Cabinet Office told to set out plan for combatting 'chronic' civil-service pay woes

MPs describe latest Civil Service People Plan as "vague" and demand step-change in performance management

By Jim Dunton

22 Mar 2024

Watchdog MPs have told the Cabinet Office it must clearly set out how it will tackle declining real-terms pay in the civil service – dubbing the issue a "chronic" problem that has dented morale and hampered staff recruitment.

The call comes in a report from parliament's Public Accounts Committee, which also describes the recently published Civil Service People Plan as "vague" and says the Cabinet Office has shown a "lack of curiosity and willingness to act" on cross-government workforce issues.

PAC's report follows a National Audit Office probe that was published in November last year, which highlighted the problem of departments competing for the same staff in an "internal civil service market" that pits departments against each other because of pay differences for roles at the same grade.

Giving evidence before PAC last month, outgoing Cabinet Office permanent secretary and civil service chief operating officer Sir Alex Chisholm used the word "chronic" to describe Whitehall's pay problems – and MPs repeat the description in today's report. He said the solution was a smaller, “more agile”, and more highly paid civil service.

This week PCS, the civil service's biggest union, said 2024-25 pay rises of at least 18% and as much as 61% would be required to restore civil service pay to 2010 levels in real terms. Think tank the Institute for Government offered a more conservative figure of 12% to 26% in its latest Whitehall Monitor report.

The Prospect union also raised concerns at an event this week.

The PAC report acknowledges that the Cabinet Office has promised to introduce a new pay and reward strategy for staff below senior civil service level this year. But it says the latest Civil Service People Plan, which was published in January, has little specific detail on what the new strategy will involve and how it will address long-term pay issues.

The report also notes that while low pay is a major issue for hiring new staff and the most common reason for "failed" recruitment campaigns, recruitment times and costs are not benchmarked across government.

Additionally, MPs point to a lack of data on how departments manage poorly-performing staff. The NAO's November report found three out of 16 departments could not identify how many underperforming staff they had in 2022, while almost two-thirds did not know what happened to staff after they were classified as underperforming.

PAC chair Dame Meg Hillier said the machinery of government would "grind to a halt" without the dedicated efforts and specialist skills of civil servants. However, she said the Cabinet Office needed to up its game on co-ordinating improved HR performance.

"It is welcome to see government pointing in an ambitious direction with a plan for a smaller, better-paid and more highly skilled civil service, but these outcomes will not materialise without more specific aims," she said in reference to the People Plan.

"For too long Whitehall has found itself in a losing recruitment battle with the private sector, without the right data, curiosity, or willingness to act to tackle the problem. The challenges this country faces are immense – an ageing population, climate change and a more volatile and hostile world, to name a few. Whitehall needs to plan to ensure it has the right skills and rewards to deliver."

Among their recommendations, PAC members say the Cabinet Office's pending civil service pay and reward strategy should clearly set out "the specific actions it will take" to address declining real-terms pay and disparities between departments – including variations in the use of performance-related pay.

The Cabinet Office is also instructed to require departments to report data on recruitment times "on a consistent and regular basis" so that benchmarks can be established across the civil service. MPs gave the Cabinet Office until the end of the year to define a common "cost per hire measure" that includes staff time spent on recruitment. The committee said all departments should be required to report their full cost per hire.

On performance management, MPs said the Cabinet Office should "mandate all departments" to collect data on the number of underperforming staff they have, how that underperformance is being managed, and the outcomes for underperforming individuals. They said the recommendation should be enacted by the time the government's official Treasury Minutes response to the report is delivered.

A Cabinet Office spokesperson said: "It's important that civil service pay awards are both fair and affordable for the taxpayer.

"The 2023-24 pay award for non-senior grades represents the biggest pay increase in over 20 years, alongside a one-off payment of £1,500 – recognising the hard work and vital importance of civil servants – and public sector workers benefit from some of the most generous pension schemes available.

"This year's pay remit guidance will be published in due course and we will continue dialogue with unions."

They added that the pending future reward strategy would also consider pay for specialist skills, including AI, digital and data skills.

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