Official Report


Finance Committee, 13 Jan 2009

Scottish Parliament
Finance Committee
Tuesday 13 January 2009

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: [The Convener opened the meeting at 14:05]

Public Sector Pay

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The Convener (Andrew Welsh): : Good afternoon and welcome to the first meeting in 2009 of the Finance Committee, in the third session of the Scottish Parliament. I ask members of the committee and the public to please turn off mobile phones and pagers.

The committee agreed that it would like to hold some evidence sessions on public sector pay. On 9 December, we took evidence from the Scottish Government's pay policy unit and from unions that organise in central and local government. Today, we will take evidence from the Convention of Scottish Local Authorities, and next week we will hear from the Cabinet Secretary for Finance and Sustainable Growth. COSLA is represented by Councillor Michael Cook, who is spokesperson for strategic human resource management, and Joe Di Paola, who is head of the employers organisation. I welcome you both. I believe that you do not wish to make an opening statement, so I invite questions from members.

Alex Neil (Central Scotland) (SNP): : Thank you very much for your submission. It seems that there is quite a disparity between people in local government and people in some of the quangos—particularly at the higher level—involving senior pay. When you decide on the right level of remuneration for senior people who work in local government at chief executive and director level, what is your reference point?

Councillor Michael Cook (Convention of Scottish Local Authorities): : Councils bargain independently of the Scottish Government. We create a series of bargaining groups that deal with each of the various big issues in Scottish local government. There is a group for the majority of workers in local government—the Scottish joint council—and one that deals with the pay of chief officials.

We have recently agreed a three-year settlement with chief officials. In each of the three years, beginning in April 2008, they will receive a 2.5 per cent increase. I will hand you over to Joe Di Paola to talk about the reference point.

Joe Di Paola (Convention of Scottish Local Authorities): : I suppose that the reference point for the salaries of local government chief officials and chief executives must be the local government reorganisation in 1996, when agreement was reached on a set of salary values that applied to chief executives across the 32 councils, which was based primarily on population banding and on the relationships that had existed in the regions that were broken up.

Between 1996 and 2002, a former chief executive, Sir Neil McIntosh, was asked to examine chief executive salaries. He made a series of recommendations that were accepted jointly by local authorities and the representatives of chief officers and chief executives in Scottish local government. The McIntosh recommendations remain the reference point for the salaries of chief executives and chief officers. Any year-by-year increases that have been negotiated since then have been based on the McIntosh values and have been uprated and revalorised in relation to the amounts that have been agreed through collective bargaining between local authorities and the representatives of the chief officers.

With regard to senior salaries, although the practice is not universal, there are still percentage relationships between local authority chief executives and other local authority chief officers at directorate level, and arithmetic relationships exist between directors and their deputes and heads of service.

Alex Neil: : In the quangos, bonuses are an issue. Do bonuses operate in any of the 32 local authorities in Scotland?

Councillor Cook: : No.

Alex Neil: : So there is just the salary, and that is it.

Councillor Cook: : That is correct.

Alex Neil: : On the differential between people at the lower end of the scale and people at the top end, in some quangos there seems to be an unfair advantage, relatively speaking, for senior people compared with people at more junior levels. There obviously has to be a significant differential between the very bottom and the very top, but in some organisations the differential is way above and beyond what is reasonable. Are the differentials in local authorities between those at the lower end of the scale and those at the top end about right or do we need to revisit them?

Joe Di Paola: : If I think that the differentials are correct, you might think that they are not. We must also consider that staff are not all in the same bargaining group, so they bargain differentially. I do not mean only in salary terms; different parameters and different structures exist to take account of the various salaries that are paid.

We do not pay hugely excessive salaries at the top end of local government, which is borne out by looking at the salaries. This year, we have again made a higher offer—by a margin of 0.5 per cent—to people who are further down the scale than to chief executives and chief officers. It is recognised that a watch needs to be kept on the difference between the very top and the very bottom of the salary scales but, because of the different bargaining structures and the numbers concerned, you are not comparing apples with apples. Scottish local government needs to pay competitive salaries.

