The claim
“The projected £1bn-£2bn saving on the public sector payroll translates into roughly 20,000 to 40,000 job losses.”
Sir Peter Gershon, Financial Times, 9 April 2010
Cathy Newman checks it out
At last, some clarity via the pages of the pink ‘un. Sir Peter Gershon – who used to be the government’s waste buster but has now crossed the floor to give the Conservatives a hand – has spelt out just how a Tory government could make £12bn in efficiency savings to help cut National Insurance.
One of the claims made by Sir Peter zoomed in on saving £2bn on the public sector payroll – that’s job losses to you and I.
So does it stack up?
The background
After much anticipation – and many FactChecks delving into the Tory plans – David Cameron’s efficiency chief Sir Peter cast some light on the Tories’ £12bn savings plans today.
He said driving down the use of agency and contract staff and not filling empty posts, would save perhaps £1bn to £2bn in 2010-11.
Cameron himself confirmed on the Today programme this morning that this is not a plan to fire people – so does the proposal to just leave vacant posts unfilled to make those savings add up?
The analysis
Saving up to £2bn on jobs without anyone getting fired sounds like a painless way to save some money, but is it that easy?
John Marsh, who was a human resources director at the Home Office from 2003-2007, and therefore involved in implementing many of Gershon’s original savings plans, talks FactCheck through some of the issues.
According to Marsh, the main problem the Conservatives may encounter is that many of these savings from vacant posts will already be being made, by sensible public sector HR bosses.
Marsh told FactCheck: “The current government have made it plain they are making billions of pounds of savings; in fact they are in year-three of that now. So most public organisations will have already budgeted for a 2-3 per cent vacancy rate.
“I think it’s true that you can make this saving (£2bn for 40,000 jobs, agency costs, consultants). But these do not necessarily translate into an automatic cost saving because a number of savings for vacancies will have already been factored into budgets by finance directors. You don’t get a budget that amounts to all posts being filled in the first place.”
So if the saving is already being made, you can’t then make a new saving on top of it. Budgets the Tories want to trim using vacant posts may already have been trimmed via the same method.
In some senses Marsh says the £2bn saving is realistic overall. There are 5m public sector jobs in total in the UK, and about 400,000 of those jobs become available each year. So 40,000 jobs would represent less than 1 per cent of the public sector workforce anyway.
But saving £1bn-£2bn in 2010/2011 – in less than 11 months by the time the new government is formed – represents a difficulty.
Gershon’s own savings plan for Labour was the subject of a report by the National Audit Office last autumn which found only 25 per cent of savings identified by departments were concrete, 50 per cent were questionable and 25 per cent were not tenable.
That shows that such grand savings plans are far from a precise science.
The verdict
Marsh’s analysis of the Gershon/Tory claims speaks volumes. Although he does think the £2bn saving is achievable by leaving posts unfilled and cutting agency and consultancy costs, he makes a valid point that prudent HR managers up and down the country will already have been using this process of “natural wastage”.
That, and the fact that this saving could not be initiated from day one of a new government, suggest the process might be rather more painful than the Tories imply.
