Who is in charge if it takes more than a few days to form a new government? And what are Labour’s policies to tackle executive pay issues? Read our second election double article.
A civil service ‘government’
With the outcome of the general election looking less clear with neither Labour nor the Conservatives seemingly able to make a breakthrough in the polls, the role of the civil service is looking likely to be critical.
If the polls are right then a hung parliament is highly likely tomorrow and that could mean a coalition government or one party governing as a minority.
Last time around, the Conservative-Lib Dem coalition was formed with little fuss and within a matter of days. There is a chance, this time, of a more diverse ‘rainbow’ coalition. The critical issue would be that coalition discussions could take a great deal longer and be much more complex. Each of the parties involved may also want to secure their own internal agreement to any deal.
This means that the civil service and, in particular, Sir Jeremy Heywood, as Cabinet secretary and head of the civil service, could find themselves under greater pressure and scrutiny. Continuity will be paramount and discussions took place some time ago about what will happen in the event of a hung parliament. Sir Jeremy has also blogged about the civil service’s role in the formation of a government, so it is clear how they will behave.
Civil servants would give practical advice during any coalition negotiations and would, as always, be strictly impartial. Even if David Cameron does not have a majority, he could remain as prime minister during this potentially prolonged period. This would be, in essence, a shadow government which would, of course, avoid taking political decisions as it ran the country. Gordon Brown played a similar role after 2010 but this lasted only a matter of days as the coalition came together quite quickly.
So we would not be looking at a Greek-style, ‘technocratic’ government, but if negotiations took a long time then pressure will mount. The City, as well as the electorate, will want an answer. The more time that passes, the more likely it will be that decisions need to be made – what happens if there are adverse economic figures, or an international or domestic emergency? Politicians will be relying on civil service advice as they will not want to do anything too political.
But the idea that the country will be left ‘without a government’ is not true.
Whatever the outcome, the civil service faces the prospect of further cuts and promised reform. Some potentially radical proposals are being considered not least by the chief executive of the civil service, John Manzoni.
Promised devolution to cities and Scotland will also change the way that central government and the civil service works. In addition, there is the very real possibility that officials will have to deal with a period of potentially extensive EU renegotiations and planning for what happens in the event of a detachment from the union. All of this whilst the normal business of government continues.
This will be one of the most challenging times the civil service has faced.
Dr Stuart Thomson, public affairs consultant, government and infrastructure at Westminster-based law firm Bircham Dyson Bell
Labour tackles concerns over executive pay
The Labour party’s manifesto announcements on banning ‘exploitative’ zero-hours contracts and increasing the national minimum wage have generated significant headlines in the last few weeks but their proposals on executive pay, although not as high profile, also have the potential to have just as big an impact. Labour has pledged to introduce changes in the following areas:
- improving the link between executive pay and performance by simplifying pay packages;
- including employee representation on companies’ remuneration committees; and
- requiring investment and pension fund managers to disclose how they vote on executive pay.
According to Labour, the intention behind these changes is to address the culture of short-termism and what it sees as rewards for failure as well as improving business performance by encouraging greater partnership between employers and employees.
As with many of the manifesto proposals that the various political parties have announced on employment and business issues, very little detail has been provided as to exactly how Labour intends to change executive pay, so a fair amount of guess work is still required here in order to anticipate exactly what the impact of these proposed changes may be.
In relation to simplifying pay packages, this is likely to include further measures to crack down on ‘bonus cultures’ within companies and to limit measures that have been used to circumvent previous attempts to tackle this issue. The shadow business secretary Chuka Umunna has stated in the past that he wants pay packages to clearly and transparently differentiate between the salary and performance elements so we could expect to see legislation which formally crystallises these differences.
More detail on employee representation on remuneration committees is provided in Labour’s workplace manifesto, which provides for these representatives to be elected with recognised trade unions or other employee bodies facilitating the election process and helping to train the representatives.
The representatives will be expected to maintain the same level of confidentiality as the other members of the committee. The aim of this proposal is obviously to increase general employee engagement on executive pay issues and to provide a greater opportunity for the views of the company’s workforce to be taken into account.
However, one unfortunate consequence, which may have to be tackled if these proposals ever reach the statute book, is that deals on executive pay are done outside the remuneration committee to bypass any employee scrutiny. Experience from across Europe’s largest companies has shown though that there is a correlation between employee representation on remuneration committees and lower executive pay, so implementing this proposal may have a chance of effecting the type of change Labour is seeking.
Fund managers are also unlikely to appreciate having their voting records on executive pay being disclosed and it will be interesting to see whether they will seek to use their not inconsiderable influence to water down the potential changes in this area should Labour seek to introduce them.
Should Labour form the next government then it seems likely that it will do so in conjunction with one or more of the smaller parties who will almost certainly seek to influence its policies on executive pay. The current political situation together with amendments in this area through the normal course of legislative events will mean that it could be some time before we get to see how much devil will be in the detail of Labour’s proposed changes in this area.
Nicholas Le Riche, legal director in the employment department at Bircham Dyson Bell