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Local authority pay policies must be open to public scrutiny with senior pay packets put to a full council vote, Local Government Minister Bob Neill said yesterday (17 November 2011).

The Localism Act requires local authority pay policies to be openly approved by democratically elected councillors. The Act was formally enshrined in law this week when granted Royal Assent.

The associated guidance published yesterday on 'Openness and accountability in Local Pay' sets out the requirement for councils to publish their remuneration arrangements, including for chief officers and approve large salary packages in an open session of full council.

Ministers explicitly say in the guidance that the pay vote ceiling should be set at £100,000. This includes publicly justifying any big bonuses, and above inflation annual pay rises, or hiring a person already in receipt of retirement or severance money. Authorities should have an explicit policy in their pay statement on whether or not they permit such practices.

At a time when the public are tightening their belts and all parts of the public sector are looking to make savings Ministers think taxpayers should have the opportunity to see whether value for money has been considered when setting pay policies.

The guidance states: "Taxpayers should rightly expect that their interests are being protected including when senior staff move posts within the public sector, particularly when those moves could be seen to have the effect of driving up average pay levels across the sector."

The measures will come into force in two months' time and pay policy statements must be in place by 31 March 2012. Ministers are calling on councils to schedule their Full Council meeting as soon as possible so pay policy is ready in time for the law change.

Bob Neill said:

"The Localism Act opens up council pay rules so that salaries for senior posts get 'democracy proofed'. Local authorities will now publicly vote on these practices at full council.

"Taxpayers have the right to expect that their interests are being protected including when senior staff move from post to post. Any responsible locally elected councillor will want to use their pay vote to secure value for money."

The Localism Act is one of the most radical pieces of legislation to be voted through Parliament - it fundamentally shifts the balance of power to communities and reinforces the importance of strong local democratic rights.

The pay bill for top managers in local government was estimated at £626.9 million in 2008 by the Local Government Association group, the Local Government Employers.

Last year the Secretary of State Eric Pickles called for council chief executives earning over £200,000 to take a ten per cent pay cut and those earning £150,000 - which is more than the Prime Minister's current salary of £142,000 - to take a five per cent pay cut.

Notes to editors

1. Provisions are included in the Localism Act that require local authorities and fire and rescue authorities to approve and publish annually at Full Council (for Fire and Rescue Authorities, a meeting of members), a senior pay policy statement which authorities will be required to follow when setting senior pay. Where councils want to depart from the pay policy, these would need to be referred back to Full Council (or a meeting of members for Fire and Rescue Authorities) to vote on.

2. The Localism Act also includes provision for the Secretary of State to issue guidance on the content and application of senior pay statements. Relevant authorities must have regard to this guidance in the exercise of their functions under the pay accountability provisions. The new pay guidance 'Openness and accountability in local pay: Draft guidance under section 40 of the Localism Act' can be found here: www.communities.gov.uk/publications/localgovernment/draftguidancelocalpay.

3. The statement must include the authority's policies relating to:

a. the level and elements of remuneration for each chief officer
b. remuneration of chief officers on recruitment
c. increases and additions to remuneration for each chief officer
d. the use of performance related pay for chief officers
e. the use of bonuses for chief officers
f. the approach to the payment of chief officers on their ceasing to hold office under or to be employed by the authority, and
g. the publication of and access to information relating to remuneration of chief officers.

4. The term 'remuneration' covers:

a. the chief officer's salary or, in the case of a chief officer engaged by the authority under a contract for services, payments made by the authority to the chief officer for those services
b. any bonuses payable by the authority to the chief officer
c. any charges, fees or allowances payable by the authority to the chief officer
d. any benefits in kind to which the chief officer is entitled as a result of the chief officer's office or employment
e. any increase in or enhancement of the chief officer's pension entitlement where the increase or enhancement is as a result of a resolution of the authority, and
f. any amounts payable by the authority to the chief officer on the chief officer ceasing to hold office under or be employed by the authority, other than amounts that may be payable by virtue of any enactment.

5. The Secretary of State published 'The Code of Recommended Practice for Local Authorities on Data Transparency' on 29 September 2011. The Code enshrines the principles of transparency and asks councils to follow three principles when publishing data they hold; responding to public demand; releasing data in open formats available for re-use; and, releasing data in a timely way. This includes data on senior salaries and the structure of their workforce. The code can be found here: www.communities.gov.uk/publications/localgovernment/transparencycode.

6. According to the Local Government Employers data from the Joint Negotiating Committee's Salaries and Numbers survey 2008 and Setting Rewards for Top Managers in Local Government, the chief officers pay bill is £576.5 million and Chief Executives is £50.4 million.

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