As long as taxpayers are forced to foot the bill, the state has a duty to keep costs tolerable
5 March 2018
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Economic Theory
Tax and Fiscal Policy
Government and Institutions
Our concept of a “public servant” goes far beyond the official definition.
In the US, to some extent, and much more here in the UK, a public servant is not simply someone employed by the state, but is often viewed as an extremely generous agent.
Similar to someone who has devoted their life to charity or aid work, a public servant has forgone other pursuits in life (mainly money), and instead given their talents and time to serving the public at large.
But as the failures of public sector wage-setting take a toll on employees across the UK, and calls for pay caps to be lifted grow louder, we must ask ourselves: what levels of public sector pay can and cannot be justified?
Take this week’s report in the Telegraph, which revealed that, while the nursing shortage worsens within the NHS, the number of people hired into management positions is on the rise.
On the face of it, this is a story about blatantly poor resource allocation on the part of the state monopoly, which has seen the number of bureaucrats rise by “almost one quarter in four years”, while the Royal College of Nursing estimates a “shortage of 40,000 nurses”.
But to focus solely on the fiscal and resource management of the NHS would be to miss the wider problem developing around public sector pay. Among the thousands of new hires, the “sharpest rise was among senior managers, whose pay normally starts at £65,000 a year”.
In the private sector, it is common to use salaries to recruit top talent. Attracting the best chief executives keeps companies competitive in increasingly globalised marketplaces. But the very concept of the public sector is that the best and brightest are there to serve the public first and foremost – their own rewards are a secondary concern.
I am not suggesting that NHS managers should work for pittance. Public sector employees deserve a decent quality of life, just like everyone else, and there should be more opportunity in the sector for merit-based wage-setting.
However, there is something grating about calling someone a “public servant” when your taxes are paying for them to have what is often akin to a lucrative private sector salary.
Even the most powerful person in the UK, the Prime Minister, earns hundreds of thousands of pounds less than the most prominent chief executive. That is exactly how it should be. Theresa May is a public servant. Chief executives are not.
Sadly, some public sector organisations don’t seem to have got the memo. According to The Taxpayers’ Alliance “Town Hall Rich List”, there were 2,314 council employees in in 2015-16 whose total annual remuneration exceeded £100,000 – an increase of 89 from the previous year.
The critical role of the Rich List isn’t just to highlight which three Sunderland City Council members had a combined £1,676,023 spent on them over the course of a year, but to demonstrate how lucrative and unaccountable the business of “public service” has become for some.
If taxpayers are made to foot every bill, it is the ethical duty of the state to keep costs and salaries as lean as possible. While one side always delivers on its responsibilities, it appears that the other side may have some work to do.
This article was first published in City AM.
In the US, to some extent, and much more here in the UK, a public servant is not simply someone employed by the state, but is often viewed as an extremely generous agent.
Similar to someone who has devoted their life to charity or aid work, a public servant has forgone other pursuits in life (mainly money), and instead given their talents and time to serving the public at large.
But as the failures of public sector wage-setting take a toll on employees across the UK, and calls for pay caps to be lifted grow louder, we must ask ourselves: what levels of public sector pay can and cannot be justified?
Take this week’s report in the Telegraph, which revealed that, while the nursing shortage worsens within the NHS, the number of people hired into management positions is on the rise.
On the face of it, this is a story about blatantly poor resource allocation on the part of the state monopoly, which has seen the number of bureaucrats rise by “almost one quarter in four years”, while the Royal College of Nursing estimates a “shortage of 40,000 nurses”.
But to focus solely on the fiscal and resource management of the NHS would be to miss the wider problem developing around public sector pay. Among the thousands of new hires, the “sharpest rise was among senior managers, whose pay normally starts at £65,000 a year”.
In the private sector, it is common to use salaries to recruit top talent. Attracting the best chief executives keeps companies competitive in increasingly globalised marketplaces. But the very concept of the public sector is that the best and brightest are there to serve the public first and foremost – their own rewards are a secondary concern.
I am not suggesting that NHS managers should work for pittance. Public sector employees deserve a decent quality of life, just like everyone else, and there should be more opportunity in the sector for merit-based wage-setting.
However, there is something grating about calling someone a “public servant” when your taxes are paying for them to have what is often akin to a lucrative private sector salary.
Even the most powerful person in the UK, the Prime Minister, earns hundreds of thousands of pounds less than the most prominent chief executive. That is exactly how it should be. Theresa May is a public servant. Chief executives are not.
Sadly, some public sector organisations don’t seem to have got the memo. According to The Taxpayers’ Alliance “Town Hall Rich List”, there were 2,314 council employees in in 2015-16 whose total annual remuneration exceeded £100,000 – an increase of 89 from the previous year.
The critical role of the Rich List isn’t just to highlight which three Sunderland City Council members had a combined £1,676,023 spent on them over the course of a year, but to demonstrate how lucrative and unaccountable the business of “public service” has become for some.
If taxpayers are made to foot every bill, it is the ethical duty of the state to keep costs and salaries as lean as possible. While one side always delivers on its responsibilities, it appears that the other side may have some work to do.
This article was first published in City AM.
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I nearly always agree with Kate, but on this occasion I have some doubts. A few weeks ago I wrote on this blog:
‘ People may have forgotten that unease about pay in the public sector led the coalition government to set up an enquiry under Will Hutton, a long-standing critic of high salaries. It was expected to lead to a cap on the ratio of top pay to low pay; a maximum for public sector chief executives of 20 times the pay of the lowest-paid was touted, and the PM’s salary was seen as the sound barrier through which nobody was permitted to jet.
However, Hutton’s report turned out to be an unexpectedly sensible recognition of the dangers of populist thinking. He pointed out that there would be many indirect consequences of rigid limits. More fundamentally, Hutton argued that the country needed to avoid making the public sector an unattractive place for those with talent and drive.
If strict regulations were avoided by Hutton’s conclusions, the climate of opinion has made it very difficult to increase public sector pay across the board, and certainly at the top end. This is a good thing in some ways, for instance in helping to rein in the fiscal deficit. However there remains a danger that public sector jobs – many of which are highly challenging, and require candidates with vision and the ability to push change through against powerful unions and intellectually lazy politicians – may become the preserve of the less ambitious and less competent.
Or, worse, the domain of fanatics and professional hair-shirt wearers. Taking the PM’s salary as a marker is certainly not sensible. It has not gone up since the privately wealthy David Cameron (who can now make much more money as a speaker and author than he ever did as a Parliamentarian) refused an increase. It will be politically impossible to raise this in the foreseeable future. Given inflation, this will mean that top public sector pay will fall in real terms year on year.’
If pay in top public sector jobs is artificially held down, we will end up with even more such jobs in the hands of politically-motivated people who believe they are doing good and are morally superior to those working in the private sector. And, as Adam Smith so wisely put it, ‘I have never known much good done by those who affected to trade for the public good’.