Treasury complains of brain drain to better-paying Bank and HMRC

Sir Nicholas Macpherson said the superior pay on offer made it hard to prevent talented junior staff from jumping ship

Economics Editor

The Treasury’s top mandarin has blamed higher salaries offered by the Bank of England and Her Majesty’s Revenue and Customs for the finance department’s chronic difficulties in holding on to promising employees.

Giving evidence to the Treasury Select Committee yesterday, Sir Nicholas Macpherson, the most senior civil servant at the finance ministry, said the superior pay on offer to staff at the central bank and also the tax authorities made it hard to prevent talented junior staff from jumping ship.

“In the last year we’ve lost twelve people to the Bank of England” he told the committee. “It’s slightly frustrating that the Bank of England’s a nationalised industry... but these guys just pay a lot more than us”

Sir Nicholas went on: “It’s frustrating for us to be some sort of feeder second division Belgian football team which provides really good people for Premier League teams like Chelsea and Manchester United.” Sir Nicholas said he had discussed the matter with the Bank of England’s Governor, Mark Carney who had been “very helpful”.

Sir Nicholas, who has been permanent secretary since 2005, added that relatively junior Treasury staff departing to work at the tax authorities was also a problem. “We have a lot of staff in their late twenties who will go and get a job at HMRC because they can get £10,000 more a year” he said.

While Sir Nicholas said some turnover of staff was desirable the situation had gotten out of hand. “We pay less well than other departments, we have much higher turnover and I think we’ve got to do something about it” he said.

Staff turnover at the Treasury is notoriously high. In 2011 it was running at 28 per cent a year, which some insiders noted was “higher than McDonalds”. The turnover rate has fallen since then, declining to 23 per cent in 2013-14 according to the Treasury’s most recent annual report. But that still remains higher than other Whitehall departments. Staff turnover at the Bank of England was 8 per cent in 2013-14.

In an annual survey of Treasury staff published in February only 21 per cent of those who responded agreed with the proposition that pay adequately reflects performance.

Only 13 per cent of Treasury employees felt they were receiving reasonable pay compared to people doing a similar job in other organisations. The comparable figure at HMRC was 23 per cent. At the Department of Communities and Local Government 32 per cent felt their pay was reasonable. At the Foreign Office 26 per cent felt the same.

Sir Nicholas said a large part of the problem was that the Treasury could not realistically award across-the-board pay increases for staff at a time when the department was imposing austerity on the rest of the public sector. The effect of this was that “the only way to get a pay rise is to get promoted”.

Sir Nicholas added, however, that one way the finance ministry had been able to keep hold of some staff by offering flexible working conditions.

“Often we will retain high quality women who will have child caring responsibilities who find life as City corporate lawyer or a City financier pretty difficult” he said.

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