By Suzannah.Brecknell

18 Jun 2010

What does the list of the 172 highest-earning public servants tell us about the upper echelons of government? Suzannah Brecknell reports.

While releasing the names and salary details of the 172 civil servants earning over £150,000 at the end of May, Cabinet Office minister Francis Maude said the government was “pulling back the curtains to let light into the corridors of power”. On the surface, that light didn’t reveal much that wasn’t already known – many of the salaries had already been published – but it did bring into focus the dramatic extent to which external recruits now dominate the top of the civil service.

Some 58 per cent of individuals on the list come from private, voluntary or wider public sector backgrounds, and individuals from the private sector make up 38 per cent of the total. This lines up with research carried out by CSW in 2008, which found that between 2005-08, 50.5 per cent of jobs for which the civil service commissioners chaired appointment panels – the very top positions – went to external candidates. The 2008 Normington Review on SCS pay and workforce development reported that at the time, around 43 per cent of directors-general had been recruited from outside the civil service. The variation between these figures is largely explained by the variation in the groups being considered – and it suggests that the higher up the public service tree you go, the greater the number of external recruits you find.

Figure 1: Proportions by department/agency of SCS to total staff, and high earners to SCS; plus absolute numbers of high earners

Paying for private

The Normington report noted that “a substantial market premium” had often been paid to attract these external recruits – and, again, the list of highest-earners confirms previous data on the pay gap that has developed here. Individuals from the private or wider public sector earned 12 per cent more on average than those from a central government background (£198,177, compared to £177,660). If we consider only individuals from a private sector background, the difference is even greater – with an average salary of £208,054, they earn 17 per cent more than colleagues with a career largely based in central government.

This gap is perhaps not surprising – the 2007 Report of the Review Body on Senior Salaries found a 12 per cent gap between internal and external recruits for those at pay bands one and two – but the difference may now come under increased scrutiny, given that the move towards transparency is part of a wider drive to deliver better value for money in public spending.
The reasons for recruiting externally to the civil service are well known: to fill skills gaps and bring best practice from other sectors into areas where internal development has been poor among traditionally generalist senior civil servants. The Normington report noted particularly high levels of external recruitment into finance, HR and commercial director roles; and the list of high earners also shows a relatively high proportion of private recruits in these areas, as well as IT.

Figure 2: Where high-earning external recruits work.

Each department’s share of the wheel depicts their number of external recruits as a proportion of those in departments; the paler section shows what proportion of their high earners are external recruits. Numerals show absolute numbers of external recruits

A question of value

But does the need for these skills justify the difference in pay? A recent public administration select committee report found no data to support the claim that external recruits bring value for money in the senior civil service, and FDA chair Jonathan Baume questions whether the service should be paying so much more for these attributes.

“There are some very specialist posts, but a lot of those posts are jobs that could easily have been filled by a civil servant, but it just happens that in that particular competition they went for the outsider and decided to offer them a higher salary than they’d offer a civil servant,” he says. “Why didn’t they just offer the same salary as [they would to] a civil servant?”
If candidates would not accept the job at that salary level, says Baume, recruiters should reassess the value of that person. “Are they that much better that they need £50,000 more than a civil servant? We need some rationale and discipline about how pay levels are set, which has been lost, frankly.”

More widely, Baume is calling for greater openness about how pay levels are set, and emphasises the need for clear principles behind these levels. He welcomes the work of the Senior Salaries Review Body and Will Hutton, executive vice-chair of the Work Foundation, who is carrying out a review of how senior pay relates to more junior pay.

Figure 3:  Average pay of high earners in each department, as a multiple of mean (i) departmental SCS pay; (ii) departmental pay; and (iii) civil service pay. 

Note that DWP figures – like all departments’ data – do not include agencies. Including JobCentre Plus staff would have reduced the average DWP wage

Performance, not pay

However, Raj Tulsiani, head of executive resourcing agency Green Park, worries that pressing too hard on salaries at the risk of getting the right person into the job could be counterproductive.

“In roles which involve the opportunity to change, if you don’t have the very best person directing and importing best practice from other areas, then you don’t release the financial synergies that you need, so [paying less] can be a false economy,” he says. “There is a feeling that public sector employees should either be paid less or should work in the public sector for purely altruistic reasons. But the sector is built up of complex, difficult-to-manage organisations, and people need to be paid accordingly for managing those organisations.”

Given the current freeze on external recruitment across government, the issue of where to get the best candidates for senior roles, and what salaries they should be given, is something of a moot point in the very short term. Another way of accessing those skills, suggests Appointments Commission chief executive Andrea Sutcliffe, is better use of non-executive directors with commercial nous. “Having people at the board level asking the right questions, setting the strategic direction and then holding the executives to account for delivering on that is one way of addressing a skills gap that may exist,” she says.

While there are a number of non-executive directors on the high-earners list, Sutcliffe does not believe that pressure on pay would be such an issue here: “People don’t become non-executive directors to make money out of it.”

The Normington report and a recent public administration select committee report on external recruitment called for a focus on internal talent development, in order to reduce the need for outside appointments. Tulsiani agrees that succession planning and talent management are key, saying the real issue is not pay, but performance. “We need accountability and rigorous performance management to ensure that we’re getting a good return on this public money,” he argues. “To me, the publication of salaries is secondary to the effectiveness of senior civil servants.”

Fig 4: Proportion of women, by department, among (i) SCS; (ii) all staff, and; (iii) high earners. DfID and DECC have only one high earner: the perm sec

Individuals’ backgrounds were classified using information available at biographies website, department websites and other public sources. We defined background based on the sector in which the individual has worked for most of their career. Where the available information was not sufficient to judge the person’s background, we removed them from the calculations.

Information on staff and SCS numbers in each department was calculated using data from the Civil Service Statistics 2009 tables, published by the Office of National Statistics in January 2010.

We used the high-earners’ salary data as released by the Cabinet Office, so it does not take into account retirements and moves which took place after the data was collated – such as that of Scottish permanent secretary Sir John Elvidge.

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