Hundreds of town halls would no longer pay six-figure salaries to chief executives under Conservative plans for the biggest shake-up of councils for a generation, The Times can reveal.

Dozens of council chiefs who earn more than Cabinet ministers would lose their jobs as clusters of councils merged their frontline services and backroom operations to provide better value for money.

Many chief executive posts would disappear, with the remainder being forced to run larger “economic areas” covering several local authorities or take on additional functions such as running primary care trusts.

Eric Pickles, the Shadow Communities Secretary, said that the Conservatives would retain the current political structure and a similar number of councillors.

However, local authorities would be expected to follow the example of Brentwood Borough Council, which removed its chief executive in March and now pays £30,000 a year to Essex County Council to share its chief executive, Joanna Killian.

The number of council employees whose remuneration packages exceed £100,000 has jumped in recent years, according to research by the TaxPayers’ Alliance. In 2006-07, the most recent year for which figures are available, the figure was 818, up from 645 in 2005-06.

The highest-paid local government chief executive is believed to be Joe Duckworth, chief executive of the London Borough of Newham, who earns a basic salary of £240,000. Andrea Hill, the chief executive of Suffolk County Council, is in second place with a basic salary of £218,592. Suffolk justifies Ms Hill’s salary by saying that the authority is a “£1 billion business”.

Mr Pickles has called the salaries a symptom of the “Premiership manager syndrome”.

John Healey, the Local Government Minister, wrote to council chiefs this year to warn them that pay packets for senior officials were out of control.

A Conservative source said: “There is super-inflation of chief executive pay that bears no correlation to the level of services they provide. There is a bureaucracy and self-feeding hierarchy of senior officials that are completely unaccountable to the local community. You have councillors who take the fall, and staff who bear no responsibility. This urgently needs to be addressed.”

The Local Government Association argues that its chief executives are paid modestly compared with private and public organisations with comparable turnovers and staffing levels. Paul Coen, the head of the association, has pointed out that a chief executive at a big council could earn on average more than twice as much in a public or private organisation of a similar size.

The Tories would abolish rules preventing councils outside the same region from working together, such as those around the M25 that have similar economies and demands.

In a major change to the way that councils are funded, those which agreed to pool functions would be allowed to keep more of the money raised through council tax. Under the present system, council tax revenue is handed to central government and redistributed on the basis of population and need, as part of a “resource equali-sation” across the country.

A new commission would determine how much extra authorities would be allowed to keep.

The Conservative source said: “Good behaviour will be rewarded. Britain is possibly the only country in the world where local politicians have no influence over their tax base. This must change.”

Other proposals in the Tories’ decen-tralisation consultation paper, to be released next month, include: the power for councils to raise funds in the money markets by selling their own bonds; a requirement for authorities to hold referendums if they propose “excessive rises” in council tax; scrapping the Standards Board, the local government watchdog, and shrinking the council inspection regimes; establishing a more equitable relationship between local authorities and central government.

Mr Pickles emphasised that no city or county would be forced to change its status and that larger cities would be given the option of having a directly elected mayor.

Local government analysts said that to make the proposals work there had to be strong incentives for councils to merge services. They would be unlikely to be proactive about cutting their staff, and had been slow to take up mergers proposed in 2004.

Tony Travers, of the London School of Economics, said: “There is the potential for big savings. But getting authorities to work jointly is always a bit of a struggle. The political question is making authorities do something that you might have thought was in their best interests anyway.”

Much of the local government reform carried out under Labour in the past decade has focused on setting tight performance targets.

The structural changes have mainly been to create unitary authorities from two-tier councils, which often faced local opposition because of fears that the new council would be less accountable.

Top local government earners

£240,000* Joe Duckworth, chief executive, Newham (appointed 2008)

£220,000* Andrea Hill, chief executive, Suffolk County Council (appointed 2008)

£213,162 Kim Ryley, chief executive, Kingston upon Hull

£205,000 Derek Myers, town clerk and chief executive, Kensington & Chelsea

£203,000 Nick Johnson, chief executive, Bexley (since retired)

£201,485 Caroline Tapster, chief executive, Hertfordshire

£195,456 Darra Singh, chief executive, Ealing

£195,330 Richard Shaw, chief executive, Surrey

Figures represent complete remuneration figure, including all benefits except figures marked *, which represent basic salary. Most recent figures avaliable for 2006-07, compiled by the TaxPayers’ Alliance annual report, released in March

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