Public sector salaries should rise, not fall

It is open season for senior-level public servants. Public sector workers
earning a six-figure salary are coming under increasing scrutiny, as the most
recent survey of public sector salaries from the Bureau of Investigative
Journalism shows.

Given the level of the public debt and the need to curb expenditure, a furore
is understandable. But there are risks for the country as a whole if public
sector finance directors are not valued and appropriately remunerated.

A finance director in a London borough, for instance, may be looking after
the finances for an organisation with a turnover of £1bn or more. For this to be
done effectively, individuals who hold this post need the appropriate level of
experience and qualification.

Considerable judgment calls need to be made. The Icelandic banking crisis was
just one example of the decisions that public sector FDs are required to make
daily. Rates offered to borough councils by Icelandic banks were attractive and
about 25 percent of local authorities made deposits which were lost when the
banks collapsed. Those that decided not to invest were going against the grain:
evidence of the tough decisions public sector FDs must be prepared to make
constantly to protect the public purse.

The pressures can be considerable. It must be remembered that, generally,
individuals who hold these posts will be paid significantly less than FDs in
equivalent-sized public companies. Indeed, perhaps surprisingly, other
professions compare favourably – a qualified plumber working in central London
can rake in a lot more.

Few can contest the need to fundamentally reduce levels of public spending to
put the country on a sounder economic footing. Equally unavoidable is the need
to reduce headcount in public services. But the effective management of this
process will, in many instances, be led on a long-term basis by public sector
FDs. If these roles are going to become devalued and remuneration cut, it will
be difficult to recruit and retain the strongest and most committed individuals
who may be required to deal with the delivery of the savings agenda.

While there is an argument that those in the public sector should be paid
less than those in the private sector, as they are remunerated from public
funds, it is not always the case that the role of the public sector FD is less
challenging than that in a private enterprise. If salaries in the public sector
underperform, it will inevitably become a less attractive career path and the
quality of public sector FDs will fall after years of the Government Finance
Profession working to raise the game of its FDs and their teams.

If this happens, the chances of the country being able to effectively address
public sector spending issues will be reduced, to the detriment of the long-term
economic objective of ensuring that public spending is under control.

The writer is the FD of a borough council. We invite comment on this
topic at our LinkedIn site,
www.financialdirector.co.uk/linkedin