Sunday, 19 February 2012

If you pay peanuts, you get monkeys (or rockapes...)

The Telegraph is running a story claiming that a civil service member of the Defence board is currently receiving an annual bonus of £85,000. Apparently the default implication of this is that all civil servants are money grabbing bankers, and that we are all claiming every last penny owed to us (as noted by the way the article referenced claims in the Daily Mail that the Civil service can apparently claim for worn clothing).

To put this in context, let’s take a look at what may or may not be going on here. The Defence Board is the most senior organisational grouping in the MOD, comprising Ministers, CDS, VCDS, PUS, 2nd PUS, CDM and non-executive directors. This group is designed under the revised Levene Review to monitor the financial performance of Defence, and function as the Departments management board, structured in the same way as other government departments are being organised.

There are three possible Civil Servants who could have received this bonus. The PUS, Ursula Brennan, DG finance, Jon Thompson, or the Chief of Defence Material, Bernard Grey. Both Ms Brennan and Mr Thompson are career civil servants, and highly unlikely to have received bonuses of this size, which would be almost double their salary. While the senior civil service enjoy good bonus levels, (relative to wider civil service pay scales), their remuneration package is still extremely low compared to their peers in industry. This author suspects few leaders in industry, responsible for running a portfolio of operations in multiple continents, encompassing a procurement arm, financial arm, nuclear energy, hugely complex logistics roles and so on, would accept a salary of barely £100,000 per year. Looking at the remuneration package of some of the directors in companies who the author holds in his portfolio, in fact much smaller companies pay much larger sums of money for a far less complex job.

It is this author’s view that the bonus is likely to have been paid to the Chief of Defence Material, Mr Bernard Gray, who is not a career civil servant. As CDM he has been brought in as an outside appointment to try to resolve many of the woes in the procurement world, and shift the organisation to try to make it more adaptable to the challenges it faces. It is highly likely that when applying for the position, he would have held out for payment of a bonus, partly to make his salary more realistic commensurate to his experience in the private sector, but also to compensate for the lack of pension contributions that he would have received as a senior civil servant relying on 40 years of service to provide a reasonable pension in retirement. It is not unrealistic then to assume that CDM is on this package, which was designed to try and tempt a captain of industry into the organisation.

While some may be outraged at this, personally this author sees it as vindication of the argument that if you want to bring talent into reform defence, you have to be prepared to pay market rates. Let’s be really clear here –you can try to tempt captains of industry to join the department, but how many really successful captains of industry are going to leave well-paid jobs, which come with stock options, sane travel budgets permitting travel without seeking CDS approval or flying in the back of a sub Easy jet style flight, and which pay far more money than the MOD can provide? The answer is very few – particularly not for the likely £100K per year salary (EDIT - further research has shown he is on around £200K per year plus bonus reportedly) that would have been on offer. Humphrey has many friends in the private sector in a range of jobs, many of whom would love to come across to the public sector and help reform it, but who make clear that they cannot afford the permanent loss of income that such a move would have on their lifestyle.

Every time that people on internet forums start the ‘and I’d reform the MOD by doing X,Y,Z’ list, at some point someone usually pipes up with the comment, ‘bring in private sector leadership to sort it all out’. The problem is that the MOD has done just this – brought in an experienced private sector individual to do this, and it is finding that getting this expertise doesn’t come cheap. Naturally it is now being lambasted for doing just what self-proclaimed experts have demanded it do, because they can’t see that if you want good people from industry, then you have to pay the going rate for them.

A key thought worth noting here is that this appointment would almost certainly have required ministerial scrutiny to approve. It is inconceivable that a 4* post would have been appointed without having a Minister approve the appointment, and confirm their support for the salary package. It will be very interesting to see which Government minister approved the deal, and whether they willingly signed off on an £85K bonus at a time when a pay freeze was being imposed for all CS. Humphrey is picking up the minor whiff of a political scandal here, and will watch with great interest to see where this goes.

