Since 2004, when the government announced 100,000 posts would be cut from the civil service, tens of thousands of civil and public servants have lost their jobs and about 2,000 offices have been closed.
Pay for many civil servants in recent years has been frozen or increased below the rate of inflation. And yet, the coalition government plans to make massive cuts in public spending that will inevitably lead to thousands more job cuts, and hit public sector pay and pensions. The new government is also committed to further privatisation of our public services.
While sections of the media and some politicians continue to try to blame the public sector for the country’s economic problems, the truth is that civil and public servants are as much the victims of the recession as other workers.
To help challenge some of the common myths and misconceptions, we provide some facts and figures about public sector pay, pensions and jobs.
Myth 1: civil and public servants are well paid
Civil and public servants are well paid and have enjoyed better pay rises than the private sector.
Since 2007, basic pay in the civil service has increased by 6.5% and inflation by 10%, meaning a real terms cut in living standards.
Almost half (48%) of civil servants are in admin grades where the average (median) pay in 2009 was £17,120 for women and £17,600 for men.
Average civil service pay is £22,850 a year, compared to £24,970 in the private sector.
35,000 (7%) civil servants are paid less than £15,000 a year.
40.5% of civil servants - 210,000 people - are paid £20,000 or less. And 63% of civil servants - 330,000 staff - earn less than £25,000 a year.
There are currently 230 separate sets of negotiations over pay and terms and conditions across the civil service.
A member in one department can earn up to a third more than a member in another department/agency on the same grade.
Government plans to cap public sector pay at 20 times the lowest salary will have very little impact in the civil service. In the Department for Work and Pensions, for example, the lowest paid are on £13,110 and the highest paid is the IT director on £249,999.
Unlike elsewhere in the public sector, progression costs for civil servants are included in the overall pay pot. So when pay is frozen, they suffer a double whammy of not being rewarded for length of service or given a cost of living increase.
When you compare civil service grades with comparable jobs in the private sector, admin officers, who deliver services such as getting people back into work, tax credits and passports, are paid 21% less.
Executive officers, who typically work as supervisors and in roles that require a vocational qualification, are paid 18% less than the private sector.
Myth 2: civil service pensions are ‘gold plated’
Private sector employers are paying for ‘gold-plated’ public sector pensions, which are expensive, unsustainable and unfair when compared to their own pensions.
Pensions in the civil service are far from generous and have been changed recently to a career average scheme.
The growing gap between public and private sector pensions is the fault of private sector employers retreating from decent pensions. The real divide is between executives in the boardroom securing for themselves large pensions with low retirement ages, and their workforces suffering repeated cuts.
It is counterproductive to degrade pensions because it will force more people into poverty and onto state benefits in their retirement – this is more costly and will have to be met by future taxpayers.
We all help to pay for private sector pensions through the price of goods and services. And we all help to contribute to public sector pensions through taxation.
Excluding the very highest earners, the average civil service pension is £4,200 a year.
More than 100,000 people receive a civil service pension of £2,000 or less a year: over 40,000 receive less than £1,000, and more than 60,000 get between £1,000 and £2,000.
Two and a half times as much public sector money is spent subsidising private sector pensions through tax relief than paying for public sector pensions – 60% of this goes to earners at the higher rate.
The Treasury’s estimate of the cost of public sector pensions as a proportion of the UK’s national output shows a modest increase from 1.5% to 2% by 2027/28. After this, projections show a slight decline.
The civil service is covered by a collection of several different pension schemes which have developed over the years. The most recent is called nuvos and is a defined benefit whole career base scheme for new entrants from 30 July 2007.
Myth 3: civil and public servants are secure in their jobs
The civil service is bloated, and civil and public servants all have safe and cushy jobs.
Since the Gershon review in 2004 tens of thousands of jobs have been cut from the civil service, resulting in a deterioration of services to the public. Job cuts and office closure programmes are ongoing in many departments under the previous government’s ‘efficiency savings’. The new government’s plans to cut public spending further and quicker will inevitably lead to more job losses.
Revenue and Customs: Since 2006, HMRC has cut more than 20,000 staff towards its target of 25,000 by March 2011, and 200 offices have been closed, are in the process of closing or are under threat.
Cutting jobs in the department responsible for collecting tax makes no sense, especially when around £120 billion is lost to the economy every year through tax evasion and avoidance, and through revenue not being collected because of a lack of resources.
The department’s own figures also show that, after staff costs, tax inspectors bring an average of £600,000 a year each in tax revenue.
Cuts have led to increased errors, backlogs in post and half the calls from the public going un-answered last year.
Department for Work and Pensions: Between 2005 and 2008, 30,000 jobs were cut. A further 5% year on year job cuts were planned for 2008 onwards, but the department took on 15,000 staff on 18-month fixed term contracts to cope with rise in unemployment.
These contracts are coming to an end and, though some may be renewed for a limited time, the department has announced plans to cut another 4,000 from jobcentres on top of the 4,000 that have already gone this year. Cutting jobs in jobcentres is unprecedented at a time of rising unemployment.
As DWP increases automation of services, such as online claims to benefit, it is likely there will be further moves to cut jobs.
The government has also announced it will replace all existing back to work schemes with a single work programme provided by voluntary and private sectors.
Ministry of Defence: Since 2004, 25,000 jobs have been cut with a further 10,000 threatened for 2010 to 2013.
The coalition government has announced it intends to cut the department’s running costs by 25%, and more detail is expected in the next strategic defence review.
