Whitehall job cuts come at a price

29 Jul 10
Ministers plan to slash thousands of jobs in government departments this year. But first they want to rush through cuts in civil service redundancy terms - and the unions are lining up to stop them. Jaimie Kaffash reports
By Jaimie Kaffash

29 July 2010

Ministers plan to slash thousands of jobs in government departments this year. But first they want to rush through cuts in civil service redundancy terms – and the unions are lining up to stop them. Jaimie Kaffash reports

To misquote Josef Stalin, the loss of one civil servant’s job is a tragedy; the loss of thousands is just a statistic. Few would claim the coalition government’s intentions were similar to the Soviet dictator’s, but the job losses mooted so far certainly fall into the statistics bracket.

Now those numbers are beginning to be translated into reality. Last week, two Cabinet ministers became the first to set out where jobs will be lost. Culture Secretary Jeremy Hunt has told the Treasury that he will be cutting up to 50% of his department’s 590 staff. Communities Secretary Eric Pickles’ plans to scrap all regional government offices in England will result in 1,700 job losses, unions say.

But with major job cuts come major redundancy payouts. The current civil service redundancy scheme is one of the most generous in the country, with some compensation packages equivalent to six years’ pay. For the coalition government, keen on both reducing headcount and making savings, this is ‘an untenable position’, as Cabinet Office minister Francis Maude has put it. 

The previous Labour government was the first to attempt to revise civil service redundancy arrangements. It agreed with five of the six civil service unions to introduce a cap of two years’ pay for compensation. However, the sixth, and largest – the Public and Commercial Services union – was not in favour, and had the agreement overturned in court.

Maude has been busy tackling this since taking office in May. ‘The financial situation and the actions of just one union [PCS] to contest previous reforms meant we had to move quickly to limit the cost of payments under the current scheme,’ he said on July 15.

Maude has deployed a ‘money Bill’ to limit compensation to 12 months pay for compulsory redundancy and 15 months for voluntary. These Bills, which deal with national taxation, public money or loans and their management, do not need House of Lords’ approval.

Unsurprisingly, unions have reacted angrily. Dai Hudd, deputy general secretary at the Prospect union, tells Public Finance the scheme represents ‘entitlements accrued from civil servants’ whole working lives. It is not whether they are generous or not, it is whether they are appropriate and part of the contract – and in that way, they are.’

Mark Serwotka, general secretary of the PCS union, adds: ‘The government has decided the civil service is going to be bearing a large part of its assault on the public sector and seeking to use it as an example – a bad example at that.

‘Clearly, it is taking our redundancy terms and turning them into the worst in the public sector as a pre-emptive strike to get rid of tens of thousands of people on the cheap.’

But the government cannot do this without a fight. Both unions intend to challenge the legality of using the money Bill mechanism to rush through reforms. This could hold up the government’s changes beyond its preferred September deadline – meaning redundancies would be based on current terms, hitting the public purse hard.

Colin Talbot, professor of public policy and management at Manchester Business School, says ministers’ commitment to making huge savings quickly has left the government in a tricky situation. 
It can’t hold off making large-scale redundancies, he tells PF.  ‘In terms of their own plans, they have to start cutting job numbers quite quickly. If they have to make them under the existing terms, it is going to be quite expensive. They have got themselves in a bit of a pickle about it all.’

John Marsh, a director at consultancy Ernst & Young and former Home Office human resources group director, says ideally, the government would like to remove as many people as they can voluntarily, as soon as possible. ‘But it will be a struggle to move people voluntarily if the new terms are brought in. You will get a lot of people who will move on the current terms, but you will not get them moving on the new terms.’
So the cold war continues, with much talk of the scope of job losses but few actual redundancies yet.

By the autumn Spending Review, civil servants across Whitehall will know whether they are just a number.

See 'Labour Pains'

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