We have recently done some work on the salaries of chief executives of local authorities in England and Wales. The Local Government Association in England and Wales is concerned that chief executives' salaries are running away, because in England and Wales they do not have the central reference points that we have as a result of the McIntosh recommendations, so individual authorities determine salaries without there being any brake on them. We are clear that there must be a brake based on population and on the McIntosh reference points. There will always be an argument that there is too great a difference between what is paid at the top and what is paid at the bottom, but we need to examine what we do at the bottom of itself and on its own merits rather than try to make spurious comparisons.

Alex Neil: : Joe Di Paola has referred two or three times to the different pay bargaining structures in local authorities. The unions have made the point, not only in respect of local authorities but in respect of the wider public sector in Scotland, that some of the structures need to be streamlined, which might lead to fewer discrepancies, as it were, between people who do similar jobs in different structures. Is there a need to streamline the negotiating structures or are you satisfied with the existing group of bargaining units?

Councillor Cook: : There are currently seven separate bargaining structures. We echo the unions' wish for them to be streamlined. There would be advantages in streamlining the bargaining process by reducing the number of bargaining groups, but that would have to be agreed between the unions and local government. It is perhaps a matter of each side reconciling their aspirations. In the longer term, we wish more bargaining to be brought under a single umbrella but, at present, individual groups of workers may have issues that they want to press, may be keen to retain a degree of autonomy and may, as a consequence, be keen to retain a particular bargaining group. If there were movement on that, we would be willing to respond positively.

As an adjunct to that, we have made significant strides on equality proofing and single status arrangements for the majority of workers within local government who are represented within the SJC. We cover something like 257,000 full-time equivalents in Scottish local government, and more than 228,000 of them are embraced in the umbrella group that is the SJC.

David Whitton (Strathkelvin and Bearsden) (Lab): : One of my concerns is low pay, which Unison told us the Government aims to tackle. Mr Di Paola spoke about a margin of 0.5 per cent. Is that enough to address low pay and make up some of the differences between the people at the bottom end and those at the top?

Councillor Cook: : We thought that we might be asked that question, so we compared the SJC's agreed minimum hourly rate of pay and the national minimum wage. I will give you a series of dates, which may be instructive. We have worked out that, at 1 April 2007, the SJC minimum hourly rate was £5.81, whereas the national minimum wage hourly rate was £5.35, so we were paying 108.6 per cent of the minimum wage. By 1 October, although the SJC minimum rate was still £5.81, the national minimum wage had crept up to £5.52, so we were paying 105.25 per cent of the minimum wage. That continues to be the case: the minimum hourly rate that local authorities pay is around 105 to 108 per cent of the minimum wage.

There is something else. I mentioned single status earlier. A public aspect of our wage negotiations is that we have offered 3 per cent and 2.5 per cent in two successive years to the SJC unions. Unison has accepted that offer, but the other two unions are contemplating their response to it. However, there is a load of unseen investment in jobs within local government in Scotland. The easiest way of explaining that is through single status. The Society of Local Authority Chief Executives and Senior Managers carried out a piece of work that estimated that the single-year costs of single status added 4.5 per cent to the global Scottish local government wage bill. That is another significant but unseen investment in jobs in Scottish local government.

In the SJC discussions, the unions have asserted that there is an issue of endemic low pay. We do not necessarily accept that, but we are willing to examine the issue with them. Indeed, some time ago, in the context of our SJC discussions, we wrote to the unions saying that, if they wanted to discuss low pay, we were up for examining it with them and would set up a short-term working group for that purpose. The unions need to reflect on our proposal and respond positively to it.

David Whitton: : By my rough calculations, the difference between the minimum wage and what you were paying was about £20 a week for an average 40-hour week in April last year and about £12 a week come October. Those figures do not seem to me to be tackling low pay. It is no wonder that the unions tell us—and I infer from what you have just said—that COSLA does not believe that it has a problem of low pay. Do you or do you not?

Councillor Cook: : I have said that we need to consider the evidence together. The experience on the ground in my local authority—Scottish Borders Council—is that pay is not an issue. Jeremy Purvis will be well aware of that. Our retention is good, and the perception is that the local authority pay generally raises the average wage in the area. That is true in other places in Scotland, so there is no uniform position. As I have explained, we are keen to sit down with the unions and explore together the assertion that low pay is an issue. However, I will certainly not make a rough and ready assessment of the position now, because we need to examine the evidence to find out what it shows us.

