Wandsworth Council's £300,000 Pay Off
The danger here is thinking that Dawn Warwick is the problem and not that her case is indicative of a much bigger problem.
There has been a very significant rise in the salaries of people at the top level of local government so far this century. This was justified by the argument that the public sector needed to keep talented people and had to keep pace with executive salary rises in the private sector particularly in financial services.
The basis for this was a bit dubious at the time as there was little evidence that people were being poached from local government but the fiscal position generally was much better so there was money in the pot to pay for these rises.
Two important changes have happened since this time. Firstly the defined benefit pension has more or less disappeared from the private sector and most people under forty won't have one. The fact that half of Dawn Warwick's pay off related to her pension entitlement shows how important this is. The net present value of someone who has had a career in local government and been paid a six figure salary would be millions. We complain about bankers' bonuses all the time but ignore this far greater expense that comes directly out of the public purse. Secondly the state of government finances has deteriorated significantly requiring us to make painful cuts in spending on services. One area where cuts are unlikely to be made is in the salaries of senior public sector employees.
The public sector works very differently to the private sector. A personnel officer once told me that in the latter by 45 you are either firing people or getting fired as there is only room for a small number of people in any organisation who are older than that. Your pay is usually linked to the amount of revenue you bring in and if the people of your generation who were your clients are no longer there it will tend to fall if you keep your job at all.
In the public sector it is like the Hotel California in that you check in but can never leave. People rise to the top whose main talent is knowing how to play the system and therefore aren't really that employable in any job that isn't funded by the tax payer. Because their contracts make them so expensive to get rid of and because it is very much in their interest to hang on as long as possible most public sector organisations gradually accrue more and more senior people many of whom add no real value. It shouldn't escape your attention that Wandsworth's children's service cut a senior position at a time when it is under huge pressure to improve standards and there was no suggestion that the loss of the role would undermine this goal.
These taxpayer funded sinecures will but an even greater burden on public finances as time progresses. It is not just the cost of paying salaries but the pensions that will require other services to be cut. Wandsworth is relatively well off having reduced headcount at an early stage and the borough pension scheme is well funded at this point but that is not the case elsewhere. Schemes in other London boroughs have deficits of over half a billion and I was told of one example in which the number of potential pensioners from the Council scheme could eventually reach 7% of the population. This can't be funded at the local level so we will all have to contribute to the bill, a bill that in large part be paid by people who have no future entitlement to the generous pensions they are having to fund for previous generations.
David Parker ● 2070d4 Comments