Mind the pay gap: quango chief execs paid more than £10m

The chief executives of quangos appointed by Scottish Government ministers were paid over £10m in total last year, leading to “excessive pay gaps” between those at the top and lower paid public sector workers, The Ferret has found. 

In the course of our research we looked at the salaries – before bonuses or pension tops-up – of 89 leaders of quangos (quasi autonomous non-governmental organisations). There are just over 130 quangos in Scotland, which include Scottish government public and health bodies, executive agencies, non-ministerial offices and commissions. 

The three highest earners all earned over £200,000. Topping the chart is Tim Hair, Ferguson Marine’s “turnaround director”, appointed in 2019 after the struggling shipyard went into administration and was nationalised, earning £790,000 per year.

The shipyard has faced criticism over its “catastrophic failure” to deliver two west coast ferries by 2018 –  at a cost of £97m. The company says it is expecting to deliver one in 2022 and one in 2023.

Next was Douglas Millican, chief executive of Scottish Water, who earned £267,000 before bonuses took it up to £303,000. The Ferret reported on sewage spills directly into Scotland’s rivers, lochs and seas on Scottish Water’s watch and the organisation was fined in May for releasing chemicals into a Fife river that killed hundreds of salmon and trout in October 2018.

The third highest earner was Eilidh Mactaggart, the new chief executive of Scotland’s National Investment Bank, with a salary of £235,000. There has been criticism of the lack of political scrutiny over appointments made and pay awarded by the Bank, as it is known.

In total 17 of the 89 chief executives earned more than the First Minister’s £157,861 salary. Fifty-five earned over £100,000. According to the 2020 Annual Survey of Hours and Earnings (ASHE) the average salary for all Scottish workers is £25,616.

Scottish Government figures from 2019 suggest the inequality gap is widening in Scotland, with the top 10 ten percent of the population earning more than the bottom 40 per cent combined. About one million Scots are living in poverty according to the Joseph Rowntree Foundation.

The Ferret’s research also found the gender imbalance in Scotland’s quangos was especially apparent amongst those most highly paid –  59 of the 89 current chief executives are men and 30 women. Of those earning over £100,000 40 were men and 18 were women.

If the Scottish government wants to show that it is taking inequality far more seriously than the Westminster government, tackling excessive pay gaps in the public sector is one of the best things it could do.

Andrew Speke, High Pay Centre

The Ferret did not specifically ask about ethnic diversity and there is no obligation for public bodies to report it. However it was apparent in the course of the research that almost all – especially the highest earners – were white.

Many in the top ten were university educated and some had background in the private sector before taking up their highly paid public sector roles. Some had experience in accountancy firms such as Pricewaterhouse Cooper, investment banking and management consultancy.   

Duncan Mackison, chief executive of David McBrayne, for example, was previously a “general ambassador for the GFG Alliance in Scotland” – the owner of Liberty Steel – as well as the chief executive of its Highland property arm, JAHAMA Highland.

Before that he was chief operating officer of the Duke of Buccleuch’s Buccleuch Group, now chaired by Benny Higgins, the First Minister’s strategic advisor for the Bank. Several chief executives had noteworthy access to ministers, according to engagement diaries

The Scottish Government claims its public sector pay policy, which requires employers to pay staff the real living wage of £9.50 per hour, is “fair and progressive”. This year it includes a two per cent pay increase for those earning £25-40,000, a one per cent rise for those earning £40-80,000 and rises of no more than £800 for those earning over 80k.

There is also an “expectation” that salaries will be cut by 10 percent when new appointments are made, though there is no statutory requirement for quangos to do this.

But equal pay campaigners said that if the Scottish government was serious about inequality it must do more. Others said diversity needed to be prioritised to allow equal opportunities and put an end to the “chumocracy” on public boards. 

In my experience the times that black and ethnic minority people can access boards are for voluntary roles which are not remunerated.

Pheona Matovu, Radiant and Brighter

Andrew Speke, of the High Pay Centre said: "If the Scottish government wants to show that it is taking inequality far more seriously than the Westminster government, tackling excessive pay gaps in the public sector is one of the best things it could do.

“The idea that the public sector needs to be more like the private sector to succeed has not always led to improving the quality of services, but it has led to far more being spent on the pay of those in senior positions, while wage growth in real terms for most public sector workers has been slow to stagnant.”

Speke claimed it was time to introduce mandatory pay ratio disclosures for all public bodies and a maximum pay ratio between bosses and ordinary workers. Developing talent in house, rather than looking to the private sector for senior roles, should also be prioritised, he added. 

Paul Sweeney, Labour MSP for Glasgow, said more scrutiny of quangos by Scottish Parliamentary committees was needed. “And indeed the Scottish Parliament should be able to sign off on the remuneration of the senior leadership of quangos,” he added.

“I don’t think the public appointments committee has the teeth that it needs. In the case of Ferguson Marine I don’t think there is much oversight at all. Meanwhile it’s bleeding public money.”

Pheona Matovu, co-founder of Radiant and Brighter - a social enterprise helping people from black and ethnical minority backgrounds to access employment opportunities –  said she was shocked at the lack of ethnic diversity amongst the highest earners. 

She claimed people from black and ethnic minorities backgrounds were losing out on opportunities, while Scotland was failing to capitalise on the value they could add. 

“In my experience the times that black and ethnic minority people can access boards are for voluntary roles which are not remunerated,” Matovu said. “The ones where you find the high earners often do not consider the value that diversity brings or consider capability.

"Instead the emphasis is all on those who have managed millions of pounds, or hundreds of people. And if you have not been given the opportunity to do that, you are ruled out.

“Often people are chosen by boards under an unspoken code of how they speak, how boards should behave and anyone coming in has to be able to decipher that code and fit in. 

“I’m surprised that the importance of ethnic diversity is not taken more seriously in Scotland. It is not thought of as something of value contributing to our economic system but as a charitable thing to do and we have to get over that mindset. It reduces the opportunities Scotland has to be a global player.”

A spokesperson for the Bank said that Eilidh Mactaggart’s salary was approved by Scottish ministers following “a robust process, which included benchmarking with other UK development banks”. 

They added: “It is the ambition for the Bank to become a leading mission-focussed investor. In order to achieve this it is critical that specialist investment experience and skills are obtained. These skills are highly valued and sought across the private sector, and the compensation for the Bank CEO was significantly discounted relative to comparable private sector roles.”

A Scottish Water spokesperson said that the pay of its chief executive remained “the lowest of any water company”. They added: “Executive pay reflects the essential nature of the water and waste water services to the daily lives of five million people, public health and supporting a flourishing Scotland.”

“Scottish Water must attract and retain leadership talent in competition with private sector utilities and other organisations across the UK.”

Ferguson Marine said comment on Tim Hair’s pay should come from the Scottish Government, as it was its decision. 

A Scottish Government spokesperson said the remuneration for both chief executives and board members of public bodies was “based on the appropriate labour market and being able to recruit the best candidates while providing value for money in the use of public resources”.

“Our continued progressive approach to pay, through our support for paying the real Living Wage and cash underpins for the lowest paid, alongside the restraint applied to higher earners is helping to reduce overall income inequality,” they added. 

This investigation is part of our wider series Who Runs Scotland. We will be shedding a light on ownership and power in Scotland’s economy, environment and politics.

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Photo Credit: iStock/tadamichi

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