1 Staff reduced
Lower salary cost
The number of civil servants has fallen significantly, reducing annual salary costs by around £2.29 billion. The Civil Service Reform Plan (June 2012) set out a vision of a smaller and more strategic civil service with a projection of 380,000 staff (23% smaller than March 2010) by March 2015. Overall, the number of civil servants fell by 18%, from 492,000 in March 2010 to 405,000 in December 2014, which is slightly above the projection adjusted for organisational changes that brought some existing public sector employees into the civil service. The reduction in staff numbers has reduced salary costs by around £2.29 billion, representing most of the £2.49 billion net decrease in salary costs overall (In the full NAO report: paragraphs 1.3 to 1.4 and 1.14 and Figure 2).
2 Number of staff reduced by minimising recruitment
Age profile affected
Departments reduced the number of civil servants mainly by minimising recruitment, which has affected the age profile. Reducing headcount by restricting recruitment costs less in the short term than paying staff to leave. The Cabinet Office restricted departments’ ability to recruit externally. The number of new entrants to the civil service therefore declined from an average of 9,400 per quarter in 2009 - 10 to only 2,800 in 2011 - 12 (less than 1% of the civil service). In comparison, the number of leavers per quarter averaged 8,700 between 2009 - 10 and 2013 - 14, with a peak of 12,300 leavers April– June 2011. Following the low level of recruitment the age profile of the civil service has changed, creating a generational gap: 20 - to 29 - year-olds reduced from 14% to 9% of the civil service (2010 to 2014), while 50 - to 59 - year-olds increased from 26% to 31%. We consider it fair to assume that low levels of recruitment and the creation of a generational gap potentially heightens the risk that the civil service will not have the talent and skills needed for future challenges. Although there is a growing awareness in government of this risk, there is not yet a clear understanding of the potential consequences and the necessary management actions (paragraphs 1.8 to 1.9).
3 Long-term operating models not set
More efficient working practices not facilitated
Some departments have made good progress in setting out long-term operating models, but others have made less progress. The Committee of Public Accounts reported in 2012 that departments did not have long-term plans to work with fewer staff. The government agreed that all departments should set out these plans. Since then, two of our case study departments have undergone significant change. HMRC has reduced its workforce by 20% since 2010 and is undergoing further major transformation. The Ministry of Defence (MoD) introduced a new operating model in 2014, following Lord Levene’s Defence Reform report in 2011. However, transformation in departments is not as widespread or advanced as we expected, and departments need information -based operating models that facilitate more efficient working practices (paragraphs 2.2 to 2.5).
4 No information on workforce's skills
Strategic workforce planning is under-developed
Our case study departments have weaknesses in their approaches to developing strategic workforce plans, which could hinder staff cost reductions. In 2011, we reported a lack of a structured approach to staff cost reduction. This time we have found that departments had good intentions to develop strategic approaches. But none had progressed to implementing them across their group. Other than developing workforce options as part of its estates strategy, HMRC’s strategic workforce planning was mainly qualitative and DFID’s workforce plan only included projected total staff numbers in each area of the business. Although operating a group human resources function, DfT does not plan across the group. It believes its agencies are best placed to do their workforce planning and there is no need to produce an overall plan. Similarly, MoD expects its business areas to carry out workforce planning (paragraph 2. 9).
Case study departments continue to lack comprehensive and reliable information on the skills their workforce possesses and their needs. In 2011, we reported that departments lacked information on their workforce’s skills. This time, we have found that case study departments continue to lack systems to monitor all staff skills, restricting how they assess capability. Departments also find it challenging to assess their skills needs, as they have not sufficiently developed new long-term operating models to be clear about the skills they will need (paragraphs 2. 11 to 2. 14).
5 Entities’ workforce information is incomplete and not comparable
Centre is not producing an overall strategic workforce plan
The centre is not producing an overall strategic workforce plan for the civil service. The 2013 capabilities plan set out actions to address skills gaps in key areas in the civil service. However, an overall strategic workforce plan for the civil service would help the centre to plan better for, and support departments in making, reductions. The centre can not yet produce a plan because departments’ workforce information and projections are incomplete and not comparable. Improved information would strengthen how well the centre understands the cross-government picture and its ability to provide strategic leadership (paragraphs 3.3, 3.6 to 3.7).
Background
In 2010, the world economy was in recession and the UK faced its own financial crisis, with the government posting its highest-ever budget deficit in 2009 - 10. The coalition government announced that a main priority would be to control the government’s finances, including public spending.
A substantial proportion of public spending is for human resources: staff directly employed, with temporary staff paid directly or through agencies, and consultants paid through firms. In 2013 - 14, the public sector workforce of 4.4 million employees cost £164 billion, representing 23% of the total public expenditure. The civil service accounts for 9% of the workforce (405,000 people in December 2014). In the 2010 Budget, the government clarified that a key part of its fiscal policy would be to cut staff costs to help reduce the deficit. However, we concluded in 2011 that departments did not have a structured approach to reducing staff costs.
17 The centre is not producing an overall strategic workforce plan for the civil service. The 2013 capabilities plan set out actions to address skills gaps in key areas in the civil service. However, an overall strategic workforce plan for the civil service would help the centre to plan better for, and support departments in making, reductions. The centre can not yet produce a plan because departments’ workforce information and projections are incomplete and not comparable. Improved information would strengthen how well the centre understands the cross-government picture and its ability to provide strategic leadership (paragraphs 3.3, 3.6 to 3.7).
Objectives
This report examines:
• how far departments have reduced civil service staff costs and how they have done so (Part One);
• whether departments are managing their workforces strategically to make sustainable reductions (Part Two);
• how the Cabinet Office, HM Treasury and Civil Service Human Resources are supporting staff cost reduction (Part Three).
17 The centre is not producing an overall strategic workforce plan for the civil service. The 2013 capabilities plan set out actions to address skills gaps in key areas in the civil service. However, an overall strategic workforce plan for the civil service would help the centre to plan better for, and support departments in making, reductions. The centre can not yet produce a plan because departments’ workforce information and projections are incomplete and not comparable. Improved information would strengthen how well the centre understands the cross-government picture and its ability to provide strategic leadership (paragraphs 3.3, 3.6 to 3.7).