Oral evidence: Local government Chief Officers' remuneration, HC 191Wednesday 11 June 2014

Oral evidence, 11 June 2014.

Witnesses

Councillor Colin Lambert, Former Leader, Rochdale Borough Council, Jim Taylor, Former Chief Executive, Rochdale Borough Council, Councillor David Hodge, Leader, Surrey County Council, and David McNulty, Chief Executive, Surrey County Council, gave evidence.

Chair

Thank you all very much for coming to this, our third public evidence session in our inquiry into local government chief officers’ remuneration. At the beginning, I ask members of the Committee to state their interests to put them on the record. I am a vice-president of the Local Government Association.

Simon Danczuk

My wife is a councillor, and a couple of members of my staff are councillors.

John Pugh

I have recently become a vice-president of the LGA as well, and I have two employees now who are councillors.

Mark Pawsey

A member of my staff is a councillor.

Chair

Okay, we will get that on the record. Thank you very much for coming. For the sake of our record, could you go along the line and say who you are and which organisation you are from?

Cllr Hodge

My name is David Hodge. I am the leader of Surrey County Council.

David McNulty

Hello, I’m David McNulty. I am the Chief Executive at Surrey County Council.

Jim Taylor

My name is Jim Taylor, the former chief executive of Rochdale Council. I am now city director for Salford City Council

Cllr Lambert

Colin Lambert, former leader of Rochdale Council.

Chair

Thank you all very much for coming this afternoon to give evidence to us. Let me say right at the beginning it is probably understood, by you not least, that one of the reasons you are here as witnesses is there has been an element of controversy around certain issues in your domain, but this is not an opportunity for us simply to have a go at you. It is an opportunity for us to explore the situation, find what happened, and for you to put across your point of view as well, to give evidence to us in that way. That is how we intend to proceed with this afternoon’s business. Could I begin therefore by asking the leader of Surrey and the former leader of Rochdale, Councillor Lambert, what role you had as leaders in determining the remuneration of chief executives and other chief officers in your authority?

Cllr Hodge

Good afternoon. We have a set agenda on how we actually determine the rate of pay for all officers. When we recruited the chief executive in 2009, we decided we would use the benchmarks and start a chief exec almost on the lowest rung of that ladder.

Chair

Benchmark?

Cllr Hodge

We have a grading system from a lower starting point of 209—

Chair

Where does the benchmark come from?

Cllr Hodge

What I mean is that there is a scale from A to B, and from that we then determined where we would start a chief exec when he arrived in 2009.

Chair

Maybe it is me misunderstanding you, but I am still not quite clear. Is this a benchmark that you determine as leader?

Cllr Hodge

Yes.

Chair

So you simply decide: this is the range, and this is where we will pay.

Cllr Hodge

It is decided by the remuneration committee, which I chair.

Chair

Right, okay. And that is councillors, is it?

Cllr Hodge

County, yes.

Chair

Okay, thank you.

Cllr Lambert

We do it differently, in that at Rochdale, like many authorities, the role of leader is to ensure the correct information and all available information is before full council. The decision is taken before full council. Therefore, we would look independent of the council. When we recruited Mr Taylor, initially we used North West Employers, and they did the benchmarking and the measures across certainly the 10 Greater Manchester authorities. When we restructured in February 2013, that reduced senior management from the 24 I inherited down to 10, which was six executive leaders and four assistants. For that, the Hay Group were used to do the benchmarking.

Chair

Okay. In terms of Hay and their use, did you simply follow what they said, or is there an element of discretion that you chose to use as part of that process?

Cllr Lambert

When you come to appointing, whether it was North West Employers—who I believe will still do it next time; I hope so, anyway—or whether it was the Hay Group in the review of remuneration of the senior managers, you talk to them prior to that contract being set.

Mark Pawsey

Chairman, may I just ask who North West Employers are? They are not a body we are familiar with.

Cllr Lambert

North West Employers are a group that local authorities also pay into. They are a consultancy group.

Mark Pawsey

They are a consultancy company?

Cllr Lambert

But they are within the council “family”.

Mark Pawsey

But they are independent of the council—

Cllr Lambert

They are independent of the council

Mark Pawsey

—appointed by the council as a consultancy.

Cllr Lambert

As a consultant towards recruitment.

Chair

To both leaders, once you have appointed a chief executive at a given salary, do you have a role then in assessing how well they perform, and doing something about it if they do not perform to the standards that you expect?

Cllr Lambert

Certainly within Rochdale, the chief executive is assessed at the end of each year by the three party leaders. That was a system I inherited at the end of 2010, when I was appointed leader, and that continued. This year it has not occurred, because Mr Taylor has left, but prior to that, the three party leaders would meet with the chief exec and measure against any outcomes. That happened certainly with the previous chief exec as well.

Cllr Hodge

In 2008 and early 2009, Surrey County Council was not in a good place. In effect, we had a failed Ofsted report on children’s services, we did not do very well at all on adult social services, and we went from a four star authority to a one. So when we decided to recruit a new chief executive, we were absolutely adamant that we wanted to go for the best that we could find on the market. We set out quite a clear programme of getting the right chief executive. We then instigate performance assessment, on an annual basis. I use people from outside the market—in other words, people from the private sector who are with BP, Canon and places like that—who help me, with my deputy leader, when we do the performance assessment of the chief executive. I have to say—and I hope I will not make him blush—I think we made absolutely the right decision. We have a chief executive of high quality, who has changed the organisation: he has changed the culture; he has changed the performance of the organisation, and we are definitely in a better place than we were four years ago.

Chair

Okay. Not every appointment is as successful as the one you have just described. If under the arrangements that you have you find that the performance is not up to scratch, have you got experience of encouraging someone to go through the door, to use a phrase? If you have had that experience, has that normally been associated with a little helping cash hand along the way, to ease the way out? That is something the public often gets very upset about. Have you got examples of someone simply being fired through non-performance and not given a cash hand-out along the way?

