How to control the cost of our over promoted civil service
Civil service pay has been frozen yet the wage bill remains the same as it was 10 years ago. Time to clear out the dead wood and boost the pay of top talent, says Henry Hill
It’s all so predictable. The previous government froze civil service pay to try and control costs as headcount ballooned.
Result? According to new analysis from the Institute for Government, over the past decade the number of middle-managers has doubled, as bosses use early promotion as a carrot to try and prevent staff from quitting.
Thus, the pay bill is pretty much the same as it was a decade ago and almost £2bn more than it would have been had the grade structure remained the same as it was then. Well played, Sir Humphrey.
‘Grade inflation’ also means that each department now effectively has its own hierarchy hiding beneath the superficially-uniform civil service rank system, as “a certain grade in one is informally equivalent to a totally different grade in another department”.
All this is storing up trouble, even beyond the unreformed wage bill. People fast-tracked up the pyramid end up with nowhere to go, whilst it cannot be good for morale for a civil servant in one department to see someone younger and less experienced enjoying a more senior grade – not because of any special ability, but merely as a result of more expeditious promotion.
The state can’t compete with the private sector
Managers are also, to an extent, reacting to a very real problem. When it comes to top talent and technical skills, the state has long failed to pay anything like enough to compete with the rewards available in the private sector. It wouldn’t be a huge surprise if that problem were spreading to the wider civil service.
But what can ministers do? Rachel Reeves can hardly turn on the taps on pay; it’s not 2024 anymore, and the Chancellor is gearing up to ask departments to make a fresh tranche of cuts if, as seems increasingly likely, economic circumstances threaten to push the government outside its fiscal rules.
Nor should she neglect that this problem is the result of a successful attempt to do an end-run around a government objective. Ministers need to be able to control the cost of the civil service if that is their will – and voters will have little reason to think a government that can’t has any chance of getting a grip on the economy.
Ministers need to be able to control the cost of the civil service if that is their will – and voters will have little reason to think a government that can’t has any chance of getting a grip on the economy
(It is not a new tactic, either. Even in 2014, after a successful four-year effort to shrink the civil service, the National Audit Office noted that “departments’ workforces have become more senior in grade, which can reflect new ways of working but increases the average cost per head”.)
Instead, the government should use the problem of civil service pay as a carrot to get senior mandarins to cooperate with the other big cost-cutting avenue: reducing its bloated headcount back to where it stood even just a few years ago.
Were ministers to mandate redundancies up to a certain share of the workforce over this parliament (and resist the temptation to claw back 100 per cent of the cost savings via budget reductions) senior civil servants would be able to use the money saved from clearing out the dead wood to boost the pay of their best staff.
It might also go some way to remedying the ‘grade inflation’ too, for there are no better-value targets for redundancy than the over-promoted. But most importantly, it would be operating inside the civil service’s current budget, and spare Reeves the need to further test her colleagues’ waning patience with even more cuts to their own.
Henry Hill is deputy editor of Conservativehome