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Councils must not pay senior staff ‘over the odds’, MPs warn

Councils must seek better ‘market information’ to make sure they are not paying over the odds for their senior staff, the Communities and Local Government (CLG) Committee says. 

Most councils have kept pay down for senior staff in the recent tough economic years, after dramatic 75% pay rises for senior council staff in the first decade of this century, the committee says. 

But local authorities must ensure there is “no return” to inflation-busting pay increases even as economic conditions improve. 

In its report ‘Local government Chief Officers’ remuneration’ the committee recommends that the Local Government Association (LGA) works with local employers’ bodies to fill an “information gap” on regional pay and recruitment trends.  The MPs on the committee are concerned that many councils do not have robust appraisal systems for senior staff, and so lack an established link between senior officer pay and performance. 

Committee chair Clive Betts MP said: “There is no ‘one size fits all’ formula and it is right that councils set pay within the context of their own local needs and priorities. 

“But some councils have made pay decisions insensitive to local circumstances. Councils need to look more critically at the pay packages suggested by external consultants and job evaluation schemes to ensure it isn’t possible to secure a good officer on lower pay.” 

Rigorous performance appraisals needed 

Betts, the MP for Sheffield South East, added that from the committee’s inquiry it is also clear that many local authorities do not carry out rigorous appraisals of senior staff performance. 

The report acknowledges that innovative approaches such as sharing a chief executive with other local councils could reduce overall salary bills and that councils should consider measures which can deliver “best value” for their communities. 

However, the committee does not support merging the posts of leader of the council and chief executive since each has a distinct role, with the robust challenge between the two posts helping to safeguard effective services for local communities. 

An LGA spokesman told PSE: “We are pleased that the committee has recognised the importance of councils being able to take a local approach to pay. The LGA is already working on improving market data and refreshing guidance on performance pay, as recommended by this report. It is also pleasing that the committee recognises staff made redundant through no fault of their own should not be penalised through the clawing back of exit payments.” 

He added that the Association supports the CLG’s recommendations on improved data and will be taking steps on this soon. 

Graeme McDonald, director of the Society of Local Authority Chief Executives and Senior Managers (Solace), who sits on PSE’s editorial board, welcomed the committee’s recognition of “local government’s ability to manage pay locally” versus centrally imposed dictate. 

He said: “The creation of a transparent and flexible market has kept pay under control and led to the wage differential between the lowest and highest earners being kept at the right level. An open, locally determined and well informed approach by the sector leads to the right salary levels being paid. 

“The committee raised the issue of staff appraisal and Solace would welcome a drive to ensure that all senior staff are properly and appropriately appraised. A good appraisal system benefits the organisation and the employee, creates a positive cycle of learning and delivers better outcomes to local communities. 

“Solace believes that the merging of chief executive roles can be effective where the impact is comprehensively considered and the local circumstances are right. However, the committee rightly highlights the risks of merging political and managerial functions within a council. The distinction between political and non-political roles should be clear and unambiguous.”

Local Government Funding 

In a separate report, the Public Accounts Committee (PAC) of MPs expressed concern that insufficient scrutiny is being given to council spending. 

Margaret Hodge MP, chair of the PAC, said: “The government believes that the best way to ensure that councils spend our money wisely is to rely on local residents and councillors to provide scrutiny. 

“However, there is no convincing evidence that ‘armchair auditor’ members of the public are being empowered to hold local authorities to account for how they spend the £36.1bn in funding they receive every year.” 

“Councillors do not always have the skills or time to fulfil this role, which involves scrutinising the delivery of complex services such as adult social care provision.” 

The PAC added that there are concerns over whether the new arrangements for the audit of local authorities provide sufficient assurance and whether scrutiny arrangements are independent of partisan politics. 

It was suggested that government departments that fund new local bodies, such as Local Enterprise Partnerships and Health and Wellbeing Boards, need to introduce clear systems and rules around both the transparency and accountability of money spent by these joint bodies. 

McDonald stated that PAC sets out the symptoms of the lack of real fiscal autonomy and accountability for local areas across the UK, a key concern for Solace. 

“The committee raises concerns that central government cannot be assured that the funding it provides to councils achieves value for money,” he said. “Solace believes this merely highlights the need for a constitutional settlement where local authorities form a fiscally autonomous layer of government with its own mechanisms for assurance. Local government should raise and spend money locally.” 

McDonald added that proposals such as devolving a greater number of tax-raising powers or local Public Accounts Committees have so far been ignored. However, he believes that only with devolved powers will local people be able to make the decisions that ensure their money is spent wisely. 

An LGA spokesman added that local councils are accountable through the ballot box for the way they spend public money and they are serious about transparency. 

“With a successful and comprehensive system of sector-led improvement in place, there is no need for greater government control over local spending,” he said. “In fact, we need more devolution of power to elected councillors to enable them to rewire public services and make local accountability clearer.” 

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