chief executives Many chief executives'salaries exceed what is stipulated in Department of Health guidance.Trust remuneration committees are ignoring the government's fair pay policy, argues Dr Nigel Dudley

Published: 11/4/2002, Volume II2, No. 5800 Page 28 29

It can be tough at the top: thousands of people to manage, some of whom can be challenging in their behaviours; a budget of many millions to oversee; responsibility and accountability for anything and everything; and the prospects of remaining in post for a shorter time than the average England football manager.

Who would want to be health secretary when the financial rewards and long-term job prospects are far better for considerably less work, responsibility and accountability as the chief executive of many an NHS trust?

1If the chief executive also happens to be in a trust where the remuneration committee is docile and benevolent with the taxpayers'money, then big pay awards year on year are virtually guaranteed.

The average increase in chief executive pay, reported by companies such as Incomes Data Services and Pay and Workforce Research (PWR) since 1998-98, suggests that many remuneration committees are seemingly incapable of reading or understanding the specific and explicit details in government pay guidance letters and are ignorant of the Wednesbury principles (outlined below) in relation to their Parliament-derived, discretionary decisionmaking powers.Some may choke with self-righteous indignation at such views, but the facts and evidence are all within the public domain and open to independent evaluation.

Chief executives often bear the brunt of the criticism for the size of their annual pay awards but these decisions rest primarily with the trust remuneration committees.Under the National Health Service and Community Care Act 1990, a trust is given the discretionary power 'to employ staff on such terms as the trust thinks fIt iso as to discharge its functions.

A remuneration committee has to be set up from the non-executive directors who are representatives of the local community.This committee takes responsibility for determining the remuneration package of the chief executive that could include basic salary, performance bonus and other benefits.

The committee is under certain obligations as laid out in the employee relations section of the Department of Health's 1994 code of accountability for NHS boards.This states: 'The terms and conditions agreed by the board for senior staff should take full account of the need to obtain maximum value for money for the funds available for patient care.The board should ensure through the appointment of a remuneration and terms-of-service committee that executive members' total remuneration can be justified as reasonable.'

All board members explicitly subscribe to both this code and the code of conduct that covers ethical issues of openness, probity and accountability.Failure to uphold the codes is incompatible with board membership.

Demoralising and demotivating Before coming to power in 1997, Labour expressed concerns about the demoralising and demotivating effects of excessive executive pay on the NHS causing staff to vote with their feet.Such actions were considered to result directly in poor patient care.

Harriet Harman, then shadow health secretary, stated in a parliamentary debate on 13 February 1996: 'It is clear to everyone that the Tories value managers more than frontline staff.Last year chief executives'pay increased at twice the rate of nurses'pay increases.Chief executives'pay rose by 7.6 per cent, while nurses'pay rose by 3.2 per cent.'She demanded an answer to 'one simple question'.Was it 'fair that chief executives last year had double the pay increases the nurses had?'

Labour listed five proposals on that day to lift the morale of NHS staff.The fourth proposal was that there should be fair pay and conditions in the NHS.As a result there have been pay guidance letters circulated by the DoH each year since 1998.

The first pay guidance letter from the then health secretary, Frank Dobson, set an individual limit of 2.7 per cent, in line with the independent pay review body awards for doctors, nurses and therapists announced on 29 January 1998.The letter spelled out the principles of fair pay and the overall disciplines applying to all NHS staff, including managers.

He also emphasised the damage that would be done to morale and motivation as well as to public perception if senior managers were given awards not consistent with the fair approach.

A compliance statement was required in the trust annual report to demonstrate that guidance had been followed.This was reinforced by a health service circular about the 1998-99 annual accounts, HSC 1998/184.

The NHS pay branch expected rises above the limit that may have been due to prior contractual obligations or workload reviews to be accounted for in the compliance statement.

Despite this clear guidance and associated explanations, trust remuneration committees made awards resulting in an average 5 per cent increase in salary for chief executives with a slightly lower 4 per cent (48 per cent above the fair 2.7 per cent limit) increase in total remuneration.

The figures from Incomes Data Services were produced from a matched group of chief executives, so rises were not due to mergers and any associated increase in workload and responsibility.

In 1999-2000, the guidance wording was altered to allow room for extra pay to reflect performance.However, the guidance clearly indicated the government's wish that rises were not to be out of line with the 3.2 per cent awarded to other NHS staff.Remuneration committees awarded an average salary rise of 6 per cent and a total remuneration rise of 5.6 per cent (75 per cent above the fair 3.2 per cent limit).

The pay guidance letter circulated by Alan Langlands, then NHS chief executive, to trusts in England on 16 March 2000 stated once again the policy that the government believed in fair pay for all in the NHS, including its managers. It stated explicitly that no recruitment or retention problems had been identified for managers; that equity in pay should be maintained across the service and that pay increases should be in line with those of other staff, at 3.25 per cent. It said that moderation was required to 'ensure that resources for service modernisation are not eroded'.

The PWR figures recently published in HSJ (17 January) showed an average salary rise of 6.2 per cent.

The figures from Incomes Data Services for a matched sample of chief executives who had been in post for more than two Dr Nigel Dudley is consultant in elderly medicine St James University Hospital, Leeds.

Key points

Trust remuneration committees are paying chief executives above the limits recommended in Department of Health guidance.

In doing so they are ignoring the government's stated policy of fair pay for all in the NHS and their duty of accountability.

Excessive awards made by a remuneration committee can be subject to judicial review and overturned.

The health secretary should review the workings of trust remuneration committees and ensure that their decisions are transparent to the public.