The arguments given for raising top bureaucrats' pay were nonsense.
In the recent past, there's been much improvement in institutional arrangements for fixing pay and conditions for parliamentarians and departmental secretaries.
The Remuneration Tribunal's responsibility for such matters has been restored and a committee report on the entitlements of parliamentarians, to which the tribunal made an excellent contribution, provided a solid basis for tidying up a messy area.
Things were looking up.
Unfortunately, the tribunal has now fluffed it. Its announcement just before last Christmas about MPs, secretaries and some statutory officers is such a mish-mash of poor process and twisted policy that the public can have no confidence the greatly improved remuneration it intends for them is what it should be.
And the tribunal has largely got away with it. Setting aside the inflammatory bigotry of the Steve Lewises of the deep yellow press, those ever content to pander to the worst instincts of their readers, much commentary from reliable reporters has been more or less favourable or at least neutral. For example, the rightly respected Laura Tingle in the Financial Review gave the tribunal the thumbs up, though the paper's editorial didn't. It's probably the only case in that publication's history of Tingle being wrong and the editorialist being right on any jointly tackled topic.
To give the tribunal its due, it does get some things right. For example, while supporting the abolition of overseas study travel entitlements for MPs, as recommended by the committee on parliamentary entitlements, it will not, as the committee suggested, cash it out. Further, the tribunal expresses justified concern that remuneration arrangements for the senior executive service ''promote inconsistency, internal leapfrogging and entail additional unnecessary costs to the Commonwealth''. That's spot on, and the sooner the government plucks up the guts to deal with the bloated SES, as recommended in Roger Beale's perceptive but dust-gathering report, the better; as long as it doesn't, the public service will remain a long way from its aspiration to be the best in the world. Indeed, the SES's structure and remuneration may well be among the worst in the world.
But let's get back to the darker sides of the tribunal's December announcement.
First, MPs. It is lamentable that the tribunal has not given citizens the opportunity to have a say on what they think are fit and proper rewards for their servants. This is a serious failure of process. The tribunal hasn't recognised that public sentiment is a fundamental constraint on MPs pay. It should have because, for better or worse, such sentiment has been critical in the axing of overseas study travel and the cheap politics of the Mark Latham-''inspired'' reduction in parliamentarians' superannuation.
Instead of taking the public into its confidence, the tribunal engaged private sector consultants Egan Associates, who appear to be as sensitive as a reasonably well-informed rhinoceros about factors relevant to public sector remuneration.
The consultant starts off trying to determine the ''work value of a backbench member of parliament'' by comparing them with jobs in the private and public sectors doing ''work of equivalent value''. This, of course, is futile and the exercise quickly bogs down into error and mumbo-jumbo. For example, the consultant claims MPs ''have a shared responsibility for the federal government's annual expenditures in the order of $400 million''. It's actually about $400 billion, but no matter; apart from members of the executive government, backbenchers do not have such responsibilities, half of them usually vote against the annual budget and many spend a lot of time in estimates committees trying to tear it apart.
Through many pages of such arcane ''reasoning'' and invalid comparisons, the consultant says, ''In my judgment, an appropriate positioning (albeit conservative) would be to determine a salary level between the adjusted minimum and adjusted median of the interquartile range'' of remuneration of jobs alleged to be of comparable work value. That is, between $185,000 and $210,500.
The tribunal buys all of this. The consultant's advice, it says, is ''sound'' and it intends to increase the backbench MP rate by about 31 per cent from $140,910 to $185,000. The consultant's advice is not ''sound''. It is based on comparisons of unlike jobs in the public and private sectors, its arithmetic exactitude is fake and, as indicated, it contains false assumptions about MPs' responsibilities. It's rather like saying that parsons should be paid the same as pilots if their overall responsibilities can be construed to be of equivalent ''work value''. This is comparative wage justice gone mad.
Having made a hash of things, the tribunal then gets on its high horse saying that ''any existing linkages between the remuneration of state and territory parliamentarians and assembly members and the base salary of federal parliamentarians be severed on the basis that it cannot be justified without a state or territory-based work-value assessment similar to that conducted for federal parliamentarians''. That's wrong on every count. It's not the tribunal's job to lecture state authorities, still less to will upon them the flawed methodology it has used. Indeed, state and territory bodies should fully take into account the increases proposed for federal MPs; that would be a proper like-with-like comparison and they should be at pains to ensure that the Federal Parliament does not have a comparative advantage in attracting quality MPs from their legislatures.
