As seven years of public sector pay restraint come slowly – and unevenly – to an end, Suzannah Brecknell meets the Office for Manpower Economics, the team helping pay review bodies and departments navigate new terrain
In September last year, prime minister Theresa May seemed to bring an end to seven years of pay restraint in the public sector, by announcing pay rises above 1% for prison and police officers, backdated to April 2017. Other areas of the public sector could also expect pay rises from 2018, government announced, but the precise figures would depend on recommendations from independent pay review bodies.
Recommendations from those pay review bodies (PRBs) – there are eight in total, that collectively cover around 45% of public sector staff and advise on a pay bill of more than £100bn – are usually published in March or April, alongside the government’s responses (see box). As CSW goes to press in April, not one PRB report has been published for 2018-19, though the Armed Forces Review Body provided its recommendations to government shortly before the Easter recess.
This delay is because all PRBs got their remit letters from departments late, thanks to the Treasury’s decision to move the Budget from March to November. But this year’s process is also significant as review bodies balance recruitment, retention, morale and affordability (all part of their general remits) with “flexibility” on pay rises for the first time in years, but no extra funding for departments and a clear message from the Treasury that higher pay must be in return for higher productivity.
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At the centre of this delicate process of evidence gathering, engagement and deliberation, working away behind those all-important PRBs, is the Office of Manpower Economics. Sponsored by the business department, OME is a non-departmental public body which provides secretariat and research support to all eight PRBs.
It has around 30 employees, made up of the secretariat staff – each PRB has around four or five people assigned to work for it, with most of them working across more than one body – as well as a research team and a central support team.
It’s the OME which helps to ensure – by arranging visits, collating submissions and commissioning research – that the review body process is evidence-based. This, for pay specialist Nicola Allison, is the key thing which separates the process from the directly negotiated settlements in other parts of the public sector. Review body recommendations are formed after considering not only submissions from interested parties, she explains, but external information such as the OME’s broad research around private sector pay or trends in reward systems.
Charles Jordan (left) , secretariat to the NHS Pay Review body, agrees this is crucial. “We shouldn’t underplay the amount of store that the unions place in having an independent review body particularly on the NHS side,” he says, giving the example of the late-running 2018-19 round to illustrate this. The review body felt that “to go through an evidence-based process that arrives at recommendation was more important to the NHS this year than meeting the deadline for a settlement”.
And there is an art to those recommendations, says Martin Williams, the OME’s chief executive, which again moves the process away from a straightforward negotiation and into a more delicate dance between government, employers and the independent arbiters on the review body. “If you work it carefully,” he says, “you can give the recommendation that government needs rather than the recommendation that government has asked for.” That means balancing what the body thinks government needs to do with what it can politically accept.
“Clearly putting forward recommendations which get rejected is a waste of time for everybody,” says Williams. “On the other hand simply playing back what the government has said it wants is equally a waste of time. Somehow you’ve got a find an area where you are saying: ‘Government hasn’t said it wants this, but if we recommend it, government will probably do it and we think that will be a good thing’.”
Review bodies can also lay the ground for future recommendations. Two years ago, for example, the school teachers review flagged up recruitment and retention pressures which meant a pay rise of above 1% would be needed before the end of the Parliament, while concluding that there would be “significant risks” involved in uplifting pay in 2016 because of the impact on school budgets. Last year, they recommended a higher pay award, which government accepted.
This delicate system of back and forth does not always work smoothly, however. In 2015 the Senior Salaries Review Body, which covers pay for the Senior Civil Service and judges, called for the minimum amount a senior civil servant can be paid to rise by £2,000. The government rejected this recommendation (though it did accept others made for different pay bands in the SCS), saying it did not leave sufficient flexibility for departments to target pay rises in other areas. For several years the SSRB has been calling for a full review of SCS pay, but government has only recently put out proposals for reforms, inviting the body to comment on its plans earlier this year.
Williams says that the SSRB and government “particularly on the civil service, frankly, have found it hard to find a match between what the review body felt it could recommend and what the government felt that it could accept”. He is more optimistic that a match will be possible with the current review of judicial pay, but says that in any case review bodies do not expect all their reports to lead to changes.
“The review bodies are not naïve,” he says. “They realise there are political lines to be drawn, that governments at particular times find it very difficult to cope with particular recommendations. They have to take a view about whether they recommend them anyway.”
