Public administrators are out of control; only governance reform will stop them

There were strong words in the Public Audit Committee of the Scottish Parliament yesterday. They were examining the case of the Water Industry Committee for Scotland (WICS), ostensibly only a consumer protection regulator doing a basic regulator job. In reality it looked rather like a machine for creating perks for its leadership team.

The profligacy has been widely reported – hundreds of thousands of pounds of public money spent on junkets, 'luxury' professional development courses and extravagant salaries. In fact one of the big giveaways that this was an organisation out of control is that they were paying for Christmas gifts and perks for each other out of public money. It is minor in terms of money, but highly revealing in terms of mindset.

There is so much to be concerned about here. Probably 99 in 100 people in Scotland would struggle to recognise that WICS even exists and would almost certainly struggle to tell you what it does. Scotland has a publicly-owned water system. Why is the boss of the body that regulates a publicly-owned service the highest paid public employee in Scotland?

The WICS website calls it a 'world-leading regulator'. It is difficult to understand what this means – is there a league table of global regulators, or is that just rhetoric there to make WICS's foreign travel seem justifiable?

Putting this into the context of two other recent stories helps to illustrate the scale of the problem. A number of former senior Glasgow City Council officials had to hand back hundreds of thousands of pounds they had been paid under a series of rule changes which they had created and passed without any authorisation. These are public employees; they exist to serve, not to rule.

Or look at the very generous increase in Ministerial salaries in the Scottish Parliament. Parliamentary wages seldom lag behind wages elsewhere in the economy and often take large jumps beyond. There are generous pensions and so an in-year pay rise can result in lifelong financial gain. This is a group of people who choose their own salary.

Or look at how bonus culture arrived in the public sector in Scotland. Again, the increasing blurring of the lines between the public and private sectors in Scotland have resulted in the cultures of the private sector being imported into the public sector. It is hard not to believe that one of the reasons public sector managers have encouraged the public-private blurring is exactly this outcome.

The difference is that in the private sector your shareholders will eventually remove you from your position if you fail – because it will cost your shareholders money. Very few people at senior levels in the public sector are ever removed from their role as a result of failure, and this is because they are a self-regulating group of people.

Ministers give enormous latitude to senior officials over their pay and conditions and this washes back towards Ministers. Thus it is that the Public Audit Committee was equally scathing about the Scottish Government giving perfunctory retrospective approval for outrageous spending decisions that were unjustifiable without much thought.

It shows that the default reaction of politicians is to cover up for their officials, and the default reaction of officials is to cover up for their politicians. The ruling class have created a sprawling network of impunity from consequence.

The only solution to this is to change governance. First, there should be an absolutely presumption against 'arms length' – quangos, agencies, ALEOS and the rest. These are untrustworthy structures largely created precisely to bypass scrutiny. Second, no-one in Scotland should be self-governing and no-one should be in control of who governs them.

In the vast majority of cases we think this means that the governing body should be elected not by the officials in the quango and not by the politicians they work for but by the stakeholders they effect. A WICS governed by a Board elected by water customers would not have approved this.

And conflicts of interest should be removed altogether. MSP and Ministerial pay should be index linked to median wages. They should not be allowed to choose to make themselves richer than their policies have delivered for ordinary people. Finally they need to be watched closely. Audit Scotland does an excellent job, but we believe a Citizens' Assembly as a second chamber of the Scottish Parliament with the full power to scrutinise these kinds of decision would change the dynamic completely.

Until there is reform, there will continue to be a continuous stream of scandals. Read more about democracy and governance reform in our book Sorted.