Why cuts can be expensive

 

          I was sent an interesting email this week. It came from someone who knows how the changes at a particular  quango are going. It makes worrying reading.

          The bottom line is that spending goes up in the short term in order to achieve a closure of a quango and the transfer of duties elsewhere. 14 administrative  staff lose their jobs, but 7 new management grade staff are recruited, along with three adminstrative staff hired in another location. As a result the early years costs include redundancy and pension payments that more than wipe out the small staff  savings.

          The public sector ought to have a huge advantage. It can offer continuity of employment, in return for asking flexibility about duties. The traditional civil service regularly switches people within a given department from one area to something very different. Sometimes staff are switched between departments, as recently happened over the change of Competition responsibilities between Culture and BIS.

           The same should apply to quangoland. Taxpayers do not want to be paying redundancy payments, and then  hiring fees within a similar organisaiton owing to organisational changes. The main mechanism for bringing public spending under control should be cutting recruitment. As people leave, others from within the public sector should be offered promotion if the job is essential or the post should be abolished and any valuable part of the work reassigned.

        The Cabinet Office needs to get a grip. We do not want big reorganisational costs with the cost savings delayed for several years or never materialising.

       The remorseless langauge of cuts reflects three differing realities. In some cases new budgets are tough and require actual cuts that are not popular. In other cases, like this one, the cuts themselves are expensive, leading to worrying redundancy payments and special pension contrbutions. In a third set of cases the cuts are political, as a bad public sector management wants to make a point by doing something damaging. I read in some places that I do not think there are any cuts. As I always point out, there are indeed cuts, despite public spending going up every year for 5 years in cash terms.

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18 Comments

  1. lifelogic
    Posted February 5, 2011 at 7:45 am | Permalink

    If they limited redundancy/unfair dismissal costs to say £2000 they could reduce the state sector in size with little cost. And employers would be able to make more jobs available and anyone one who was any good would be able to get a new job quickly anyway.

    Large pay offs are absurd if one can get another job quickly why are then needed and they destroy job flexibility.

    Easy hire easy fire mean good people will get the good jobs and the bad will go and industry and government will be more efficient and create more jobs (and fewer pointless jobs for lawyers/tribunals). Win win all round so doubtless it won’t happen with this government.

    What objection to this is there I can’t see any sensible ones other than from the legal profession.

    • lifelogic
      Posted February 5, 2011 at 7:56 am | Permalink

      Also if people knew they could loose their jobs easily they might be more likely to do their jobs properly.

      • Acorn
        Posted February 5, 2011 at 11:19 am | Permalink

        I bet dinner times are fun in your house lifelogic. But you are not wrong. There is no way a bunch of amateur politicians, are ever going to put one over the Civil Service. The only way you can get them, is by repealing – lock; stock and barrel – primary legislation.

        Primary legislation only ever gifts privileges; benefits and immunities to a select group of lobbyists – often within the state machine – or a client voter group. The more I study the Whitehall/ Westminster machine; the more I realise how irrelevant our parliament has become. We could save a fortune by just electing the “executive”, and having recall powers for voters.

        But; I think I have found Whitehall’s most boring job. It is the guy who writes the Statutory Instruments for temporary road closures. See the following link. And; just to cheer up lifelogic, see the “most requested Acts” on the rh side. Top of the list for repeal???
        http://www.legislation.gov.uk/

        • lifelogic
          Posted February 5, 2011 at 6:07 pm | Permalink

          Don’t worry I am quite happy and dinner times are great fun. But it is a shame to see the UK and the EU, with all their natural beauty and delights heading in such a big over suffocating state direction, especially under a so called right wing government & likely to be replaced soon by an even worse Labour one.

    • lifelogic
      Posted February 5, 2011 at 2:17 pm | Permalink

      The same applies to landlord and tenant relations the best protection is the availability of other properties to rent not some jobsworths at the council interfering all the time.

    • Bazman
      Posted February 5, 2011 at 6:04 pm | Permalink

      Have you ever heard of the word ‘exploitation’ or ‘slums’ Lifelogic?
      It’s great fun telling agents and potential employers. “I don’t work for that”. “I’m not that desperate” Etc. It’s obvious that is not what they are used to hearing and the change in tone is notable. It must be the subversive in me. The country would be a much better place if everyone had the option to say that.
      I’ll just drive off in my van now as you don’t even get verbal abuse for that money.

  2. Alte Fritz
    Posted February 5, 2011 at 8:29 am | Permalink

    Another post which speaks volumes. By contrast, the public debate on this subject is poverty stricken.

  3. Steve Cox
    Posted February 5, 2011 at 8:51 am | Permalink

    We know that this sort of thing happens with local Councils. A highly paid but incompetent Council Chief gets pushed out of Council A with a nice redundancy settlement, and a few weeks later is employed at a similar salary by Council B, presumably with some recruitment or head-hunting agency pocketing a nice little fee in the process.

    It’s very worrying that this is now going on in quangoland. When management jobs start to be shed in the largest quango of them all, the NHS, and teh redundancy cheques start to flow, I wonder how many people will worm their way back into highly paid jobs in other parts of the public sector, or perhaps even in other parts of the NHS.

    The (well managed and highly profitable) multinational oil company I worked for most of my life has a strict rule that, if a staff member is made redundant or given early retirement, then they may not be taken back on by any part of the company in any capacity for a minimum of 2 years after receiving the payoff, not even as a freelance consultant or contractor. Perhaps some similar guideline could be formulated for the public sector?

