Public Sector Executive Pay and Governance

David Amess Excerpts

Wednesday 15th October 2014 Commons Chamber

[Mr David Amess (Southend West) (Con)]

The Economic Secretary to the Treasury and I are both Members of Parliament and politicians, and, as such, we are under no illusion as to how politicians are regarded. We are blamed when things go wrong and, from time to time, we are praised when things go right, and we make no apology for any of that. As Members of Parliament, we are paid £67,060, and the pay for the Prime Minister is £142,500. Some people would say that that is a lot of money, and it is compared with the pay of all sorts of people, but the Minister and I are judged by the electorate every five years. If they do not like us, they can get rid of us, and if they do not like our party, we may pay the price for that too, so we are constantly judged.

What I am increasingly angered by is the way public sector governance and executive pay are not working. I am sick to death of the relationship between chief executives and the chairmen of local authorities. There seems to be, in all sectors, a very cosy relationship, and there is no rigorous scrutiny whatever. The late Baroness Thatcher once famously stated:

“There is no such thing as public money; there is only taxpayers’ money.”

I called for this debate because there is, and has been under previous Governments, a huge problem with the ease with which taxpayers’ money is spent.

There are many hard-working people in the public sector, and I praise all of them, including those in the health service, the police and education, for doing a fantastic job under difficult circumstances. Thirty-one years ago, when I became a Member of Parliament, I did not think that I would be making this speech. I now think that the management of some public services is not up to scratch, and the salaries paid to the executive directors are in many cases absolutely outrageous and unjustifiable.

I have, of course, touched on this subject in previous debates, but I am sadly not sure that any action has been taken as a result of what I said. I have been looking very closely at how the management of my local public services function and to say that I have been unsatisfied with them would be an understatement. Of course, Madam Deputy Speaker, you are a fellow Essex Member and are proud to be so, and I am well aware that some of these organisations serve your constituency as well.

I have raised the issue of my local mental health trust, the South Essex Partnership University NHS Foundation Trust—or SEPT—my local hospital and probation services on many occasions in the House. Let me repeat once again that I will not let the matter drop when it comes to any of those services until I see a satisfactory and radical change of management.

This is not just about Essex and my constituency of Southend West. It is a nationwide issue. At 48.5% of our GDP, we have one of the highest public spending levels in the world. We spend more on public services than Germany, Japan, Canada, the USA, Brazil, Russia, Australia, Switzerland, South Africa or Singapore. Whereas I wholeheartedly support our hard-working medical staff and our wonderful police officers, taxpayers’ money could be managed much more efficiently and fairly.

Many aspects of our public expenditure need to be addressed. For instance, we contribute a net amount of €9.2 billion to the European Union—when the Prime Minister renegotiates things I know that that will be at the top of his agenda. We subsidise trade unions with the stunning amount of £113 million per annum, and lose 2.6% of total hours on sickness leave in the public sector, as opposed to just 1.6% in the private sector. However, I am going to concentrate more specifically on the problems that should be addressed in public sector governance and the salaries of public sector executives. When what I have to say is reported in Hansard, some of the individuals concerned will not like it.

My major concern about executive pay is not the amount of money directly paid to the director, but rather how in many cases it seems inversely proportional to the quality of service provided. We seem to be rewarding failure, which is absolutely and totally unacceptable. I have done some numerical comparisons of my own and the figures at which I have arrived are shocking. I attempted to compare the ratio of directors’ pay to the income from activities at various hospitals. For this reason, I compared my local NHS foundation trust’s management, with which I am very unhappy, and Salford Royal NHS Foundation Trust, which appears to provide exemplary service to patients and has displayed some excellent management.

It turns out that Salford hospital spends only 0.2% of its income from activities on directors’ pay, whereas SEPT spends 0.5% and Southend hospital 0.6% of their income from activities on directors’ pay. Let me reiterate: both SEPT and Southend hospital have management boards that are not suitable for their roles and yet they spend twice and three times as much respectively on rewarding their directors. That is absolutely unacceptable.

