Parliamentary Commission for Administration and Health Service Commissioner for England

Lord Beamish Excerpts

Monday 18th July 2011 Commons Chamber

[Mr Kevan Jones (North Durham) (Lab)]

I should like to start by agreeing with what the hon. Member for Harwich and North Essex (Mr Jenkin) said about the role that Ann Abraham has played as parliamentary ombudsman. As Members of Parliament, many of us will have referred cases relating to the Child Support Agency and tax credits to her. She and her staff have dealt with those cases very efficiently and ensured that those people, who had had awful experiences at the hands of the system, got some redress. I should also like to welcome the appointment of Dame Julie Mellor to the post. She has considerable experience in the public and private sectors, and her enthusiasm for the role was evident during her interview with the Public Administration Committee.

The Government have not handled the issue of remuneration well. With their spin agenda and attempt to translate sound bites into policy, they do not understand one thing about the parliamentary ombudsman. There seems to be a difference between what the sound bite element in the Conservative party comes up with and putting things into practice. They are creating long-term problems for the Government in respect of the parliamentary ombudsman’s position. Her decisions, which will often criticise Departments for their dealings with our constituents, should be independent of the Government and this House.

It is in our interests as Members of Parliament to ensure that the ombudsman is as independent as possible. However, I do not think it is possible for her to be independent when she has to negotiate her own pay with the Government. I am not suggesting for one moment that Dame Julie Mellor is going to be influenced by money; clearly, as has already been said—by the hon. Member for Dover (Charlie Elphicke), I believe—she took a pay cut to do the job in question. We hear the rhetoric about being on a par with the Prime Minister’s salary, but no policy decisions have been made on that and no evidence has been provided on why the benchmark for senior positions should be the Prime Minister’s salary.

Since I have been in the House—the last Labour Government might have been as guilty as this one—independent bodies have been asked to decide on remuneration, but when Governments did not like the outcome, they changed it or argued against it. That might be justifiable when it comes to MPs’ pay, which we put out to an independent body. The first thing the Government did was to stop us taking the increase, which was to be over many years, taking our pay further and further down. There is a big difference between that and the ombudsman, who has to be seen to be independent from the Government. It is not acceptable for the Government or Executive to be able to exert any levers over the ombudsman.

There is a lot of inconsistency in what has been done. The hon. Member for Harwich and North Essex raised the issue of the Comptroller and Auditor General—another post that should be independent of the Government—but his salary range goes from £210,000 to £214,999. The point made by the hon. Member for Dover is right: with a link to a High Court judge, it is the independence of the person that counts. Controlling things in the way the Government have done—to be honest, I do not think they have done it intentionally; it is just that the soundbites have got the better of them—shows that they have not thought this through. If we are to have this nonsense whereby the Prime Minister’s pay is the benchmark, I ask the Minister to provide at least some justification of why and how it is formulated.

It is important to understand the history of the parliamentary ombudsman and the health service ombudsman. The Committee’s report was good both in questioning why things had been changed and in saying that the previous situation, although it had arisen largely as a result of tradition, was at least a justifiable way of determining the individuals’ pay.

Schedule 1 of the Health Service Commissioners Act 1993 says that where a person holds the office of parliamentary ombudsman and the office of the health service ombudsman, they are entitled to draw a

“salary pertaining to the office of the Parliamentary Commissioner.”

Section 2 of the Parliamentary Commissioners Act 1967 sets out the salary provisions for the parliamentary ombudsman, and section 2(1) states:

“There shall be paid to the holder of the office of Commissioner the same salary as if he were employed in the civil service of the State in such appointment as the House”

may resolve from time to time. The Act states that, in the absence of a resolution passed by the House, the salary payable to the ombudsman

“shall be the same salary as if he were employed…as a Permanent Secretary.”

Over time, the way in which civil servants are remunerated has changed. The current annual salary of permanent secretaries ranges from £140,000 to £239,999. There is also the bonus culture, of which, as a former trade union official, I am not in favour. To give the impression that civil servants’ pay is being kept down, the basic salary is kept down but bonuses are paid as well. Civil servants may be on the lowest scale of £140,000 a year, but by the time they have received their bonuses—and various other payments—they are earning considerably more.

The salary of the Cabinet Secretary and Head of the Home Civil Service ranges from £235,000 to £239,999. The salary of the chief executive of the national health service ranges from £210,000 to £214,999. The annual salaries of the permanent secretaries of the Departments that are responsible for most complaints to the ombudsman range from £170,000 to £174,99 and from £180,000 to £184,999.

