Whitehall job cuts ‘set to save £400m a year’

15 Mar 12
Government departments should save around £400m a year in pay after making 17,800 staff redundant in 2011, the National Audit Office said today.

By Nick Mann | 15 March 2012

Government departments should save around £400m a year in pay after making 17,800 staff redundant in 2011, the National Audit Office said today.

Payouts for the redundancies, both voluntary and compulsory, amounted to £600m – around 45% less it would have cost before compensation was capped in December 2010. Changes to the Civil Service Compensation Scheme which came into effect that month limited payments to 21 months’ salary for voluntary exits and redundancies, and 12 months’ for compulsory departures.

Departments can expect to see net savings from the staff cuts between 11 and 15 months after the departures, depending on how quickly they can eliminate headcount-related costs such as IT and property, the auditors found.

For the taxpayer, the payback period should be between 10 and 16 months. The ‘significant’ impact of this number of staff cuts means that the net present value to the taxpayer could be between £750m and £1,400m over the government’s Spending Review period, depending on the ability of departments to eliminate costs. This figure will also be affected by whether those leaving find comparable work and pay tax, or claim benefits.

NAO head Amyas Morse said that sustaining these savings would depend on departments redesigning the way they work so that workforce numbers do not simply increase when the drive to cut costs is less of an imperative.

‘Departments have acted quickly to reduce staff numbers and this should bring significant savings, after compensation and early pension payments are paid,’ he said.

‘In order to sustain these savings, and deliver long-term value for money improvements, staff numbers must stay at these reduced levels and departments must develop new ways of working, so that they can cope with greater demand without increasing staff numbers again.’

A spokeswoman for the Cabinet Office said that because of outstanding issues regarding the NAO’s approach and the report’s conclusions, the department had taken the ‘unusual step’ for not signing it off.

The job losses would save the taxpayer £630m a year, she said. ‘The Coalition Government’s decisions to quickly and comprehensively reform the Civil Service Compensation Scheme in 2010 has saved the taxpayer millions of pounds – roughly halving the cost of early departures under the old scheme.’

‘In addition, by freezing recruitment and putting in place spending controls across Whitehall, this Government is on track to deliver unprecedented savings of £5bn this year – on top of the staggering £3.75bn of cash savings made last year.’

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