Local Government - July 2009

“How much do you earn, then?”

Government proposals to force local authorities to reveal details of senior officers’ pay.

One of the less appealing features of the public response to the recession has been the renewal of prurient interest in how much people in local government are paid. A strange cocktail of a crocked economy, the spectre of tough spending cuts, rows over bankers’ bonuses, baby Peter, and the MPs’ expenses farrago has fuelled the fire of righteous public indignation. After all, these people are paid out of money taken away from us whether we like it or not, and, according to the 2008 Place Survey, two thirds of us do not think that we are getting good value. So we need to be told exactly what each of them receives, so that we can say that it is too much. We would have said that anyway, but it sounds better if we can pontificate about real figures, and embarrass real people.

In May, the Taxpayers Alliance claimed that “there are 1,089 people in town halls earning more than £100,000 a year.” Their spokeswoman said “The size of council executives’ pay and perks is staggering, and every year the cost continues to rise. … Councils must start tightening their belts – we’re in a recession and many of these rewards are financially unsustainable and morally indefensible. Despite calls for transparency by all three major parties, and an obligation to come clean with taxpayers, many council executives are still secretive about their massive pay packets.”

More recently the BBC’s “Political Club” claimed that politicians and their sinister sounding “aides” cost UK taxpayers about £500 million a year. Their figures included £254,582,587 for “Councils”, divvied up between 22,737 councillors and 108 political assistants. The fact that this represents just over £11,000 each, that member’s allowances are published in full, that they are reviewed by independent committees, that their expenses are rigorously controlled on an “actually and necessarily incurred” basis, and that there is a statutory cap on the pay of political assistants, were not given particular prominence. The more recent attack on BBC executives’ salaries and bonuses offers a more than a little schadenfreude.

One outcome is the erosion of the principle, carried forward through successive pieces of legislation about the information that local authorities must make available to the public at various times, that the remuneration of individual employees is, basically, private. This is personal data, exempt from access under the Freedom of Information Act 2000 so far as disclosure would contravene the Data Protection Act 1998. Unless the employee has given consent, the authority has to ask itself whether disclosure is “unwarranted in any particular case by reason of prejudice to the rights and freedoms or legitimate interests of the data subject” (DPA 1998 Schedule 2 paragraph 6). The Information Commissioner now advises that:

Salary scales should usually be published as a matter of routine.
Disclosure should only be to the extent necessary to fulfil a legitimate public interest. This may involve narrowing down advertised scales, for example to the nearest £5,000. Only in exceptional circumstances is disclosure of exact pay likely to be justified.
More senior staff who are responsible for major policy and financial initiatives can expect greater scrutiny of their pay than more junior employees. It will nearly always be unfair to disclose the exact salaries of junior employees.
There could be factors that weigh in favour of greater disclosure, such as legitimate concerns about corruption or mismanagement, or situations in which senior staff set their own or others’ pay.
Specific individuals’ concerns should be considered when determining whether the disclosure is justified.

The Accounts and Audit Regulations 2003 prescribe the information to be made public with local authority accounts. Regulation 7 says that it must include a note of the numbers of employees whose remuneration exceeded £50,000, in £10,000 bands. "Remuneration" means “all amounts paid to or receivable by an employee, and includes sums due by way of expenses allowance (so far as those sums are chargeable to United Kingdom income tax), and the estimated money value of any other benefits received by an employee otherwise than in cash”. Section 15 of the Audit Commission Act 1998 limits public access to financial information in connection with the audit process to exclude access to payments made to individual employees, or on the cessation of their employment, but this is subject to Regulation 7.

These requirements apply to the following bodies, unless their turnover in both of the last two years was less than £1 million: local authorities, joint authorities, the GLA, a functional body of the GLA, the London Pension Fund Authority, a parish meeting (unlikely to have a £1 million turnover), a local authority committee or joint committee, the Council of the Isles of Scilly, charter trustees, a port health authority, the Broads Authority, a National Park Authority, a police authority, a fire and rescue authority, a licensing planning committee, an internal drainage board. There is separate legislation for local government bodies in Wales.

CLG is now consulting, for the second time, on proposals to increase the information that must be made available. It goes way beyond the Information Commissioner’s wildest dreams. The consultation paper, issued on the 12 June, includes a draft SI amending the 2003 Regulations. Consultation closed on the 20 July.

