How to cut the public sector pay bill

published 12 April 2010

The best article in today's newspapers comes from West Yorkshire's Chief Constable, Norman Bettison, writing in the Times. He says he is "not worth" the £213,000 a year he costs the tax payer.

I think most of us will probably agree with him: he may be excellent at his job but, regardless of his excellence, two hundred grand plus is just too much for the taxpayer to be expected to shell out for anyone. We've writtenbefore on how we got ourselves into the ridiculous position of paying tens of thousands of public employees these insane salaries, so I won't go into that here. The question now is simply how we put an end to it.

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Bettison has another. He suggests the 'Micawber Plan'. Under this, all public sector pay and pension provision would simply be frozen, with "no exclusions or special pleading." He'd start with the top 25%, then move down in later years, hence ensuring that not only would real salaries be cut across the board, but differentials in pay would be cut too. That, he says, "should do the trick and sustain the public services".

I like it. But you know what? It just doesn't go far enough. Far better, surely, to say that no one in the public sector should earn more than, say, £150,000 (the level at which Labour believes people are being paid enough to pay a special rate of rich people's income tax). And then to cut all salaries below that by a set percentage. Say 15% off all salaries between £100,000 and £150,000, 10% off all from £75,000 to £100,000 and 5% from £50,000 to £75,000. That should do the trick, too. Just faster.

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Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.