Cllr Lambert

I am happy to go first, yes. I would say I have probably experience of both. I became leader on 15 December 2010, which is an unusual time to change political control of a council. In January, we had a conversation with the entire senior management team. We were about to offer a package to all the workforce who were suitably qualified for leaving, and the conversation was had with the then chief exec and a number of assistants. No packages were done for the current ones who have left since then, because there was not a package open to the rest of the workforce. but we offered to management the same package that was available to every single member of the workforce: that is, did they wish to volunteer for early retirement or, if there were going to be reductions in staff, did they want to volunteer for redundancy?

Chair

Okay, but these are about redundancy and trying to reduce numbers, rather than saying to someone, “You’re not performing. We don’t require your services any longer.” Have you had any experience of that?

Cllr Lambert

No. The system I inherited made it that the only person the council employs is the chief exec. All council employees are then employed by the head of paid service, which is the chief exec.

Chair

So councillors did not have a role at all.

Cllr Lambert

Only when it got to appeals committee.

Chair

Right.

Cllr Hodge

I am grateful at this moment in time we do not have that situation, but I agree with the sentiment of what you were saying. If you had that situation, then I am a great believer that you should have sorted it out much earlier. You should never have allowed an officer to get to that state at senior level where you end up having to do that. You should always make sure that you conducted the relevant interviews, the relevant assessments, so that if somebody is failing in their job and it cannot be put right, then I think it is time to part company.

Chair

You have not had to reach that stage yet, as leader?

Cllr Hodge

No.

Chair

Would it be your decision or someone else’s?

Cllr Hodge

Certainly, if it was at senior level, I would be taking the advice of the chief executive, and certainly the remuneration committee. We would then look at that and make a decision on what we would do, and then we would eventually report it to council.

Chair

So it would be reported to council—including any financial agreement that had been reached?

Cllr Hodge

Yes.

Cllr Lambert

In terms of the two separations, if you have got a situation where there was gross misconduct, then you would immediately step in and be straight on the door of the chief exec, and you would be looking for disciplinary and dismissal. What you often get in employment situations is what has been previously described as a drip feed of under-performance, and that is where you look for the full process within the council—whether it is a letter of warning, or whether you say to somebody they are going to be monitored or supervised—but in terms of paying anybody off because they are incompetent, I would oppose that.

Chair

Right. Can I move on to your situation, Mr Taylor, which obviously was pretty much discussed in the public domain? You have left Rochdale now and gone to Salford. Was the refusal in the end to approve your £40,000 salary increase the basic reason why you left?

Jim Taylor

Well, remuneration is a factor with anybody when they move jobs, and I am no exception to that, but it is not the only factor. There are many other factors: for example, the challenge of the role, the size, the complexity of the job, the demographics, the location, the skill match, and whether or not the individual—in this case, me—feels as though they have something to offer. The job I currently do is a bigger job; it is a promotion. It is in a city. It has a mayoral system—a different system of governance—and it is still within Greater Manchester. I do quite a lot of work across Greater Manchester, so for me it was the right move to make.

Chair

Okay, but the issue of your salary increase that did not happen was a factor.

Jim Taylor

Well, it was a number of factors, to be honest, Mr Chairman. Actually, I am currently still probably the lowest paid chief executive or chief officer in Greater Manchester. Certainly remuneration was not the prime motive for me to actually leave Rochdale Council.

Chair

I do not think you have quite answered the question, have you? It was a factor.

Jim Taylor

Amongst other factors, yes, of course—amongst other factors, which hopefully I have listed.

Chair

Do you think the whole issue around your proposed salary increase was well handled in Rochdale?

Jim Taylor

It is not my decision, and it was not within my gift to make those decisions about the process or how everything worked out. I cannot deny that it was a difficult situation. My only disappointment about that stage was that it did deflect from the important job that I was doing, and it was a distraction to the council and indeed the workforce when it was made so public. We wanted to get on with the job, and I certainly wanted to get on with the job that I was contracted to do.

Chair

Okay. Councillor Lambert, do you think, from your perspective as the leader of the council at the time, that the matter was well handled? Could it have been better handled, or are these issues always ones that are likely to exercise public opinion in a certain way?

Cllr Lambert

The decision was taken when we took control of the council that we would publish everything and be open and transparent. The whole process, including the Hay recommendations, was published in full on the council intranet. It was available to the media. At that point, it did blow—some people used it to blow it—but at the end of the day it meant the public got fully involved in that debate. So, could it have been handled better in that could it have been kept quiet? I would never have been part of keeping it quiet. I refuse in any way to see that be kept quiet. There are arguments that this would not get public unless it was leaked. It was not leaked; it was published by the council right from the start. At that point you will get a reaction. I think the way it was reported in some of the local media was unfair, certainly in terms of officers of the council, because they had no right of response. We could perhaps with hindsight have been better prepared, but if you were to ask me would I do it any differently other than publish it in full, no, I would always publish it in full. Q293 Chair Finally from me, when Hay came to see us last week they indicated that they had given you a range of options, and you had gone to the upper end of those options.

Cllr Lambert

We went to the medium.

Chair

Went to the medium, okay. So that view they gave us, or the impression they gave us then, was not correct? You are saying you published the full Hay recommendations, and that you went to the medium ones of those?

Cllr Lambert

Yes.

Chair

Right. Do you think you learnt any lessons about how things might be handled in the future?

Cllr Lambert

We had involved the three party leaders, the cabinet; it was going through the employment committee and full council. It may have been we should have got the media involved earlier because, having got the report, they were reacting to comment rather than the report. It may be at that stage you get in the local editors, or the media representatives. But in terms of taking it through the council, the decision we took when we took over in December 2010 was to open the council up, and that is what we did.

Mark Pawsey

Can I ask how long you were in post, Mr Taylor? When did you start and when did you leave?

Jim Taylor

I started in May 2012, and I left in May 2014.

Mark Pawsey

So you were there for two years.

Jim Taylor

Two years.