David Whitton: : My final question is on the pay award, which Councillor Cook mentioned, of 3 per cent this year and 2.5 per cent next year. The award has been accepted by Unison but rejected by the other two unions. However, I understand that the vast majority of local authorities are just implementing that pay increase. Is that correct?

Councillor Cook: : That is correct.

David Whitton: : How does that sit with pay negotiation, given that two of the unions have not agreed the deal?

Councillor Cook: : Through Unison, a majority of the trade unionists voted for the deal. Unison has the largest membership, with about 95,000 members, whereas the other unions taken together amount to about 40,000 members. Councils also have significant swathes of non-unionised staff, so councils had to make a decision. Through the SJC, the unions were supposed to come back to us with a collective position, but they found it difficult to do that for a number of reasons. Individual local authorities—it comes down to that level—had to make a decision on how to proceed. In the circumstances, our advice to councils was to implement the deal. The majority have proceeded on that basis.

David Whitton: : If individual councils have just implemented the deal, does that not undermine the position of COSLA, which is supposed to be doing the joint negotiation?

Councillor Cook: : We have been doing the joint negotiation. We offered 3 per cent and 2.5 per cent, which was accepted by the largest of the unions. Within the SJC structure, the unions are required to present a unified position, but they were unable to do that, so we had to assess the position and come to a conclusion on how to take things forward. In view of all the circumstances, our decision was that it was best simply to encourage councils to implement the deal. I accept that that is not an entirely satisfactory position, but we are where we are.

Jeremy Purvis (Tweeddale, Ettrick and Lauderdale) (LD): : Good afternoon. I will return to the issue of low pay in a moment, but I want first to consider how the structures are configured. The committee has received evidence from the Scottish Government about its senior executive pay policy. Excuse my ignorance, but does COSLA operate with an equivalent stated pay policy with sets of policy ambitions—other than the McIntosh principles and criteria that have developed through convention and practice—when it commences negotiations?

Councillor Cook: : I was momentarily distracted, so I will let Joe Di Paola answer that.

Joe Di Paola: : A policy-based pay structure is being developed inside COSLA. We use a variety of sounding boards—directors of finance, directors of personnel, chief executives and elected members—to ask councils what they can afford before any negotiations start. We always try to ensure that negotiations are based on councils' ability to pay, or affordability, as well as on equity. Frankly, we also need to reach a situation in which we can get a collective agreement—I accept that we have not as yet fully achieved that in the SJC. The principles are based on reaching a collective agreement that is affordable to councils at that point in the pay cycle or settlement. Given that we have a three-year settlement with Government, we look at multiyear settlements to provide councils with some stability. All those factors are built in, but we do not have a mechanistic approach or a checklist as such, although a checklist exists for chief executive salaries because McIntosh gave us a template for them.

Before every negotiation, we use all those sounding board mechanisms to reach a consensus. Through those sounding boards and the COSLA leaders meetings, we are given a negotiating mandate. The leaders receive a report telling them what we think is affordable and what we as officers think would be the optimum length of settlement. However, a political decision then needs to be taken by the leaders based on the mandate that they have been given by their individual authorities.

Jeremy Purvis: : Could the pay process also be a policy process to bring about outcomes? According to the Scottish Government, a stated aim is to address low pay. We may be able to hold the Government to account on whether such an outcome is achieved. When the pay process applies to more than 200,000 workers in Scotland, it is hard to judge the outcome other than by what is affordable within the period. Is that being considered by COSLA? You said that a process is under way. Can we expect, in the next year or two, a more transparent process, in which some local government policy aims or outcomes, rather than just affordability, are sought through the pay process? Unlike in previous years, for one reason or another local government has not been given an indicative grant level for next year by the Scottish Government, which might have an impact on your discussions.

Councillor Cook: : I apologise for being momentarily distracted by a note earlier. I am not sure whether I am able fully to answer the question. However, to pick up where Joe Di Paola left off, COSLA's approach is informed by local authorities. As Joe rightly said, the key issues for local authorities are affordability, stability and continuity of services to communities. I came into local government because I was concerned about service provision. That is really at the heart of it. We pick up the attitude of individual local authorities to those three propositions. We have to make an assessment in the context of the global financial position and the amount of funding that we are getting from central Government. We determine what is possible within that context and make a series of judgments.

