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Will Hutton's review on public sector pay calls for transparency

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Will Hutton has published the Final Report of his Independent Review into Fair Pay in the Public Sector, along with his recommendations to the Government, calling for stronger performance related pay and improved transparency.

Hutton, who was commissioned by the prime minister in June 2010 to investigate public sector pay for senior staff, has proposed senior public servants' pay should be more strongly linked to their performance through a system of 'earn back' pay.

Under this system, executives will have an element of their basic pay 'at risk', to be earned back each year through meeting pre-agreed objectives.

He called all public service executives' full pay should be disclosed each year, along with an explanation of how it relates to job weight and performance

He said the Government should not benchmark senior public servants' pay against that of the Prime Minister, and should not impose a fixed limit on pay multiples (such as 20 to one).

Hutton also proposed an 'informed debate' around senior pay. To support this informed debate, he said the Senior Salaries Review Body should publish Fair Pay Reports each year, detailing pay multiples across public services

Commenting on the review Katja Hall, CBI chief policy director, said: "The Government was right to ask Will Hutton about senior public sector pay. His central suggestion that more senior public servants' pay should be performance-related is welcome. "But we must be careful about judging pay fairness by a single number, like the ratio of executive to median pay. While Hutton is right that there should be more transparency and understanding about how pay is set in the public sector, a single ratio can be misleading. Differences in the sizes and make-up of workforces lead to a variety of pay differentials based on very valid grounds. "It is right that shareholders decide how pay is set. In the public sector this means it is for government to decide what the standards are. "In the private sector, however, remuneration committees are responsible to shareholders. Shareholders not the Government should decide how to split the pay budget in a way that gets the best results, and this includes firms delivering services on behalf of government."