States Members’ Remuneration Review Body: recommendations for 2009-2011 – Part 2, pensions, severance and differentiatio

STATES OF JERSEY

STATES MEMBERS' REMUNERATION REVIEW BODY: RECOMMENDATIONS FOR 2009-2011 – PART 2, PENSIONS, SEVERANCE AND DIFFERENTIATION

Presented to the States on 12th June 2009 by the Privileges and Procedures Committee

STATES GREFFE

2009   Price code: C  R.62

FOREWORD

The Privileges and Procedures Committee is pleased to present to the States Part 2 of the recommendations of the States Members' Remuneration Review Body (SMRRB). The terms of reference of the SMRRB require it to present its recommendations to PPC which is then obliged to present them to the States.

As explained in the introduction to its report the SMRRB's recommendations are divided into 2 parts, Part 1 and Part 2 and, because of the difference in the method of implementation  of  the  recommendations  in  the  2  parts,  PPC  is  presenting  the recommendations to the Assembly in 2 separate reports (for Part 1 see R.61/2009).

This report contains the Part 2 recommendations which relate to matters that cannot be implemented by default and which could only be introduced after debate and approval by the Assembly.

Members will note that the SMRRB has made 2 main recommendations in Part 2 of its report, namely –

1. that public funds should be used to contribute to pension arrangements for States members; and
2. that the States should give further consideration to the desirability or otherwise of differential remuneration for members and give a clear steer to the Review Body on this issue.

As stated in its previous reports the SMRRB considers that it would be inappropriate for the Review Body to make any firm recommendation on the issue of differential pay until the States have given a clear indication of whether or not Article 44 (which currently  precludes  differential  pay)  should  be  amended  or  repealed.  Article  44 currently reads as follows –

"44  Remuneration of elected members

1. No scheme, agreement or other arrangement whatsoever for the remuneration  of,  or  the  payment  of  any  allowance  to,  elected members out of the consolidated fund shall provide for different elected  members  to  be  entitled  to  receive  different  amounts  of remuneration or allowance.
2. In paragraph (1), remuneration' does not include payments out of the consolidated fund –

1. into  a  superannuation  fund  or  pension  scheme,  for  the benefit of an elected member;
2. to an elected member, as an allowance in respect of his or her  contributions  to  a  superannuation  fund  or  pension scheme for his or her benefit.".

The Privileges and Procedures Committee has only just received the recommendations and has not yet had the opportunity to discuss them in any detail. It is clear that there might be a significant cost if pension arrangements were introduced and there is

currently no financial provision for that. In addition the issue of differential pay is a controversial  one  where  opinions  are  extremely  divided.  The  Privileges  and Procedures Committee will therefore now need to consider the recommendations in detail and decide how they should be taken forward.

As mentioned in the Foreword to Part 1 of the recommendations PPC would like to express its sincere gratitude to the 5 members of the Review Body for the work that they have done on an honorary basis on their task and for the very comprehensive way in which they approached it.

STATES MEMBERS REMUNERATION REVIEW BODY

RECOMMENDATIONS FOR 2009-2011

Part 2

May 2009

Introduction

The  States  Members  Remuneration  Review  Body  presents  its recommendations to the Privileges and Procedures Committee in two parts.

Part 1 deals with remuneration including expenses and  Part 2 deals with other matters which arose from its consultations and subsequent deliberations, particularly concerning the issue of pensions for States Members.

This Part 2 contains recommendations which are not governed by the one month' default rule above and in accordance with the decision of the  States  on  22nd  July  2005  those  recommendations  cannot  be implemented until they have been debated and agreed by the States.

Part 2

Further conclusions and recommendations with regard to matters other than remuneration

Pensions

The Review Body recommends that pension arrangements should be introduced  for  States  members  and  that  these  should  be  akin  to  a defined-cost contributory scheme.

Each member would be entitled, upon making a chosen contribution to an  approved  private  scheme  of  his  or  her  choice,  to  have  that contribution  matched  to  a  given  level  by  the  States  acting  as "employer". No member should be obliged to participate if he or she did not wish to do so.