On low pay, I can only repeat what I have said: we cannot accept any propositions at this juncture without absolutely clear evidence on low pay within Scottish local government. Nonetheless, there is a willingness to consider the issue jointly with the unions and, depending on what is established, to begin to address any issues on a policy basis, although that is always confined by other considerations, such as affordability, stability and continuity of service provision.

Jeremy Purvis: : I have one further question on the low-pay element. It has been put to the committee that many term-time or cyclical workers in local government may, averaging it out over 52 weeks, be on take-home pay that is significantly below the minimum wage. You cited the helpful information that local government workers' pay now stands at 105 per cent of the minimum wage. How many workers, such as janitorial staff in schools or elsewhere, or carers, for whom there are costs that take away from their take-home pay, are employed on a term-time basis? Does COSLA assess that? That issue was to the fore in the Scottish Borders Council's commission on poverty and social exclusion, which considered not just full-time, salaried, 52-weeks-a-year local government staff.

Joe Di Paola: : Whether a person works 10 hours a week or 40 hours a week, the multiplier is the hourly rate that we quoted. In terms of the rate, the comparison stands good hour against hour. Yes, there are people who are paid on a term-time basis—that is a clear, contractual arrangement. Term-time pay is calculated as 39 weeks plus approximately five weeks' holiday, so it is 44 weeks out of the 52. Some people opt for a payment arrangement that spreads their 44 weeks' pay over 52 weeks. It is a pay arrangement—that is all. No one gets paid anything other than the correct hours multiplied by the hourly rate.

I say with all due respect that you need to be careful to compare salaries properly. All the hourly rates are in the grade spinal column that we use and we uprate that with pay increases that we agree on an all-Scotland basis. How they are applied is a matter for local authorities, but the minima and maxima are set on the spinal column of hourly rates. Comparisons can be made, but we must accept that some people do not work 52 weeks a year and that others do not work a standard working week, which is 37 hours in Scottish local government. Variations are agreed locally and are usually below that.

Jeremy Purvis: : That answer was helpful and I appreciate it.

Is the way in which payment is spread over the year common to all local authorities?

Joe Di Paola: : It probably is. People opt to spread their pay.

Jackie Baillie (Dumbarton) (Lab): : I thank you for the explanation of the sounding-board process that you follow on affordability, equity and all of that, but I will take you a step back. Before you start negotiations with the trade unions, how do you negotiate with the Scottish Government to ensure that there is enough in the pot to give you the flexibility to negotiate with the trade unions? I understand absolutely that the Government's pay policy does not apply directly to local authorities, but I am equally convinced that it will use that in shaping the terms of the settlement that it gives you. How do you build in enough to give you flexibility to negotiate meaningfully?

Councillor Cook: : The amount that we expect to be required to pay because of pay settlements informs our discussions and negotiations with the Scottish Government about the settlement. That is the most straightforward way of approaching the matter. That amount informs those discussions, but it is safe to say that it is only one part of those discussions.

The 2007 spending review provided a general inflationary increase of 2.7 per cent to the money that central Government gives to local government. With the guidance of the local authorities that make up COSLA, we will have to assess how we operate in the context of that increase. That is a pay and prices increase—inflationary increases in some items are much more significant than 2.7 or 2.5 per cent. We will, in the light of that, have to judge internally how we pitch our pay settlements. A good deal of work and thought goes into considering the wider context.

Jackie Baillie: : Having worked in local government, I am conscious that taking out more than is given has a direct impact on services. In the context of pay rises, do you have the opportunity to renegotiate with the Government the settlement through the historic concordat, or any other mechanism?

Councillor Cook: : We have no such opportunity. I wondered when the historic concordat would be referred to.

Jackie Baillie: : I got it in before Alex Neil did.

I will raise a slightly tangential issue: benchmarking. I am conscious that local authorities benchmark key groups of officers against similar officers elsewhere. Given changes that have occurred in past years—for example, a body of social workers no longer work for local authorities, as they work for the Scottish Commission for the Regulation of Care—is keeping benchmarking between social workers in local authorities and those in the care commission appropriate?

