Gordon Brown vows to curb top public sector salaries

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Gordon Brown pledged to curb a "culture of excess" in senior public sector pay and bonuses today as he detailed plans to cut another £3 billion from the cost of running Government.

The Prime Minister said many salaries above £150,000 and £50,000-plus bonuses would in future require ministerial approval as part of an efficiency drive.

Top earners would also be publicly identified and bodies that wasted public cash "named and shamed", he said, warning that some had "lost touch" with reality.

Mr Brown said he hoped to shave 20% from the senior civil service pay bill over the next three years as the Government bids to cut the spiralling deficit.

Wednesday's Pre-Budget Report is expected to confirm it will top £175 billion this year, the combined effect of a costly fiscal stimulus and plummeting tax receipts.

Other savings planned include getting more services online, which could cut £600 million from telephone and paperwork costs, and a 50% reduction in consultancy fees and 25% in marketing.

The PM said: "Of course public service is admirable and important and it deserves fair reward and we must never forget that our priority is excellence at the front line.

"In the wider public sector, some senior pay and perks packages have lost sight of this goal and lost touch with the reality of people's lives.

"Money which should be spent on health, on schools, on policing and on social services is, in some cases, going on excessive salaries and unjustified bonuses, far beyond the expectation of the majority of workers. This culture of excess must change and will change."

It was unacceptable that 300 local council officials were paid more than £150,000 and more than 300 across the public sector got £200,000 or more, he said.

"For £100 million you could have four new secondary schools or ten new GP-run health centres every year. Or that £100 million could pay the salaries of 3,000 nurses or 2,000 servants for a year," Mr Brown said - announcing a full pay review in time for next year's Budget

"For future civil service appointments and other managerial appointments to public sector bodies which are subject to ministerial approval, the Chief Secretary to the Treasury will approve, in advance of recruitment, all salaries above £150,000 and any bonuses above £50,000.

"And where senior managerial appointments are not directly under Government control we will expect the organisations in question to justify to the relevant secretaries of state and to the public any salaries above this level."

Asked if he could be confident about the money-saving potential of increased internet use given the problems with the NHS IT programme, Mr Brown said the Government had received advice from technology entrepreneur Martha Lane Fox and added: "I am satisfied with the figures we have now got about the savings that can be made."

Stating online services were the way forward, the Prime Minister said: "We have been working with Martha Lane Fox over the last few months.

"What we have found is something that is both inspirational and cost-effective.

"It's when people get the chance to use online services that we can then both cut costs and give people an interactive service where public services can respond to them and they can respond with complaints and queries.

"What Martha has shown us is that if you can move one transaction that everybody does daily or weekly by post or by telephone onto being online, where the technology is available to use, then we can save hundreds of millions of pounds of money.

"The direct service that puts the user in charge by giving them access to the internet is the way forward for many of the public services that are quite expensive as transaction services."

Mr Brown said £3 billion of additional efficiencies had been identified since the Budget, just under half from streamlining central government, taking the total planned savings to £12 billion over four years.

More "value for money" measures are also set to affect several major projects including the multi-billion-pound NHS IT programme.

The PM spoke as he launched the so-called "Smarter Government" report setting out where savings could be made.

Among other measures included were merging or abolishing more than 120 arm's length bodies, saving an estimating £500 million and relocating another 10% of civil servants out of the South East.

As part of a new "culture of openness" the numbers of civil servants under direct Whitehall control in each salary band above £50,000 would be published and all those earning more than £150,000 named, Mr Brown said.

"I would expect others - including publicly-funded media, regulators and other public sector bodies - to do the same," he said.

Axing "expensive" civil service early retirement terms, reducing redundancy pay for top staff and preventing people returning to work after a pay-off would also save up to half a billion pounds over three years.

Hailing the potential impact of the internet, he said he hoped to make the "great majority" of government services online-only within five years.

Another £30 million would be spent to get at least another one million people online by 2012 in preparation, he said.

