Remove trading funds from civil service pay remit process, union urges

Prospect also calls for "rapid review" of all ALBs and the case for including them in the pay remit
Photo: Intellectual Property Office

By Tevye Markson

21 Feb 2024

The government should remove trading funds – such as the Intellectual Property Office and Met Office – from the civil service pay remit, Prospect has said.

The union has also asked the Cabinet Office to investigate the case for removing all other arm's-length bodies from the pay system. Currently, there are around 308 covered by the remit. 

Prospect is calling for a series of changes to how the civil service pay remit guidance is applied to officials working in ALBs and other non-departmental organisations, arguing that the status quo “does not serve them well”.

The guidance provides a yearly framework for departments and other government organisations to set pay. It applies to non-senior civil servants in departments and their agencies, as well as public sector workers in some non-departmental public bodies and other arm’s-length bodies.

In a letter to Cabinet Office minister John Glen, seen by CSW, Prospect general secretary Mike Clancy said many of the managers, professionals and specialists that Prospect represents do not work at the centre of government, are often not technically “civil servants”, and have very different roles “from the more administrative functions usually associated with larger civil service employers such as DWP and HMRC”.

Clancy said the inclusion of these officials in the remit “fails to recognise the very different labour markets they operate in”.

"The experience of our members in these areas is that they have not been well served by the current pay remit process," he said. "This is very often a view shared by their employers."

Trading funds: Remit a ‘barrier’ to recruitment

The civil service pay remit guidance aims to strike a balance between employees' needs and affordability.

Clancy said “it has never been explained” why the guidance applies to trading funds – which raise their own revenues instead of or in addition to receiving funds from the Treasury or their departments – “where there is no burden on the exchequer”.

Trading funds’ success is “based on them being able to recruit and retain staff with the specialist, data and STEM skills they need in what are highly competitive labour markets”, Clancy explains in the letter.

But he said these bodies see civil service remit guidance “as not being reflective of the labour markets in which they operate and a barrier to recruitment and retention”.

“In many areas this stymies their commercial expansion, which would generate more income for the exchequer, and their ability to meet the needs of customers and citizens,” he added.

The Prospect letter points to concerns raised about staff turnover, unfilled roles – particularly in IT – and reliance on contingent labour in recent annual reports from the Met Office, the UK Hydrographic Office, the UK Atomic Energy Authority, the IPO and FCDO Services.

This includes the Met Office citing its ability to ensure its “the skills, knowledge and competence of the workforce match our needs to deliver our strategic objectives” as a red-rated risk, and the UK Hydrographic Office saying it is struggling to maintain the necessary levels of in-house expertise in areas that are critical to its work.

The letter says Prospect members often tell the union they are choosing to leave trading funds for non-government organisations, where they are offered much higher pay. It quotes a message from an official who said they were leaving a trading fund to join an IT consultancy that had offered a 50% increase in salary, adding: “Ironically they've suggested three projects as possible starters, and one of them is the [ALB I have been working for], so I might be straight back in through the door again with a different colour badge”. Another member at a trading fund told the union its organisation's failure to retain staff had led to “crippling backlogs”.

Prospect also wants the Cabinet Office to “rapidly review” all other ALBs and the case for removing them from civil service pay remit guidance coverage, “with the presumption that if a specific output or function is best delivered at arm’s length, then that should include the freedom to adopt pay systems best suited to support that goal”.

The union is seeking urgent public clarification of which ALBs are and are not currently subject to the civil service pay remit guidance. The Cabinet Office “has never been able to share” a definitive list of the bodies covered by the guidance, the union said.

Pay remit process 'labyrinthine'

The letter also asks the Cabinet Office to streamline the process for submitting and agreeing pay-flexibility business cases, so that any ALBS remaining under the guidance can address issues such as recruitment and retention “in a timely manner”.

It says the remit process “can be labyrinthine for organisations to navigate”, with pay-flexibility cases sometimes taking more than a year to be assessed, and cases sometimes rejected or diminished at the last minute.

Clancy said the process “feels both arbitrary and contrary to the principles of delegation” as “those closest to the labour market challenges and business requirements feel divorced from the decision-making process”.

'No evidence' for inclusion of research institutes

Another request in the letter is for the restoration of pay flexibilities for public sector research establishments and any ALBs with a significant role in research and development, as recommended by the 2023 Nurse Review.

The review of the UK R&D landscape by Sir Paul Nurse found no economic evidence for the value of having pay controls for public sector-funded research organisations, concluding that “in fact, the reverse is true”.

Research institutes were told they would be given pay flexibility as part of a range of financial and commercial freedoms in 2015 by then-chancellor George Osborne. In a paper published by King's College looking at Britain’s R&D performance, former science minister David Willets recounted that, in 2014, “after George Osborne and I visited the Laboratory of Molecular Biology he was so impressed with what they were doing and shocked by how public sector rules were impeding their performance that he granted greater freedoms to them and similar bodies”.

These freedoms have since been withdrawn.

The letter also calls for:

  • Updates to the guidance on undertaking reviews of public bodies to ensure that workforce issues, and the impact of civil service pay constraints, are always investigated, and reported on
  • Proactive promotion and support from the Cabinet Office for ALBs to implement capability-based pay progression
  • Full funding for necessary improvements in pay and progression arrangements so that they are not made at the expense of service delivery or the fairness and coherence of workforce-wide pay systems

A Cabinet Office spokesperson said: “Arm's-length bodies play a vital role in the delivery of public services and support government to meet its wider commitments.

"The public rightly expects their money to be spent efficiently and effectively across the entire public sector, as such, ALBs are required to comply with all relevant controls and guidance in relation to pay."

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