New HR Austerity Panel: Reaction to £6.2bn public sector cuts

The coalition government’s £6.2bn spending cuts will lead to a “cultural shift” for public sector HR and create momentum for change, according to Personnel Today’s new ‘Austerity Panel’.


Chancellor George Osborne yesterday revealed the new government will create the savings this financial year by slashing departmental, local government and quango budgets by hundreds of millions of pounds and saving a further £120m through a Whitehall pay freeze.


IT spending will be cut by £95m, and £1.15bn will be saved by slashing consultancy fees, advertising and travel costs. Meanwhile, employment programmes such as the Young Person’s Guarantee and the Six Months Offer will take a £320m hit.


Here is how Personnel Today’s expert ‘Austerity Panel’ – assembled to assess the impact of all the forthcoming efficiency measures – reacted to the announcement:


Graham White, HR director of Westminster City Council


This initial broadside of cuts was exactly what we needed in the public sector to give us the momentum to raise our game. The public sector has some of the finest managers and staff in the UK and for some time we have been sitting on a powder keg of energy waiting for someone to light the fuse. This has now happened and we will shortly see those who really want to deliver.


The protection of programmes such as the graduate fast stream and the challenge on consultancy spend work well together as the public sector has to move away from a reliance on expensive external capability.


In these coming months and years we will finally need to embrace technology, outsourcing and self-service, allowing our line managers to own their teams and have responsibility for the welfare of their staff. Consequently, HR teams will inevitably shrink. Public sector HR business partners will be seen as unnecessary overheads and our enthusiasm to be ‘strategic’ will be replaced with a need to be realistic.


Dean Shoesmith, president of the Public Sector People Managers’ Association and joint HR director for Sutton and Merton councils


In the main the proposed reduction would appear to affect central government departments more than local authorities, although many of the proposals appear to be in outline and not fully explicit yet.


From a local government perspective there’s mixed news, but the immediate good news is no reduction to the formula grant – the main funding for local authorities. That said, there could well be some impact on current schemes that are grant-funded as the cuts include £1.165bn, and this may have implications for those schemes and people employed to deliver those scheme.


There could be implications arising from the £836m reduction in funding for the department for Business, Innovation and Skills, especially if funding is withdrawn for basic skills development, which has been a key factor in supporting improved service delivery. HR will therefore need to think creatively and use innovation to ensure there are education, training and employment opportunities stimulated within local economies and communities to assist national effort to embed the economic recovery.


Roger Seifert, professor of industrial relations and HR management at the University of Wolverhampton Business School


These savings are only partial, since if the cuts mean job losses (and they will) then that individual will cease to pay tax and will claim benefits, thereby creating more costs and less revenue for the state. As the level of demand drops there is a real danger of a further recession, this time driven by unemployment and low economic growth.


As far as HR is concerned, we know it will turn into a much tougher proposition as jobs are lost, work intensified (with more stress and absenteeism), and union reaction. HR will struggle to cope with the demand for its services, and like most other ‘backroom’ activities will be cut back itself.


HR may find it hard to maintain any notion of impartiality in dealings with staff, and may suffer a blow to its status within organisations.


Sian Thomas, former NHS HR director and chief executive of membership organisation Synuron


It really is only the tip of a very big iceberg and what people will be pleased about is that it shows there can be pain-free cuts in these big government departments. These cuts give HR professionals in the public sector a signal that recruitment and labour costs need scrutiny, including consultancy fees, which need real time reporting to the senior leadership for them to be managed.


We need to have a focused effort again on protecting jobs, especially for graduates, and it is good news that some investment in schools and colleges was protected. Talented HR professionals will now begin to create efficiency programmes which take out cash, while motivating their staff. The big danger of freezing permanent jobs is that unit labour costs could rise if employers don’t have the systems to manage flexible workers.


Taking money out of budgets before people can spend it is the best way to save money, and we are early into the fiscal year and I suspect many managers will have already planned savings. The challenge is always to take out posts quickly and unravel contracts or give notice soon enough. Every month that goes by the clock is ticking.


Richard Crouch, head of HR and organisational development at Somerset County Council


The cuts are as expected and most councils would have already made preparations in their own spending plans.


HR will be tasked to make direct savings off the pay bill so that funds can be redirected where gaps emerge.


These cuts are probably achievable, but it will take time to put some of them in place and there will need to be a cultural shift in many government departments. Many of the areas seem sensible as they have tried to avoid too many cuts in front-line services.


 


Kevin Green, chief executive, Recruitment and Employment Confederation (REC)


It’s likely that most of these changes will affect HR in some capacity as a climate of cuts will inevitably create a climate of uncertainty, which HR professionals will need to carefully manage. HR professionals could also be tasked with monitoring employee performance and may well need to make recommendations on where resourcing efficiencies could be made.


It’s also likely that a number of public sector roles will evolve and redeployment of staff will take place under the new regime which will need HR’s involvement for re-assigning staff, arranging training, etc. There is however a risk that the HR function might be seen as a back-office role, and that HR professionals themselves could be at risk of being examined as an area where cuts could be made.


It will also be important to challenge the common assumptions around efficiency. One area that the REC has focused on is challenging the pre-conception that agency workers are a cost that can easily be removed without affecting front-line services. The reality is that agency workers can play a crucial role in delivering front-line services – for example, through locum doctors and nursing staff. Looking ahead, it’s crucial that there is long-term and sustainable reform in the public sector rather than random, short-term cuts.

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