  4. Javelin
    Posted February 5, 2011 at 9:27 am | Permalink

    The Labour Party tried and failed (under civil service) advice to cut redundancy payments. The day the Conservatives came to power they should have ensured new public sector contracts had the same terms and conditions as private sector workers.

  5. CHEESED OFF
    Posted February 5, 2011 at 9:33 am | Permalink

    This lot are as bad as the Labour lot!

    What on earth are they doing making redundancy payments rather than redeploying staff?
    I recall you and some of your readers making this point several times since the election – clearly to no avail as the same is happening in the NHS sector with planned redundancies in the PCTs and recruitment (probably the same people) within the doctor’s surgeries.

    As you rightly say to the Cabinet office (Francis Maude?) and no doubt beyond – for God and the weary public’s sake…GET A GRIP. We thought that, unlike Labour, you were a government of old-fashioned Common Sense! Clearly you are merely naive and in competent.

  6. D K McGregor
    Posted February 5, 2011 at 9:58 am | Permalink

    Good to see that you are aware of this problem and that you have advised colleagues accordingly. The public sector must be stopped from featherbedding itself at every turn , it really doesn’t play well with the rest of us.

  7. alan jutson
    Posted February 5, 2011 at 10:09 am | Permalink

    John

    Did you really need an “e” mail to discover what has been going on for years in the Public Sector.

    Anybody who has worked in both the Public and Private sectors will tell you about the huge amounts of waste, the endless meetings, the constant change of direction, the forests of paperwork, and the lack of accountability in the Public sector.
    Given that many departments seem to approve end of year spending, just to use up the budget, that some staff (not the majority) deliberately use their full entitlement to paid sick leave each year, sick or not, it is no wonder it costs billions to fund.

    During the past decade we are told the Public sector has grown an extra 1,000,000 jobs. if those jobs were paid £25,000 per year each (the national average) that is a massive amount of extra cost which has to be funded each year.

    Given the vast increase in personel, has the performance improved ?

    No!

    Does it need to be cut ?

    Yes !.

    Will it be hard on those who have to go ? Yes !

    The best way of starting. A recruitment freeze as you suggest, then really dig into what exactly we expect from our Public services in the way of provision of core services, and run a sensible level of staff to provide it.

    The problem John is that successive Governments request more and more information for informations sake, pass more and more complex regulation and tax laws, and introduce new schemes to try and run our lives ever more closely.

    Yes those who genuinely cannot help themselves of course need some support, but for too long the Government has been undertaking social engineering on a massive scale, to try and protect millions from the realities of life.

    The sooner the Government gets out of our lives, the sooner the cost will come down.

    Reply: No, it did not require an email, but it did require an insider to give chapter, verse and figures on a small part of the public sector to illusrate what I and you know in general terms.

  8. Andy Dowland
    Posted February 5, 2011 at 10:20 am | Permalink

    The NHS reforms are happening in a similar way, Mr Redwood. The cost of dismantling the old structures and replacing them with GP Commissioning Consortia has been estimated at £1.7 billion by Mr Lansley, with many health policy experts believing that he is being far too optimistic. At the end of it pretty much the same people will be running the commissioning service. Because of spending on redundancies and recruitment, the tariff for 2011/12 has been reduced by 1.5%, that means that hospitals will get 1.5% less money for providing the same service. And that’s a cash cut, not a real terms cut, if a hospital trust received £100m for services this year, they will only get £98.5m next year.

    I’m a socialist and work in the NHS so you might expect me to defend the NHS corner, but the NHS is there to serve the public and keeping down the cost of waste so that patients on the frontline can get better services is absolutely the right thing to do. I wish you all the best in cutting the waste so the NHS can provide the best services possible.

    • Richard
      Posted February 6, 2011 at 4:21 pm | Permalink

      Andy, a great post, and your last paragraph is what makes me feel proud to be a
      citizen in this country.

  9. David Price
    Posted February 5, 2011 at 12:50 pm | Permalink

    If an employee refuses to follow instruction or wantonly wastes money or resources they can be fired for cause can’t they? This is certainly the case in the private sector so why isn’t HMG making very visible examples these people?

    They should receive no golden handshakes, no redundancy pay beyond the statutory minimum anyway since the country is bankrupt and I suggest they lose some pension rights to limit their impact on the tax payers who they obviously hold in utter contempt.

    Part of the problem might be that they can’t take HMG seriously since, according to the Mail, Francis Maude apparently gave Suzy Leather a whole year to mend her ways. That approach to management would have me wondering if it was a joke as well.

    Why on earth are they allowed to recruit anyway! Is this whole farce a case of behaving so outragously that no-one believe they are actually doing it and ignore them?

  10. Bazman
    Posted February 5, 2011 at 5:38 pm | Permalink

    Large pay off’s, years on the sick then massive redundancy payment and a new job really only ever happens to the upper levels of council workers. Redundancy payments for most workers are often just the legal minimum and the higher levels of payment are to older workers with long service history. Compensation for age if you like. If you are 50 years old with 30 years service and earn 35k a year you would get £9800 from the governments own website http://tinyurl.com/yft85ln Hardly an amount to live a life of style and if you believe they should not get anything you are wrong.

  11. ian wragg
    Posted February 5, 2011 at 7:21 pm | Permalink

    Perhaps if managers made redundant from the PCT’s start work with the GP’s they should be made to pay their redundancy back.
    This would be a first

  12. Lindsay McDougall
    Posted February 6, 2011 at 2:08 pm | Permalink

    Have you forwarded that e-mail to George Osborne? You might get a reaction. He has several junior ministers to whom he can delegate the task of getting the Civil Service under control.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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