The government has launched a review of its powers to control pay and bonuses in public sector bodies, following rows over the rewards for the heads of state-backed companies.
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The move follows a row over planned bonuses for the heads of government-backed Royal Bank of Scotland and Network Rail. Both subsequently declined their packages.
RBS chief executive Stephen Hester announced late last month that it would be ‘indulgent’ to accept his near £1m bonus. Last week, Network Rail chief executive David Higgins said he would donate any bonus, which is still to be decided, to a fund to improve safety at level crossings.
Alexander and Maude have called on secretaries of state to audit the powers they have over pay policies at ‘bodies that are likely to attract public comment’ by the end of the month. This will also likely include organisations such as Channel Four, the Royal Mail and the Met Office.
Existing powers should be used to ensure that bonuses are not paid to reward ‘run-of-the-mill performance’, the letter added.
Confirming the review, a Treasury spokeswoman said: ‘It is important that top pay and remuneration reward genuine excellence and command public confidence.
‘The chief secretary to the Treasury and minister for the Cabinet Office have asked departments to look at the levers they have to control pay and bonuses in their arm’s-length bodies and whether these levers are being used effectively or could be strengthened.’
Danny Alexander told the Daily Telegraph today that this was ‘not about getting rid of performance pay’, but ensuring that it rewarded top performance.
He added: ‘The idea is to look at the levers government has, to make sure that the remuneration rules are fit for purpose and command public confidence.’
However, the trade union Prospect, which represents civil servants in public bodies, said that the bonuses are often a substitute for pay increases, and instead called for a full-scale reform of pay arrangements.
Deputy general secretary Dai Hudd said: ‘This is an arbitrary announcement, which has been made without consulting the unions.
‘Bonuses were introduced by the Treasury in the 1990s as part of a government policy designed to make departments more “business-like”.
‘It's all very well for Danny Alexander to complain about them now, but it's the politicians and Treasury officials who drove forward this agenda, introducing arrangements that in many cases replaced genuine pay increases.’