It will be asked why that matters. I believe that it matters because of the status of the ombudsman herself. That can best be explained by means of an exchange of letters between the present ombudsman, Ann Abraham, and the Prime Minister, which revealed that the current salary was analogous to that of a High Court judge in salary group 4, which is £172,753. As the hon. Member for Dover pointed out, we are asking such people to act in a quasi-judicial capacity, and I think it important that they not only retain their status but cannot be influenced by Government.

In a letter to the Prime Minister dated 11 April 2011, Ann Abraham wrote:

“The existing arrangement provides an objective and effective mechanism for determining the Ombudsman’s salary, and any increases to it. It gives Parliament assurance that an Officer of the House is being appropriately remunerated and it provides clarity and certainty for the Ombudsman. It enables Government to reject out of hand any suggestion that Ministers or officials are applying undue pressure or offering inappropriate rewards to the Ombudsman.”

She went on to object to the salary bands proposed by the Government.

I think that it was right to link the ombudsman’s salary with that of a High Court judge, because it meant that the ombudsman, either on appointment or each year, would not interfere with, or have some influence over, his or her pay, and it removed the danger, which may be posed by the salaries of the many civil servants who earn much more than the ombudsman does now, that the person concerned would be influenced by his or her salary level. Continuing to do that would also dispense with the nonsense that if we are not careful—I will say more about this in relation to the motion concerning the increase in the salary of the new occupant of the post—it will be necessary to negotiate every time there is a new Government, or if the salary becomes pegged below its present level when the economy becomes buoyant in the next few years and pay restraint is removed.

[Mr Peter Bone (Wellingborough) (Con)]

The hon. Gentleman is making a detailed and valid point, but MPs, too, have to hold to account people who are earning a lot more money than them. Is there not a correlation between that point and the argument he is making?

[Mr Jones]

There is—and quite rightly. Because of previous Governments’ and this Government’s pegging of MPs’ pay, many people, even some quite low-level local government workers, are earning considerably more than us. In terms of the process that we are addressing however, it is important that the ombudsman is independent of, and cannot be influenced by, Government. We have a slightly different relationship with the individuals to whom the hon. Gentleman has referred.

These measures were all brought in on the basis of pay restraint. A lot has been said about trying to cut senior salaries. I have already mentioned the Auditor General’s pay, and there seems to be some inconsistency across Government about where this restraint should apply. If we are going to make exceptions, I cannot see why things were changed here, as opposed to, say, for Bernard Gray who was appointed Chief of Defence Materiel at the Ministry of Defence by this Government on a salary of £250,000 a year, plus a potential bonus of £30,000. I know that that is a very important job; it delivers equipment to our armed forces. I have no objections to Bernard, either; I know him well, and he is a very fine individual. However, if the decision was taken to break the principle of the Prime Minister’s salary being the ceiling in that case, I do not understand why the Government have intervened in that way in this other case.

The Prime Minister’s letter of 21 June reveals a lot about the attitude to pay restraint policy. I do not think he has understood the process. What we are doing here is going away from quite a well-thought-out system to one that has now brought into doubt whether not only current Ministers and Governments, but others too, could influence these areas in future.

[Mr Jenkin]

I think that the hon. Gentleman will find that when he served as a Minister, civil servants received performance-related pay and quite substantial salaries. Indeed, larger salaries were probably offered to public officials than the current Government are offering. I am therefore not quite sure what his complaint is. Does he now recognise that the Government have conceded the principle of what he is arguing in the wording of their motion, in that in future the salary will be agreed between whoever holds my office of Chair of the Select Committee on Public Administration and whoever is Prime Minister

“in advance of the recruitment process”

starting, so there will be stability in the salary at the outset of the recruitment process? I am therefore not quite sure what the hon. Gentleman is arguing with the Government about now.

--- Later in debate ---

[Mr Jones]

The hon. Gentleman has not won a great victory here, because he has no powers of determination now in respect of the existing salary, unless he is going to be able to go back and negotiate—be the shop steward—on behalf of the ombudsman each year to increase her salary. A mechanism would be better.

What is the difference between this instance and the cases of other individuals—such as the MOD example that has been given—in terms of the pay restraint policy that the Government are introducing? Another problem is where to start in terms of the salary band. As the motion says, the individual would get an increase, but that will be forgone at the moment.

[Mr Jenkin]

Is the hon. Gentleman seriously suggesting that we should have come back to the House of Commons, with the new ombudsman having negotiated and agreed her salary at the current level, demanding that the House of Commons vote for a higher salary than she has agreed? In these straitened times I think that the British public would have found that difficult to understand. Starting from now, we have come up with a much better solution to sort this out for the future without embroiling the new ombudsman in a silly controversy that would have distracted from the seriousness of her office.

