For many people, there's something unpalatable about public sector bosses enjoying salaries close to those of their private sector counterparts. It has become a highly sensitive issue for the government that, as it pours billions into improving schools and hospitals and building homes, the public believes much of the money is being soaked up in perks for those at the top.

The recent spate of generous payouts to RSL chiefs – who, like it or not, are deemed to work in the public sector – and the doubling of the number now earning more than £100,000 make it look as if the housing sector is in the front carriage of this gravy train. The pay hikes that housing directors often get when council homes are transferred only exacerbate this. So it is timely and right that the deputy prime minister is asking the sector's regulator: just what is going on?

Put aside the recent bad PR and you will still find a trend that John Prescott is bound to be uncomfortable with. According to the 2003 Inbucon salary survey published in Housing Today last year (28 March 2003, page 26), the national median pay for association chief executives is about £68,000. That represents an inflation-walloping 7.3% hike from the previous year, which is well above the average cross-sector pay rise of 3.9%. Meanwhile in town halls, a housing director earning more than £75,000 is reckoned to be on good pay while in charge of more stock than his or her RSL counterpart, and the average for council chiefs is about £103,000. Of course, these salaries pale next to the private sector where golden handshakes are not unusual and the average chief exec is paid more than £390,000 – but the government has done nothing to prevent or limit those payouts.

There are two arguments for the rise in senior pay at RSLs: the need to attract top-quality people and the risk the jobs carry. Council housing directors question how much risk RSL chiefs actually shoulder, as the safety net of the Housing Corporation means no one is really left to go out of business. But many do have their work cut out trying to improve efficiency and services and deliver more homes – all on a flat revenue stream, as Home Group chief Malcolm Levi reminds us on page 24.

It is timely and right that John Prescott is asking: just what is going on with chief executives’ pay?

Those who manage to balance these demands don't always get the recognition they deserve. Often, pay is determined by stock level rather than the difficulty of the task or how well the person rises to the challenge; and for some boards it is almost a badge of honour to pay their chief more than their neighbouring RSL.

Fair remuneration will come from good governance. Hopefully, boards are being more careful these days about the severance settlements they sign off, but are they setting enough targets for senior staff and linking pay to performance? The new Audit Commission inspections – which councils have lived with for years – are a useful yardstick, if one is needed.

Source

Housing Today