Can we just get something straight?
There is no such thing as the public sector labour market. There’s just the labour market.
Unless a job is specific to the public sector, the pool from which organisations must recruit is the same, regardless of which sector they are in.
Inevitably, therefore, pay increases in the wider labour market exert a pull on pay levels in the public sector. Given the massive increases in executive pay in private companies over the past decade it would be surprising if public sector salaries did not rise too. There was a time when public servants were a different breed from private sector managers – they were expected to be motivated by public service alone and not to seek the high rewards of their private sector counterparts. That is still true to an extent but there is now a far greater interchange of executives between public and private sectors.
Many private sector managers cross over to the public sector. Some are motivated by the idea of public service, others by an opportunity to broaden their CVs. Often, they are prepared to make the move for no pay increase or even for a small pay reduction. It is unlikely, however, that many will switch sectors for a massive drop in salary. Altruism and a belief in public service only goes so far.
Therefore, if George Osborne is serious about attracting private sector expertise into the public sector, he will have to offer salary levels above the public sector norm. Many local authorities, NHS trusts and government agencies have already discovered this grim reality, which is why senior public sector pay packages have risen.
Public sector pay levels are still well below those in the private sector. As Duncan Brown of the Institute for Employment Studies points out, in this somewhat sarcastic article, “senior public sector leadership roles are still only paid about half of their private sector equivalents”. But the more private sector people the public sector recruits, the higher the salaries it will need to pay.
Which makes all the fuss about public sector bosses earning more than the Prime Minister start to look a bit silly. People become Prime Minister for a whole raft of reasons. The salary is unlikely to be one of them. Publishing salaries over £150,000 may be a good idea in itself – transparency, public accountability and all that – but the ruling that any salary above £150,000 will require Treasury approval seems to imply that paying public servants any more is somehow wrong.
But, for people managing large and complex organisations, £150,000 is now the going rate in the public sector and many private sector execs would not even get out of bed for that amount. Given that the public sector will need to be reformed beyond recognition over the next four years, it is inevitable that it will need to attract some new leaders and that many of them will come from the private sector. Upward pressure on public sector salaries will only get worse.
If some people’s salaries are obscenely high, this is not a public sector problem, it’s an executive pay problem. If executive pay shoots up again then public sector managers’ salaries will rise too, albeit probably not at the same rate. Capping the pay of public sector managers and attracting more private sector expertise are contradictory aims. Any organisation attempting to do both will fail.
It is likely that, four years from now, we will have a lot fewer senior public sector managers. Those that survive, though, will need to be excellent leaders and will therefore be paid accordingly. There won’t be as many of them but you can bet that they’ll be paid a lot more than the Prime Minister.