[Mr Jones]

The hon. Gentleman cannot have it both ways. He cannot say that he is objecting to the arrangement and that he has obtained some kind of victory for the future when he has not. I am sorry to say that what was wrong was the fact that the Government intervened by imposing an arbitrary cap and then saying to the ombudsman, “Sit down and negotiate your pay.” He has obtained something for the future but it is not going to affect the starting salary or the situation now. He is asking whether it would have been wrong for his Committee to have suggested something, but it could have proposed a mechanism that would have possibly increased a larger salary. If it is okay for Bernard Gray at the MOD to be paid £250,000 a year plus bonuses, why are the Government not having consistency across the board? This is a very important job, as it involves independence from the Government and from Parliament, and it is wrong for the Government to be interfering.

[Charlie Elphicke]

I say to the hon. Gentleman that under the previous Government there was a lack of ability to check pay and keep it to the correct level. As a matter of policy, it is right, in general, that officials should not be paid more than the Prime Minister. Nevertheless, the failure and misunderstanding of the policy in this particular case relates to the fact that the ombudsman’s role is akin to that of a High Court judge, and her office means that she should be treated in the same manner as a High Court judge. That is what I hope Ministers will consider, and will perhaps reflect upon and act upon.

[Mr Jones]

I know that the hon. Gentleman is a new Member, but he is living in hope if he thinks that any future Government are suddenly going to throw money at individuals once the salary has been set; he is being a bit naive to say the least. He makes an interesting point about the figure of £142,500. The policy is that nobody should earn more than that. Why? Where has that come from? We know where it came from. It came from the soundbite machine at the general election, from this Government and from a Prime Minister who does not need the salary in any case, because he has independent wealth. If someone could argue that that was the proper level for the job, that would be fine and I would have no problem with it. However, no evidence is being put forward to support that figure of £142,500. That is an absolute fortune, and most of my constituents could only dream of earning anything like that, even in 10 years, let alone in one year. None the less, I would have more respect for the Government’s approach if there were an evidence base to suggest that that figure was the norm, rather than people plucking it out of thin air and then trying to give an impression that it is the norm and capping the pay of the ombudsman—the one post that it should not have been applied to—while having different arrangements for other positions, such as the MOD example that I gave, and others.

I opposed bonuses when I was a trade union official, and the hon. Gentleman is right about our approach. The last Government used them all the time; we tried to say that we were keeping civil service pay down but we were paying bonuses instead. I was always against bonuses because they do not accrue in terms of pensionable entitlements. Let us be honest and say that the Government should try to get away from this whole idea.

The Government have put forward the same argument in respect of local government. The idea that cutting the salary of the chief executive of Durham county council by £5,000 a year or £10,000 a year will actually make a difference in delivering £140 million-worth of cuts over the next three years is completely bonkers. It is nice for the newspapers and it is a nice soundbite at elections, but it does not do the job. What we need in all these situations, as we need in any organisation, is well-thought-out remuneration structures. I am not happy about the cosy relationship between the Chair of the Committee and the Prime Minister in determining the salary of this individual. What the Committee should have proposed are the proper, thought-out, independent salary review processes that we need. As I said before, all Governments try to ignore them when they do not quite fit what they are arguing for, but that is what we need in this case.

The Government have done the ombudsman a huge disservice by intervening in such a way. I feel sorry that she is now lumbered not only with this salary but with a feeling that she somehow has to negotiate her own salary. The Committee did not pull its punches. It said:

“We believe that this is neither a sound nor desirable way to proceed.”

One of the many things about the Government that concern me is the fact that they are completely ignoring processes in devising any type of policy. That leads not only to inconsistencies but to changes that will have an effect, over time, on how the ombudsman service is seen.

My final point concerns the motion. We will agree a salary of £152,000, which the motion says is

“within the range of salaries payable to Permanent Secretaries”.

It is and, as I have already demonstrated, it is not. There are some who are on possibly £100,000 more than that and who are eligible, as the ombudsman is not, to receive annual bonuses. The hon. Member for Dover is right. On some occasions in the Ministry of Defence, I could never quite work out which targets some people got bonuses for meeting. Bonuses were used as a way of avoiding giving pay increases.

The motion says that the salary should be subject to

“any relevant increase…recommended by the Senior Salaries Review Body and…after the end of the current…freeze, 1% annual uprating in lieu of performance pay”,

and that the House considers

“that in future, and subject always to the statutory requirements, the remuneration of the Parliamentary Commissioner…should be agreed by the Prime Minister”.

That is fine for the future, but why 1%? What is that figure based on? Trying to do something at the end is not very satisfactory. Although the motion will be passed tonight, the Government have a lot of questions to answer about why they have intervened in such a way.