Unless it’s all a joke and George Osborne is just messing with us, he will be announcing big public spending cuts today. Some of the first people to notice will be those working in the public sector. According to the ONS, around 20% of the workforce (slightly more if you include the nationalised banks) is employed by the public sector. Data released by the government last week, though, show that, in central government alone, the workforce is supplemented by 20,000 people who are not on the payroll but who nonetheless work in civil service departments.
The report divides these workers into agency staff, interims, specialist contractors and consultants. In truth, it’s often difficult to draw clear lines between these categories. Consultants and specialist contractors can become interims over time. The civil service is not especially good at managing contractors and giving them a tight brief. Once they are sitting at a desk it becomes all too easy to throw all sorts of tasks at them and before you know it, they have full-time jobs.
The figure given for the spending on staff who are not on the payroll is just over £2bn. This is a conservative estimate. As the notes in the spreadsheet concede, some organisations were unable to give the cost of non-employee staff and, if you look closely, a number of organisations give a number with no cost. The £2bn figure only covers the civil service departments. There will be contractors consultants and agency staff throughout the NHS and local government too.
The public sector workforce is like a series of concentric circles. In the middle you have the full-time permanent public servants, mostly employed by the civil service, local authorities and NHS trusts. Then you have a layer of fixed-term contract staff who are still employed public servants but without the same level of job security. Then there are the interim managers who are self-employed and often work through agencies. Many of these people cover senior roles and have executive responsibility. Some even hold jobs which would otherwise be Senior Civil Service posts. Moving further out there are the specialist contractors who, supposedly, come in to do specific projects but often end up doing full-time roles. The vast majority of these are in IT functions. Further out still are the consultants who, in theory, are only there to advise but, due to frequent scope-creep, can become indistinguishable from contractors.
And then there are all the people employed by the outsourcing companies doing what would, at one time, have been public sector jobs. Often these people are based on the same site as the civil servants. IT suppliers such as Accenture and finance back-office providers like Steria have large numbers of people who only do public sector work. Add to them the large public-sector focussed practices of the accountancy and consultancy firms and the number of people working for the public sector becomes larger still.
Finally, in the outer circle, are those people who are employed by firms who are not exclusively public sector focussed but who do a significant proportion of their work with government bodies.
So, while the number of people employed by the public sector is around twenty percent of the workforce, the number of people whose salaries are paid fully or partly by the public sector is considerably higher. Based on the civil service figures it’s not unreasonable to assume that the pay-packets of a further five to ten percent of the workforce are dependent in some part on government spending.
Government cuts will hit those in the outer layers first. Employment agencies are already suffering from the public sector recruitment freeze. Penna, which gets half its revenue from the public sector, issued a profits warning earlier this month. Many public sector organisations are frantically getting rid of their contractors, often without any thought to transferring skills and expertise to their permanent staff. Demand for IT contractors has fallen steadily over the last three months. Even before the job cuts start to hit the core public sector employees, many other people will have lost their jobs or seen their earnings reduced.
The ripple-effect of the spending cuts to be announced today will spread far beyond the public sector. The effects will be felt almost immediately by some, with the number of people being hit increasing as the weeks go by. Last week the CIPD revised its estimate of public sector job losses up to 750,000. Add in the non-employee jobs lost and it might well hit one million.