Pay cuts, job losses, outsourcing: local government in 2012
A recent survey of local authority directors and chief executives painted a bleak picture looking ahead at the next 12 months, as the second year of front loaded cuts to local government bites even deeper.
We saw in the Chancellor’s Autumn Statement that the combination of attacks on pay and pensions is imposing massive cuts on the average living standards of public sector workers.
Little wonder then that yesterday’s joint report from the Audit Commission and Local Government Association on the future of workforce pay and employment in local government gives us real cause for concern.
The report tells us that, as councils face 26% cuts in funding between 2011/12 and 2014/15, workforce costs will be increasingly targeted. This will be achieved in three main ways:
Cutting the pay bill
Councils are already cutting pay bills through a range of measures including pay freezes, increasing part-time working, reducing additional payments, such as over-time and mileage allowances, and cutting the number of agency workers and use of consultants.
It is worth noting that TUC research has found that public sector workers are the most likely to do unpaid overtime, with over one in four (26.3%) regularly putting in more than seven hours of unpaid overtime a week, compared to around one in six workers in the private sector (18.9%). Cutting overtime pay while expecting depleted numbers of staff to maintain existing services means that the pressure will intensify to work longer hours without pay.
The report also points to councils exploring the potential for greater “local adjustment” within the national pay bargaining agreements. It recommends that councils should “benchmark pay rates with public, private and voluntary organisations in similar labour markets”. While it stops short of recommending local pay bargaining, it clearly links local variation with potential labour cost savings thus echoing the government’s direction of travel that we highlighted here recently.
Patrick Butler at the Guardian also rightly points out that the report doesn’t mention those councils, like Shropshire, who are trying to push through pay cuts by threatening to sack staff who refuse to accept enforced changes to their terms and conditions.
PricewaterhouseCoopers estimate that local government lost about 145,000 jobs in the last year, accounting for about 5% of full time equivalent posts. So far, this has largely been achieved through recruitment freezes, early retirements and voluntary redundancies.
Next year will be more brutal. The report states:
The numbers of compulsory redundancies are likely to increase as councils make further budget cuts following service and departmental reviews.
The report acknowledges that redundancy costs are spiralling. This is why 43% of councils plan to reduce their local redundancy severance payments.
The increasing use of part-time work is another part of the strategy. In the two years to April 2010, full-time working dropped by 4.1% while part-time working rose by 4.4%. The report attributes this, to some extent, to:
many people working shorter hours to help their employers cut labour costs and thereby minimise redundancies
Outsourcing is clearly seen as a means to remove workers from the pay bill. The report suggests that:
outsourcing helps to explain why the pay bill reduced by 5.6% in real terms between 2008/9 and 2010/11
One county council featured in the report estimates that of its 7,500 full time staff, around 2,000 are included in current outsourcing plans with the potential to outsource a further 2,500, leaving a remaining core staff of just 2,500 by 2014.
In their guide to insourcing, the Association of Public Service Excellence (APSE) have shown that time and again local authorities have found service delivery to be more flexible, higher quality and better value for money when brought in-house. None the less, increasing numbers of councils will view outsourcing as a means of cutting wage bills.
What is particularly worrying is where the axe is likely to fall most. The LGA claim that 90% of councils have reduced senior management costs by employing fewer people or paying them less.
However, the proportion of staff earning over £50k represents just 7.6% of the total pay bill. Those looking to find big savings through pay cuts are likely to target those who represent the biggest slice of the wage bill. In 2009/10 most spending on pay was on three groups:
- Non-teaching staff in education, such as teaching assistants (35%)
- Social care staff (22%)
- Management and support services (14%)
No prizes for guessing what kind of workers fill these jobs. As Heather Wakefield of UNISON comments:
Teaching assistants, youth workers and social care workers are among the groups facing the largest cuts – despite record youth unemployment and an ageing population. Low paid women are the biggest losers, as they make up 75% of council workers and 90% of the occupations worst hit.
Once again low paid women will be bearing the brunt of the cuts. And, of course, those most reliant on the services being cut.