How progressive is Cameron's public sector pay proposal?
9 April, 2010 - 00:00 -- Full Fact team
David Cameron today claimed the mantle of progressive politics with proposals to reduce pay inequality. He plans to introduce a pay multiple for public sector organisations. Full Fact investigated the potential savings involved and whether the policy was considered progressive.
David Cameron today claimed the mantle of progressive politics with proposals to reduce pay inequality.
Contrasting his Conservatives with the “reactionary” Labour party in today’s Guardian, Mr Cameron said he would introduce a pay multiple so that in public sector organisations, the highest salary would never be more than 20 times greater than that of the lowest paid worker.
The Conservative leader said: "A pledge to investigate public pay inequality is part of our push for bold, progressive change". He also said the proposal would “help tackle unfair pay policies and improve cohesion and morale in the public sector”.
So how does the policy actually measure up to the claims Mr Cameron makes about its potential impact? How wide-ranging would the effects of the policy be, and would they be significant enough to be deemed progressive?
Furthermore, does the measure have the potential to boost cohesion and morale in the way Mr Cameron claimed?
Full Fact decided to investigate.
Analysis
The Tories plan would link pay levels in public sector organisations. The lowest possible annual salary, based on the minimum wage, is £10,556. This means that anyone currently earning over £211,000 in the public sector could face a pay cut. So how many people would be affected by the move?
Comprehensive figures of the highest earning individuals in the public sector are not available. The next available source is the Taxpayers’ Alliance public sector and local government rich lists that are compiled through Freedom of Information requests.
The Alliance reports show that 169 public sector executives earn over this level (the Conservatives exclude BBC, Channel 4 and bank executives from their proposal). Chief executives of regulatory bodies such as the Office of Fair Trading, Ofcom and Ofgem could all therefore be affected.
Nevertheless it does not amount to a significant saving of taxpayers money. Full Fact has calculated, on the basis of the Alliance lists, that a total of £15.2 million would be saved by capping top public sector earnings at the threshold of £211,000. This is only an approximate figure as it is unlikely that every organisation listed employs staff at the minimum wage level.
Matthew Sinclair, research director at the Taxpayers’ Alliance was nevertheless critical of the Tory proposal.
“In principle a pay multiple could have important effects at the top of the public sector but in order for that to happen it has to be predicated on serious measures,” he told Full Fact.
“This proposal would only affect an absolutely tiny proportion [of public sector workers].”
Given the potentially limited effects of the proposal, does it do it enough to satisfy progressive groups?
Compass, a progressive group campaigning for a High Pay Commission, was scathing about Mr Cameron’s proposals. Gavin Hayes, general secretary of Compass, told Full Fact that focussing only on the public sector pay was not a progressive way to address inequality.
“The real problem with morale and productivity in the economy as a whole is to be found in the private sector,” he said.
“To pick on the public sector simply isn’t good enough.”
He accepted that in principle pay multiples could be a positive move but insisted that action needed to be focussed on the private sector first.
In the workplace
With questions over both the scope and progressive nature of the proposal, what do the experts say about its chances of improving morale and cohesion in the work place?
Duncan Brown, Director of HR Business Development, at the Institute for Employment Studies told Full Fact that the idea of the pay multiple had the potential to be a success.
“Where there’s a mutuality of interest between leaders and employees you get higher levels of employee engagement and commitment,” he said.
However Mr Brown also warned that the design of any pay multiples cap had to overcome potential “perverse incentives”. These include the risk that the measure could be overcome by outsourcing low paid work.
Equally he said the effects could vary from organisation to organisation with smaller, professional bodies having a narrow pay spread relative to very large organisations.
However some organisations fear that the pay policy might have not necessarily boost morale in the way David Cameron suggested.
Full Fact contacted the Chartered Institute for Personnel and Development (CIPD), who pointed to evidence suggesting that the effect of the policy on morale and cohesion would be limited. Performance and Reward Advisor, Charles Cotton, told Full Fact that the size of managers' salaries does not currently appear to be fuelling pay dissatisfaction.
"We did a survey in November last year of 2,500 employees asking them about their pay rise and whether they were satisfied or dissatisfied with them. Dissatisfaction in the public sector wasn’t really driven by annoyance about the fact their rewards were below those of senior managers," he said.
In the survey, pay increases below those of senior management were only cited by 15 per cent of public sector workers who expressed dissatisfaction over remuneration.
Conclusion
Mr Cameron’s new proposal does go further than previous commitments made by his party and the Government on pay in the public sector.
However, a pay multiple of 20 means that only a very small number of individuals in the public sector will be affected.
Given the issues raised with the policy, the CIPD’s Charles Cotton warned that the plan left the door open to criticisms that Mr Cameron's primary concern was not tackling unfair pay.
"I’m sure that David Cameron’s detractors will argue that he is using this initiative as a way of trying to bring down top pay to save money through the back door, and not necessarily about tackling unfair pay policies and improving cohesion and morale in the public sector," he said.
The policy would save money on the public sector wage bill, and could possibly bring benefits in terms of workplace morale. Yet Mr Cameron's claim to the progressive mantle of politics is undermined by the limited scope of the plan.
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