Mark Pawsey

After you had been there a year or so, the council proposed a £40,000 increase in your salary. Is that the case?

Jim Taylor

After about 19 months, a year and a half, there was a senior review, a benchmarking exercise. So it was about that time, yes.

Mark Pawsey

That is a heck of a percentage increase, Councillor Lambert. Was that done on a performance basis? Had Mr Taylor had an appraisal that justified that size of increase?

Cllr Lambert

Could I refer to some notes? I am happy, Mr Chairman, if you would like to take the entire file as evidence at the end; it is fully available to you. On 20 February 2013, the decision was taken over senior management structure, and that was so we could reduce the senior management cost. The full report, if it had gone through, would have produced a saving of £1.5 million in senior management cost. That would reduce, or continue to reduce, from the 24 when I took over down to the 10.

Mark Pawsey

So it was part of restructuring.

Cllr Lambert

It was part of the restructuring.

Mark Pawsey

But was the post reviewed? Was it concluded as part of that review that Mr Taylor was going to be worth an extra £40,000 a year?

Cllr Lambert

That is shown in the Hay report. They assessed the post.

Mark Pawsey

Okay. Is there any element of you offering Mr Taylor that sum as an attempt to keep him and stop him leaving? You had a successful chief executive; he had not been there very long. Was it that you were concerned he might leave, so you needed to up his salary to try to stop him leaving? Was there a bit of that involved?

Cllr Lambert

Certainly Mr Taylor had not indicated to me at any point that he wished to leave.

Mark Pawsey

You were not looking for a job at that time, Mr Taylor.

Jim Taylor

At which time?

Mark Pawsey

At any time during your service—at a time your increase was being discussed. Because you got the increase, and then you went after the increase was given, I understand.

Jim Taylor

No, the increase did not take place.

Mark Pawsey

It never happened.

Cllr Lambert

No.

Jim Taylor

It did not happen.

Mark Pawsey

But had you made it known to Councillor Lambert that there were better paid jobs elsewhere, and that if a decent increase was not forthcoming you might consider leaving?

Jim Taylor

No. I did not ask for it, and I did not get it.

Mark Pawsey

It was never part of the discussion?

Jim Taylor

No.

Mark Pawsey

It was very convenient for you then that this restructuring occurred at about that time.

Jim Taylor

There were a couple of restructures that took place. In terms of chronology, in February 2013 I restructured the senior team and went from 14 to nine members of the senior team, which reduced the senior staffing costs by a further £800,000, which was further to the decrease that had taken place since 2010 from 24 senior staff down to the 14 that I inherited. That was the employment committee, which is a cross-party committee. They made a recommendation at that time to do a benchmarking exercise around salaries, which did not include the salary of the chief executive. Then, at October time, the committee decided that they wanted to do that and include the salary of the chief executive in that review.

Mark Pawsey

In that process, Councillor Lambert, you got the worst of both worlds. You wanted to pay the increase, which you did not get, and you lost your chief executive. How would you do things differently next time?

Cllr Lambert

You have to understand the political climate in Rochdale, and the games that were played. But, apart from that, it was an exercise in which we put it out in public and I would never do that any differently.

Mark Pawsey

Well, presumably you were not happy with the outcome, because you lost your chief executive.

Cllr Lambert

At the end of the day, the public have a right to give their view, and their view was quite rightly listened to. Rochdale was in a bad position when we took over. In December 2010 they knew they had £50 million of cuts. A few weeks later, the case broke on child exploitation. Within a matter of 10 days, we were then told the budget cut reduction had gone from £50 million to £64 million. The whole thing was developing. I had had the discussion with the previous chief executive and some of the senior management, who were then agreeing to leave. We then had to go through a process of 12 months of recruiting, where we recruited Mr Taylor. We did it on a salary level that the council agreed would be a reduction. In February 2013, we did the review, which was to reduce senior management again, but also to review the existing positions, which would be chief exec and five members of the executive leadership team. That would give us six of the most senior management from where we were. That would produce a saving. We brought the Hay Group in, in March 2013, commissioned to undertake the review in terms of their levels, what their jobs were, what their jobs should be and responsibilities and how they would be assessed. At that point, they also gave us a band of three areas for recommendations.

Mark Pawsey

Councillor Lambert, you have already had a recent further change, because I understand you are no longer leader of the council.

Cllr Lambert

That is correct.

Mark Pawsey

Is that change associated with this issue that has happened previously, or is that independent of that?

Cllr Lambert

You are probably asking me to give a view that I could be accused of being biased if I said one way or the other.

Mark Pawsey

I am a long way from Rochdale and have no particular interest in the matter.

Cllr Lambert

I would find it difficult to prove it was not related.

Chair

Simon Danczuk has a couple of supplementaries. Councillor Lambert, thank you for offering the complete file. I do not think we will need to take your offer up in full, but there may be one or two specific questions we need to come back to, which would be helped by particular information from the file. We will contact you about that if we need to. Thank you for the offer.

Simon Danczuk

Just a couple of quick supplementary questions: Councillor Lambert, do you have any regrets in putting so much faith in the Hay Group proposals?

Cllr Lambert

Do I have regrets in putting faith in the Hay Group proposals? No.

Simon Danczuk

You are happy with what they were suggesting.

Cllr Lambert

I am happy that they did a thorough job on the levels of each of those remaining and the total saving then, in the reduction of staff, Mr Chairman, was £1.5 million. At the same time, we had agreed with the trade unions in terms of introducing the living wage mid‑year. We had also agreed that Rochdale is a low employer. The payments in Rochdale for street cleaners or gravediggers are, in many cases, less than other Greater Manchester authorities. I hope that process with the trade unions continues, so that in Rochdale you get a fair day’s pay for a fair day’s work. I hope that continues.

Simon Danczuk

Jim, Rochdale Council has just advertised today, I believe, your previous job at Rochdale, at a salary of between £126,000 and £131,000. What do you think the consequences of that will be for Rochdale Council?

Jim Taylor

I could not really comment on that, Mr Danczuk.