MPs should be fairly paid for what is a tough job. But that should be based on a broad judgment of what it takes to ensure an adequate stream of good-quality candidates for election, general movements in remuneration elsewhere, levels paid to politicians in states and territories and a well-informed appreciation of community expectations. The tribunal has not done this. If its answers are right, that's a complete fluke.
And so to the secretaries of government departments.
Once again, Egan Associates have been used to provide work-value/job-ranking information. The tribunal rightly distances itself from the material it commissioned, saying it has ''complemented its own judgments'' and that it has been a ''touchstone - rather than a substitute - for the tribunal's own assessments''. We can be grateful at least for that.
The tribunal says that ''total remuneration for the most senior public offices in its jurisdiction provides clear guidance as to appropriate remuneration for the office of secretary''.
Then the tribunal casts an eye towards the remuneration of the governor and deputy governor of the Reserve Bank (now on a touch over $1 million and $822,000) and the heads of the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission, the first on $800,000 and the others on $700,000.
There are some problems with these benchmarks. The rates for the RBA chaps are the product of irrational exuberance of its board and the tribunal has said it will cut a couple of hundred thousand dollars from the positions when the jobs become vacant. The Reserve essentially breeds its own and it would be better for the governor not to come from the banking sector. So there are no reasons for the RBA jobs' remuneration to come close to the gothic levels of financial industry titans.
On the other hand, the heads of the other three authorities are often recruited from the private sector and their remuneration must reflect that. Their relevance to secretaries in a public service that rarely recruits from the private sector is limited.
Anyway, the tribunal has said it intends to establish a four-level classification structure of secretaries with eight ''pay points'' in a range of $620,000 to $570,000. By July 2014, these will increase from between $825,000 to $650,000. This compares with the base salary pay points determined by Prime Minister Julia Gillard in June last year of $431,670 and $403,850.
These are hefty increases, vastly in excess of the government's 3 per cent a year upper limit on increases for other staff in the public service. They also establish a huge gap between secretaries and deputy secretaries, the latter now being on an average base salary of a touch under $300,000, with the risk that the vacuum will be filled by even more associate and super deputy secretary positions.
It's standard operating procedure for government authorities to take into account relevant government policy. The tribunal simply ignored the government's 3per cent salary increase policy, providing no explanation as to why it should be so massively breached. It also comes with a touch of irony, as the government bears down on operating costs via a 4 per cent ''efficiency dividend'' that must involve staff reductions. Finance Minister Penny Wong's assurances that the required savings can be found from spending on travel, consultants and the like are just political rhetoric divorced from reality.
The four-level, eight-point classification structure involves absurdly fine distinctions, including one of $5000 between the Department of the Prime Minister and Cabinet and the Treasury's secretaries, and $2500 between the Treasury secretary and the top of the third level in the structure. This cannot rationally be justified. The long-standing, two-level, two-pay-point system has worked well and there are no reasons to displace it with something worse.
The tribunal's proposals fail to recognise that the responsibilities and job weight of secretary positions can fluctuate rapidly. For example, the Immigration Department, which the tribunal puts on the lowest level with the Veterans' Affairs Department, has been much more significant recently than the Health Department, which is placed at a level above it. Further, the fine distinctions in the structure will complicate mobility between jobs. If this is not bad enough, the tribunal proceeds to break an elementary rule of sound classification practice by introducing overlapping salary ranges with their obvious implication that the work of a lower level is equal to that of a higher one.
Finally, the tribunal says the salary ranges it has created will allow ''secretaries to be recognised by enabling an individual to be assigned to a higher pay point''. That looks like performance pay in a modest form for a favoured few.
There were high hopes for the Remuneration Tribunal when its powers to fix pay for MPs and secretaries were restored. Its pre-Christmas announcements have dashed these hopes; they're hopeless on rationale and big on rationalisation. It may well be that its answer on MPs is right using a wrong methodology, and that for secretaries is wrong using a sounder one.
However that may be, the tribunal's procedures are all wrong. It should not be huddling behind closed doors with ill-equipped consultants who, in this case, have led it up the garden path. It should be open and transparent for all interested parties, including the government - providing them with opportunities to make public submissions and holding public hearings.
It's hard to know what the problem is. The tribunal members all essentially have private sector backgrounds and they've turned to consultants who seem to have little understanding about what is needed. In combination, they've done as good a job as a group of public servants might in fixing pay for senior executives in BHP. The lesson is plain enough. And maybe the government should think about legislating factors the tribunal should take into account in its work. Something's gotta give.
Paddy Gourley is a former senior public servant.
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