How many jobs will be lost in the public sector?

In the debate on thursday on Public Spending Labour pressed home an attack on the question of how many people will lose their jobs in the public sector as a result of the cuts   Everyone seemed to accept the Office of Budget Responsibility’s figures that over the next four years there will be 490,000 fewer jobs than today, which may or may not be true.

I pointed out that you could reduce the numbers by 490,000 without a single redundancy. According to government statements, natural wastage runs at much higher levels than 490,000 over four years.  Labour asserted that all the jobs would be redundancies. Ministers did not immediately latch on to my suggestion and deny the Labour figures.

I was surprised by this.  After the debate I asked Ministers what the true figure of redundancies will be and why they are so coy about it. After all, it is a perfectly reasonable Labour question to know how many such job losses taxpayers may be funding.

The answer I was assured is they do not know. Ministers do not know because they have apparently asked civil servants to review the spending figures and then to recommend to them how they will meet them, including recommending the balance of job losses between natural wastage and redundancy. Parliament will be told after Ministers have been told.

I think Ministers should tell civil servants they wish  to maximise the amount of the adjustment undertaken by natural wastage. They should want a special case to be made where redundancies are thought to be necessary. Redundancies are not  pleasant for staff, and  Ministers need to get their officials onside for the task of delivering more for less. Redundancies are costly for taxpayers. Why do we want to pick up the bill for the payments, if we can achieve the same result for less cost by using natural wastage? Transferring more people onto early retirement is also far from being a cost free option, given the state of public sector pension funds. Voluntary redundancy schemes often result in the loss of some of the best people, taking a large cheque with them to go into a different job elsewhere.

The government  needs to control the costs of slimming as well as the costs of everything else. Ministers need to keep control of the job loss programme. If they let civil servants control it it may turn out to have substantial up front cash costs we cannot afford.

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32 Comments

  1. lifelogic
    Posted October 30, 2010 at 7:13 am | Permalink

    Natural wastage tends to get rid of the best people but then redundancy has legal restrictions too (on who you can actually legally make redundant). As much of what the state does is either pointless of negative for the economy anyway perhaps this does not matter too much for this sector.

    The best solution is clearly to limit pay offs for all to say £3,000 and change the law to restrict all legal claim to this figure. This would encourage the private sector to take more people on and both sectors could hire and fire the right people at will without much risk, thus making everything much more efficient.

    Better for employees, employers and consumers all round and we would get rid of many pointless legal/tribunal jobs in the parasitic employment litigation industry as a free bonus.

    There is of course no chance of Cameron & Clegg doing anything sensible like this. They would rather just appear to be “caring” “fair” & “progressive” while actually damaging all the citizens in the process.

    Appearance is all to them and being “progressive” far more important than actually making progress .

  2. London Calling
    Posted October 30, 2010 at 8:31 am | Permalink

    As a veteran of at least a half dozen Civil Service restructurings, some pointers.

    On no account allow any HR staff in the first wave of change Again and again I’ve watched HR teams paid off, only to be brought back as consultants to handle all the restructuring HR. You think they didn’t know this?

    The second is the rules on pension-abatement in the event of re-employment are a shambles. Employers like the NHS are riddled with “management consultants” who were Chief Executives the day before. As self-employed “consultants” they get to keep their £250k payoffs and cosy pension paid up, as being a “consultant”doesn’t constitute a return to NHS employment. Well you could have fooled me.

    The third is the rules on offers of “equivalent ” employment. If they can’t be found an equivalent status job, then they can do a lesser one, on protected payfor a period.

    You are going to need good people to handle all the grief of downsizing. Have you got them, I wonder?

