Fat cats?

The British government have today announced plans to further restrict redundancy pay-offs made to public sector employees. Proposing an £80,000 cap, this will only affect senior staff, and it is in part a response to a populist media campaign, enraged about public sector ‘fat cats’ not just because of redundancy pay-offs but, more generally, high salaries and ‘gold-plated’ pensions.

Fair enough, perhaps – although where is the comparable outrage about private sector rewards? – but it is worth considering how it has come about that public sector managers enjoy the high rewards that they do. For it was not always so. Traditionally, senior managers (then more often called administrators or officials) had substantially lower salaries than in the private sector, and were expected to be motivated primarily by their commitment to public service.

That all changed from the 1980s, when under the general ideology of the market and the particular influence of the ‘New Public Management’ that derived from it, it was argued that the public sector was inefficient because it did not have the dynamic management of the private sector and that, therefore, it had to offer rewards commensurate with those in the private sector so as to attract that talent. This new breed of managers could hardly be expected to work for so fluffy an ideal as public service – no, in line with the motivational theories of what was then called the New Right, they had to be paid top dollar. And they were – bringing with them many of the reforms that have laid waste to the public sector. But that is another story, about which I have written elsewhere in the blog.

One way of understanding this story is to see it as one of a huge number of examples where the consequences of decisions by now long-retired or dead politicians who were in power in the 1980s neo-liberal heyday have now come to fruition. Examples range from the decision to relax planning regulations on flood plain building because the market should decide where to build, leading to the floods of recent years, through to the deregulation that led to the global financial crisis.

It’s the same with the 1980s approach to those parts of the public sector that were not privatised (those that were, by the way, have mostly now died). Wind forward 30 years and we see that the very same ideologues who blasted the public sector for not paying the going rate for top managers now blast the public sector for … paying the going rate for top managers. It is a hypocrisy unleavened by any acknowledgement that the going rate for top managers is ludicrously high. Because of course their quarrel is not with top management pay rates at all, but with the very existence of the public sector.

Indeed, the attack on public sector fatcat pay is really only a way of finding a soft point to attack public sector pay in general. It is part and parcel of two claims. One is that public sector workers are paid more than private sector workers. The other is that public sector workers get 'gold-plated pensions’. Often, the two claims are linked together.

The problem with the first claim is that – again because of the impact of market ideology and neo-liberal reforms – the lowest skilled (and therefore lowest paid) jobs in the public sector have been outsourced to private sector contractors. Thus, of course, average public sector pay is higher. As regards pensions, in 2012 (the latest year for which I have been able to find comparative figures) the median-average public sector pension was £5,600 pa (mean-average £7,800 pa) and the median-average private sector pension was £5,860 pa (mean-average £7,467). It’s true that most final salary pension schemes in the private sector have closed; it’s also true that those in the public sector are closing (one reason being the pressure put on them by high paid managers).

So let’s by all means challenge the high pay and pensions of senior managers in the public sector. But doing so only makes sense if we do so across the board, perhaps by considering a maximum wage. In 1998 FTSE-100 CEOs were paid a huge 47 times the pay of their average employee. Shocked? Well, by 2014 they were paid 130 times as much as their average employee. We might think about Fred Goodwin, who brought down Royal Bank of Scotland and cost the taxpayer billions of pounds, scraping by on a reported pension of £342,500 pa, poor fellow. We might think about Paul Dacre, Editor-in-Chief of the Daily Mail which has so vociferously campaigned against public sector largesse. In 2014 his pay and bonus package was £2.4M. The average UK pay in 2014 was £26,500 or 1.1% of what anti-elitist Dacre earned that year. The highest paid public official, and this by a long chalk, in 2015 was the Attorney-General at £205,000 or 8.5% of what public sector scourge Dacre earned the previous year. We might think about Jonathan Isaby, the Chief Executive of the Taxpayers’ Alliance that campaigns against public sector pay in the interests of transparency – but, alas, so profound is his commitment to transparency that his pay isn’t on the public record, nor are the identities of the donors that fund the Taxpayers’ Alliance. Strange, perhaps, to learn that the Taxpayers’ Alliance are enthusiastic advocates of freedom of information, but we surely can’t doubt that everyone associated with them is an assiduous taxpayer, can we?

So let’s think about all that, let’s understand the hypocrisy of those who decry the consequences of what they advocate, and the underlying agenda they champion, and the kind of world they really want to see.