Friday, November 03, 2006

Specious Riddell

Nice and fat

Today the Taxpayers' Alliance publishes the Public Sector Rich List (see here and here). It reveals that at least 171 public servants earn more than £150,000 pa, with 46 on more than £250,000, and three on over a mill.

Westminster commentator Peter Riddell doesn't like it. He says:

"To attempt to highlight a specifically Public Sector Rich List, as the Taxpayers’ Alliance does today, is specious and misleading populism."

He reckons the public sector "has to pay if it wants the best". And he lays into the TPA:

"The self-styled and self- appointed alliance is not a detached think-tank but an energetic pressure group for lower taxes and a smaller public sector. ”

"Detached think tank". What a quaint notion. I'm running through the main political "think tanks"- ippr, Demos, New Economics Foundation, Policy Exchange, CPS, etc etc- and I'm trying to come up with one that is "detached".

Nope. Can't think of one.

The TPA makes no secret of the fact that it is a campaigning group on behalf of taxpayers, and unlike many of the established "think tanks", it is building a legitimacy based on mass membership. Just like similar taxpayers groups in many other countries.

But to attack the TPA for having a position doesn't undermine the Rich List. The reality is that top public sector salaries have increased massively over the last few years, and many public servants are now being paid City style salaries.

But whereas in the City, firms paying fancy salaries can only fund them by selling their services in a highly competitive market, in the public sector such salaries are underwritten by taxpayers. There is no market test. Nobody ever finds out if the cat really can catch more mice, or whether he's just fat.

Consider what Riddell says about public vs private salaries in media:

"The report highlights the £619,000 earned by Mark Thompson, Director-General of the BBC, and the total pay of more than £300,000 of seven other BBC executives, as well as the £550,000 of the two top Channel 4 executives. However, these figures are dwarfed by the £1.85 million and £1 million earned last year by Charles Allen, now retired, and by Henry Staunton, the top executives at ITV, and by the £2.23 million and £1.23 million received in total emoluments by James Murdoch and Jeremy Darroch at British Sky Broadcasting."

But what Riddell misses is the incredible market pressure on those private sector execs. Charles Allen didn't actually "retire" at all- he was marched out into no-mans land and bulleted because he'd failed shareholders. And given the massive shareholder pressure on Murdoch and Darroch to start generating some return on all that subscriber investment, you'd have to guess their firing squad is already loading up. All Tommo has to worry about is massaging financial expert Tess.

And it simply isn't relevant for Riddell to point to out that executive pay setting in the private sector is also imperfect (all those mutual back-scratching non-exec rumeration committees etc). Be they ever so high, in the private sector, the market eventually finds the underperformers. In the public sector, they just get shifted to another job.

The real problem with these public sector mega-salaries is that they make taxpayers stump-up for City-style salaries to employ people in monopolistic tax-funded state industries. And even if we can persuade real top talent to spend their time working for our appalling politicos- which I'm very dubious about - we just don't get value. Sir David Varney joined as head of HMRC with excellent private sector credentials- yet he totally failed to get a grip on the deepseated problems and left within two years.

Paying top dollar is a waste of our money.

Because you see, It's The System Stoopid.

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