Public scandal

Spectator, The, Jun 28, 2003 by Clark, Ross

Ross Clark says that if you want job security plus good pay and conditions, forget the private sector and take up public service

To get elected in 1997 Tony Blair championed the cause of 'Mondeo Man', a hard-working, hard-driving travelling salesman who had suffered from years of negative equity and suppressed bonuses. It is not Mondeo Man, however, who has ended up as the beneficiary of Labour's six years in office. It is Principal Project Delivery Officer Person. That antihEro of Chekhov, the white-collar government employee, is emerging as the hero of Blair's Britain.

Forget the corporate fat cats supposedly draining the British economy dry through their self-rewarding of failure; it is the public sector that is enjoying the explosion in pay. Between the first quarter of 2002 and the first quarter of 2003, according to the Office of National Statistics, the average public-sector salary rose by 5 per cent, a more than healthy 2 per cent above the rate of inflation. The accelerating wealth of the nation's outreach workers and community-development officers, however, has been at the expense of private-sector workers. Over the same period, private-sector pay grew by just 2.7 per cent. Subtract the 1 per cent rise in national insurance contributions, and private-sector workers have just 1.7 per cent more in their pay packets than they did last year. With inflation running at 3 per cent, private-sector salaries have actually shrunk over the past 12 months by 1.3 per cent - equivalent to about half a week's wages. Not since Denis Healey was chancellor have workers found themselves in such a situation.

It is fair to say that when New Labour won its first election, the fortunes of publicand private-sector workers were more or less reversed. Public-sector salaries weren't shrinking, but they were being held down by Labour's promise to stick to Tory spending plans. Meanwhile, huge numbers of well-paid jobs were being created in the new economy. For a teacher or nurse in 1997, thumbing through an executive appointments page must have been a painful experience.

Yet the boom in private-sector salaries in the late 1990s was illusory. The young and spotty dot-commers who began on salaries of L50K plus share options enjoyed a few months' easy spending before realising that the difference between a public-sector post and a job in a business start-up is the difference between a gilt and a junk bond. No matter how grim the economic outlook, HM Government simply docs not default on the salaries of its employees. Not so those dot-commers reduced to pilfering their laptops when, without warning, the banks pulled the plug on their employers.

Over the five years between 1997 and 2002, who do you think enjoyed the biggest percentage rise in salary: software engineers or prison officers? The answer is prison officers, by 34 per cent to 24 per cent. The salaries of advertising executives rose by 6.9 per cent in 1997, but over five years they rose by just 13 per cent, significantly below teachers (26 per cent), local government officers (22 per cent) and social workers (20 per cent). As for bank managers, their pay has risen just 7.6 per cent in five years - compared with 23 per cent for civil servants. Of the few classes of private-sector employees who have clearly done well out of Blair's time in office, one is hardly a surprise: thanks to overregulation, solicitors have seen their pay rise by 34 per cent.

Until recently, it was accepted that when you took up a public-sector job you traded earning potential for security of tenure. You weren't going to get rich, and your car was always likely to be a level of trim below that of your private-sector neighbour. But come the next recession, you could count on still being able to pay your mortgage. Over the past year, however, the government and public-sector unions appear to have entered into an unwritten agreement that public-sector staff must be paid at least as much as their nearest equivalent in the private sector. Hence local-government functionaries are now called 'chief executive', and, in the case of the City of Bradford, earn L200,000 a year.

It emerges that the five directors of Network Rail, the state-owned 'not for profit' company which replaced Railtrack, have been engaged on the same kind of bonus structure that ministers have attacked in the private sector. The only difference is that in Network Rail's case there are no shareholders to register a protest at the AGM. Instead, it is taxpayers who are left screaming at the prospect that Network Rail's five directors will each pocket more than L1 million this year if they can hit an unchallenging target: that 82 per cent of trains run on time. In the year before the Hatfield disaster, Railtrack achieved 88 per cent punctuality - and that was by running considerably more trains than Network Rail proposes to allow. When Network Rail's board pockets its millions next year, it will be at the expense of commuters whose trains are being axed in order to speed up the services which remain.