  3. Andrew
    Posted October 30, 2010 at 9:16 am | Permalink

    This is spot on. I run a business and I wouldnt abrogate the responsibility of working out the redundancy costs to middle managers. I would treat the money like IT WAS MY OWN, and ensure best return for the shareholders.
    These ministers need to get their act together and start managing all tehse civil servants who have historically cocked a snook at their masters. It isnt good enough, and running a cost reduction programme isnt about PR, it is about detail, managing detail, and managing costs.
    We have seen the report from Philip Greene about govt waste, why isnt some-one using that as a stick to manage this cost saving programme through, thereby saving money for the public?

  4. Freeborn John
    Posted October 30, 2010 at 9:54 am | Permalink

    I’ve seen two periods of redundancies in the tech sector differing in scale and how they were done. 2001 & 2009.

    The 2001 down-turn was the biggest for tech companies who were in the eye of the storm after the dotcom bust. All companies had layoffs but some did them in 1 big round and others in multiple waves. I think the 1 deep-cut is better because if it is clear that is the end of it then morale is better.

    Another difference has been who goes. The 2 approaches I have seen are basically an across the board cut though weighted to different departments. And the approach is more surgical eliminating specific groups associated with older products or services. I think the first is better because the last is a bit unfair on good people in bad groups.

    I guess the cutting of quangos etc. is a bit like a surgical closure of an undeperformin group. Ideally one would shift good people out of the groups to be shut down.

    Also the company should decide who goes or the best will volunteer. However any over a certain age was made an offer they could not refuse.

  5. Brian Tomkinson
    Posted October 30, 2010 at 9:58 am | Permalink

    It looks like “the blind leading the blind”. What a pity your talents and experience are not being utilised.

  6. Mark
    Posted October 30, 2010 at 9:58 am | Permalink

    I note that between 1992 and 1995, public sector employment fell from 5,905,000 to 5,368,000 – a total of 537,000 in just 3 years. It then fell a further 205,000 before the effects of good Conservative housekeeping were eroded by Labour profligacy. In short, we’ve been here before – and not that long ago. Not even as far back as Margaret Thatcher. (Data are from the final annual edition of Economic Trends, table 4.8)

  7. The ESSEX BOYS
    Posted October 30, 2010 at 10:01 am | Permalink

    We’ve been similarly very puzzled. At this site we all agreed 3 years ago that Labour should stop recruitment and reduce the public service by natural attrition and redeployment. They did the opposite of course but we expected the new government to do just that without feeding the media and unions with alarmist talk.
    Successive governments do so enjoy talking tough!
    Redundancies are simply very expensive in budget, human and goodwill terms and should be a last resort.

    We’ll await your comment on developments in Brussels. We doubted here the PM’s ‘street smarts’ to get the best result for the UK and we think we were right in our assessment. Unexpectedly for him Europe is turning into a major issue for THIS not some future Parliament. Labour will turn tail on its own recent poor EU record and join the pressure coming from the Conservative back benches and the public.
    We must all add to this pressure and stay on Mr Cameron’s back.

  8. alan jutson
    Posted October 30, 2010 at 10:08 am | Permalink

    John

    Once again you are asking the right questions, and making commonsense suggestions.

    The fact that many of your fellow MPs do not even comprehend the similarity, that you should never ask a Turkey to vote for Christamas, put a drunk in charge of a bar, or ask Civil Servants the best way to reduce employment numbers, really does begger belief.

    If you want the Civil Service for their ideas, and absolutely no reason why they should not contribute some thoughts, you give guide lines, such as:

    We want to reduce the workforce by this nominated percentage, in these Departments, using natural wastage only. Start by giving me the figures on how many will reach retirable age in the next 5 years. Then how many are on long term sick leave which could be medically retired.
    During the next 5 years we will not employ anyone else, other than front line staff (and list them) all other positions will require the authorisation of ….. (and name them).

    No wonder David cameron thinks he has a super deal at 2.9% increase, when the European Members Committee had already voted on this very sum back in May.

    EU 6% was kite flying. You do not enter negotiations saying I want a cut, or it kept the same, because you have already moved your position with your opening Statement.

