Announcement

New local pay guidance to help tackle tax avoidance

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

Government rules to open up Town Hall pay practices and senior salaries to public scrutiny now include measures to root out any inappropriate…

Government rules to open up Town Hall pay practices and senior salaries to public scrutiny now include measures to root out any inappropriate tax avoidance arrangements, Local Government Secretary Eric Pickles announced today.

Chief Secretary to the Treasury, Danny Alexander has set out the Government’s commitment to tackling all forms of tax avoidance. As local government is also paid from the public purse Mr Pickles has issued new statutory guidance that addresses the matter.

The Localism Act requires councils to publish and be accountable for their pay policies, helping to ensure that local remuneration arrangements - particularly for chief officers - provide value for money for the whole of the public sector.

The Government’s associated guidance on Openness and Accountability in Local Pay published today now states that authorities should review the terms of senior appointments, particularly where arrangements could be perceived as seeking to minimise tax payments.

It specifically states that councils should vote on salary packages for employees greater than £100,000 a year. Councils should also publicly justify any big bonuses, above inflation pay rises, or the recruitment of staff already in receipt of public sector retirement or severance money.

Elected councillors have until the end of next month to approve pay policy statements that should include explicit local policies on all the above practices and whether or not they intend to permit any of these sorts of arrangements.

At a time when the public are worried about the cost of living and all parts of the public sector should be making savings, this action will give taxpayers the clearest evidence possible that value for money has been considered in pay policies.

Eric Pickles said:

Opening up the pay deals of top Town Hall jobs to public scrutiny will mean taxpayers know with certainty their interests are being protected.

Local people have a right to know whether any Town Halls allow tax arrangements that could short change the public purse; whether bumper bonuses are being awarded to poorly performing workers; or whether pay is being hiked up for execs who’ve boomeranged from post to post.

The door to council pay practices is being unlocked by the Localism Act - local authorities must now publicly endorse their pay practices by next month. Doing this will reassure residents that local pay is fair, fit for purpose and fully ‘democracy proofed’.

Mr Pickles has previously called for council chief executives earning over £200,000 to take a ten per cent pay cut and those earning £150,000 - more than the Prime Minister - to take a five per cent pay cut. Independent research has found that between January and June 2011 newly appointed chief executives were earning on average 19 per cent less than their predecessors.

Notes to editors

  1. The Localism Act is one of the most radical pieces of legislation to be voted through Parliament - it fundamentally shifts the balance of power to communities and reinforces the importance of strong local democratic rights. Provisions in the Act require local authorities and fire and rescue authorities to approve and publish annually at Full Council (for Fire and Rescue Authorities, a meeting of members), a pay policy statement which authorities will be required to follow, including when setting senior pay. Where councils want to depart from the pay policy, these would need to be referred back to Full Council (or a meeting of members for Fire and Rescue Authorities) to vote on.

  2. The Localism Act also includes provision for the Secretary of State to issue guidance on the content and application of senior pay statements. Relevant authorities must have regard to this guidance in the exercise of their functions under the pay accountability provisions. The new pay guidance Openness and Accountability in Local Pay: Guidance under section 40 of the Localism Act can be found here: www.communities.gov.uk/publications/localgovernment/guidancelocalpay.

  3. The statement must include the authority’s policies relating to:

a. the level and elements of remuneration for each chief officer b. remuneration of chief officers on recruitment
c. increases and additions to remuneration for each chief officer
d. the use of performance related pay for chief officers
e. the use of bonuses for chief officers
f. the approach to the payment of chief officers on their ceasing to hold office under or to be employed by the authority, and
g. the publication of and access to information relating to remuneration of chief officers.

  1. The term ‘remuneration’ covers:

a. the chief officer’s salary or, in the case of a chief officer engaged by the authority under a contract for services, payments made by the authority to the chief officer for those services b. any bonuses payable by the authority to the chief officer
c. any charges, fees or allowances payable by the authority to the chief officer
d. any benefits in kind to which the chief officer is entitled as a result of the chief officer’s office or employment
e. any increase in or enhancement of the chief officer’s pension entitlement where the increase or enhancement is as a result of a resolution of the authority, and
f. any amounts payable by the authority to the chief officer on the chief officer ceasing to hold office under or be employed by the authority, other than amounts that may be payable by virtue of any enactment.

  1. A letter on tax arrangements of public sector appointments can be found here: www.communities.gov.uk/publications/localgovernment/taxarrangementsletter.

  2. The Secretary of State published The Code of Recommended Practice for Local Authorities on Data Transparency on 29 September 2011. The Code enshrines the principles of transparency and asks councils to follow three principles when publishing data they hold; responding to public demand; releasing data in open formats available for re-use; and, releasing data in a timely way. This includes data on senior salaries and the structure of their workforce. The code can be found here: www.communities.gov.uk/publications/localgovernment/transparencycode.

  3. According to the Local Government Employers data from the Joint Negotiating Committee’s Salaries and Numbers survey 2008 and Setting Rewards for Top Managers in Local Government, the chief officers’ pay bill was £576.5 million and Chief Executives was £50.4 million.

  4. The Local Government Chronicle published analysis in January which found that salaries for newly appointed chief executives in January to June 2011 were on average 19 per cent less than their predecessors: for July to December 2011, salaries for newly appointed chief executives were on average 10 per cent less than predecessors.

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