Joe Di Paola: : The strict technical answer is that the salaries and employment conditions for qualified social workers who work for the care commission are a matter for the commission and not for local authorities. A reference point for the qualified social worker's salary no longer exists throughout Scottish local government. Given the advent of the single status agreement and—I hope—equality-proofed pay structures, it is for individual local authorities to pick a range or a single spinal-column point and apply that to their qualified social worker grade. That means that there could be 32 variations on what a social worker in Scottish local government is paid; there no longer a prescribed grade and salary throughout the country. That is the impact and the logic of single status and equality-proofed pay. It is open to the 32 councils to have 32 variations in their pay structures as long as they pick a spinal column point from the agreed column of hourly rates.

I suppose that the answer is that logic ineluctably leads us to say that there is no longer a benchmark between qualified social workers in Scottish local authorities and those in the care commission. They will probably be clustered around the same three or four spinal column points, but there is no need for the care commission to attach its salaries to a single local authority point.

Jackie Baillie: : I suppose that this is an unkind question. Given that you are a poacher turned gamekeeper, what would you change in the process of negotiation?

Joe Di Paola: : I would give everybody more money, on both sides.

In all seriousness, we need to consider streamlining the bargaining machinery. I have said quite openly to colleagues in the trade unions who have been before the committee that they need to agree a mechanism that lets a majority decision come back through the bargaining machinery. I understand more than just about anybody in the room the need for consensus between local authorities and the trade unions, but there is a real difficulty this time round. The majority trade union said yes and, through its branches and its leadership, urged local authorities to pay the money, but the other two unions have so far said no.

If you are asking me what should be different, I would like more clarity in the bargaining arrangements. Frankly, my ambition would be to reduce the current number of bargaining units.

The Convener: : You have given us a clear indication of the hoops to jump through and somersaults that are required. The ability to negotiate certainly seems to be trapped in complexity and historical structures as well as present demands. How possible would it be to simplify the complex current system? Do we need a present-day Sutherland report?

Councillor Cook: : The situation is, we think, perhaps not particularly complex, but there are a number of bargaining groups within the machinery and, as Joe Di Paola and I said earlier, they could do with some rationalisation. It seems that the unions have suggested such rationalisation. Our view is certainly that they would benefit from that. Beyond that, however, the dynamics of the groups are relatively straightforward, as is the context within which we operate.

The Convener: : That is reassuring.

David Whitton: : Councillor Cook mentioned the concordat. I will not describe it as "historic".

Councillor Cook: : That was merely a reference to how it was described to me.

David Whitton: : Never mind.

Did COSLA involve the trade unions in discussions before it started to negotiate the concordat with the Government?

Councillor Cook: : Plainly, that was a matter to be discussed between the Scottish Government and COSLA. As I explained earlier, things such as the spending review and negotiations about the concordat are matters for the Scottish Government and local government to resolve, and the unions are not party to that. They are party to the discussions about pay settlements, which form one dimension of the resources that we have available through the spending review, and about the raising of resources locally. However, those things are not in my view related, but are separate.

David Whitton: : So, although the local authorities were agreeing to a zero per cent increase in council tax, which has inevitably impacted on front-line services, you did not think that you should negotiate with and talk to the unions about that before you implemented it.

Councillor Cook: : With respect, that is a misapprehension. Obviously, it was an adjunct to the concordat that £70 million be provided to allow councils to freeze council tax. In other words, there was a tab for that proposition. The £70 million was paid, councils said that they were content to accept it and, on that basis, they froze the council tax. That did not impact directly on pay settlements.

James Kelly (Glasgow Rutherglen) (Lab): : Was there any interaction between the pay settlement negotiations and the concordat? There will be a financial value attached to the pay settlement negotiations and to the list of factors in the concordat.

The Convener: : We are in danger of straying into deeper waters than we should be in, but I invite the witnesses to respond.

Councillor Cook: : The answer is no, and I agree that we are in danger of straying away from public sector pay, which we understood was to be the focus of this meeting.

Joe FitzPatrick (Dundee West) (SNP): : Will you confirm that the minimum salary that was paid by local authorities prior to the concordat was roughly the same percentage of the minimum wage as it is now?

Councillor Cook: : The figure that I gave you was for 2007, which began at 108.6 per cent. The most recent figure that I have is for 1 April 2009, which stands at 106.98 per cent. The two figures are roughly the same.