    Cameron is a PR man, not a negotiator, and it shows.

    An opportunity absolutely wasted. How bloody sad.

  9. Acorn
    Posted October 30, 2010 at 10:10 am | Permalink

    Whilst generally agreeing with you JR, it is possible that the natural wastage will reduce considerably. If there is not a safe job to jump into in the private sector, even the generous voluntary redundancy lump sums and early pensions, may not seem a long term attraction. Better to sit tight and take your chances.

    The economy will have to grow by at least 3.5 % yoy, to sustain new job growth. With an increasing population and us baby boomers hitting the social over the next ten years, I don’t see that happening.

  10. Bill
    Posted October 30, 2010 at 10:11 am | Permalink

    Considering Mr Cameron’s background in PR it’s somewhat surprising that the government is often poor in getting its messages across.

  11. StrongholdBarricades
    Posted October 30, 2010 at 10:17 am | Permalink

    In the Private Sector, actual pay cuts were undertaken to protect jobs.

    From your thoughts here, it would be apparent that this isn’t an option being considered by the Public Sector. Why is that? Surely ministers could work with unions to protect jobs, and still effectively get more for less.

    If, however, these jobs are being lost because the bureaucracy is no longer required then like any other organisation some redeployment is required.

    I’m certain that certain folk within the MoD could be fired for incompetance based on ministerial quotes, and that might save vast amounts of redundancy money and focus the attention of civil servants on gaining value for money

  12. English Pensioner
    Posted October 30, 2010 at 10:19 am | Permalink

    If you listen to Labour supporters, their complaint about many of these job losses is no longer that vital jobs are to go, or even that there is a need to cut jobs, but simply that by making these cuts, there will be another half a million more unemployed.
    In other words, they are admitting that the Public Sector has been used to create non-jobs in order to reduce the numbers shown as unemployed. Whilst, like most people, I would like to see full employment, as a taxpayer, I would rather see unemployed people paid benefits than given a non-job in government (at greater cost with a pension) in which they end up making even more unnecessary work for others.
    Our District Council has just done this. My wife and I both received separate letters telling us that our Pensioner’s concessionary bus passes would soon be expiring, and would we return the attached tear off form if we wanted them renewed.
    Why? Both my Bank and Credit Card Company send out new cards when they are due without first writing and asking whether they are still needed, and these are infinitely ore valuable than a bus pass. And in the case of the council, I’d returned the electoral registration form only a few weeks ago, which provided virtually identical information.
    A small matter, but it no doubt unnecessarily employs a couple of people full time and costs council tax payers their salaries along with all the associated overheads and unnecessary postage costs. These sorts of job can go without any real loss to anyone.
    .

  13. TimC
    Posted October 30, 2010 at 11:39 am | Permalink

    Absolutely-time to TELL Civil Servants rather than ASK them.

  14. forthurst
    Posted October 30, 2010 at 2:11 pm | Permalink

    Would it nor be appropriate to talk about ‘posts’ which are redundant rather than ‘jobs’ which are lost?. Would it not also be appropriate to ensure that the total Civil Service wage bill includes redundancy and pension costs? Would it not also be appropriate to ensure that all the vacancies in the Civil Service are advertised internally and preferentially available to staff whose posts are to be removed with simply the priviso that their prior performance had been at the very least acceptable?

    As we understand, of the 2 million new jobs created under New Labour, 1.8 million went to foreigners. This is because employment discrimination law as with ‘hate’ law only apples to us, so foreigners preferably employ foreigners of the same ethnic group without fear of falling foul of the law. This could mean that British people, despite vacancies existing in the private sector, having been made redundant from the Civil Service would struggle to obtain private sector posts.

  15. Neil craig
    Posted October 30, 2010 at 2:37 pm | Permalink

    I would impose a hiring, promotion & pay rise ban (perhaps excluding doctors, nurses & few photogenic front line staff) on all civil service depts until it has achieved the mandated cuts. That would minimise redundancies, ensure that cuts were going to be achieved automatically if only by natural wastage & concentrate civil servant’s minds wonderfully on better ways to cut.

