Revealed: The £16.4bn cost of central government pay rises

By Ian Dunt

Pay rises in central government have seen costs spiral upwards to hit £16.4 billion, according to official figures.

The figure amounts to a ten per cent increase in the cost of central government in real terms in the ten years to 2009/10.

“Increasing numbers of higher grade posts have led to much of the recent cost growth,” Amyas Morse, head of the National Audit Office (NAO), which conducted the report, said.

“The centre of government needs to review its ability to understand and challenge these management decisions.”

Staff numbers actually fell by one per cent during the period in question, but the number of workers rising to a higher pay grade forced costs up.

The NAO estimated that 35 per cent of the increase in staff costs could be pinned on salary increases and performance-related pay.

Performance-related pay increased from virtually zero in 2000/01 to around £200 million in 2009-10, accounting for around one per cent of the total pay bill.

Without a plan for how to reduce staff costs, hopes for extensive savings in central government were unlikely to be met, experts warned.

“There is also a lack of a structured approach to delivering the staff cost reduction required across government in the next spending review period,” Ms Morse said.

Natural turnover alone would be insufficient to reduce staff costs and the up-front cost of voluntary or compulsory redundancy schemes and early retirements would also hinder efforts to reign in budgets.

“It’s important to remember that we have already taken quick action to get a grip on civil service numbers and pay as part of our commitment to protect important front line services by reducing costs at the centre,” the minister for the Cabinet Office responded.

” We have frozen salaries, reduced bonuses and our freeze on external recruitment back in May 2010 has already delivered £120 million in savings.”