Managing staff costs in central government

Book excerpt: The total costs of central government staff grew by 10 per cent in real terms in the ten years to 2009-10, with current costs totalling £16.4 billion. Over the same period, staff numbers fell by 1 per cent, from 497,000 full time equivalents to 493,000. The growth in staff costs is largely the result of an unplanned increase in the number of staff in higher grades. Between March 2001 and March 2010, the number of administrative grade staff declined. But all higher grades grew in number, with Civil Service management grades 6 and 7 showing a 67 per cent increase (around 14,000 posts). This change in grade mix accounts directly for approximately 50 per cent of the staffing cost increase. Some 35 per cent of the real terms increase in staff costs is due to increases in salaries and performance-related pay. A range of immediate central actions in response to spending pressures has been announced, including freezes on pay and recruitment. But the longer term reductions in staff costs required by the 2010 Spending Review will be the responsibility of departments and agencies, and many do not have a comprehensive understanding of their own staff costs or skills in order to support this cost reduction activity adequately. The scale of staff cost reductions is unlikely to be achieved by natural turnover alone. Despite proposed changes to the Civil Service Compensation Scheme, the up-front costs of voluntary or compulsory redundancy schemes and early retirements will be significant.