Tuesday, 16 June 2009

How to have your cake and get the taxpayers to fund it

The report is now out on the States Remuneration Pay Award. Bear in mind that the following statement was issued by the Chief Minister, Terry Le Sueur, when noting a pay freeze for civil servants:

I would like to inform the House of a decision by the Council of Ministers. At our last meeting we decided there should be a pay freeze for public sector staff in 2009/2010.  We took the decision with the States Employment Board in attendance. The States will now be asked to withdraw the 2% which had been set aside in department budgets to fund this year's pay awards..... Ministers also decided that they would recommend a pay freeze for States members (1)

The preamble to the report gives the basis for its recommendations:

The Privileges and Procedures Committee is pleased to present to the States Part 1 of he recommendations of the States Members' Remuneration Review Body (SMRRB). This report contains the Part 1 recommendations which relate entirely to the issue of the basic level of remuneration and expenses for States members for the period 2009 - 2011 although, as explained in the report, SMRRB has not yet finalised its recommendations for 2011 because of the current economic uncertainty.(2)

What are these recommendations? An increase of £1,000 in States members pay! This is where it gets interesting. By a magical sleight of hand, it is shown that this is really no increase at all! Here is the argument, which would be worthy of Sir Humphrey Appleby, in Yes Minister!

The Privileges and Procedures Committee itself fully accepts and endorses the recommendations of the SMRRB and urges all members to do likewise. The Committee would, in particular, ask members to note that the SMRRB has drawn attention to the fact that the public sector pay year runs from 1st June each year whereas the remuneration for States members runs from 1st January. Comparisons between levels of public sector pay and members' pay have usually been undertaken on the basis of comparing the increase in members' remuneration with the figure for the public sector from the previous June. The Privileges and Procedures Committee therefore considers that a fair comparison on this occasion is between public sector pay that increased by 3.2% for the pay year 2008-2009 and the £1,000 interim increase in members' remuneration for 2009 (that has now been recommended by SMRRB as the final increase) which represents a 2.3% increase. The proposed one year pay freeze for both the public sector and for States members therefore applies only to the next pay year for both groups.(3)

This is the argument from Yes Prime Minister, when Sir Humphrey is showing how a high percentage can be reduced to a "sensible increase", and takes different periods to calculate the pay awards. Note how similar it sounds to the report to the States on their members remuneration:

Don't calculate from last time. Calculate from 1973, the high point. And don't just take it to this year. Take it up
to two years' time, the end of the claim period. Correcting for inflation, that should do it. The percentage increases will sound all right now.(4)

Here is another quote from the report:

When compared against local indices the remuneration of States members appears to have lost ground over the last three years and, while the prevailing economic situation might well inhibit any significant recovery in this position, the Review Body considers it responsible to seek to limit further such deterioration as far as it is reasonably possible to do so.(5)

The report does not state what those "indices" are, which makes it difficult to see what has been going on. It does mention the discussion document, which in turn mentions the "average earnings index". The failure of Jersey to have any meaningful statistics on wages, relying on the arithmetic mean rather than the median wage (as is best practice in most countries), means that any reliance on averages in this context will probably be biased. It is well known that with wage distributions, averages (arithmetic means) are significantly higher than medians (the middle point), so that most people earn far less than the "average".

In fact, any consideration of anecdotal evidence alone, with pay freezes, reduced working weeks, or below cost of living increases, shows that the average is unable to account for the increasingly skewed distribution of the economic downturn, and this does not seem to factor into the board's deliberations.

In all private sectors, there is "lost ground" with respect to pay awards, and it is perhaps only with the public sector that States members may have "lost ground". A comparison with median pay increases in the private sector (who pay most of the taxes) would perhaps indicate that States members are not doing so very badly.

The starting principles in our terms of reference are therefore of importance, namely that "the level of remuneration available to elected members should be sufficient to ensure that no person should be precluded from serving as a member of the States by reason of insufficient income and that all elected members should be able to enjoy a reasonable standard of living, so that the broadest spectrum of persons are able to serve as members of the Assembly. (6)

That is an admirable policy, but with the increasing reach of "means testing" creeping into the States system for income support, pension bonuses, television licences, old age provisions, etc, it would not be inconsistent with a means tested States salary, to be supplemented up to a particular limit. It has always seemed invidious to me that those in the States who go on about the need for means testing, and the need to be careful with taxpayers money, do not seem able to apply the same noble principles where they are concerned, and their own interests are at stake. When means testing of States remuneration was abolished, this was noted:

The Committee has formed the view that suitable remuneration and expenses should also provide a means of compensation for elected members, to enable them to plan and save for their own futures, in a similar way that they advocate policies relating to prudent future financial planning for all citizens, for the benefit of the Island and its community.(7)

And yet the same principle is turned on its head when people who have saved all their lives are forced to sell their house (whether or not they have children) because they are not eligible for income support, or because that is the price to be paid for their keep in old age by the States; those who have not saved, are supported by the State. I know of one case where a wife was in serious danger of being turned out of her own house (which would be sold) because her husband needed residential care.  How does this tie in with the principle of "relating to prudent future financial planning for all citizens"? There is an inconsistency here which should certainly be rectified.

(1) http://www.statesassembly.gov.je/documents/statements/29003-7216-3042009.htm
(2) http://www.statesassembly.gov.je/documents/reports/3984-242-1262009.pdf
(3) http://www.statesassembly.gov.je/documents/reports/3984-242-1262009.pdf
(4) Yes Prime Minister, "A Real Partnership"
(5) http://www.statesassembly.gov.je/documents/reports/3984-242-1262009.pdf
(6) http://www.statesassembly.gov.je/documents/comm_reports/820-32390-.pdf
(7) http://www.statesassembly.gov.je/documents/propositions/30036-208-21102003.htm

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