The Costs of Defence - Analysis of the NAO Report into the MOD Civil Service

When it comes to discussing how to save money in the Defence budget, one of the most common themes emerging on comment sections of newspaper websites is the refrain ‘sack all the civil servants who just sit behind desks’ or words to that effect.

These comments are usually accompanied by tired clichés like ‘the SA80 is known as the Civil Servant – it doesn’t work and cant’ be fired’ and how they have no idea what it is like on the front line and our poor soldiers have boots that don’t fit while fat cat civil servants get bonuses.  Attacking the MOD Civil Service is an easy win – few people stand up for them, few people like civil servants and frankly anyone who dares work for defence without wearing uniform is probably suspect?

There is a completely false public perception that during a time of large manpower reductions to the regular military, the Civil Service has gotten way without suffering the same pain. According to self-proclaimed experts, a large cull of these wastes of space would solve every military problem known to man (except whether to have your sleeves rolled up or down and whether jackets are tucked in or out).

The 2015 SDSR made clear that the Civil Service was to be heavily cut in order to meet financial savings targets, while the regular military headcount was to be preserved at any cost. This move sat well with commentators who were pleased at the prospect of seeing nearly 15,000 civil servants lose their jobs by 2020.

On 8 March the National Audit Office produced a report into progress to date in meeting these targets, and whether the MOD will hit the goal of having approximately 40,000 civil servants by 2020. The results are challenging and potentially difficult reading for those who take a long term view about defence.

The key fact emerging from the report is that the MOD does not think it can meet the requirement to cut 30% of its headcount, but that it can find equivalent savings from the wider civilian pay bill.

To all intents and purposes one of the key outcomes of the 2015 SDSR has been scrapped and replaced with a very different goal of finding savings without finding the same level of headcount reductions. This is a very welcome decision, that the report identifies has been reached for several different reasons.

Firstly, the challenge for the MOD in cutting headcount is working out what to cut and where to cut it. The 2015 SDSR began the process of reducing numbers by some large scale moves, such as reducing the number of locally employed civilians in Germany (where some 4,000 local civil servants were made redundant), to privatising or transferring departmental functions to other areas (for instance the Met Office now sits under BEIS).

But the problem strikes when you then try to work out how you can continue to cut and where to do so. As the report notes, MOD staff are spread across 570 different sites, and more than 50% of staff (roughly 25,000 people) work in  over 300 small sites with no more than 10staff present.

This diaspora is widely dispersed across the country (as the image below shows) and represent the hugely diverse range of areas where the MOD runs facilities. To meet the sort of headcount reductions demanded would be very difficult without closing these sites en masse.

MOD Locations in the UK

This would have a deeply damaging impact on defence and local economies-  often Defence is a major employer for a region (for instance RNAS Culdrose is one of the single biggest employers in Cornwall), and site closure will have wider economic ramifications.

The work done by locals on these sites is not nugatory – it is often intended to do things like guard duties (ensuring security), or local administration to support regular military units (ensuring people are paid, equipped and properly supported) or delivery of training (e.g. range safety wardens) or all manner of other small discrete tasks.

If you remove these people from the site, the need to do the work doesn’t go away – it merely gets passed somewhere else. Consequently it has proven extremely difficult to work out what can be done to reduce headcount across over 300 sites because the reduction would have a disproportionate impact on output.

The wider problem is working out what roles to cut without hurting Defence as a whole. Contrary to badly informed public opinion, the role of the MOD Civil Service is not to function as generic ‘admin officials’ but to work across a very broad range of skills and areas.

The table below, also taken from the report highlights just how diverse these responsibilities are, and how critical they are. For example one of the largest parts of the MOD Civil Service is the defence engineering and science function -without which the ability of the armed forces to operate globally would rapidly grind to a halt.

Career Areas for MOD Civil Servants

These assets are also spread across the complex mixture of organisational boundaries that make up Defence – for example nearly 23,000 Civil Servants work in Front Line Commands doing very different work. There is not a homogenous group of individuals doing nearly identical work and outputs that can be merged to be more efficient. The role of a junior admin assistant in a barracks near Inverness is utterly different to the work of a project manager working in Navy Command in Portsmouth. The scope to rationalise the workforce is very difficult without directly harming outputs.

A further challenge is that of retention and demographics. The Report pulls no punches in noting that across the MOD there are no less than 57 ‘pinch points’ for civilian staff at the moment. A pinch point is an area of critical shortage which could have major impact on the ability of Defence to deliver. This is not about a shortage of paperclip counters, but a real shortage of staff with skills that take decades to acquire – for example at the moment there is a shortfall of 1,650 staff in areas such as nuclear engineering, finance and also programme management.

While these areas may perhaps lack the glamour of the military pinch points like special forces operators, pilots or Principal Warfare Officers, they are still a vital part of ensuring UK security. A failure to secure sufficient nuclear engineers calls into question the long term viability of the nuclear deterrent and submarine force -one of the most central planks of UK security policy.

These pinch points are coming about for a variety of reasons, but one of the most challenging parts of the review to read is the looming demographic timebomb facing the Department. The report notes that today roughly 55,000 people work for the MOD, of whom 47% are aged over 50 (up from 41% in 2010). By contrast just 11% of the workforce are aged 16-29.