The proposed changes are:

The banding rules will no longer apply to “senior employees”.
The bands will still start at £50,000, but they will be £5,000 bands instead of £10,000. In small authorities it will be easier to single out individuals.
The remuneration of each individual senior employee, temporary or permanent, must be disclosed. This must itemise:
The total amount of salary, fees or allowances in the current and previous financial year.
The total amount of bonuses in the current and previous financial year.
The total amount of taxable expenses allowances.
“The total amount of any compensation for loss of employment paid to or receivable by the person, and any other payments paid to or receivable by the person in connection with the termination of their employment by the body” – so, when your chief executive leaves in difficult circumstances, confidentiality clauses in compromise agreements will lose much of their purpose, and the trick (which we suspect but cannot prove) of leaking a smaller figure than the actual pay-off will no longer work.
“The total predicted pension entitlement of the person in any pension scheme to which the body contributes or for which it is responsible for paying pensions out of” – two options are included: one is pension benefits accrued to date, the other (presumably an Aunt Sally to be dropped after consultation) being the amount they would receive if they stayed in post until their normal retirement date.
The total estimated value of any other benefits received by the person which are “emoluments of the person, and are received by the person in respect of their employment by the body.”
“Senior employees” are those earning over £50,000 a year (or pro rata for part timers) who are:
The Head of Paid Service (designated under s 4 Local Government and Housing Act 1989) – the Chief Executive, of course.
A statutory chief officer (within the meaning of section 2(6) of that Act) – the Director of Children’s Services, the Director of Adult Services, the Fire Chief, and the Chief Finance (s151) Officer.
A non-statutory chief officer (within the meaning of section 2(7)) – anyone who reports direct to the Head of Paid Service, other than administrative and secretarial staff, and anyone who reports direct, or is directly accountable, to the authority itself (full Council) or to a committee or sub committee.
The “head of staff” for any body caught by the Regulations to which the 1989 Act does not apply – there are a few of these: some waste authorities for example.
“Any person who has responsibility for the management of the body to the extent that the person has power to direct or control the major activities of the body during the year (in particular activities involving the expenditure of money), whether solely or collectively with other persons” – a catch-all in case the previous catch-all dropped someone.
“Employee” includes a member of the body, and a holder of an office under the body, but does not include a person who is an elected official.” There are a few office holders who are not employees, interim managers for example.

The most unsatisfactory aspect of the list of people is the inclusion of non-statutory chief officers. Presumably you report direct to a committee or sub-committee if the committee receives reports with your name on it. The definition pre-dates the creation of executive arrangements, so cabinet reports do not count. However any senior planning and licensing officers, and heads of audit, who earn over £50,000 will be caught. Although the Monitoring Officer is not a statutory chief officer, he or she may – some would say should – report to the Chief Executive, and in any event he or she will report to the Standards Committee or an Assessment Sub-Committee. This definition was conceived for the purposes of the rules on politically restricted posts, but, because of the comparatively low salary threshold, and the lack of interest of the vast majority of council officers in politicking outside work, it has not been important before. Adding these to the statutory officers, in a large authority between five and ten people will be on the list.

They will all have to suffer the embarrassment of seeing details of their, pay, bonuses, benefits and pension rights mulled over, and quite likely criticised, in the local paper. Your neighbours will know how much you earn, and whether your pay or bonus went up or down last year. It is not the worst thing that could happen to you, but it is unpleasant and it is a clear invasion of your privacy. Without this legislation, it would be likely to contravene the Data Protection Act. There is little evidence of similar moves in the civil service, NHS, civil and criminal justice system or the armed forces.

It is open season on senior local government officers. Remember that CLG has consulted on a statutory code of conduct for officers which singles out senior officers for special treatment, obliging them, amongst other things, to list in a public register all the public bodies of which they are a member, large shareholdings and any land or buildings in the area in which they have an interest. In most cases they would reveal to an astonished world that they own a house and are members of the National Trust or whatever, but again it is intrusive. And the Local Democracy, Economic Development and Construction Bill will require local authorities to adopt a petition scheme under which a petition with the right number of names can require senior officers to be “called to account” by being grilled by an overview and scrutiny committee. The Bill also draws on the 1989 Act definitions and includes non-statutory chief officers.

There are a lot of things askew in the relationship between local authorities and the people they serve at the moment. The same can be said about national politics. But the need to poke Council officers in the eye is not one of them. It is the solution to a non-existent problem. People are always envious of high salaried public officials, and sceptical of the argument that their pay should be compared with the private sector. Taking difficult decisions can make you unpopular. These measures will not change any of that in the slightest. There is no point, though, trying to argue for less public access to information in order to safeguard the privacy of a few thousand bureaucrats. Members will not support you – their allowances, expenses and registerable interests are public already, so why should you be protected? The answer is that they have been voted into office and are directly accountable to the electorate, whilst you have (by law) been appointed on merit and engaged under a contract of employment, but in the ordinary hurly-burly of town hall life this distinction quickly evaporates.

If any authorities have seemingly generous benefits arrangements, perhaps now would be a good time to review them with members. And is the performance-related element in your pay a “bonus”? If it is, the world will soon know about it, and be able to work out whether you did better this year than last , so perhaps you could rephrase some of the language used in the documentation. Otherwise, those affected will just have to grin and bear it, and think about what they are going to say when the details hit the press.

Graeme Creer
Weightmans LLP