Cutting civil service jobs could cost more in the long run, PAC chair warns

Meg Hillier's annual report calls for urgent investment in "big nasties" including ageing IT, the schools estate and hospitals
Dame Meg Hillier Photo: UK Parliament/Jessica Taylor

Cutting civil service jobs could end up costing the government more in the long run, the head of the Public Accounts Committee has said.

Government should avoid “simplistic headcount targets” and instead focus on building a resilient workforce by tackling recruitment and retention challenges, Dame Meg Hillier said in her annual report, which also calls for more longer-term thinking in government and sets out several areas in need of urgent spending.

Earlier this week, the prime minister reiterated that it is still the government’s policy to reduce the size of the civil service – but declined to give a target figure, pointing instead to a drive to increase productivity instead. The chancellor, Jeremy Hunt, said the civil service headcount would be capped at its then-level – 488,000 – in October. However, it has since risen to 502,750.

But Hillier said ministers’ goal should instead be to “hire the right people and keep them”.

“Government has fewer than half the digital, data and technology professionals that it needs, leaving departments reliant on contractors,” the PAC chair wrote, pointing to a shortage of cybersecurity staff as a particular concern.

“Despite this, headcount cuts are still taking place, which risk costing government more in the long term. For example, when government’s own recruitment service cut its headcount by 40% in 2022, it had to reverse the cuts a year later to avoid service failure. To ensure long-term benefit, government should avoid simplistic headcount targets and instead invest continuously in staff development 101 to maintain resilience.”

Skills shortages – which contribute to “delays, inefficiencies and budgetary overruns” affecting government projects and programmes that PAC scrutinises – are among a list of “big nasties” Hillier highlights in the report requiring immediate spending.

“Severe shortages” in areas such as digital, cybersecurity, nuclear, engineering, construction and public audit cost the government an estimated £980m in management-consultant fees needed to plug those gaps in 2018-19, according to the report.

“The lack of skills must be addressed otherwise there will be huge risks to delivery of major capital projects,” it says.

Also on the “big nasties” list are the overall health budget; the schools estate; the Defence Equipment Plan; and outdated IT systems and ageing data, which Hiller called “a key source of inefficiency and a major constraint to improving and modernising government services”.

“Many of these ‘legacy’ systems were built several decades ago and are now costly to run and risky,” the report said – repeating a theme seen in a number of PAC reports over the last few years. It pointed to the £11.7m cost to update and replace the Ministry of Defence’s legacy IT systems in 2019 and £726m the Department for Environment, Food and Rural Affairs spent on modernising legacy services between 2021 and 2025.

“Failure to modernise legacy systems exposes organisations to possible service disruption, operational failure and cyberattacks. The increasing costs of maintaining legacy systems and loss of associated specialist skills is unsustainable in the long term. Government must make long-term investment to improve and modernise its systems to deliver the best possible service to taxpayers,” the report says.

The need for long-term thinking and spending plans – which Hillier describes as "slow politics" – rather than short-term fixes is a key theme of the report.

“Government does not do enough to plan for the long term, or to provide long-term investment for its policies. This not only causes problems now, but leaves problems that will be critical in the future. Lack of forward thinking means leaving problems that are more costly and more urgent, until they get to the point where they can no longer be ignored. Government must become better at ‘slow politics’,” it says.

Other areas where prioritising short-term spending needs has had long-term consequences include the Department of Health and Social Care’s approach to its New Hospital Programme, the report said. The programme was intended to deliver 40 “new” NHS hospitals – which included refurbishing existing buildings and adding to existing ones – in a bid to tackle the maintenance backlog, which had reached £10.2bn in 2021-22. However, “there appears to be insufficient funding to build all of the planned hospitals, and the new hospital design will be too small for projected future demand”.

Hillier used the report – which is expected to be her last as PAC chair, as she has said she will not stand again for the position – to urge any incoming government to learn from the failures the committee has highlighted over the years.

Hillier wrote that her “lasting lesson” from 13 years as a member of PAC – and nearly eight of those years as chair – is that “Britain is not a corrupt country, and we are fortunate to have public servants overwhelmingly dedicated to public service”.

“But that does not mean we are a transparent and efficient country. All too often, we have seen money misdirected or squandered, not because of corruption, but because of group-think, intransigence, inertia, and cultures which discourage whistle-blowing," she added.

"On occasion, the scale of failure has been seismic, such as HS2 or Horizon in the Post Office, or the procurement of PPE during Covid. Other times, there has been a systemic failure to be agile and adaptable as events unfolded.”

If the next government does not learn lessons from these failures, “my successors as chair of the PAC will be doomed to a cycle of broken promises and wasted cash in perpetuity”, Hiller said.

Keep an eye out for an exclusive interview with Hillier in CSW's upcoming summer issue

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