The legal minefield that can pressure councils into giving large pay offs to chief executives they want to dismiss is to be ended.
Slow and costly bureaucracy that requires councils to appoint an independent person, usually a Queen’s Counsel, to review dismissal and disciplinary cases for chief executives is to be changed. The Isles of Scilly Council has recently suspended its chief executive pending one of these investigations.
Councils seeking to dismiss a chief executive for misconduct or poor performance often pay out inflated lump sums to avoid the cost of taking this bureaucratic route. Eric Pickles intends to remove this expensive roadblock, which does not exist in other parts of government or the private sector.
Local government estimates the review process can cost between £100,000 and £250,000 in legal fees not counting independent investigation costs and salary for the suspended officer. One case cost £420,000 and took 16 months to adjudicate. Ministers believe decisions by full council ensure proper democratic accountability, without the need for a centrally dictated process.
The post of chief executive is not set in statute, which means there are no central barriers to removing the role. It only takes a simple democratic decision by the council. Several councils have done this in the past year. The statutory head of paid service role can be done by another senior officer.
Eric Pickles has also today written to the Local Government Association to urge them to take steps to improve their performance management of senior posts. Better management can make it easier and quicker to tackle performance issues.
Eric Pickles said:
“A town hall chief executive costs a lot of money, but if they are simply not up to the job, councillors must be able to get rid of them quick smart without having to throw away thousands in parachute pay-offs.
“It is ridiculous that councils feel forced to give bumper pay offs to dismiss inadequate chief executives simply to avoid these unnecessary golden goodbye reviews from expensive lawyers.
“Scrapping this bizarre bureaucratic ritual will save taxpayers money and put the decision firmly back in democratically elected hands.”
The Localism Act requires councils to publish their pay policies so that local remuneration arrangements - particularly for chief officers - are out in the open and provide value for money for local taxpayers. The associated guidance states councils should vote on pay deals over £100,000.
Eric Pickles announced he intends to toughen up the guidance before councils publish their pay policies for next year. For example, if smaller councils do not pay staff above £100,000 they should consider setting a lower vote threshold. Ministers will reserve the right to regulate should councils not act on it.
It also states that councils should also publicly justify any big bonuses; above inflation pay rises; hiring staff already in receipt of public sector retirement or severance money; and avoid any perceptions of minimising tax payments.
With a public worried about the cost of living and all parts of the public sector looking to make deficit savings, ministers believe these steps will show taxpayers that value for money is being fully considered for top paid staff.
Notes to editors
The post of chief executive is not statutory. Councils are not required to have a chief executive. The ‘Local Government and Housing Act 1989’ allow regulations to require councils to adopt standing orders relating to staff. The ‘Local Authorities (Standing Orders) (England) Regulations 2001’ state that the full council must approve any decision to dismiss the head of paid service. The regulations state that “the authority must appoint a designated independent person” to investigate proposals for disciplinary action against the chief executive, monitoring officer or chief finance officer because of misconduct, disciplinary issues or poor performance and that “no steps…are to be taken before a report is made” by that “independent person” and “a local authority must pay reasonable remuneration to a designated independent person appointed by the authority and any costs incurred by him in, or in connection with, the discharge of his functions under this regulation.” Ministers intend to amend the regulations so that all references to the independent person process are removed. There will be a consultation (no more than 4 weeks) before the changes are made in Parliament.
Pay evidence: Recent analysis by the trade press showed that salaries for newly appointed chief executives between January and June 2012 were on average 11% less than before, which broadly reflects the trend since May 2010. 81 chief executives have moved post since July 2010. In addition Local Government Association figures suggest that, in 2009, the combined pay bill for chief officers and chief executives was £629.3m. An earlier 2008 survey by Local Government Employers revealed that the chief executive pay bill was £50.4m. 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’ is defined as all salaries which are above £58,200 and above (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
An Audit Commission report, By Mutual Agreement which looked into severance payments to council chief executives in 2010 found that the designated independent person system has placed local authorities, as the employer, at a great disadvantage with the average length of time for investigation being 1 whole year. It estimated a minimum legal cost to a council of £100,000, excluding the cost of the investigation, preparing the case and briefing lawyers. Salary costs for a suspended chief executive also have to be met by the council.