Finance Committee, 13 Jan 2009

Meeting date: Tuesday, January 13, 2009

Official Report 126KB pdf

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Public Sector Pay

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.

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?

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.

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.

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

No.

So there is just the salary, and that is it.

That is correct.

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?

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.

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?

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.

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?

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.

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?

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.

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?

That is correct.

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

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.

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?

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.

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?

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

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.

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.

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.

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.

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.

That answer was helpful and I appreciate it.

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

It probably is. People opt to spread their pay.

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?

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.

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?

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

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?

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.

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?

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.

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?

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.

That is reassuring.

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

That was merely a reference to how it was described to me.

Never mind.

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

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.

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.

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.

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.

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

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.

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?

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.

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

Meeting suspended.

On resuming—