Online transactions were around £3.30 less expensive than those done by telephone and £12 cheaper than traditional postal versions.

Student loans, jobseekers allowance, working tax credits and and child benefit would be the first services to move, he said, with exclusively online vat returns and employer tax returns by 2011.

"Our aim is - within the next five years - to shift the great majority of our large transactional services to become online only - and this has the potential to save as a first step £400 million but, as transaction after transaction goes online, billions more."

Mr Brown also promised a new "culture of openness" - in an apparent response to Tory proposals to publish far more government information.

"We will actively publish all public services performance data online during 2010 completing the process by 2011.

"Crime data, hospital costs and parts of the national pupil database will go on line in 2010.

"We will use this data to benchmark the best and the worst and drive better value for money. It will have a direct effect on how we allocate resources."

Data to be released would also include previously unavailable public transport data and "significant underlying data for weather forecasts".

Mr Brown defended the plans against the suggestion the Government had been inefficient up to now by emphasising that it was only because of recent developments in new technology that such savings could be made.

He said: "What has happened in the last year or two is that the possibilities open to us in the public services have become enormous.

"What has happened is that the growth of the internet and the ability to put services online...transforms the way we can deliver public services.

"This is a very recent development."

The Prime Minister told the audience he believed many civil servants would be "excited" by the opportunities presented by the new technology and changes in policy, adding: "The days of Whitehall knows best are over. The days of the citizen in charge of the service have started."

He refused to say how many jobs would be lost saying: "We have got to a position where we have got the smallest civil service since the 1960s.

"So there are further changes to be made - I am not putting a figure on that today."

He did, however, reveal that the plans were intended to lead to 15,000 workers being relocated from London and the south-east.

"But a lot of our effort is, of course, getting people to do services online and then making sure we can provide better service as a result of that," Mr Brown added.

Liberal Democrat Treasury spokesman Jeremy Browne said: "Gordon Brown has spent over 12 years signing the cheques for an increasingly inefficient and centralised system of Whitehall bureaucracy.

"Greater efficiency is always welcome, but we will not get the improvements we need until there is fundamental reform in Whitehall.

"Central government is too big, too powerful and too expensive. The Liberal Democrats would scrap entire departments and introduce massive decentralisation, making politics better, cheaper and more accountable."

Sureyya Cansoy, associate director for technology trade association Intellect, said: "The Prime Minister is right to see technology as a potential tool to cut the costs of government, alongside the bitterer pills of tax rises and service cuts.

"Technology is not a panacea and requires tough decisions and political courage in its implementation, but as Intellect shows in its Pre-Budget Report submission, there are examples from around Britain and the world of how moving services online can cut costs and give citizens a better service.

"The real challenge will be taking everyone along in this digital revolution."

Civil service union leaders accused the government of launching a "bidding war" on who could cut the most, warning that public services would suffer.

The Public and Commercial Services union said ministers were holding the "sale of the century", and also warned against forcing staff to relocate out of London and the South East.

General secretary Mark Serwotka said: "What we are seeing is the continuation of a bidding war on who can cut the most with little thought for the impact on public services. Added to which you have the government preparing for the sale of the century with a fire sale of key assets and agencies.

"Cutting arms-length bodies may sound all well and good, but let's not forget that these are organisations that the government themselves set up and include organisations such as Jobcentre Plus. The government has to ask itself what it is going to stop doing.

"While not against relocation in principle, they should not be forced, hit the black and minority ethnic community disproportionately or be based on flimsy business plans which offer no value to the taxpayer."

Bill Cockburn, who chairs the Senior Salaries Review Body, has been tasked with reviewing pay "across the whole of the public sector".

Asked if the new pay openness arrangements would include those of BBC stars such as Jonathan Ross, the Prime Minister's spokesman said he did not expect "talent" to be affected.

But he said it would be for Mr Cockburn, who is expected to work on the review with the heads of other pay bodies, to decide the exact scope.

