Public sector bad, private sector good? An armchair audit of the staff costs of the Audit Commission.

I spend a lot of time looking at the annual accounts and reports of charities, so I wonder what insight could be had from a quick comparison of the annual accounts of the recently axed Audit Commission with the annual accounts of a private sector financial services firm.

I'm not trying to pick on PWC particularly here, and this is of course not an entirely like for like comparison. PWC also has a large consulting and tax-avoidance advisory business as well as its audit work, but as one of the "big four" accountancy firms it is likely to pick up a chunk of the work from councils once the Audit Commission is axed.

So it's an armchair audit - that is it is a little bit half-arsed, but until the private sector starts disclosing all of their expenditure above £500 in the same way as the DCLG has done we can't compare the important facts like how much they spent on bagels

Salaries:

The Audit Commission employed 1,954 staff on average in the year, staff salaries cost £85.5million (excluding redundancy costs of £0.6million), for an average salary of £44,000.

PWC employed 15,200 staff on average during the year, staff salaries cost £817million (excluding redundancy costs of £18million), for an average salary of £54,000.

They certainly aren't starving at the Audit Commission, but their private sector counterparts earn more.

Pensions

The Audit Commission spent £17.4 million on its pension scheme, an average of £8,915 per employee or 20% of salaries - the total cost of salaries and pension per employee (including executive pay) was £52,648.

PWC spent £56million on its pension scheme, an average of £3,684 per employee or 6.9% of salaries - the total cost of salaries and pension per employee (excluding members share of profit) was £57,434.

So it is true, the public sector staff seem to be doing better in terms of their pension contributions, but remuneration is still lower overall.

Executive Pay:

The Audit Commission was banned by Eric Pickles from paying their new chief executive £240,000 in a bid to curb excessive pay. The amounts paid to senior management are included in average salary of £52,648 above.

PWC shared profits of £680million between their 879 members of the partnership - an average of £777,000 each excluding the 21 partners on secondment elsewhere). This amounts to £44,736 per employee on top of the salaries above. The Chairman's share of the profits was £3.3million.
This is in addition to the salaries of the mere mortal employees, brings total average remuneration to £102,170.

Conclusions

I'm not meaning to defend high pay - financial services are pretty expensive no matter who delivers them, but the public sector seem to be taking an extraordinary amount of flak compared to their better paid counterparts in the private sector.

While all the high-paid public servants have been "named and shamed" there are almost certainly more people in just one private sector company - PWC - who earn more than £200k (and the Prime Minister's real salary including perks is probably higher than that) than in the entire public sector.

There are a lot of angry people running around complaining about high taxes who have created a moral distinction that I just don't understand - "private sector good, public sector bad."

An increasing portion of everything society produces - the cost of all of the goods and services finds its way into the pockets of a small number of people. Somehow, because they are forced to pay taxes, they can't see that they are also forced to pay the wages of the high paid in the private sector.

And what is the likely outcome of this particular bout of public sector bashing? The people who worked for the Audit Commission will get jobs doing the same work in the private sector, on higher salaries, and charging a nice fat fee so that the partners get their share.

Monopoly profits all round for the large professional services firms. Hip hip hooray Henry.

The annual reports and accounts can be found here:
http://www.audit-commission.gov.uk/aboutus/annualreportsandreviews/pages...
http://www.pwc.co.uk/annualreport09/
(NB the comparable figures are for the year 2008/9)

Update - this post initially stated "there are more people in just one private sector company - PWC - who earn more than the Prime Minister than in the entire public sector."
Now some people have tweeted about it I thought I had better check the facts. I wrote this blog post before they had disclosed the pay of all the extra public bodies - there are apparently 9,000 people who earn more than the Prime Minister's new 25% reduced salary of £142,500 (it used to be £197,689).

The PM's real salary is of course much more than the "more than the PM salary" anyway - he also gets a load of free accomodation. Anyway the point of this post still stands. If all we do is bash people who earn lots of money in the public sector, services will be privatised, and the executives will end up earning even more.

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Canal boat at twilight
Brighton Beach
Tube snowed in
Hmmm, more pictures of the horizon

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