A tale of two Huttons

"Overpaid public sector workers ripping off the taxpayer with gold plated pensions". This is the stuff of tabloid headlines but also reflects a perception within government and beyond that the way in which public servants are rewarded cannot continue as before. Hence the two Hutton reviews. First came Lord Hutton’s review into public sector pensions whose recommendations included replacing the existing final salary scheme with a career average scheme and linking the normal pension age for public sector workers to the state pension age. This was also presented as good deal for the taxpayer through making public sector workers work longer and the government establishing a fixed cost for employers’ contributions to public sector pension schemes. More recently Will Hutton has reported on fair pay in the public sector arguing that fair pay must be proportional to each individual’s contribution and set according to a fair process and is essential to high quality, well managed public services. His recommendations included the publication of annual Fair Pay Reports setting out trends in pay multiples across public services and preventing rewards for failure through senior executives having an element of their basic pay that needs to be earned back each year through meeting pre-agreed objectives. Those who exceed their objectives would be eligible for additional pay. This recommendation has attracted the most attention and has rekindled the debate about whether private sector type remuneration structures and packages are appropriate to the public sector.  Whilst the scale of remuneration in parts of the private sector, in particular financial services, may be deeply unpopular, there is broad acceptance that if, say, an investment banker makes a fortune for his company, paying a bonus would not be unreasonable. Yet can this culture meaningfully be transferred to the public sector? How can realistic performance targets be set when success in roles can rarely be measured by financial returns? A core problem therefore is one of measurement and what is being rewarded. So often the really big challenges in the public sector cannot be determined by short term fixes but are long term in scope and execution. Yet the culture still veers towards reasonably rapid job rotation so that those who start a project will rarely see it through. If people were kept in post long enough for a proper judgement to be made of whether a project was a success, then appropriate performance payments become easier to assess.

Performance related pay -  how much of a motivator in the public sector ?

The other issue is the extent to which performance related pay is a genuine motivator in the public service. Does anyone realistically think that those in the FCO and MOD who are working on North Africa are working that bit harder because they might get a bonus at the end of it? It just doesn’t work like that. People are attracted into the public service because they subscribe to its ethos: they believe that society benefits from a well run public service. They accept that a price to pay for this is a lower level of reward than could be found in many parts of the private sector. Yet this does not mean that they should not be rewarded fairly. And the risk of a draconian approach to public sector pay restraint is that it will appear to undermine the concept of fairness and discourage talented people from going into public service. All governments, whatever their colour, depend upon an effective bureaucracy if their policies are to be developed and implemented successfully. This means nurturing talent, not driving it away.