Speaking in an interview with Civil Service World (see here), the Ministry of Defence’s chief of defence materiel Bernard Gray said that the pay scales in his 14,000-strong agency, Defence Equipment & Support, are “25 to 85% adrift of what the best average for the private sector is – and at senior levels, more so. I am definitely losing people at the moment, mid-career, because they can’t afford to work for us any more.”
DE&S struggles to retain specialist professionals such as engineers and programme managers, said Gray. By the time people are “trained up”, he said, they’re “quite valuable to the outside world, and our pay becomes increasingly uncompetitive… so I have a drain of talent out to the private sector, which I need to fix.” He also argued that penny-pinching on salaries can ultimately result in bigger costs: “If we save £20,000 on somebody’s salary, and it costs us £200m in a failed project, is that really good value for money?”
Meanwhile Mark Russell, chief executive of the Shareholder Executive – which oversees the government’s trading funds and manages its shareholdings – told CSW that the current restrictions on civil service pay are “definitely a constraint, and we have many healthy arguments with the centre [of government] about pay. We do firmly believe that if you don’t get decent management and potentially pay a bit more for them, you can lose tens of millions of pounds.” Russell said the executive isn’t struggling to attract candidates for vacancies, but added that “at the more junior level, where people have just started to have families and take on big mortgages, et cetera, it’s not straightforward” to attract and retain staff. (See interview.)
The officials’ comments follow interventions by former cabinet secretary Lord O’Donnell and the government’s lead non-executive director Lord Browne – who have complained about uncompetitive pay levels for senior specialists – and a National Audit Office report, published last week, which warned that declining real-terms pay for senior officials is weakening the government’s ability to compete in jobs markets, and may lead to an exodus as the economy picks up.
The report, ‘Building capability in the Senior Civil Service to meet today’s challenges’, presents “evidence that promotion to the senior civil service is becoming so financially unattractive as to put off talented people,” the NAO said. “The total reward for senior civil servants has been reduced by around 17% in real terms over four years... While there is currently a low rate of resignations, there is a risk that economic recovery could see an exodus of the most talented and marketable senior people, at the very time when effective corporate leadership is needed to meet the challenges of the remainder of the Parliament.”
Ministers have argued that the quality of civil service work and the public service ethos compensate for lower pay rates, but Gray said: “It’s a noble idea to just rely on everybody being public service-minded about driving outcomes, but people have bills to pay.” He also warned that poor pay levels may deter older DE&S staff from acting aggressively with contractors, lest they lose out on post-retirement employment opportunities.
“Although these middle managers within the civil service act entirely properly and entirely appropriately, they are by and large a bit older, and therefore relatively close to retirement”, he said. “Many of them then go to work for the private sector to supplement their retirement income. If you’re sitting there in a negotiation it must weigh on your mind, at the very least, that the people you’re negotiating with must be amongst the group who you’d regard as potential employers down the road. So how hard are you going to push them?” The danger, he added, is that poor pay levels “place you in a position where your economic incentive is not actually to be loyal.”
See also:
CSW's interview with Bernard Gray