Simon Danczuk

You have done the job; you have been paid the money. You must have a feeling for it.

Jim Taylor

The job as chief officer in any local government role is very demanding, whether it is in Rochdale or elsewhere. It is obviously advertised on the same salary range that I have, so there is no change there. I hope that Rochdale Borough Council get a really good chief executive.

Simon Danczuk

They got you on that rate, did they not?

Jim Taylor

Yes, that is right.

Simon Danczuk

They will get somebody as good as you, presumably.

Jim Taylor

I hope so.

Simon Danczuk

Just moving on to you, David, if I am not mistaken, I think I am right in saying I played a part in giving you your first job in local government, in Blackburn, about 15 years ago.

David McNulty

You were the first Cabinet member I worked with when I came to local government.

Chair

And you survived.

David McNulty

I learned a lot and I am very grateful to Councillor Danczuk’s expertise in managing me at the time.

Simon Danczuk

Let me say you have done well for yourself.

David McNulty

Thank you.

Simon Danczuk

In terms of salary levels from what you were on then to what you are on now: well over £200,000. What evidence can you provide Surrey residents that you are worth over £200,000 then?

David McNulty

The first thing to say is I play no part in setting the salary level for the role of chief executive of Surrey County Council. The council decides on what the appropriate salary level is, dependent on their view of the scale and complexity of the role. We are one of the five largest councils in the country.

Simon Danczuk

That is the evidence, is it?

David McNulty

I am continuing. We are one of the five largest councils in the country. There were a particular set of challenges on scale and complexity for Surrey as a place, and they have been compounded by the situation that Surrey had got itself into in 2008‑09, which the leader described earlier, and the fact that we had a challenge in terms of making, to date, £260 million worth of savings for residents, which we have managed to achieve, while also dealing with a 25% to 30% increase across the majority of our services, and with clear evidence that we have reduced unit cost and raised quality of performance for Surrey residents during that time. I would draw attention to those details, in terms of what the roles required and where the Council chose to set the remuneration level.

Simon Danczuk

That is the evidence. The situation has improved; that is the evidence.

David McNulty

The evidence is that the role has very serious responsibilities. There are significant demands on the county council, and the council demanded a whole set of improvements. The evidence was that they needed a chief executive who could deliver them.

Simon Danczuk

How much of the £100,000 bonus to be paid over five years from 2013 has been paid out to you to date?

David McNulty

There is no bonus.

Simon Danczuk

Is there not?

David McNulty

There is no bonus. There has never been a bonus offered to me. There was a discussion of a bonus two or three years ago, which I rejected. There has never been a bonus offered to me since, and I think that story is a misunderstanding.

Simon Danczuk

Thanks for clearing it up. Councillor Hodge, could you just tell the Committee why you have 15 members of staff on wages well over £100,000 a year?

Cllr Hodge

It is to do with the size of the organisation. We do actually have a budget of £1.7 billion. As the chief exec said, we are the fifth‑largest council in the country. We have unique issues at this moment in time in Surrey. I have brought them along with me today for each member a unit cost analysis, which is something that the chief executive and I have done, which sets out exactly what the costs were going back as far as 2010‑11. We will update it again. This demonstrates that we are reducing the cost of the services. Nearly every single service has been reduced by cost, despite the demand for places going up. We do actually have a huge school building programme. We are struggling to meet the costs of that, because obviously we do not get the capital allowance to meet that, but last year, we had to provide 2,862 school places.

Simon Danczuk

What you are saying, Councillor Hodge, is it is getting you quality staff. By paying that much, it is getting you the quality staff.

Cllr Hodge

Yes. That is not just my opinion.

Simon Danczuk

That is not just your opinion. Fair enough. Am I right in saying that you have had a pay rise, as leader, of 60%? Is that right?

Cllr Hodge

About that.

Simon Danczuk

I am right in saying that the independent remuneration committee has resigned because of the council’s decision to give you a 60% pay rise. You have also, as we have just heard, been generous to the chief executive and senior officers, but am I also right in saying, Councillor Hodge, that you opposed the recent resolution to the council that would have given the most poorly paid workers in your authority the living wage? Why would you oppose giving the poorest paid workers a living wage and yet increase your own salary by 60% and give a load of cash to the chief officers? Why would you treat your poorest paid workers like that?

Cllr Hodge

We do not give a load of cash to chief officers. They are on specific rates of pay.

Simon Danczuk

Why would you not give a living wage to poor workers?

Cllr Hodge

What we actually have done, and the negotiations have taken place, is brought the lowest‑paid staff up. We have given them the largest increase this year.

Simon Danczuk

It does not bring them up to the living wage, which I think they have done in Rochdale. Why would you increase your salary by 60%, to put it simply, and not increase the poorest workers to a decent level—a living wage level? I would rather Councillor Hodge answered. You were leading this authority. Why would you not do that?

Cllr Hodge

We have a structure of pay that we pay people. In many cases, most of our staff are on well above the living wage.

Simon Danczuk

A good proportion were well above £100,000 a year, but the poorest paid you will not give the living wage to. Do you link in any of the work that you do the top pay to the bottom pay? Do you do a link and keep it limited?

Cllr Hodge

The chief executive is on a ratio of 14.6 to 1.

Simon Danczuk

That is not a particularly good ratio, is it, compared with some authorities?

Cllr Hodge

I think Hutton came up with those things himself.

David McNulty

There is a distinction between the resolution that you are discussing and the situation the leader is in. One of issues with the resolution was it demanded that we ensure that all our partners’ organisations and suppliers paid the living wage.

Simon Danczuk

The resolution is not really relevant. It is whether you are paying a proportion of staff a lot of money.

