Financial and Business|

Public sector fat cats may face 20% salary cut

Radical new plans to rein in the soaring salary bill for high level public sector employees may result in tens of thousands facing a 20 per cent salary cut.

A report commissioned by the coalition government has revealed at least 20,000 public sector tsars are raking in salaries of over £117,000 a year. It also singles out quango bosses who received unjustifiable increases in salaries over the years of the Labour government’s public spending boom.

The study, authored by government ‘fair pay czar’ Will Hutton, is proposing pay benchmarks and a strong link between performance and pay. Senior public servants, it suggests, should have a proportion of their annual salary held back, to be released annually only if performance merits, with 10 to 20 per cent as a benchmark. Also recommended will be similar measures to apply to the private sector.

Controversially, Mr Hutton is also urging a pay ceiling in private sector companies, justifying the move by saying salaries have ‘spiralled out of control’, especially in the banking sector. In the commercial sector, bosses of FTSE100 firms’ salaries have doubled since 2002, bearing no relation to performance which, in the main, has been ‘average’, according to Mr Hutton.

Listed companies face being forced to publish details in the public domain of gaps between pay levels of average workers and those of company executives, The move would need an amended Companies Act and is certain to provoke fury from fat cats themselves as well as right-wing Tory MPs. However, PM David Cameron as well as George Osborne is reported to be in sympathy with the idea.

The report appears to suggest bankers would need to put a proportion of their salaries on the line should they wish to receive their year-end bonuses and long-term incentive payments, with the ‘double liability’ aspect of the scheme applicable to all executive remuneration. Importantly, the report also suggests workforce representation on firms’ committees appointed to decide levels of executive pay.

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