Localism Bill

My Lords, first, I thank the noble Lord for introducing the government amendments. Indeed, I thank the Government for bringing forward the proposals, which build on the debate in the other place. I see that he has taken the opportunity to get his retaliation in first on our amendments. I will speak to Amendments 101A, 101B, 102A and 108B. When these matters were addressed on Report in another place, the Minister, Andrew Stunell, said that Will Hutton’s report, "““made some clear recommendations, particularly about the benefit of setting decisions on senior pay in the context of the pay of the rest of a body’s work force””—" meaning the median earnings, and I accept that point. He continued: "““We are sympathetic to that idea, particularly the potential for linking lower pay with senior pay””—" so the Minister in the other place focused on low pay as well. He went on to say that he did, "““not think it would be helpful to use the Bill to address the pay of contracting bodies””," which is consistent with what the noble Lord just said. However, he then went on to state, "““That does not prevent a local authority from developing a local policy to ensure that bodies with which it contracts are open about their rates of pay as a matter of contract””.—[Official Report, Commons, 17/5/11; cols. 210-11.]" Although significant growth in executive pay is largely a private sector phenomenon, we support the thrust of greater transparency. We also support the Government’s approach to tackling this in the manner provided, rather than as in the other two options set out in the impact assessment. As the fair pay report also concludes, evaluating these by benchmarking off the salary of the Prime Minister is a nonsense, particularly if you add in the benefits that the Prime Minister gets, which include a central London flat with access to rather a large garden, not to mention the odd country estate. A more realistic figure of his remuneration might be in excess of £0.5 million a year. However, the report also concludes that putting in limits of fixed multiples of lowest pay would, in a sense, be unfair as well. These provisions regarding transparency on pay are important if we are to address public anxiety about the perceived explosion in senior pay in the public sector. However, transparency on pay is not just about senior pay and fairness in senior pay; it is a matter of understanding the context in which that pay is set. We accept that there has been growth in pay in some senior roles in the public sector but there are many myths about public sector pay, some of them stoked by the Secretary of State. Will Hutton made a powerful case for fair pay in the public sector. He said: "““Fair pay is essential to high quality, well managed public services. Public services are vital co-creators of wealth and well-being … Public trust in public services requires that public service pay is fair and seen to be fair, and that public services stand up to high standards of scrutiny””." We agree with that. As my honourable friend Barbara Keeley explained in the other place, the Local Government Association estimates that of 1.7 million employees in mainstream local government jobs, 60 per cent earn less than £18,000 a year. According to the LGA, more than 400,000 council workers earn less than a living wage, including more than 250,000 who earn less than £6.50 an hour. Indeed, a quarter of those experiencing in-work poverty are employed by the public sector, and the average public sector pension is not a gold-plated amount; it is just £4,200 a year. Therefore, we need a rounded approach to transparency in local authority pay which is fair and consistent and which focuses on those at the bottom end of the scale as well as those on median earnings. We also consider that excess pay should not just be tackled in the public sector but that focus should also be put on pay in the private sector which is paid from the public purse. As we have heard, the government amendments require relevant authorities to prepare pay policy statements to include remuneration of the lowest paid and the relationship between remuneration of their chief officers and employees who are not chief officers. They would lump together all employees other than chief officers. This potentially meets the Hutton criteria of comparison with median earnings, as I think the noble Lord said. Our amendment would simply require the statement to provide information about the numbers as well as about the remuneration of the lowest-paid employees so that the position could truly be seen in context. It would also require that, rather than just look at the relationship between the remuneration of chief officers and other employees, the statement should also look at the relationship between the remuneration of chief officers, the lowest-paid employees and other employees. The retention of a focus on low pay is an alternative approach to the specific linking of senior pay to multiples of low pay—that is, the 20 times factor—which the Hutton report recommended against and which seemed to find favour with the Minister in the other place. Our Amendment 101B would add to the policies which must be included in an authority’s statement its approach to the engagement after retirement of former chief officers. We read press reports of senior officers retiring one day, only to be recycled as expensive consultants the next. I do not assert that to be true; nor do I argue that it should necessarily be inhibited, but transparency will help to set this issue in context. Our Amendment 108B is an attempt to take account of indirect employment, whether specifically structured—for example, to avoid the rigours of these provisions—or otherwise. It is accepted that to devise a comprehensive description of the range of circumstances might be difficult to enshrine in primary legislation; hence, with some embarrassment I am bound to say, we have resorted to giving the Secretary of State an extra power to produce guidance—but guidance that must be subject to consultation with local authorities and trade unions. Finally, we included provisions for the statement to cover the approach the authority takes to the pay policy of those providing goods or services. Indeed I think that that was recognised as something which would be appropriate by Andrew Stunell in the other place. It is in a very mild form, and simply builds on the Minister’s remarks that authorities are free to adopt this approach. If they are free to adopt this approach, guidance may be one way to remind them of that; putting it in the Bill is another, not as a requirement but as something for consideration. The Minister dealt with Amendment 105, which is in the name of the noble Lord, Lord True. We accept and agree with that position. Amendment 108A simply reflects the removal of mayoral management arrangements from the Bill and obviously has our support. I believe that our amendments go with the grain of what the Government are supporting. I accept that the Minister will not accept them today and sees that some of them can be encapsulated in guidance. However, I believe that we ought to be mindful of the fact that people who might be directly employed would be caught within these provisions, whereas those who are one stage away—perhaps in an agency company but otherwise directly engaged in working for the local authority—would be outside these provisions. One can see the scope for those wishing to use those mechanisms to get round these pay transparency provisions. I therefore urge the Government to see whether some mechanisms might not, as we have suggested, be most appropriate to tackle this lacuna in the proposals.