David McNulty

Sorry, Councillor Danczuk; I am trying to clarify. For our directly employed staff, I do not believe any of them are below the living wage. The issue with the resolution was it was asking us to do something that was not within our gift, because of the contractual arrangements. However, it is also true to say that, over the past three to four years, we have had a freeze on senior salaries, so the total cost of the top 15 in the organisation has gone down, because people who have left have been replaced by people on slightly lower salaries and there has been a freeze for those posts. Meanwhile, for our lowest‑paid staff, we have managed to do small increases each year. For instance, in the year that has just ended, there was just over a 4% to 4.5% increase for our lowest‑paid staff. It is fair to say that we have focused our attention on those members of our directly employed staff that faced the most difficulties in cost of living.

John Stevenson

Just carrying on from where Simon was going there, Councillor Hodge, you mentioned that your council had difficulties in 2008‑09. What happened to Mr McNulty’s predecessor?

Cllr Hodge

I was not in the leadership team at that time, but he left.

John Stevenson

He left. Was he paid off?

Cllr Hodge

Personally, I do not know the details. I have never been privy to them.

John Stevenson

I do not want the details, but was he paid off?

Cllr Hodge

I do not know. I was a backbencher at the time.

John Stevenson

As a backbencher, you were unaware of what happened to your chief executive.

Cllr Hodge

Yes. I knew he parted company with the council. That is all I know.

John Stevenson

Mr McNulty, do you know what happened?

David McNulty

It happened six months before I was approached to take the role in Surrey, so I do not think I can be any help on this question.

John Stevenson

Nobody knows what happened to your predecessor in Surrey.

David McNulty

I was working in Manchester at the time and, six months later, I was approached to take the role on.

John Stevenson

Most people would enquire what happened to their predecessor in their role.

David McNulty

I had a huge set of work to do. As the councillor has said, we were in intervention on children’s services. We had significant problems around our adult services.

John Stevenson

I am not interested in that.

David McNulty

I think the residents of Surrey were interested in it, to be perfectly honest. We had a huge agenda.

John Stevenson

We are interested in remuneration.

David McNulty

I am trying to explain.

John Stevenson

Councillor Hodge, you were a backbencher; you did not know what happened. Could you find out for us and inform this committee?

Cllr Hodge

I can certainly find out, but I did explain to you I was not privy to the details at the time, but I am happy to find out for you.

John Stevenson

You are quite happy to find out what happened. Was there a pay-off or was he found to not be performing and removed from his post, because that is the purpose of risk and reward? Moving on to risk and reward, which is the area I am interested in, Mr Taylor, you indicated that you are one of the lowest‑paid chief executives in the Greater Manchester area. Do you think you are overpaid?

Jim Taylor

That is for others to judge. I have certainly applied for jobs where the salary level is already set for that particular role and, if I personally have the skill set and meet the personal specification that the particular council needs, then it is a match, in my view.

John Stevenson

At present, you think the salary you receive is correct for the risks that you take and your responsibilities.

Jim Taylor

Yes, I think it is.

John Stevenson

Mr McNulty, do you think you are properly paid at the rate you are at, underpaid or overpaid?

David McNulty

I think the county council set the level of pay it required for the responsibilities it had, and I signed the contract to deliver the outcomes the council wanted for that salary.

John Stevenson

You are really saying that you think the salary you receive is correct for the responsibilities that you have.

David McNulty

Clearly I thought it was correct when I signed the contract, yes.

John Stevenson

Fine. Out of interest, Mr Taylor, do you think you could get a job in the private sector at the same salary?

Jim Taylor

Probably. I have had an opportunity or opportunities to work in the private sector in the past, which I have rejected. Certainly over the last 10 years working in local government, I have had a number of approaches on higher salaries, but I have not chosen to explore those opportunities.

John Stevenson

Do you think the skill set of a chief executive in the public sector is transferrable to the private sector?

Jim Taylor

I think it is. It depends what sector of the private sector you are looking at. There will be certain areas of probably technical expertise, because of my background and qualifications, that I would not be able to meet in terms of a personal specification, but there would be some jobs in the private sector that I would do. I think there are transferable skills, yes.

David McNulty

I agree with Mr Taylor: it would depend on the role. I do have a master’s degree from Warwick Business School. I believe I have a set of skills. I do on occasion get approached by companies searching for placements in the private sector. To date, I have not chosen to follow those up.

John Stevenson

Just out of interest, on the risks and the challenges that there are in the public sector—I am not just talking about your own jobs here; I am just talking about other chief executives. Do you think, broadly speaking, the salaries that they receive reflect the risks that they take and the responsibilities that they have?

Jim Taylor

I think they do. The responsibilities of local government chief officers are changing. The public health function is now the responsibility of councils and, in particular, chief executives—things like infection control and sexual health services, for example, are now within the realm of public sector councils. Integrated health and social care is another area that again is emerging, in terms of trying to deflect hospital admissions and work more closely in partnership with the health sector. Councils are responsible for health visiting from 2015, which again is an additional responsibility. Certainly in my own situation in Greater Manchester, many of the chief officers have responsibility for the combined authority areas, overseeing a population of 2.5 million, as opposed to just the 220,000 or so residents in each particular district in the conurbation of GM.

David McNulty

I agree with those points but also, widening it and giving an example, we have one of the finest procurement teams certainly in public services. In the last month, we have lost three senior category specialists—two to the private sector, one to central government—all at considerably higher salaries than we are able to pay in Surrey. I do think there are specific skills, certainly within some of the officers in Surrey, that are both highly desirable and sought after by companies in the private sector.

John Stevenson

Councillor Lambert, just out of interest, do you think that chief officers are properly rewarded for the responsibilities that they have, given the fact they are not in competition, generally speaking they have job security, and they do not have to worry about the income side of the equation?

Cllr Lambert

It is a strange situation. The private sector often goes recruiting former chief executives and assistant chief executive officers, usually in a consultancy role. They are often snapped up as simply as that, so I think the skill set is there. In terms of overall—the level of pay at senior management right across council—it is a strange area, because we needed somebody and we recruited on the level of £130,000 an excellent candidate, who has delivered in terms of where we have moved on children’s services, has delivered in terms of regeneration of Town Centre East in Rochdale, and has delivered on the investment of £10 million in highways. In terms of his assessment, he has done exactly what we were asking him to do. My view, which was held within the council for some time, is that senior management should be on fixed‑term contracts. To do that, you have to have a system within the elected membership as well, where that control is also fixed.