I want to provide some examples. The departing chief executive of Southend University Hospital NHS Foundation Trust—we do not know whether the individual has gone voluntarily or what has gone on, but we have been saddled with a huge amount of debt—took a pay rise of £20,000 in the last year. When I challenged the individual on that, because I had been told that it was £25,000, they said, “David, you’ve got it completely wrong. It’s £20,000.” That is absolutely ridiculous: a £20,000 pay increase, and the deputy took a £15,000 pay increase in the past year.

It gets worse. The commercial director at Southend university hospital trust, who is paid £112,500, took a pay rise of £40,000 last year. The former deputy chief executive, currently chief executive at SEPT, is on a salary of £167,500 plus £22,500 employers’ pension contribution. I know that my hon. Friend the Member for Colchester (Sir Bob Russell) is served by the same trust.

The former chief executive at SEPT—I have talked about the trust many times in the House—received a salary of £217,500. That is crazy. What on earth was the chairman of the board thinking? It gets worse, because they also received £32,500 in employers’ pension contributions. That is absolutely outrageous. While all that was going on, the then deputy got the job of chief executive.

The former executive director of strategy and business development at SEPT, who has a close relationship with the former chief executive—I believe that individual was hired in contempt of the non-fraternity policy and am following up the issue with Monitor—does a totally unnecessary middle-management job with a salary of £147,500 and £22,500 in employers’ pension contributions. Most shockingly of all, when that individual left SEPT—coincidentally with the chief executive—in October 2013, he received an exit package of £470,000. That is absolutely outrageous, and I will not shut up about it or allow a line to be drawn under the matter simply because it happened last year. I will keep going on about it until those responsible for this outrageous abuse of taxpayers’ money are held to account.

The executive chief finance officer at SEPT received a salary of £207,500 and £22,500 in employers’ pension contributions. It is marvellous that at the Liberal party conference we were guaranteed certain waiting times for mental health appointments and all that, but the reason I get so many complaints about mental health services from my constituents is the appalling mismanagement of SEPT.

The executive director of corporate affairs at SEPT, another unnecessary middle-management person—why the trust needs someone in that role, I do not know—received a salary of £132,500 and £17,500 in employers’ pension contributions. That is more or less the same as the Prime Minister. Whatever anyone thinks of the current or previous Prime Ministers, as far as I am concerned it is the toughest job in the public sector.

It is also outrageous that the chief executive of Essex county council receives a salary of £210,000 and total remuneration of £254,769—over £100,000 more than the Prime Minister. That is absolutely ridiculous and totally unacceptable. It is a matter that I think Essex county council should address pretty quickly.

The TaxPayers Alliance’s list of the highest-paid council employees ranks Essex as the place in England with the greatest number of council employees who earn more than £100,000—there are 30 such employees in Essex. That is crazy. Those officers might turn up to the House of Commons to brief us on an issue, yet they are earning a hell of a lot more than we are. The director-general of the BBC, which is publicly owned and, frankly, has not had a great record over the past years, is paid £450,000. That is absolutely ridiculous and totally unacceptable.

I am not going to name names, but Essex MPs were lobbied today by a number of individuals, and at one of those meetings three of those officials turned up, which I think was ridiculous, as one would have been quite sufficient. When I asked about their salaries, I found that one was on £140,000 and the other two were on £111,000. It is absolutely ridiculous. I have been in contact with the Royal College of Nursing, which is calling on all NHS senior managers to demonstrate the kind of pay restraint that nursing staff have been forced to accept in recent years.

I have identified a number of unnecessary jobs in the public sector, such as the overpaid “commercial director” position at Southend hospital and the “executive director of strategy and business development” at SEPT. However, this is just the tip of the iceberg, as lots of unnecessary, middle-management positions are created across the country in the public sector, and it is the taxpayer who pays for this arrogant self-indulgence.

The TaxPayers Alliance has tried to scrutinise public expenditure, and it has identified 1,129 unnecessary jobs in the NHS alone, costing £46 million. According to its report, taking the east of England as an example, there are 52 unnecessary public relations jobs in the NHS. Why we need to have all these public relations people, I do not know. If the organisation is doing such a marvellous job, I would have thought that the media would cover it in any case, and it would be self-evident. I should think it is more like having 52 apologists. There are also four unnecessary equality jobs, six green jobs, and three other unnecessary jobs.