  16. Johnny Zero
    Posted October 30, 2010 at 2:47 pm | Permalink

    Redundant Civel Servants cost us as Tax Payers a HUGE amount of money, often more than keeping them on the Payroll

    Natural Wastage and taking out any new replacements if bar far the most cost effective way of delaing with this issue

  17. Chuck Unsworth
    Posted October 30, 2010 at 4:44 pm | Permalink

    Ministers need to get a grip of their Civil Servants. It’s no good coming to the Chamber poorly prepared. The question is obvious enough and any competent Minister must anticipate such attacks and deal with them. Your suggestion at the time could easily have been incorporated in Ministerial responses.

    As to ‘Parliament will be told after Ministers have been told’ – well that’s a pious hope and by no means certain. My cynical view is that this information will be leaked long before even Ministers are told. After all, public opinion must be gauged , eh?

  18. Steve Hemingway
    Posted October 30, 2010 at 5:34 pm | Permalink

    There are about six million people employed in the public sector. It takes five years for half of new employees to leave their current job. So in five years we can expect about three million public sectors to have voluntarily left their jobs. By not replacing one in six of these we will have made the necessary savings without a single person being made redundant. Simples!

  19. lola
    Posted October 30, 2010 at 6:45 pm | Permalink

    It is now generally agreed that there is massive overmanning, waste and lots of pointless (non) jobs in the State sector. The real tragedy is that Labour appointed all these poor people to posts that add zero value to the UK. It is the Coalitions problem to sort out the mess now they will have to go.

    You really need to get on top of the news management of this fiasco ASAP.

  20. electro-kevin
    Posted October 30, 2010 at 6:57 pm | Permalink

    I do not want to see people made redundant, especially not key workers and especially as my own private sector services could be in the firing line as well. But if it is the case that New Labour were outrageously profligate in their expansion of the public sector (as the Tory party claims) then how can there not be drastic and imminent cut backs in the offing ? More to the point how will the money markets react when it is discovered that there aren’t ?

  21. Nick
    Posted October 30, 2010 at 8:00 pm | Permalink

    1. By dictate (since everything the government is by dictate) ban all advertising for jobs.

    That deals with the guardian by the way.

  22. Richard1
    Posted October 30, 2010 at 8:57 pm | Permalink

    Yes but lets recognise that the public sector – like many private companies – in reality has many completely expendable staff. Only no politican will say so. But why not? Everyone knows its the truth. You have often drawn comparisons on this site with what a private sector company would do, faced with the problems which the UK Govt now faces. What a private company would start with is a bottom 10% excercise and make redundant the 10% or more of the workforce who are not only expendable but whose departure would enhance quality of service. This is difficult territory – but easy targets to get the discussion going are polticised quango heads who are highly paid and frequently on the airwaves with self-serving attacks on the ‘cuts’.

  23. william
    Posted October 30, 2010 at 9:20 pm | Permalink

    This is a 4 year cost reduction programme,where the ministers will have probably moved on,and the top civil servants remain in place. As a consequence, today’s minister has to put in place a system which ties the top bod to a cash positive rolling headcount reduction, as is common in the private sector.Rule !, NO new hiring.Rule 2,you quit now, then you get 12 months maximum, regardless of your contractual rights. Rule 3.redundancies are only made if the cost saving from 1 and 2 above are not meeting the planned annual cost reduction.Welcome to the real world.

  24. Lindsay McDougall
    Posted October 31, 2010 at 6:33 am | Permalink

    I particularly liked John Redwood’s contribution to the 28th October debate in the House on the Spending Review, in which he was able to go into more detail. Well done.

    Natural wastage is the way to go and an absolute ban on recruitment is not practical. It can lead to imbalances in the age and seniority profile, and regional shortages in particular skills.