John Stevenson

Councillor Hodge, I am just interested in your views on the level of pay. Do you think it is set at the right level at present? It does not just need to be with Surrey—across the board.

Cllr Hodge

I can only speak for Surrey, because that is the county council I am responsible for, and I do believe we have set it at the right level. It is a really big important job. The chief executive has delivered £260 million worth of savings in the first four years and he has a further £250 million to deliver over the next five years. Over a decade, we will see £0.5 billion taken out of our costs. This is really important, because many companies out there would like to see these costs taken out of their companies, and I sometimes think that we do not give the chief executives the credit that is due to them. You talked earlier on about income. The chief executive is responsible for making sure that the £110 million that we, as a cabinet, set down for income is actually delivered. If we did not get that income, we would be in trouble. For me, the chief executive has a really important role in making sure he delivers on that. We also have a £760 million capital programme and we are currently trying to build schools over the five years. We have £325 million capital. Last year we delivered the equivalent of 26 primary schools. These are major jobs, major contracts and major things.

John Stevenson

Going on that basis then, do you think he should actually be paid more?

Cllr Hodge

I think the salary we have for the chief executive is the right salary for the right job.

Mark Pawsey

I would like to follow on that line of questioning by asking about systems of appraisal. We all recognise that, if people are performing well, they deserve to be paid more and, if they are performing badly, there needs to be some route to remedy that and, in extreme cases, for them to exit the organisation. If I might start, I have a little bit of information from Rochdale on this. I think Councillor Lambert said that an appraisal takes place at the end of each year by the three party leaders. That is presumably in April of each year; there is a diary date set for the political parties—the three leaders of different parties—to come together and do an appraisal on the chief executive. Is that how it works?

Cllr Lambert

Certainly what has happened is a date is chosen when the three party leaders get the chief exec in and nobody else is in the room. It is measured by: what were your targets; have you met your targets?

Mark Pawsey

It is what people in business would know as a staff appraisal. My first question is: what experience do those council leaders have in carrying out an appraisal on a very senior executive? What training have you had or have those councillors had to enable them to do that job well?

Cllr Lambert

I would say your biggest training is public opinion and whether or not they have delivered.

Mark Pawsey

Deferring to public opinion is not an appraisal method. We are talking about a technical appraisal of a member of staff’s abilities. Is the biggest issue looking back at public opinion, rather than seeing how they have performed in their job?

Cllr Lambert

There has never at Rochdale Council been a formal process for the politicians to be—

Mark Pawsey

So there is no formal process of appraisal.

Cllr Lambert

No, not within Rochdale Council.

Mark Pawsey

How did you come to be offering £40,000 as a salary if there is no formal appraisal?

Cllr Lambert

That was done via the independent review of the Hay Group.

Mark Pawsey

You abdicated the appraisal to somebody else.

Cllr Lambert

It was taken independently outside of the council. I do not take that as abdication.

Mark Pawsey

Councillor Hodge, what happens in Surrey, because presumably you have this appraisal of all three party leaders, where you sit down with the chief executive and analyse his performance against his job description.

Cllr Hodge

No I don’t, actually. In Surrey, I have set down clear criteria for myself and my deputy leader, who has come from I beg to move, a very senior—

Mark Pawsey

Do you not trust the other parties then?

Cllr Hodge

Just bear with me, if I may. We also have somebody from the Local Government Association or a senior chief executive who has been around, and then we actually ask two or three very senior local businesspeople, who are from BP, from Canon and places like that, who are involved with management at a very senior level in the private sector. I think it is really important that we have, I do believe, a really robust process. A number of 360 degrees are agreed between me and the head of HR.

Mark Pawsey

How long does this appraisal last? How long does this process take?

Cllr Hodge

It will take probably, over a period of time, something like six to eight weeks.

Mark Pawsey

How many meetings are in these six to eight weeks?

Cllr Hodge

Individually, the head of HR will conduct 360 degrees—

Mark Pawsey

No, I am really just interested in the chief executive’s appraisal.

Cllr Hodge

The chief exec’s appraisal will probably take the best part of a day.

Mark Pawsey

You and colleagues will sit down over a day and evaluate the chief executive’s performance.

Cllr Hodge

We will go through on whether he has delivered on each specific issue.

Mark Pawsey

You are very happy with him, because you have spoken with very congratulatory terms about your chief executive. In all of these things, he is scoring pretty high marks. Is there a number ranking out of 10 for each component of the job?

Cllr Hodge

We have “satisfactory”, “outstanding”, et cetera.

Mark Pawsey

So Mr McNulty is ticking the “outstanding” box on a regular basis?

Cllr Hodge

No. I am not an easy man to please, to put it bluntly, and neither is my deputy, nor are the people who sit on the panel. We demand high standards, and the chief executive has now received an “outstanding” report in February.

Mark Pawsey

Were Mr McNulty to have a bonus, then you would look favourably upon that because of the relative high scoring he has achieved on his appraisals.

Cllr Hodge

We do not discuss bonuses.

Mark Pawsey

At same time, the downside if people are not performing well is that they should be encouraged to exit an organisation. I have to say I do share Mr Stevenson’s incredulity that, as a backbencher in the organisation, presumably at that time with aspirations of leadership—and you have moved on to leader—you did not understand the process at the time the last chief executive went and you do not know the terms of his departure.

Cllr Hodge

What I said is I am not actually able to give you an honest answer. If I cannot give you an honest answer, I am not going to pretend I know the answer, but I will do what Mr Stevenson asked and I will get the information and pass it to the Chairman.

Mark Pawsey

Let us say, then, if you were in a much less strong position than you are with a great chief executive, you were to have a chief executive who was not performing: what steps would you take? First of all, how would you identify that in your appraisal system and how would you then rectify it?

