Private sector pay must also be made transparent

Duncan Exley, One Society's campaign director, responds to Will Hutton's Review of Fair Pay in the Public Sector, which published its final report today.

Duncan Exley is the campaign director for One Society

Today’s coverage of the Hutton Review of Fair Pay in the Public Sector (which published its final report today) reflected the now-familiar narrative that taxpayers’ money should be spent in a way that reflects performance and is accountable. This is right – taxpayers’ money should be spent in that way, but this can only be done if public and private sector pay is made transparent (as Mr Hutton recommends), and if there is also reporting on low pay (as he does not).

The usual messages that the taxpayer is paying over the odds for performance that is neither sufficient or accountable are illustrated by today’s approving headlines in:

The Daily Mail: “Value for money at last”;

The Daily Telegraph: “Pay cuts for council bosses who don’t do a good job”; and

The Sun: “Fat cats to fat cuts”.

Most of the coverage does not mention Hutton’s recommendation that “all organisations delivering public services” (i.e. including the contracted-out sector) should report “remuneration of all executives”, and although his recommendation that all listed companies should “publish top to median pay multiples” is mentioned, it is little discussed. These recommendations should be discussed – and welcomed.

Pay transparency in the contracted-out sector is a matter of public interest. The chief executive of Serco (over 90% dependent on taxpayers’ money) is paid more than £5 million – far more than the fattest of the ‘council fat cats’.

But pay in those private sector companies which do not have public contracts is also a matter of public interest, and public cost; undeserved top pay can create perverse incentives of the sort that contributed to the financial crisis and which can lead the portfolios of our pension funds and other investments to under-perform.

Yet it is the bottom end of the pay ratios where there is the most glaring public interest. Where excessive top pay is subsidised by excessively low pay for those at the bottom, we all pay the cost. According to the Institute for Fiscal Studies, low pay costs the taxpayer around £6 billion a year in benefits and foregone revenue. This figure ignores the health and social costs associated with large proportions of the workforce working long hours on insecure incomes.

The need to examine low pay is most glaring in the contracted-out sector, because it is nonsense for the taxpayer to subsidise high executive pay, profit margins and the benefits that prop up low pay, but we should not assume that the rest of the private sector is ‘private’ as in ‘none of our business’. The public interest in the high cost of low pay means there is a strong case for public and large private sector employers to disclose “bottom to median pay multiples” as well as Hutton’s “top to median”.

This would not be a panacea, but would help us all to examine whether we are getting “value for money at last”.

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21 Responses to “Private sector pay must also be made transparent”

  1. One Society campaign

    Hutton Review of Fair Pay in Public Sector: Why a failure to tackle LOW pay will cost the taxpayer: http://tiny.cc/g5uag

  2. Hazel Midgley

    RT @One_Society: Hutton Review of Fair Pay in Public Sector: Why a failure to tackle LOW pay will cost the taxpayer: http://tiny.cc/g5uag

  3. Cosmic Landmine

    RT @leftfootfwd: Private sector pay must also be made transparent: http://bit.ly/ftXjti says @One_Society's Duncan Exley

  4. Tim Saunders

    RT @leftfootfwd: Private sector pay must also be made transparent: http://bit.ly/ftXjti says @One_Society's Duncan Exley

  5. Press Not Sorry

    RT @leftfootfwd: Private sector pay must also be made transparent: http://bit.ly/ftXjti says @One_Society's Duncan Exley

  6. Tom Chance

    RT @leftfootfwd: Private sector pay must also be made transparent: http://bit.ly/ftXjti says @One_Society's Duncan Exley

  7. Anon E Mouse

    The minimum wage is there to protect the lowest paid – if it isn’t enough to live on blame Labour and when the private sector is paid for by the taxpayer then it should be transparent.

    It already is to HMRC. Any further is just state control freakery.

    You’d think Labour were still in power reading this. Governments are there to govern not act like the Soviet Union….

  8. john miller

    RT @leftfootfwd: Private sector pay must also be made transparent: http://bit.ly/ftXjti says @One_Society's Duncan Exley

  9. Tacitus

    The discrepancies between the lowest and highest paid in the welfare to work sector are disturbing. As I mention in my blog today, we need more accountability for the crazy salaries some of these directors award themselves – bearing in mind a lot of their turnover comes from the state purse!!!

  10. 13eastie

    In the interest of transparency and to make sure interested parties are getting “value for money at last”, could we have a link to the website that publishes Mr Exley’s remuneration, benefits and expenses as well as One Society’s detailed audited accounts?

  11. The Equality Trust

    RT @One_Society: Hutton Review of Fair Pay in Public Sector: Why a failure to tackle LOW pay will cost the taxpayer: http://tiny.cc/g5uag

  12. Press Not Sorry

    RT @One_Society: Hutton Review of Fair Pay in Public Sector: Why a failure to tackle LOW pay will cost the taxpayer: http://tiny.cc/g5uag

  13. James Doran

    RT @One_Society: Hutton Review of Fair Pay in Public Sector: Why a failure to tackle LOW pay will cost the taxpayer: http://tiny.cc/g5uag

  14. Bored London Gurl

    RT @One_Society: Hutton Review of Fair Pay in Public Sector: Why a failure to tackle LOW pay will cost the taxpayer: http://tiny.cc/g5uag

  15. Daniel Martin, Ph.D.

    RT @One_Society: Hutton Review of Fair Pay in Public Sector: Why a failure to tackle LOW pay will cost the taxpayer: http://tiny.cc/g5uag

  16. Molly

    RT @leftfootfwd: Private sector pay must also be made transparent: http://bit.ly/ftXjti says @One_Society's Duncan Exley

  17. Mr. Sensible

    Mr Mouse the point about the minimum wage is that it is supposed to be just that, a minimum.

    Duncan I think you raise an important point.

    1 thing to add though; a justification that is often used for high pay is the market rate.

    Could it not therefore be argued that high pay in the private sector, both in companies that do public work and companies that don’t, creates a spiral which leads to high public pay?

  18. Daniel Pitt

    RT @leftfootfwd: Private sector pay must also be made transparent: http://bit.ly/ftXjti says @One_Society's Duncan Exley

  19. FairPensions

    "Private sector pay must also be made transparent" @leftfootfwd http://bit.ly/egKCIa

  20. George McLean

    Has anyone done any work on a contractual right to remuneration in an organisation no lower than a certain proportion of that organisation’s highest remuneration (eg a 1:20 ratio), that could be enforced through an employment tribunal (along the lines of an equal pay clause), and what effect this would have on wealth distribution?

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