By Richard Johnstone| 3 April 2014
There are currently ‘inexplicable’ differences in pay across the civil service that need to be examined as part of the government’s deficit reduction programme, a senior Treasury figure has said.
Speaking at CIPFA’s World Class Performance Symposium today, Julian Kelly, the Treasury’s director of public spending, said the government had cut the deficit by half since 2010 according to projections to the end of the financial year.
However, the country faced what he called a 20-year period to repair the public finances and debt levels following the 2008 financial crisis and departmental current spending will continue to be under pressure as a share of national income for the duration of the next parliament.
‘The disciplines that departments are putting in place are going to have to continue and we’re going to have to get better,’ he told delegates at the event, which is held in conjunction with the Government Finance Profession & the Treasury
‘We’re going to have to continue to squeeze that as a share of our national income.
And there’s elements of this spending that we know actually will continue to grow, as we have made commitments to certain environmental goals and we are making a trade-off to deliver environmental obligations, to reduce the size of the country’s carbon footprint. That carries with it certain costs, and if those things grow, other things will need to be squeezed.’
Although Kelly said he was unable to say what the balance of consolidation between spending cuts and tax rises would be during the in the next parliament, ‘the broad message is whichever party gets into government we’re going to continue to see a squeeze’.
The Treasury needed to improve its examination of the value of public spending and there was a need to get better at what he called ‘basics’ of spending control across government, such as pay.
‘We have recently done some analysis across government of what we pay people,’ he said.
‘You take the whole of the civil service and control for age, skills and the grade mix within a particular department and you say what’s the average cost of employing someone?
‘And what you discover is huge variation that, at the moment, is inexplicable. At the top end we have an agency that’s paying people about 50% more on average than everyone else. [And ] that’s a grant giving body.
‘That’s the kind of analysis we have to do across government to really employ intelligent decisions,’ he added.
‘This is about basic disciplines, and we as finance leaders have got to take responsibility for how we’re managing the basics of what we do. We have to focus on that, and think about what is our governance, our operating model, and what are our controls to keep things simple for measurement.’
Kelly concluded that the director general for spending and finance would lead on this process as part of the government's financial management review.
‘Our objective has to be how we continue to grow an excellent finance function that genuinely helps us to demonstrate and deliver value for taxpayers,’ he told delegates.