The Convener: : I draw this evidence session to a close and thank our witnesses for their attendance and evidence.

: Meeting suspended.

: On resuming—

Climate Change (Scotland) Bill: Financial Memorandum

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The Convener: : Item 2 is to consider our approach to scrutiny of the financial memorandum to the Climate Change (Scotland) Bill. Members will see from the clerk's paper that level 3 scrutiny is proposed, which means that we will take oral evidence from bodies that will be affected and from the Scottish Government's bill team, after which we will produce a report for the lead committee.

Do members have any comments on the proposed list of witnesses, which can be found in paragraph 27 of the paper? Do you have views on whether to invite the Convention of Scottish Local Authorities or a couple of individual local authorities to give evidence?

Derek Brownlee (South of Scotland) (Con): : It is important to get a broader range of representation on the local government issues. I do not think that inviting COSLA precludes us from inviting individual local authorities.

It is important to cast the net as wide as possible, particularly in seeking written evidence. I suggest that, in addition to the organisations that are suggested in the paper, we make a point of asking all the business organisations for their comments. I expect that the Scottish Retail Consortium will have comments about the power in the bill that would allow ministers to introduce a carrier-bag charging scheme. I appreciate that that is a relatively minor part of what is a substantial bill, but it would be appropriate to ask the Scottish Retail Consortium to comment on it in written evidence.

The Convener: : You have pre-empted me; I was going to ask about written evidence after this. Is the proposed list of witnesses acceptable?

Alex Neil: : Can I make another suggestion? I am not hard and fast about this; I merely pose the question. At the moment, the official adviser to the Scottish Government on climate change is the United Kingdom Committee on Climate Change, which I presume has done a lot of work on many of the provisions in the bill, including some costing work. If that committee has not already submitted written evidence to us, would it be appropriate to invite it to do so rather than invite it to come up here and give oral evidence? It would seem sensible at least to solicit that committee's views—if it has any—on the provisions in the bill and the potential costs.

The Convener: : It is the committee's task to look at the bodies on which the costs will fall, but I am sure that we could ask the clerks or the Scottish Parliament information centre to get information from the Committee on Climate Change, which would help us in our inquiries.

Alex Neil: : There could be a cost to that committee, too, if there were a change in the arrangements.

The Convener: : Yes, but we are really looking at bodies in Scotland. I think that what I have suggested will meet your request and will help us in getting extra evidence.

Are we going to invite COSLA and individual authorities, or shall we invite COSLA alone?

Jackie Baillie: : We should invite COSLA and individual authorities.

The Convener: : Which local authorities should we invite? Should they be a rural authority and an urban authority, or do we want the clerks to provide suggestions if members have none?

Jackie Baillie: : If the clerks could do that, it would be immensely helpful.

The Convener: : The second question, which addresses Derek Brownlee's point, is whether we wish to seek additional written evidence from all local authorities or other business representative bodies. The Scottish Retail Consortium has been suggested. Do we want to take evidence from all local authorities, or are we content not to do so?

Members: : All local authorities.

The Convener: : That should give us plenty of reading material. What about other business representative bodies? We have had one suggestion. Is that adequate?

Jeremy Purvis: : One aspect of the bill that is receiving quite a lot of notice is forest land.

The Convener: : Whom do you have in mind?

Jeremy Purvis: : I wonder whether the clerks could assist us by finding out whether there are representative bodies from the private sector, rather than the public sector, that may want to contribute.

The Convener: : It would be helpful if the clerks could take a look at that, and we will take that on board. That is much appreciated. Is that agreed?

Members indicated agreement.

The Convener: : It simply remains for me to close the meeting.

Joe FitzPatrick: : Can I just check the timescale for pulling all this together? Parliament is keen for the Climate Change (Scotland) Bill to proceed as quickly as possible and many people are frustrated about how long it has taken already.

The Convener: : The clerk may wish to help in this situation.

Mark Brough (Clerk): : Whenever the committee considers a financial memorandum, the aim is to report to the lead committee within the timetable that is agreed through the office of the Minister for Parliamentary Business and the Parliament itself. If a timetable has been agreed for stage 1 consideration of the bill by the lead committee, the Finance Committee will fit in with that.

Joe FitzPatrick: : Okay—that is fine.

: Meeting closed at 14:48.