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Welfare minister Lord Freud says paying charity bosses £200,000 is 'reasonable'

By Richard Wheeler

Published 22/12/2015

Lord Freud said charities have to attract the best people
Lord Freud said charities have to attract the best people

Paying charity bosses up to £200,000 a year can be considered "reasonable" when seeking out the best people, according to the welfare reform minister.

Lord Freud said the £100,000 to £200,000 bracket for a charity which is a "substantial operation does not seem completely out" as he faced questions over a Government-backed mobility vehicle scheme.

The Motability charity has two employees on "whacking great salaries" of more than £160,000 and therefore earning more than the Prime Minister, according to former minister Lord Rooker.

The Labour peer said the charity's 59.6% grant-funding from the Department for Work and Pensions is partly responsible for this remuneration.

Motability leases cars, mobility scooters and electric wheelchairs to thousands of disabled people in exchange for their mobility allowance, which is diverted directly to the charity by the Government.

Peers praised the work of the scheme although the Government rejected a request to ensure Motability provides annual reports to Parliament in which it details, among other information, remuneration of its directors.

Speaking during the committee stage of the Welfare Reform and Work Bill, Lord Freud said the remuneration of Motability staff is a matter for the charity.

He added Motability Operations, the private operations company which carries out the day-to-day work on behalf of the charity, is also responsible for the remuneration rates for its directors.

Peers heard Motability Operations' highest paid director received £944,719 in 2015.

During the debate, Lord Rooker pushed Lord Freud on whether it could be justified to have three Motability officials receiving more than £100,000 a year.

He said: "Do you go back to the Prime Minister occasionally and justify it by saying, 'We're paying out 60% of the money to this charity and, by the way, we are paying the chief exec a lot more than you'.

"There were supposed to be some rules in Whitehall about people not being paid more than the Prime Minister."

Lord Freud said charities have to attract the best people when they are "very substantial operations", noting this applied to Motability.

He explained: "I know, because I was involved for a period in a foundation in the charitable area, that to attract the kind of people who are commercially competent puts you into that bracket. I have said enough."

Shadow work and pensions spokesman Lord McKenzie of Luton then told Lord Freud: "One can understand the argument that you have advanced in respect of the operations entity, but it seems much more difficult to justify the position you have taken in respect of the charity."

Lord Freud: replied: "The amounts in the operations are of course much greater than in the charity.

"Maybe I am over-influenced by some of my personal history on what people are paid in the commercial world, but the £100,000 to £200,000 bracket in a charitable context for what is now a substantial operation does not seem completely out.

"You can take two views on charities: either people should work for them for nothing and any money is wrong or you have to attract the very best people.

"I would think that if you are in that market, those sums are reasonable. That is the best I can do on that issue."

Lord Freud later added: "Government does get itself into quite a lot of problems because there are areas of commercial endeavour where salaries, bluntly, are much higher than the Prime Minister's salary.

"There is a different set of rates in the outside world."

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