UK Border Agency: In June, the agency announced it is to cut 1,700 posts this year, but we believe there are plans to cut almost a third of the UKBA’s 20,000 staff in the coming years, coupled with a massive increase in workloads for those that remain.
This will hit the agency’s casework particularly hard, and the advice and support staff provide to some of the most vulnerable members of society will inevitably suffer.
The truth about privatisation
Along with massive cuts in public spending that will hit jobs, pay and pensions, the coalition government – like the previous one – is committed to further privatisation of our public services.
Under the 2009 operational efficiency programme, some of the areas either proposed for privatisation, or prepared for eventual privatisation through increased marketisation, are the Royal Mint, the Land Registry, the Met Office, Ordnance Survey, the Defence Vetting Agency and the UK Hydrographic Office.
While private sector involvement is sold as a cheap and efficient way to run services, there is no evidence that this is the case.
Here we challenge some of the common myths and misconceptions about privatisation and outsourcing.
Myth 1: Privatisation saves money
Privatisation provides better value for money for the taxpayer, especially during times of economic crisis.
During times of economic uncertainty the best thing to do is invest in public services. Research shows that every £1 of public spending generates a further 64p in the economy.
Outsourcing and other forms of privatisation, especially involving transnational companies, suck money out of local economies.
The UK public deficit is now £150 billion. Yet this does not include more than £200 billion of private finance initiative (PFI) debt repayment.
So even when the government speaks of a ‘ringfenced’ NHS budget, this will still mean cuts in NHS services as massive and mandatory PFI repayments are hidden.
Myth 2: Public services are improved
Previously publicly owned utilities have been improved through privatisation.
The privatisation of the railways led to cost cutting and poor maintenance that resulted in failure to maintain the track network, and a series of train accidents at Southall, Ladbroke Grove, Hatfield, and Potters Bar.
Accident inquiries revealed that Railtrack had splintered the institutional knowledge of British Rail into many different contractors, resulting in inadequate maintenance records and no coherent asset register.
As for train companies, in May 2006 the House of Commons transport select committee concluded that rail passengers were being penalised by private companies attempting to “see how much they can get away with”.
The committee also concluded: “The private sector will never expose itself to risk unless it is proportionately, if not generously rewarded. Ultimately the taxpayer pays the price.”
Since the UK’s regional water utilities were put out to private contract in the mid 1990s they have consistently underperformed.
The European Union research project ‘Watertime’ found that – while the publicly owned and controlled Danish water utilities had an annual water leakage rate of 4% in Copenhagen, and the public water utilities of Paris and Milan each had leakage rates of 10% – the UK’s privatised water companies of Severn Trent and Thames Water had leakage rates of 26% and 32%.
Myth 3: It is the modern way
Privatisation is what all advanced industrial countries now do.The factsAfter disastrous experiments with privatisation, many countries are seeing the logic of public ownership and the renationalisation of formerly privatised utilities.
Sweden recently put a moratorium on all current planned privatisations, France renationalised the Paris water company, Germany renationalised the minting of its currency, Estonia renationalised its rail network, New Zealand renationalised its rail and air network, as did Australia, and Malaysia renationalised its national water supply.
The Obama administration in the US, having inherited a deeply flawed model of outsourcing public services from the Bush administration – which led among other things to the failure to respond effectively to Hurricane Katrina – has put the brakes on future outsourcing of what it calls “inherently governmental functions”.
President Obama’s budget director, Peter Orszag, recently stated that “over-reliance on contractors can lead to the erosion of the in-house capacity that is essential for effective government performance.“Such over-reliance has been encouraged by one-sided management priorities that have publicly rewarded agencies for becoming experts in identifying functions to outsource and have ignored the costs stemming from loss of institutional knowledge and capability, and from inadequate management of contracted activities.”
As a result the US government’s Office of Federal Procurement Policy has issued guidance which calls on government agencies to decide whether in-sourcing may now be appropriate for services that had been outsourced.Myth 4: PFI has benefited the NHS
The NHS has improved because of the involvement of private finance initiatives.
Since 1997 there have been 149 financed hospitals in the UK, for which the NHS will pay nearly £70 billion for construction costs to PFI consortia.
For example, it cost the private sector consortium Catalyst £9.4 million to build and run a new hospital for the NHS Wandsworth Trust, for which the trust must now pay Catalyst more than £10 million a year until 2034.
It is estimated that nationally the NHS has lost 12,000 beds since 1997 because of additional PFI costs.
Myth 5: Public services needs private innovation
Some civil services core functions, like welfare delivery, need private sector innovation and dynamism.
The previous government’s investigation into welfare delivery for the long-term unemployed (The Freud Report) found the UK already had “the strongest work incentives of any major economy” and that Jobcentre Plus performed to all targets.
The 2006 report ‘Third Sector Provision of Employment-Related Services’ (by Steve Davies of Cardiff University) concluded: “It is simply not true that the third sector has a consistently better record in the provision of employment services than in-house staff.”
The Davies report also found that “whenever Jobcentre Plus staff have been allowed the same flexibilities and funding as private sector companies or charitable organisations they have been able to compete with, if not surpass, the performance of contractors.”
Myth 6: Private companies do some things better
Private sector companies are more efficient in delivering certains functions such as IT.
There is no evidence this is the case. To take just one example, the former Inland Revenue’s outsourcing of its IT function to the American provider EDS was fraught with problems, and eventually investigated by a parliamentary select committee.
The re-tendering of the contract to the Aspire consortium did little to put things right, and another select committee investigation in 2008 concluded that HMRC was paying too much for the service, and the initial cost would rise from the estimated £3 billion to £9 billion.
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