“If you work it carefully, you can give the recommendation government needs, not the one it has asked for” Martin Williams, OME
As well as supporting the review bodies, the OME also offers advice to departments. This might be by pointing officials to research it has either commissioned directly or is aware of thanks to it’s watching brief on areas such as performance pay and trends in graduate recruitment. Then there is the institutional memory of the team itself, many of whom have been with the OME for years. “We are one of the bits of the civil service that can really cope with people who want to come and stay,” says Williams. “If somebody wants deep knowledge of an area we are one of the places where we have that, both in terms of people and of the material we’ve got.”
The OME has just restructured its teams to ensure that this deep knowledge and corporate memory is spread across review bodies evenly – in part a reaction to the changing context of pay policy, and the need to ensure that each team has someone who remembers a time before the pay cap.
Despite the presence of some long-serving team members, Rashmi Panigrai (left), manager of the OME’s central support unit who joined just a few months ago, describes her colleagues as very open to change and approachable compared to previous senior teams she has worked with. Perhaps this openness comes from the fact that the team also deal with wide range of stakeholders – something Jordan views as a particular attraction both in terms of keeping the job interesting, but also in terms of the relationships it enables. “We’re the only people in the middle [of this process] so quite often after a few years of doing this you build up relationships, and you can be the catalyst for helping [departments and employers] frame what they put through to the review bodies as evidence,” he says.
As the pay cap is lifted, Williams says the OME has a role now to help educate departments about how to submit evidence without the restraining foundation of a 1% pay award. Departments previously assumed the 1% cap would stand for another three years, he explains, but now “if you made a case then it might be something different”.
“So, the question is, how do you make that case?”
There’s also the question of pay affordability. Departments haven’t had to make arguments about affordability for several years – that was done for them by the pay cap. So Jordan suggests that part of the OME’s role in future years might be to help departments consider what evidence they can best put forward to make a good argument on affordability. “It’s quite a fine line for us,” he says – the OME can’t tell departments what to say, or which arguments are best. “But we’re there to say, ‘If you want to put an evidence-based argument together we can tell you the sort of information that everybody is interested in’.”
Williams notes that evidence provided by departments has improved in recent years – especially in terms of data on local or regional pay – but one area where departments could up their game, suggests Allison, is on offering a more strategic view of workforce planning. “One thing that we experience with SSRB, and I very much doubt is unique to them,” she says, “is that the evidence we get is very good, but the review body has been asking, for some years, for a strategic overview of where we’re going with this: what skills are you going to need in five years’ time, and how are you going to get there?”
“Pay can only do so much,” she continues. “We need to train qualified people and we’re not seeing long-term workforce strategies, which we would love to see.”
As well as building relationships with the departments who sponsor each pay review body, the OME also has “quite an important relationship with the Treasury”, says Williams (left), which is not surprising when you consider the £100bn pay bill that the review bodies influence. “As far as Treasury is concerned they want to feel that the review bodies understand what the world feels like from their point of view,” he says. But it is equally important, he adds, that review bodies don’t feel like they’re being told what to do – “even indirectly”. So the OME plays a delicate role, helping each group in the pay review process to understand the others and to avoid surprises when the remits and recommendations are published.
Though pay policy is devolved in some areas and some employers such as hospitals could have flexibility to make their own awards, generally organisations stick to the structures offered by PRBs, in part because it saves them an awful lot of work. “The school of thought is: ‘Just tell us what it is and we can get on with running the hospital’,” says Allison. This attitude underlies the value of the PRB process that OME supports: it enables employers and government to reach an agreement on pay which they can both live with, and allows them to get on with the job of delivering public services.
How the pay review bodies work
Each PRB has between six and eight members, appointed by the relevant secretary of state, who serve no more than two three-year terms. Every year, PRBs receive a remit letter from the chief secretary to the Treasury setting out overall pay policy (including things like pay caps) and a separate letter from their relevant ministers setting out priority areas or concerns. The bodies then commission research, receive evidence from employers and unions, and carry out both oral evidence sessions and visits – for example to prisons, schools and even out to Afghanistan when there were troops serving in Helmand province.
Their secretariat in OME help them to evaluate and assimilate this evidence into recommendations to which government responds so that public sector employers have guidance for the coming year. The PRB reports are published at the same time as the government response, usually in March.
There are eight PRBs:
Armed Forces’ Pay Review Body
Review Body on Doctors’ and Dentists’ Remuneration
NHS Pay Review Body
Prison Service Pay Review Body
School Teachers’ Review Body
Senior Salaries Review Body
Police Remuneration Review Body
National Crime Agency Remuneration Review Body