Elliott Keck is Head of Campaigns for the Taxpayers’ Alliance.
The TPA’s 17th Town Hall Rich List made waves for a reason. For months, we had been inundated with blood-curdling warnings about imminent bankruptcies if the government didn’t step in with increased funding. To list just a few. In November, a group of county councils claimed they were “running out of road” to prevent insolvency. In December, the same group said that the government’s funding offer would lead to tax rises and service cuts. In February 2024, a series of councils warned about cuts to services. A worryingly specific analysis that same month found that one in ten expect to go bust in the next year.
As a result, ministers decided they simply couldn’t allow any more local authorities to go to the wall. It was an understandable decision. Government funding would likely only paper over the cracks of the most indebted councils. But with an election fast approaching, papering over the cracks was the only option. Billions more in funding were pumped into town hall coffers.
Yet against this backdrop, the number of town hall officials receiving six-figure pay-packets was surging. The TaxPayers’ Alliance’s 17th Town Hall Rich List, found that 3,106 council officials received over £100,000 in 2022-23, the highest since 2015. The number receiving over £150,000 had hit a record high of 829. For the first time, we specifically included a mention of those who received £200,000, establishing an unhealthy baseline for when remuneration deals really spin out of control.
How do you square this circle? How can Hampshire County Council regularly brief that it’s on the brink, while at the same time it’s able to find a spare £651,000 to hand out to its departing director of culture, community and business services, the highest remuneration package of any town hall boss on the list? I spoke to one councillor recently, whose council had managed to cut the number on six-figure remuneration packages after the Conservatives came to power. As he explained, so many of these senior officials are employed on ludicrously generous and often rock solid contracts which are difficult to break. If they can be broken, it normally costs a pretty penny to move them on.
The example of Hampshire County Council is exactly why we use remuneration, not salary. Salary is a useful measure of course. It is the easiest way to compare two jobs. But it’s also incomplete. It fails to include bonuses, expenses or benefits in kind, and critically pensions and loss of office payments, all costs to the taxpayer, all received by council bosses. It’s these latter two payments that explain how some can bring home half a million pounds more in a single year.
Take the example of Hampshire’s director of culture, community and business services. That £651,000 was made up of £120,133 in salary, £121,203 in loss of office payment and £409,822 in pension.
How on earth can that be justified? Employees made redundant of course deserve a loss of office payment, to make up for potential lost earnings. But with the merry-go-round nature of local government, they act far more like gratuitous handouts. The former chief executive of Tower Hamlets left by “mutual agreement”, yet received £217,844 from a loss of office payment. It was just weeks before he was back at the helm as interim chief executive of Brighton Council. There’s something rotten in local government.
However public sector pension schemes used to be justified, we are long past that point. The public sector pension liability now sits at over £2.6 trillion, larger than the national debt. The local government pension scheme only makes up a small proportion of this total debt, but still remains a hefty £74 billion. All for a defined benefit scheme, where an employee’s pension is based not on how much they’ve paid in, and how those investments have grown, but is based on their salary and length of service. A pension scheme found almost nowhere in the private sector anymore.
Local government deals with huge budgets, and has significant responsibilities. Those in charge deserve salaries that reflect that. But much more needs to be done from central government to protect taxpayers from the eye-watering remuneration packages that so often accompany departures. And much more needs to be done at the level of local government to ensure those salaries truly reflect performance and value added to the organisation.
There are a couple of easy changes, and a couple of not so easy changes that should be made. Firstly, ministers should revive the seemingly shelved plans to cap exit payments at £95,000, as the TaxPayers’ Alliance have long campaigned for. It is probably also time to look at placing restrictions on those who receive large loss of office payments from returning to work in local government for a period. Secondly, public sector pension arrangements for new employees need to be radically reformed. New staff should join a funded defined contribution scheme, like those in the private sector. Employer contributions could remain generous, to ensure that these roles remain competitive, while no longer breaking the bank. Finally, the sensible proposal by Paul Bristow MP to require a vote at full council for all hires with salaries over £100,000 should be enacted without delay.
Our town hall rich list will always contain surprises – salaries that seem too high, councils with too many on big pay deals. But we can consign the most shocking figures to history.