"There are a huge number of public sector bodies where this could have an impact. Whether it specifically deals with the 'talent' at the BBC or not...it's for Bill Cockburn to determine how he handles that.

"The Prime Minister's view is very much at the level of saying: the public sector needs to get its remuneration act in order."

Mr Brown had "not expressed a specific view" on whether highly-paid BBC presenters should be publicly identified.

The spokesman told reporters: "There are a raft of jobs, including organisations which are not covered directly by ministerial appointment, where we think it's really important that we use the principles of transparency and accountability to shine light on them.

"There are probably certain categories which will not be covered by this, clinicians probably being one category," he said.

Paul Kenny, general secretary of the GMB union, said: "Reports that the Government plan to introduce a super tax on bankers' bonuses are welcome and long overdue. GMB has long argued that any other approach to restraining the greed of the multimillionaire elite than through taxation is futile.

"The notion that these bonuses are actually earned by exceptionally talented bankers is a myth. Record profits by investment banks, so soon after they were rescued by the public sector, are a sure-fire sign that these banks are able to overcharge for the services they provide in the financial markets. These rewards bear no relationship to what the bankers actually do."

The Tories said the proposed savings were only the latest in a long line promised by Labour - few of which had ever been realised.

And the Opposition revealed that Sir Peter Gershon, who headed the Government's last major Whitehall efficiency review, had now been recruited to work on its plans.

Treasury Chief Secretary Liam Byrne will set out details of the plans to MPs in the Commons this afternoon.

But his shadow Philip Hammond said his promises would be hollow.

"Labour have had repeated efficiency drives over the last 12 years which have identified billions of pounds of potential savings.

"Yet they have only achieved a fraction of the savings claimed."

He went on: "Efficiency reviews are not the problem - Labour is. Waste and inefficiency remain endemic after 12 years of Labour government.

"Why should we take this latest offering any more seriously when all it contains are re-heated announcements and attempts to copy Conservative policies?

"The truth is real public service reform is not in Labour's DNA."

Mr Hammond said Sir Philip would be one of four former government advisers on a six-strong Shadow Public Services Productivity Advisory Board.

"The Board will offer private advice and challenge as we develop our public sector productivity agenda," he said.

"The collective experience of the members of the Board will ensure the party has access to the lessons learnt from previous approaches to improving productivity as it prepares its agenda for public service reform. This shows only the Conservatives can be trusted to spend money wisely."

Other members include Bernard Gray, who has led two Ministry of Defence reviews, Lord Peter Levene, who was Tory prime minister John Major's efficiency adviser and Martin Read, who earlier this year led the Treasury's Operational Efficiency Review.

They will be joined by the leader of Conservative-controlled Westminster Council Colin Barrow and Lucy Neville-Rolfe a former senior civil servant who now sits on the board of Tesco.

Health Secretary Andy Burnham has been summoned before MPs this afternoon to answer an urgent question over the future of the NHS IT system, tabled by his Tory shadow Andrew Lansley.

Chancellor Alistair Darling indicated yesterday that the scheme, which has been beset by delays, heavily criticised by opposition parties and seen its budget spiral to more than £12 billion, was in the firing line.

However, he is expected to target one aspect of the programme which he does not deem essential to the NHS frontline and savings are only likely to run to the hundreds of millions.

The NPfIT would computerise medical records in a central database and link up more than 30,000 GPs to nearly 300 hospitals.

It would provide an online booking system, a centralised medical records system, e-prescriptions and fast computer network links between NHS organisations.

But the Tories, who would scrap the programme's centralised IT system, have dubbed it "another government IT procurement disaster".

Alan Leaman, chief executive of the Management Consultancies Association, said: "Management consultancies will play a critical role over the next few years in helping the Government to save money, improve frontline services and raise productivity.

"That's why the private sector uses consultancy.

"It is perverse to announce an arbitrary reduction in consultancy without any analysis or explanation.

"The Government could easily miss their other spending objectives if they rob themselves of the ability to use consultancy when it is appropriate and valuable to do so."