Cllr Hodge

At the moment the chief executive delivers a six‑monthly operational report to the council. Every one of our 81 members is invited to a review of that performance on how the county council is doing. I also take comfort from my discussions with my partners, the district leaders and the borough leaders. I talk to the voluntary and faith sector, which pays a really important part, and I also talk to the education and the business leaders.

Mark Pawsey

Let us assume you have done that and the man in post has been found failing. How do you remedy his performance, if that is what you want to do, and how do you effect his exit from the organisation if you do not?

Cllr Hodge

My own personal view is that, if somebody is not effective in their job, they will not be—

Mark Pawsey

I am not asking you your view. I am asking you what your council’s policy is.

Cllr Hodge

The council’s policy is, if a senior officer is not up to standard and is not performing—is not fulfilling his duties properly—we would then go through the process of removing the person.

Mark Pawsey

That is within contracts of employment?

Cllr Hodge

Yes.

Mark Pawsey

Does that policy exist in Rochdale as well?

Cllr Lambert

In terms of—

Mark Pawsey

Poor performance of a chief executive or senior officer.

Cllr Lambert

There are two issues: one, if it was gross misconduct, then you would immediately go to—

Mark Pawsey

We are not talking about gross misconduct. We are talking about poor performance following the appraisal process.

Cllr Lambert

The only process I inherited at Rochdale is one where you then challenge the actual performance, and you go through a long process.

Mark Pawsey

So there is no appraisal process in Rochdale.

Cllr Lambert

Formally no, not for the senior officers.

Mark Pawsey

It would be very difficult to remove somebody who is poorly performing if they have not been assessed against an objective system of appraisal. Would that be fair to say?

Cllr Lambert

Certainly that is fair to say in terms of where you would be at, but you would still have a process open to you within employment law.

Chair

Just one quick follow‑up, Councillor Hodge: given the problems you obviously had as a backbencher, not knowing what was happening to the previous chief executive, do you now publish your current chief executive’s appraisal, so all backbenchers can have that information?

Cllr Hodge

We do not actually publish the appraisal, but there is a review of it done and the cabinet is advised of the result of that, and so is the council.

Chair

Sorry, what does a “review” of it mean? What does it look like?

Cllr Hodge

There is a huge amount of detail. By the time we have done the whole process, the paperwork is probably about that high, with information, feedback, from different organisations.

Chair

In terms of what the chief executive has done well and what you are thinking he might do a bit better, in those sorts of terms, that is published, is it?

Cllr Hodge

Not directly published, no.

Chair

Something, you just said, was given to the cabinet and to council. What does that look like?

Cllr Hodge

A review takes place and a summary of that is then taken to the council.

Chair

What would the summary say?

Cllr Hodge

The summary actually looks at what we, as an organisation, have achieved with the chief executive. Has he met the targets? Has he helped play a major part? He has played a major part in turning Surrey County Council around. The evidence is quite clearly there, and we have brought along some evidence that was produced, which I thought you would like. There are 50 ways of how we have actually changed the county council over the last years.

Chair

Just coming back to the chief executive’s appraisal, you are saying a short version of it is done, which looks at his contribution, not what the organisation as a whole has achieved. Is this right?

Cllr Hodge

I then present my report to the cabinet.

Chair

And that goes to full council?

Cllr Hodge

No.

Chair

So a backbencher would not really know what the chief executive personally is achieving.

Cllr Hodge

We do have the chief executive’s six‑monthly report that goes to council every six months.

Chair

That is his report about the organisation, rather than your review of his contribution towards the organisation’s performance, so really nothing is produced as a result of the appraisal that all backbenchers are aware of.

Cllr Hodge

There are lessons to be learned every day, sir.

Chair

We have had more than one witness say they would go away and consider how they might do things in the future. Fine.

John Pugh

The relationship between a chief officer and a leader of a council is normally quite a close one. You may see more of your chief officer than your wife, at times. Now, given that, it is really very hard for a leader of a council, confronted with a paper, of whatever provenance, that suggests the chief executive is not getting paid enough or is not getting paid comparable to what other chief executives are being paid, to turn that down. Now fortunately, the Secretary of State has actually got some quite strong views about that. He has not actually given any guidance on it. Would it be helpful if he did? He basically complained a lot about the current rates of remuneration, but he has not actually given any specific benchmarking, advice or anything like that. Do you think he should?

Cllr Lambert

Yes, there should be clear advice on it. The relationship between a chief exec, senior officers and the lead member is by necessity close, but I think Mr Taylor was telling you it is also very challenging. Certainly when issues came up, we had regular meetings that were challenging and, because you respected each other’s views, you were able to have that challenge and move on. If anybody does not accept they are going to be challenged by a chief exec, or the chief exec or senior management do not think a leader is going to walk into their office and say, “What the heck are you up to?” then that relationship is wrong. Throughout our process, in our recovery on children’s services certainly, in removing some senior officers and bringing new ones in, some difficult conversations were had. In the 12 months prior to Mr Taylor being appointed, those conversations fell on my shoulders and we took them.

John Pugh

I am just suggesting this is sometimes a delicate and quite a personal conversation to have. You are talking to somebody you are working with on a day‑by‑day basis. You are not sitting above the situation. You are actually working with that person. Just on the question of whether the right level is being paid, you would look for some sort of evidence right across the piece, would you not? Have you had experience of actually advertising a chief officer’s position recently, finding that remuneration was not sufficiently attractive and having to re‑advertise to get the right sort of candidate?

Cllr Hodge

No.

John Pugh

Is that not surprising in a way? Clearly it means these posts have a generous rate of remuneration. Do you never reach a point where you find, “Heck, we have not put enough money on the table to get the right person”? It could be the case that you are putting more money on the table than you ought to.

Cllr Hodge

It is like all these things at the end of the day. We are a very large authority with very large responsibilities, with two very clear statutory responsibilities for both children’s services and adult services. On top of that, we have a statutory responsibility both for section 151 officer and a monitoring officer. You do need to make sure that you get the best-quality people, because the people of Surrey will want the best quality. We believe, and certainly I do believe now, that we have a really good top management team in the organisation.

