Hi °C | Lo °C Thousands of civil servants face the sack as the Coalition struggles to find more cuts, Parliament's spending watchdog has warned.
In a report due out today, the Public Accounts Committee said Whitehall departments will have to shift from voluntary to compulsory redundancies to save an extra £400m a year.
“Compulsory redundancies will have to be used more,” bringing considerable risks of damage to morale,” said Richard Bacon, a Tory member of the committee.
”Even greater challenges are ahead. The second phase will be more difficult as the 'easier' savings have already been made.”
The all-party committee also warned that the 18,000 job cuts could prove short-lived if the Government does not act quickly to reallocate responsibilities amongst workers who have survived the cull.
“Without a fundamental redesign in departments' working practices, staff numbers will probably rise as soon as restrictions on recruitment and spending have been lifted,” said Mr Bacon.
The initial cost of redundancy payments, which could be up to £600m, will take between 11 and 15 months to recoup, after which substantial annual savings would be made.
Savings in staff costs made through reducing departmental headcounts will only be sustainable by completing "long-term operating models for their business" beyond the report said.
The report entitled "Managing early departures in central government" suggested that without a rethink about the way departments will operate with less staff, numbers might increase once restrictions on recruitment and spending had been lifted.
The committee acknowledged that departments were required to make cost savings through staff reductions following the 2010 spending review, noting departments had "acted quickly" to cut employee numbers.
According to the report's figures, a total reduction in headcount of about 35,000 was made in 2011, nearly 18,000 of which were through early departures.
It said: "The initial cost to departments of these departures, which should be around £600 million, will take between 11 and 15 months to recoup, after which departments will save around £400 million per year.
"However if the staff reductions achieved so far, and planned, are to be sustainable then they will need to be supported by a redesign of the way business is carried out.
"We remain to be persuaded that all departments are putting in place the fundamental redesign in working practices that is needed to operate permanently with a lower number of staff."
Mr Bacon said: "Although departments have moved quickly to reduce staff numbers, few appear to be giving thought to how they are going to operate permanently with a lower number of staff. It is imperative that they do so.
"Without a fundamental redesign in departments' working practices, staff numbers will probably rise as soon as restrictions on recruitment and spending have been lifted. The savings that have been achieved in staff costs will not be sustainable unless departments now complete long-term operating models for their businesses."
The report warned there was a "real risk" to departments' ability to deliver services. It also recommended improving the "quality and consistency" of performance appraisal arrangements in the civil service to secure efficiency savings and "better decision-making about the management of the workforce".
The committee claimed the Treasury did not have "proper control over individual exit payments that exceed the standard early departure terms" and recommended this was "rectified".
Mr Bacon added: "What is not known is whether the reductions in staff are having an effect on departmental performance and service standards.
"Given the speed with which staff cuts were carried out and the scale of the cuts, there are significant risks to service delivery.
"Even greater challenges are ahead. Departments have achieved around half of the expected staff headcount reductions. The second phase will be more difficult, as the 'easier' savings will have already been made.
"Compulsory redundancies will have to be used more, bringing considerable risks of damage to morale. Strong and transparent leadership and good communication with staff will be essential."
Cabinet Office Minister Francis Maude said: "As the PAC noted, Whitehall departments moved quickly to reduce staff. We estimate this will save the taxpayer around £630 million every year from paybill costs. Our estimated savings are higher than the NAO's, and considerably more than the one-off £600m costs of the departures.
"Overall our stronger controls on non-essential recruitment contributed to savings of nearly £1.5 billion last year alone, when compared with the final year of the previous government.
"To succeed in the future we need a more flexible Civil Service that is better able to deliver our ambitious programme to reform the public services on which we all rely.
"That is why we are embracing new ways of delivering services, doing more digitally, improving performance management, improving our management information and increasing accountability.
"Much of this was laid out in the Civil Service Reform Action plan we published in June and we will be making further announcements in due course."
