them] about new guidance on pay policy statements in order to strengthen the transparency and democratic accountability measures over senior pay practices.

In addition to approving their authority’s policy on severance packages, the 2013 to 2014 guidance published today recommends that all 6-figure pay-offs for senior officers should now be presented to full council so elected councillors have the opportunity to vote and give their democratic consent to the pay-off package.

The Local Government Secretary states in his letter that if councils do not act on this, he is ready take steps to require them to.

Mr Pickles is also going to introduce changes to dismissal and disciplinary proceedings. Councils will no longer be required to appoint an independent investigator to review misconduct by senior officers before they can be dismissed. Last November he set out how this ‘bizarre bureaucratic ritual’ was substantially increasing the cost of parachute pay-offs.

If councils wish to dismiss an ineffective chief executive they will still be required to gain a resolution from the full council, while the council will also have to approve the dismissal of a monitoring officer or chief financial officer before any dismissal proceedings can occur.

These changes will mean each council can decide the best disciplinary process that delivers value for money without the need for an independent investigation.

Local Government Secretary Eric Pickles said:

“For too long, local government has made severance pay arrangements away from the eyes of those who get left with the bill: the taxpayer.

“Town hall chief executives are well paid so if they are not up to the job councils need to part ways with them fairly. Quietly agreeing to thousands in under-the-counter parachute pay-offs for departing bureaucrats is not the way to achieve this.

“Councils have a responsibility to the public and transparency is at the heart of that. By shining a light on excessive public pay and introducing new democratic checks and balances to senior salaries we are helping councils improve accountability in local government.”

The Localism Act greatly increased accountability of decisions on local government pay for the first time and pay policy statements from local authorities have provided a rich source of information for local citizens to become armchair auditors and closely examine how their money is spent on pay and rewards for council staff.

In February 2012, the government published Openness and accountability in local pay, to which authorities must have regard when exercising their duties on pay accountability.

That guidance advised councils to have a full vote on hiring officers set to earn pay deals above £100,000. In this new guidance smaller councils that paid less can set lower thresholds, while all should provide public justification for big bonuses and above-inflation pay rises.

Further information

The post of chief executive is not statutory. Councils are not required to have a chief executive.

Pay evidence: recent analysis by the trade press showed that salaries for newly appointed chief executives between July and December 2012 were on average 8% less than before, which broadly reflects the trend since May 2010. In addition Local Government Association figures (PDF 327KB) suggest that in 2009 the combined pay bill for chief officers and chief executives was £629.3 million. An earlier 2008 survey by Local Government Employers revealed that the chief executive pay bill was £50.4 million. The Hutton review of fair pay in the public sector found top managers in local government had seen larger increases in pay than the lowest paid in their workforces and the pay ratios between local authority chief executives and the lowest paid in local councils have grown in the last 10 years. Around 800 local government employees were in the top 1% of all earners (earning over £117,523).

The government has already taken action on excessive pay practices. The Code of recommended practice for local authorities on data transparency in September 2011 requires councils to publish data on senior salaries and the structure of their workforce. This includes:

  • senior employee salaries, names (with the option for individuals to refuse to consent for their name to be published), job descriptions, responsibilities, budgets and numbers of staff; ‘senior employee salaries’ are defined as all salaries above £58,200 (irrespective of post), which is the Senior Civil Service minimum pay band; budgets should include the overall salary cost of staff reporting to each senior employee
  • an organisational chart of the staff structure of the local authority including salary bands and details of currently vacant posts
  • the ‘pay multiple’: the ratio between the highest paid salary and the median average salary of the whole of the authority’s workforce

The existing Local Authorities (Standing Orders) (England) Regulations 2001 require the appointment of a Designated Independent Person to investigate and report on cases where a local authority wishes to take disciplinary action against the head of paid service, monitoring officer or chief finance officer.

The decision to take disciplinary action against the head of paid service, monitoring officer or chief finance officer ultimately lies with the council. The amended regulations will mean that it is for each council to consider and decide the best disciplinary process that will deliver value for money for the local taxpayer without the need for an independent investigation.

The Designated Independent Person process was intended to protect officers with senior corporate functions from dismissal motivated by political or relationship issues. However, there were significant concerns about how the process operated in practice. The process has become onerous and expensive. This was evidenced in the Local Government Association’s submission (PDF 1.2MB) to the Audit Commission’s call for evidence on severance payments to council chief executives (published March 2010). It was estimated that the minimum legal cost of this process was £100,000.

Published 20 February 2013