As for the other claims made this weekend, Humphrey is delighted to discover that he can apparently claim for wear and tear on his clothes. It is incredible though to see how every CS posting on the media websites covering this story is pointing out that it isn’t their department where this is allowed. Personally Humphrey would love to know which department allows him to claim for wear and tear – it would make a change from working for a department with a stupidly low accommodation ceiling cap, where 1* approval is needed to sign off for a road journey of 80 miles, where expenditure on tea and coffee is forbidden for all internal visitors, and where even providing a sandwich lunch requires ever more senior officers to approve the food. Every fiscal aspect of life is under immense scrutiny, and requiring ever higher levels of power to approve – the idea that civil servants are wandering around claiming for tights is pure fantasy. The problem is though, that even though it is, as ever, the lack of robust responses to shut down this silly season story means that once again, the CS are the target of public anger for a poorly written story bearing no resemblance to reality.

EDIT (20 Feb) - The MOD is now denying that the payoff went to a member of the defence board - the defence blog claims "The article also suggests that the individual who received the latter bonus may be a member of the Defence Board. There is no truth to this last suggestion."
This author is trying to work out which civil servant could qualify for an £85K bonus who wasn't on the Defence Board at the time.

What this author found more frustrating was the lack of clear support from senior military and political figures to stand up for the CS - he strongly suspects that had the Army been attacked for pay or allowances, then a strong and robust defence would have been mounted of their case. What is frustrating is that either no one came into bat for the CS, or that they were prepared to do so, but that no media organisation was interested in carrying it. Either way, it is little wonder that many CS appear to have such low morale at the moment when their own senior leadership seem to show no inclination to stand up for their workforce.


  1. I can understand paying someone the "market rate" for doing a job.
    What I don't understand is "paying someone a bonus for doing their contracted job"
    If the rate is too low and nobody applies for the job, then increase the rate( this is not a bonus by another name ) or change the job specification.
    I think that the bonus culture has got out of hand in all walks of life.

  2. I'm pretty delighted that as a CS I can apparently claim for wear and tear on my clothes. I've worn through the elbows of several jerseys in the last six years.
    Now nobody has ever mentioned this to me. Could it be that the Telegraph have got it wrong? Surely not!

  3. Jon Thompson is DG Finance and on the Board; Jon Day is 2nd PUS and is not:

    Also it's Gray, not Grey and he arrived at the end of 2010 so you can work out who approved his compensation package.

  4. anonymous - thanks for the spot - I've edited to correct the 2PUS and DG Finance error, and the typo. Much appreciated!

    1. Pas du tout. Here's last year's list so not fully current but gives a good comparison of the top types:
      From 245 to 334.
      My guess is Andrew Manley or (the departed) Andrew Tyler, for very different reasons.

  5. Humphrey,

    I Look forward to you cross referencing this piece about one stars being used to authorise 80 miles at 35 pence per mile with your "what have the two stars ever done for us" blog thus demonstrating the serious contribution they are making to defence.

    Lastly, for the moment, I love the way you describe Gray as a captain of industry - as though he is some kind of peer of Richard Branson or Willie Walsh.

    The bloke worked for a bank for a few years then became a journo.

    This was followed by....becoming a politically appointed SPAD (where he was heavily involved in the 1998 SDR, which kind of landed us in the over ambitious hole we are in at the moment - all that force for good bollocks).

    Having left us with this steaming turd, he apparently then went to work on a failed media merger.

    This failure fresh in mind, it was on to the gravy train of non-exec directorships.

    And then back as an obviously politically appointed CDM.

    Is this seriously the sort of outside talent that Defence is looking for? A track record of success?

  6. 35p per mile....not the department I work for then! We are allowed a paltry 25p, once it has been ascertained by people paid far too much to bother with such palfry issues to approve it and seek approval from someone far senior to themselves.

    We are beaurocracy at its best...and worst.

  7. You may want to compare to Singapore, where a Permanent Secretary (PUS equivalent) can credibly expect annual compensation on the order of £750k at a marginal tax rate of 20%.