Contributions  from  the  Consolidated  Fund  should  be  subject  to  a threshold and a maximum amount payable under these arrangements, and further subject to regulations which the Comptroller of Income Tax may apply in respect of the age of the participating member.

The  Review  Body  regrets  that  it  does  not  anticipate  that  such arrangements could be back-dated to apply to States members who have left the States prior to their introduction.

Should  the  above  recommendation  be  accepted  by  the  States  its implementation would be subject to the availability of funding which is unlikely  before  the  beginning  of  2011.  If  accepted  in  principle  we recommend that the Review Body should be invited to develop the terms of these arrangements for endorsement by the Privileges and Procedures Committee and the States.

Reason for recommendation

The Review Body recognizes that the engagement of a States member takes the form of one or more short-term contracts, that States members

are technically self-employed, and that there is nothing to stop States members making their own private pension arrangements.

In practice States members tend to get re-elected, yet the nature of their engagement might preclude the progressive career development which applies in most other occupations.

Even if there was such an element of progression the current legislation which requires all States members to receive the same remuneration (pension contributions now apart) might make it difficult for States members to build up the sort of pension cover which could be available to them elsewhere.

If service to the community as a States member is to be encouraged, as stated in the terms of reference appended "so that the broadest spectrum of  persons  are  able  to  serve  as  members  of  the  Assembly"  it  will  be increasingly  appropriate  to  offer  pension  arrangements  which  are portable and if such prudence in pension provision is to be encouraged among  the  general  public  and  the  wider  network  of  employers,  it would seem inappropriate for States members to be excluded from such consideration by the nature of their occupation.

Not  everyone  who  responded  to  the  Review  Body's  consultation document on this issue endorsed the principle of pension arrangements for States members, but the Review Body took note of the fact that some of  those  who  were  not  necessarily  well  disposed  towards  other elements  of  States  members  remuneration  supported  modest contributory  pension  arrangements  on  the  grounds  that  these recognized the reasonable aspirations of States members as professional representatives of the community.

Severance

The Review Body received no evidence which might compel a review of the existing arrangements which preclude severance pay beyond the payment of salary and expenses for one month following the date by which a States member leaves office.

Differentiation

The  Review  Body  received  conflicting  evidence  on  the  issue  of differentiation. The relevant summary page from the responses to our discussion document is set out in Appendix 1 as a re-statement of the diversity of views on this topic.

These responses tend to support the view that differentiation is not just a matter of "More pay for Ministers" (but most who respond broadly along those lines where careful to include others such as the Chairmen of Scrutiny panels in their considerations). Differences in pay were also seen  as  an  inevitable  consequence  of  a  number  of  other  unrelated considerations.

The  Review  Body  does  not  consider  it  appropriate  to  consider recommendations relevant to differences in remuneration while Article 44 of the States of Jersey Law 2005 is still in force, but it would again point  out  (as  in  previous  recommendations) that under the existing terms  of  reference  any  amounts  available  in  support  of  such differentials might be relatively small.

These terms of reference require the Review Body to consider that all States members should be able to enjoy a reasonable standard of living. This might also be taken to imply that no States member should be remunerated  to  such  an  extent  that  this  amount  was  substantially exceeded.

While the Review Body accepts that the law precludes any differences in pay between States members at present, its judgement is that there is sufficient public interest in the issue, and there are sufficient public policy  imperatives,  to  warrant  the  States  revisiting  the  matter  and giving a clear direction to the Review Body on this issue.

Number of States Members

The  largest  unsolicited  response  (response  to  questions  the  Review Body  did  not  specifically  ask)  to  our  discussion  document  was  in respect of what respondents viewed as the excessive number of States members,  often  linked  with  observations  about  the  level  of  States members pay.

Again  the  "reasonable  standard  of  living"  element  (above)  in  the Review Body's terms of reference precludes the possibility sometimes simplified in the suggestion that that the Island should have "..half as many States members but pay them twice as much"

While the number of States member is beyond the remit of the Review Body response at this level might reasonably be seen as indicating an area of public concern.