Among other non-jobs in my constituency, the TaxPayers Alliance lists two “communications managers” and an “estate and environment manager” at SEPT, as well as an “equality and diversity manager” and “head of communications and engagement” at Southend hospital. I am sure we would agree that equality, diversity and the environment are all very important, but they should somehow be incorporated into the daily duties of the top management instead of creating a number of full-time, very well-paid managerial positions to deal specifically with such issues. This is all happening at a time when Southend hospital’s management is facing a £8.5 million deficit. How has this been allowed to happen? Where is the governance? It is absolutely outrageous. To make matters worse, Southend hospital is now hiring an external consultant and has the nerve to ask hospital staff for ideas on how the hospital should manage its own finances. That really is taking the mickey, frankly.

Governance in the public sector should be addressed. The general guidance provided to the public sector services—for instance, NHS trusts—is that boards of directors have responsibility for the quality of care and for the ongoing financial stability of their organisations. In NHS foundation trusts such as Southend hospital’s South Essex Partnership University NHS Foundation Trust—or SEPT—boards of directors are held to account by the council of governors, which is elected by the foundation trust’s membership of various stakeholders, including the local public, patients, carers and staff. The council of governors is led by the chairman. Whereas that form of governance appears reasonable in theory, in practice we encounter many problems on various levels in terms of whether the dog is wagging the tail or the other way round.

It is simply unbelievable that the chairman of SEPT remains in position—she has been there since 2008— having allowed a number of scandalous developments, which I have articulated this evening, to take place. Where was the governance there? It was under her leadership that the former chief executive appointed his partner to a very highly paid middle-management job, and under her leadership that the latter employee left with an exit package of nearly half a million pounds. If Monitor is worth anything, I want it to do something about it.

How it is possible that the chief executive of the former Essex probation service, currently Essex community rehabilitation company, is still in her position? I remember that 10 years ago the probation service was judged to be failing. She hung on to her job, and now she and the chap who had been chairman for two and a half years seem to be setting up another organisation, hoping to be one of the successful bidders.

I have serious concerns regarding chairmen’s independence from the chief executives, as illustrated by Southend hospital. The chair of the foundation trust is supposed to overlook the work of executive directors. In the case that I am concerned about, the individual seems impotent and unaware of what is happening at his hospital. Indeed, I was there with an Essex colleague who was meeting the hospital chairman for the first time and did not know who he was, even though he had been chairman for three years.

Problems and irregularities at the top management level are adversely affecting other members of staff. Morale was affected as a result of the £20,000 pay rise. Guidance was given that people paid more than £100,000 should receive no pay rise at all. At the same time, staff morale seems to be at an all-time low, as the management fails to retain and motivate the hard-working medical and non-medical staff.

It recently hit the headlines that the hospital faces a £8.5 million deficit, and it is justifiable to believe that a bulk of that sum is due to the fact that the hospital’s management fails to attract and hire permanent staff and instead relies heavily on agency staff. It is estimated that the hospital spent as much as £6.9 million in just five months on agency staff. There are a huge number of vacancies at the hospital. The situation is absolutely ridiculous. What is wrong with the recruitment?

The internal financial crisis at Southend hospital is serious, but it could have been avoided. Clear guidance needs to be provided to the public sector management to boost its knowledge of skilful management as well as its ethical approach to excessive pay.

The use of external consultants should be looked at very carefully. It is outrageous that Southend hospital has just hired an external consultant to look at its financial problems, despite already having a highly paid full-time director of finance. The services of the external consultant will come with a cost of hundreds of thousands of pounds to the taxpayer. If Southend hospital needs to resort to external financial advice, what is the point of having a full-time financial director?

I apologise to my hon. Friend the Economic Secretary for bombarding her with all these facts and figures, but she will realise that I am somewhat frustrated. This is not the first time that I have raised the matter in the House. I will end with what I said at the start: my hon. Friend and I are both politicians and we are blamed for most things, but I think we are being badly let down with regard to the matters under discussion. I know that I can rely on her to do her best to address those problems.