8 July 2016
Margaret de Valois Chair of the Cornwall Council Remuneration Panel discusses the relevance of her actuarial skill set in chairing the Cornwall Council Independent Remuneration Panel Report & Recommendations – 2016.
Chairing a panel tasked with setting recommendations for allowances paid to Cornwall Councillors doesn’t sound actuarial at all and, I must admit, when I applied for the role at the end of 2015, the last thing I expected to do was to be drawing on my experience and training as an Actuary. However, at our first planning meeting, and faced with a brief set out partly by statute - but mostly open to interpretation, I started to see where my training as an Actuary could add value to the team.
Our problem: To provide independent recommendations as to a fair level of allowances and benefits to be paid to Councillors in Cornwall.
Our aim: To produce a comprehensive report setting out our recommendations and how we reached them, to be presented to Council and voted on in front of the press and public in four months’ time.
My own personal experience did not extend directly to remuneration advice at the time, and I knew very little about Public Sector structure and governance. Fortunately, the rest of the panel had more knowledge than me (an accountant and housing exec) and we had the support of the local government officers, however it really was down to us to shape the project and for me to guide the team to a successful vote.
So, where does one start? Well, the Actuarial Control Cycle of course. It is almost 20 years since I studied this in the exams but sitting in Truro County Hall I realised that the principles that I had learned, and then practised, in pensions and investments during my time in “normal” actuarial work were exactly the tools we needed to get this report done. The problem was simple and the outcome of the aim, being vote based, had to rely on putting together a set of evidence based conclusions which were market tested and robust to scrutiny and challenge. Where evidenced data was missing, assumptions could be made but would need to be evidenced and subject to market testing as experience became borne out. Simple. Now, to make it all happen.
We first identified a number of data points which would inform a simple formula to generate recommendations as to fair and reasonable allowance levels. At this point we refrained from carrying out research into other County’s allowance levels as we wanted our initial work to be fully independent and not skewed by others thinking. All of these data points were to be evidence based where possible. A survey was sent to all 123 Councillors with results analysed ensuring the sample was large enough. An assumption was made that anyone choosing not to respond was agnostic in their view and so we applied the average to them. Data was also taken from Council records, including numbers of meetings held by various committees as well as numbers of pages within meeting packs. All of these points were “scored” on a matrix to rank various activities which allowed allowance levels to be allocated that were totally evidence based and robust.
Following this we market tested the results, making comparisons with other Council allowance levels, local salary data as well as testing the proposed levels against previous ones using published index data, to ensure any increases were reasonable and within expectations. Where outliers were found we explained why these had happened and gave good reason to accept or reject them.
We then future proofed our recommendations. Looking at what could change in the future (known knowns) and what could be done to ensure our work remained relevant within these foreseen changes. Finally, we thought about the unknown knows and caveated our report to clearly state that our work was relevant within the current political climate and governance structure of the Council.
The panel was conscious throughout that our approach to the task was different to other parts of the Country, and indeed to how Cornwall had set allowances in the past. However, Richard Williams, Head of Governance and Information at Cornwall Council was supportive throughout commenting that “It was refreshing to have an Independent Remuneration Panel which came at this exercise from a new perspective. Key to this different approach was the presence of an actuary who contributed significantly to the logical and evidence-based methodology. The report was robust and well-received as demonstrated by the substantial majority of Members who voted in favour of its recommendations in full.”
Following publication of our report a vote of Council was held and a majority vote passed to adopt all recommendations made by the panel. Comment was made on the quality of the report produced by the team and the robustness of the recommendations, which in turn enabled the recommendations to be passed with minimal challenge and questioning, saving the Council valuable time and giving them confidence that the decision made was an informed one that will remain relevant and timely for some years to come.
Actuaries clearly have much to add within wider fields, extending beyond banking and risk management to the public sector and within other commercial organisations. Having confidence in what we can bring to a team is key, with an awareness that we have been trained to think and approach things differently to others. It is this difference that makes us valuable, not just our deep technical knowledge of finance and risk.
Margaret de Valois holds a number of positions including Chair of Cornwall Council Remuneration Panel; Chair of Pension Governance Committee at IMERYS Minerals and is also an Associate Director at Star Actuarial Futures.