    What is practical is to put in place a rule that recruitment should not exceed (say) 25% of the numbers leaving. Any exceptions would have to be justified by the head of the civil service case by case.

    Incidentally, where is natural wastage likely to be greatest? In Northern Ireland, where 80% of GDP is in the public sector, or in London and the South East?

  25. Molly
    Posted October 31, 2010 at 9:03 am | Permalink

    Hi John

    I have conducted several successful cost cutting reviews in the private sector and have one golden rule. Never worry about the cost of making someone redundant who is not performing satisfactorily or who is surplus to requirement. The cost of keeping them is always greater in the long run. If savings have to made elsewhere to pay for the redundancy; so be it.

    George Osborne should condsider setting up a central fund for paying for public sector job cuts. A fund which could be drawn on by all Departments without being a charge on their budgets. The creation of such a fund would encourage speedy action throughout the public sector to cut not just excessive headcount, but also poor performers.

    A simple, very effective way to save costs and improve quality

    Regards

  26. waramess
    Posted October 31, 2010 at 9:27 am | Permalink

    What is unfolding is that we have an incompetent administration. Even something as popular with the electorate as the housing cap has been badly handled and the child benefit mess was and continues to be their 10p tax moment.

    Unfortunately this lot make the last lot look pretty professional, and it pains me to admit it.

    But, here we are, and it will not be the first incompetent administration we have survived so, the sooner we recognise it the sooner we prepare ourselves for the next gaff

  27. Deborah
    Posted October 31, 2010 at 9:04 pm | Permalink

    I expect a lot of public sector employees would like to follow in the footsteps of the Chief Executive of East Herts Council , who arranged her own flexible retirement at age 50, claiming it would save the Council money.
    Nice work if you can get it.

  28. Robert K
    Posted November 1, 2010 at 9:02 am | Permalink

    At least one of the problems of the coalition government is that most ministers are novices learning on the job. I propose JR being offered a seat at Cabinet – preferably Chancellor but Chief Secretary at least. Seconders, anyone?

  29. Mark
    Posted November 1, 2010 at 10:17 am | Permalink

    Perhaps an interesting PQ would be to enquire how many redundancies there were during the reduction of 537,000 public sector employees in 1992-1995 alluded to in my earlier comment.

  30. Scary Biscuits
    Posted November 1, 2010 at 10:43 am | Permalink

    I agree with Molly. It’s always cheaper to get rid of somebody at the earliest opportunity no matter how expensive that is initially. (This also applies in disciplinary procedures where the employer should always assume he will lose at a tribunal.)

    Not obviously, it’s also fairer for the person being got rid of. If you’re performing badly in your job not only is your employer unhappy with you but you’re also probably unhappy with them. The sooner this situation is resolved the sooner the individual can find a job more suited to their talents.

    Natural wastage is a spineless cop-out. It is also suprisingly cruel, increasing the proportion of unhappy/inappropriate people employed to the detriment of all.

    Instead, the government should take a leaf out of a company by John Redwood’s constituency, Cisco. They sack the bottom 5% of their staff every year. This is good for the company and good for the people employed whether they stay there or move on.

  31. David Bouvier
    Posted November 1, 2010 at 5:47 pm | Permalink

    I disagree – the least valuable, most truculent people in the most ineffectual departments are the ones who will hang on to their non-jobs anyway they can.

    The capable people doing good work are the ones who will advance their careers and move on.

    Natural wastage – or rather shifting authorisation to hire to a higher level requiring additional authorisation – may have a place. But over-reliance on it for an extended period of time will reduce the average quality of staff and probably lead to the promotion from within the less able.

  32. alan jutson
    Posted November 2, 2010 at 8:13 am | Permalink

    John, a problem with my post ?

    Cannot see anything wrong with my comments, other than commonsense suggestions which would be practised by any sensible organisation..

  • About John Redwood


    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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