There  is  also  the  point  that,  purely  from  the  perspective  or  States members' remuneration, a smaller States offers the best prospect of achieving levels which more accurately reflect the value which States members seek to deliver.

Thanks

The  Review  Body  wishes  to  thank  again  all  who  responded  to  its discussion document and who attended the public meetings.

Thanks are also due to the Greffier of the States, Michael de la Haye, and  his  staff  for  their  substantial  practical  help  in  supporting  the activities of the Review Body.

Julian Rogers (Chairman) Brian Bullock

Maurice Dubras Christopher Lakeman John Mills

29th May 2009

APPENDIX 1

Extract from Summary of Responses (March 2009) in relation to Differentiation

d)  The equal treatment' principle having been set aside with regard to  pension  provision,  is  there  a  case  now  for  differentiating among States Members for remuneration purposes?

33 respondents gave answers which could be considered to be related to this question. 23 responded in terms which implied that differences in pay between States members might be appropriate, and 10 responded in terms which implied that all States members should continue to receive the same pay.

Most of those who suggested differences in pay did so on the grounds of the greater responsibilities of ministerial or other office, and almost all of these included Scrutiny, many pointing out that ministers had access to help which eased the administrative burden.

But about a third of those who argued for differences in pay did so on grounds which were unrelated to ministerial or other office.

Some of these argued for a lower starting rate for new members, "now that young people have the vote younger people will be elected to the States", some for increased pay based on length of service, some for performance- related pay and some for pay which was related to previous earnings, for example "the average of their past three years remuneration" [for newly elected members].

For those in favour of differentiation the response was generally mild, even laissez-faire to the extent "that the pot be divided between the States members as they see fit." or even bemused "I can't understand why anyone would want to be a Minister under the present system"

This  topic  tended  to  attract  a  more  deeply-felt  response  from  those opposed to differentiation.

"should Ministers be paid more? I do not believe so as they are blessed with a myriad of officers to assist them."

"I am not inclined to think that those with ministerial tasks should be paid more. They are compensated by the acquisition of power."

"Equal pay for all members[is]..absolutely essential until we progress to a fully democratic  party  political  system  as  adopted  by  the  vast  majority  of  modern western democracies."

"only the truly politically illiterate could endorse higher pay for Ministers – in the absence of party politics."

and some suggestions were brave indeed..

"Perhaps a basic wage with the possibility of a bonus for those people who out- perform their role? And penalties for those who under-perform or behave in an unprofessional manner. With performance monitoring the precise role can be defined and targets for achievements laid down for the year The whole process would have to be managed and monitored by an independent group to avoid the usual accusations about the establishment'."

The SMRRB has no set position on differentiation, though in relation to the last observation above it considers that it would be a courageous body which sought to apply performance monitoring to the work of a States member.

APPENDIX 2

SMRRB Terms of Reference

The terms of reference of the Review Body are as follows –

To  make  recommendations  to  the  Privileges  and  Procedures Committee  on  any  matters  relating  to  the  remuneration, allowances and benefits available to elected members of the States as  it  considers  appropriate,  following  the  holding  of  public hearings and the receipt of oral and written submissions from any persons, including members of the States, having taken account of any  other  matters  that  the  Body  considers  to  be  relevant,  and having  taken  particular  account,  but  not  being  bound  by,  the following matters –

1. the  principle  that  the  level  of  remuneration  available  to elected members should be sufficient to ensure that no person should be precluded from serving as a member of the States by reason of insufficient income and that all elected members should be able to enjoy a reasonable standard of living, so that the broadest spectrum of persons are able to serve as members of the Assembly;
2. the  economic  situation  prevailing  in  Jersey  at  the  time  of determination and the budgetary restraints on the States of Jersey; and
3. the States' inflation target, if any, for the period under review.

APPENDIX 3

List of Respondents and attendees at public meetings

The  SMRRB  wishes  to  express  its  gratitude  to  the  following  who  sent written responses or attended the public meetings -