We are paying three times over for some bits of government

I am publishing later this morning some delayed government answers to questions I tabled when we last had a Parliament in this country, which show a jump in the numbers taking early retirement from different government departments.

It reminded me that in some cases now we have pay three times over for our government. We pay the pension of the person who used to do the job but left it early. We pay the salary of the person who takes over the job. And we pay the consultant they hire to actually do the work.

In some cases people are seriously ill and of course they should be granted early retirement. In other cases, they are clearly not. There has been a surge in these early retirement grants. As most of the pensions are unfunded or underfunded, there is an immediate extra drain on taxpayers.

No wonder we have such a large deficit.

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12 Comments

  1. David Eyles
    Posted September 15, 2008 at 10:00 am | Permalink

    Just assume for a moment that the Conservatives win the next election and they get into power with an urge to do something drastic about government spending. As with Margaret Thatcher, they institute an immediate moratorium on recruitment to the civil and public services. Then what do they do? Early retirement is a good way of shedding numbers reasonably quickly without actually making redundancies. It is a mechanism used by many of the former privatised utilities and may initially be expensive, but does not wind up the workforce to the point of industrial action. I suspect that the current surge is caused by the sudden urgency in spending reduction which even this government has come round to thinking about.

    But your point is a good and serious one. How can we shed huge numbers of public servants without further deepening government debt without costing the taxpayer the earth to fund very favourable redundancies? The Conservatives need to put some considerable thought into this and come up with solutions quickly. There isn't much time.

    Reply: A staff freeze across the public sector, allied to promoting/moving people into the jobs that do need doing, would bring big savings quite quickly. Maybe 300,000 people a year leave public sector jobs each year now.

  2. figurewizard
    Posted September 15, 2008 at 10:14 am | Permalink

    For years Gordon Brown was extraordinarily fortunate in that a combination of seemingly unstoppable rises in the value of houses linked to cheap and easy credit allowed him to chip away at our net disposable income with a succession of tax rises without too much by way of protest. Mortgage funds were readily available to householders at least to more than compensate for this and the spending of this cash was largely what powered the economy for years. Now the bubble is beginning to burst, we find that our standard of living is falling, while we now start to feel the true burden of the growth of public sector spending. The only political party that the electorate trust to alleviate this is the Conservative party and Labour knows this. That is why they are now in disarray and will continue to be so until a general election puts them out of their misery.

  3. Brian Tomkinson
    Posted September 15, 2008 at 10:24 am | Permalink

    Good point, but what will a Conservative government do to rectify the situation?

  4. James
    Posted September 15, 2008 at 10:49 am | Permalink

    Is this not the case in 'local' government as well? We hear about council CEO's earning more than a Prime Minister's wage. Although we are given promises of fantastic savings when our councils transmute into Unitary Authorities, will it not be the case they will emulate the lines of 'Big' government. I certainly don't foresee my council tax shrinking no more than I foresee the numbers of council employees declining.

  5. Bernie Gudgeon
    Posted September 15, 2008 at 10:49 am | Permalink

    Until more recently, when pension funds were once in surplus, early retirement was considered by the private sector to be a legitimate way of cutting costs – by paying off the older guys and replacing them with cheaper youngsters that could undertake 2/3rds of the previous incumbents’ duties at a third of the salary. Unfortunately, I suspect the public sector will have increased rather than decreased the replacement employees' remuneration (to attract the ‘right‘ staff), and – as you say – without the luxury of an oversubscribed pension fund to take up the slack. That said, I have heard of government employees being refused early retirement recently, because of budget constraints, so life’s realities may finally be working their way through the system.

  6. Mark Wadsworth
    Posted September 15, 2008 at 11:08 am | Permalink

    For a summary of the scale at which 'early retirement' is abused in public sector, look at page 115 of Neil Record/Nick Silver's IEA pamphlet.

  7. tim holden
    Posted September 15, 2008 at 11:54 am | Permalink

    John, although not absolutely related to the topic, do the recent Labour rebels who have been summarily dismissed for requesting nomination forms have a case for unfair dismissal against their employer? This presumably would be a further liability to be assumed by the taxpayer – in the function of maintaining a premiership that deliberately explores the most doubtful limits of democratic principle. And, should a case for unfair dismissal be practisable, when can a case for negligence be brought personally against the PM for incurring expense for purely personal interest?

    Reply: I trust not – but I think they will be getting a taxpayer funded pay off of a few months salary.

  8. lucysharp
    Posted September 15, 2008 at 12:58 pm | Permalink

    I may be foolish in commenting before seeing your detailed post, but early retirement from the civil service is not necessarily permitted solely on health grounds. If a civil servant being made redundant is older than 50 then early retirement is automatically triggered. If you are serious about reducing the size of the civil service then redundancy and early retirement are going to be quite costly, so it might be better to accept a slower rate of reduction and let natural wastage take its course (combined with a recruitment freeze such as the one imposed in 1979).

    If you really want to investigate a shocking waste of public money then the provisions for civil service sick absence would be worth a look. Up to 10 days a year without a medical certificate, on full pay; with a medical certificate (which can be as unspecific as "stress" or "lower back pain"), six months on full pay followed by six on half pay, although a surprising number of people make miraculous recoveries just before their pay is due to be reduced. Furthermore, annual leave entitlement continues to accrue during paid sick absence, so it is not unknown for people to return to work only to disappear immediately on up to six weeks' paid holiday. Frankly, it is probably cheaper to let them retire.

    • Blue
      Posted September 16, 2008 at 4:19 am | Permalink

      I am in the unfortunate position of being a specialist in proprietary software which is used by most LEAs. Therefore, I tend to work for LEAs.

      Many of the LEAs I've worked for have a shocking 'sick' rate; in one particular LEA, every permie took AT LEAST one day's 'sick leave' per week. Consequently, the contractors were the only people who could be relied upon to proved a proper service to the LEAs.

      Perhaps it's time to scrap IR35 and thereby promote contracting as a means for organisations to recruit staff without being subject to onerous employment regulations.

      Contractors do not get paid for hours/days when they don't work, They get paid well (or should do) because they do not have the perks that permies have. Thus, contractors not subject to IR35 have incentives to work.

      Doesn't this enhance the case for the scrapping of IR35?

      Reply: I led the opposition to it when introduced, and put it in my list of things for repeal for an incoming Conservative government

  9. Andrew Forbes
    Posted September 15, 2008 at 3:17 pm | Permalink

    Gosh. When you said "three times over", I thought you meant that many civil servants' jobs simply didn't need doing, that many civil servants' jobs hampered the work of other civil servants (and indeed the private sector) or were making a comment on the overlapping (and at worst, competing) responsibilities of several quangoes. I hadn't imagined that, even among all this waste, there was individual job triplication as well.

  10. Tim
    Posted September 15, 2008 at 8:20 pm | Permalink

    I was a civil servant for the ministry of Defence in the nineties it was one of the most stressful jobs I ever had . I had to make an hour and half's work last all day. I ended up leaving despite its good pay and conditions due to the shear level of boredom.

  11. Johnny Norfolk
    Posted September 16, 2008 at 8:28 am | Permalink

    Is it only 3 times.

    When I look and see.

    1. The EU

    2. Westminster

    3. Regional Assemblies

    4. County Council

    5. District Council

    6. Parish Council

    Even more in wales Scotland & NI.

    I make that more than 3 times.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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