John Pugh

But nobody has had to re‑advertise so there is no shortage of applicants. The other test you would use to find out whether remuneration is right would be to find out whether people were habitually leaving because they could get better remuneration elsewhere. I think Mr McNulty suggested that people in the procurement field have moved out of this authority for better remuneration elsewhere, and that is not so surprising, because you are in an area of high employment and procurement is a transferrable skill; but in Rochdale, how many senior executives have you lost to the private sector in the last five or six years?

Cllr Lambert

In terms of the number of senior management who have gone, we took it down from 24 to 10.

John Pugh

I mean people who have voluntarily moved from being a chief executive of a local authority to being something important in the private sector.

Cllr Lambert

It is fair to say that, of the 14 we removed, it was not their choice, because we structured out their jobs. We have recruited a new director of children’s services, who is very good, from the North East, and a new head of children’s services, both of which were needed, where we had put temporary appointments in, again head‑hunting people to come in to turn that service around, which we desperately needed in the borough.

John Pugh

Generally speaking, though, there is no drift of chief executives into the private sector, except in very specialised environments like procurement.

Cllr Hodge

There have been difficulties recruiting what I call the senior officers who have a statutory responsibility in terms of children’s services. When we went out for a new children’s services director, we did not get what I would consider to be the quality of applicants from outside who were anywhere near the quality of what we were looking for. In the end, we made an internal appointment. There is a danger about the market. You have to be very careful about these really senior posts that are under public scrutiny and under the public eye all the time to make sure you get the right people in.

Simon Danczuk

Councillor Hodge, what role do you think a local resident in Surrey should play in determining a chief officer’s pay and performance? What role should they have in it?

Cllr Hodge

The role they have is that, through the ballot box, they decide who are the elected representatives. I am, and so are the 81 councillors; we are all local residents. From that point of view, we are doing this on behalf of the electorate, who have elected us to do it.

Simon Danczuk

What you are saying, Councillor Hodge, is that if Surrey residents are not happy with David’s salary, they should vote you out at the next elections.

Cllr Hodge

What I am saying is, at this moment in time, I have not yet had a single letter with any sort of criticism of the chief executive or the salary he is on.

Simon Danczuk

The ultimate way of involving the public is to vote you and your colleagues out at the next election.

Cllr Hodge

I think we are all the same here. All politicians are at the mercy of the ballot box. I do not think you are any different from me.

Simon Danczuk

You are saying that is the way to do it. Okay. Councillor Lambert, you said earlier about the media’s interest in the situation in Rochdale and the uproar that came with the proposal to increase the chief exec’s salary by £40,000. There were petitions signed by many local residents and things. Do you think the public had been fed a lie by the media or did not understand what was on offer? What made the councillors then not decide to give this salary increase? Surely it was public pressure; it was an act of democracy.

Cllr Lambert

It was certainly an act of democracy and it was not good that individuals described it as a “climb down”. If listening to the public and reacting to their wording is described as a “humiliating climb down”, Mr Danczuk, then you are killing off democracy, because democracy is about supplying people with the information openly. The information on Mr Taylor’s salary and on the five members of the executive leadership team was published on the internet, and was there for everybody to read. Any individual who contacted me directly with a return address got a response. In fact, the TaxPayers’ Alliance praised us for what we had done. It was the first time I had ever had praise from the TaxPayers’ Alliance. Only a couple of months ago, the Minister inquired on your behalf about the process; he wrote, and a copy of the letter is in the information here, if you want it. He praised the fact of the new openness and hoped this would continue across councils. Yes, we listened to the public. We listened to the public and we reacted.

Simon Danczuk

And they thought that £40,000 was too much.

Cllr Lambert

They thought it was too much.

Simon Danczuk

And that is why you stopped it.

Cllr Lambert

Yes, the reaction from the public. It was taken from me to the employment committee. The employment committee then made recommendations of Mr Taylor’s salary being £130,000, £145,000 or above the £170,000 to £175,000. They also made recommendations on the executive leadership. They also, when it went to full council, offered an alternative of no difference. Full council, all 60 members, voted in that and they voted for what we got, which was a 1% rise, like the rest of the workforce, plus the three new jobs being remunerated at the EOT level. That is democracy and it was right that we listened.

Simon Danczuk

The legislation that this Government put through says that remuneration decisions for chief officers and chief executive’s pay have to go to full council meetings. There is no choice but to do that; that is the law. Are there any other laws that you think would make it more transparent and easier for the public to engage in this process—just a brief answer from each member, just very brief—which could make it even better? Last week, we had somebody saying that they published the name of the senior officer and the precise amount of salary that they get, so that could be a change that could be made law to make every authority do that. What are your views? Is there anything else that needs doing?

Cllr Hodge

We already do that.

Simon Danczuk

Yes, but it is a range, is it not? You publish a range.

Cllr Hodge

Every post above £52,800 is published. It was published in May, less than three or four weeks ago, in the county council annual meeting. Officers above £100,000 are named by appointment.

Simon Danczuk

Yes, but it is in a range, because I have the range in here. I am saying not a range but the specific amount. That is just one example.

David McNulty

Just to clarify, the specific amount is published because it is published annually in the accounts.

Simon Danczuk

Do you think that would be a good thing to make into law so every authority has to do it?

David McNulty

I think every authority probably already does it.

Simon Danczuk

Do they?

David McNulty

Just look through the accounts.

Simon Danczuk

Any other suggestions?

David McNulty

Around transparency? I think local government is one of the more transparent of the public services. If people look at some of the things that have already been done, particularly around salaries, and then there is a wider transparency, there is a huge amount of information available on our internet. I will just put a plug in for it: independent experts quoted it as being one of the five best in the country.

Simon Danczuk

I am conscious of time, so you are saying no. Jim, Colin, anything?