At the same time though the MOD is losing proportionately more 16-29yr olds than it is over 50s. A recent survey showed that in 2018 12% of the 16-29 year old bracket left the MOD, compared to just 5% of staff in the 30-59 bracket.

The MOD therefore has the double problem of a rapidly aging workforce, while being unable to recruit and retain a younger generation to replace them. This raises serious questions about the long term sustainability of skills and knowledge given that there seems to be no coherent long term management plan to replace them.

In previous years staff had their careers closely controlled by HR, who would move them into posts at an appropriate point to help fill roles and ensure skills were developed. Someone entering as a junior intelligence analyst (for example) could expect to be moved regularly within their world and develop as a deeply specialised analyst over 20-30 years.

By contrast the modern system based on ‘core competences’ gives staff the freedom to move where they wish, but removes any ability for central HR planning to fill core roles or develop cadres of specialists. This makes it harder for the workforce planners to know where they can get qualified staff from to fill gaps (a major issue for more niche or senior roles).

At the same time staff are leaving due to poor pay and conditions. While more senior staff benefit from significantly better pensions (a likely reason why so many over 50s have remained, knowing they are on the protected final salary pension), new entrants have suffered with the combination of a new less attractive pension based on career average salary at a point when public sector salaries have been frozen in real terms for years.

Humphrey has met civil servants who due to the combination of tax and NI rises and pension contribution changes combined with a 1% pay rise ceiling are now taking home less net per month than they were in 2010. This is not conducive to feeling like you are a valued part of the organisation.

It is no wonder then that the MOD is struggling to retain staff – barely 20% of MOD staff feel their pay is adequate, and the report notes that recently 75% of electrical apprentices left immediately after completing their apprenticeship primarily due to the poor pay on offer compared to other employers.

At the same time the significant changes in terms of service meaning it is almost impossible to move around the MOD beyond your local area make it hard for civilians to move and develop. Years ago people had excess fares and relocation expenses paid for. Today, outside of a tiny number of roles it is impossible to secure this – someone in Liverpool wanting to broaden and move to a new promotion role in Bristol or London and thus stay longer and solve the skills gap has to self fund the entire relocation themselves – this is practically impossible for many junior CS, and is a major reason for the near total collapse of social mobility and staff moves within the MOD – this may have far reaching consequences.

Staff broken down by Budget Area

The MOD therefore is in an almost impossible position. Its workforce is aging, feels it is underpaid and the people it needs to keep and retain for the long haul to be the next generation of leaders, scientists and engineers are not staying. The view seems to be that why show life long loyalty to a system that seems determined to ruthlessly cull numbers?

But, the solution to increasing retention (e.g. better pay and conditions) seems outside the ability of the MOD to deliver – it has to find over £300m in savings from the civilian pay bill (which is approximately £2.5bn per year) without being able to reduce staff due to the damage this will have on Defence outputs.

The challenge for planners is trying to find the combination of financial headroom to meet these targets and find spare cash to retain people. Part of this may come about from better defining elements of the Departments work – for instance more clearly understanding where scope may exist for rationalisation of sites or roles – but this is linked to wider decisions such as the Defence Estate Strategy – when the decision is taken not to close somewhere, this reduces the ability to cut these posts.

Alternatively future military headcount reductions, such as the long rumoured cut to the Army from 82,000 to 60-65,000 will result in significant freeing up of sites to close, and units to disband. This will free up a lot of local civil servant headcount for reducing manpower overall and savings.

The MOD has to think carefully about this and more widely about how it works to make best use of its management of information to understand what it wants its civilian workforce to do, and how they can be best managed to do this. It also has to decide how to balance off the twin challenges of cutting civilian manpower while also using civilians as a very attractive substitute for more expensive military manpower in many posts – this doesn’t necessarily drive coherent planning or behaviours.

Standing up for the MOD Civil Service is not a popular thing to do. Internet hardmen think that the Civil Service is a scandalous waste of public money, and don’t hold back from saying so. Humphrey has lost count of the abusive messages, comments and emails he has had for saying that the MOD has an amazing workforce full of brilliant people who deserve a damn sight more respect for the work that they do to keep this country safe.

The Mod has got really difficult decisions ahead of it, but these need to be made now to prevent problems in 15 years time. Based on the current evidence, unless major change is made to how recruiting and retention is handled, and how skills and knowledge are transferred in a coherent manner, the UK is at real risk of losing priceless hard won experience as half the MOD workforce retire, without any coherent ‘one for one’ replacement plan in place.

Just to stand still and keep MOD staff levels as they are is going to require a significant increase in recruiting now to generate staff with the right experience in 5,10, 15 years to replace todays officials. Unless major and likely politically unpopular changes are made to improve the offer, address pay and provide a platform where people want to join and stay, and not leave for industry, then it is no exaggeration to say that there would be exceptionally serious consequences for the security of the nation.  We need as a country to recognise that MOD Civilians are the ‘Fourth Service’ and treat them with the respect and appreciation that they so richly deserve.

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