In defence of 'Fat Cats' - MOD travel and 5* hotels...

There are certain inevitable news articles out there that use statistics to make an easy headline. One of these is articles involving travel expenses and remuneration figures – particularly when it involves the Public Sector.

The Mirror has run a story  suggesting that the MOD has ‘wasted’ significant sums of money on staying in expensive luxury hotels overseas. According to the paper this came out of a total spend of over £205 million on travel last year. The inference in the article is that this travel is exclusively being done by civil servants and fat cat bosses, who are living it up while our brave boys are struggling for boots and bullets. Is this accurate, or is there more to it than meets the eye?

Business travel is a necessary evil for many large organisations, particularly those who operate across the world. Although to date Humphrey has not been able to find the specific FOI request filed to generate these answers, it is, based on the figures quoted, almost certainly going to cover the entirety of Defence, meaning the armed forces as a whole, and not just the MOD Civil Service.

The first key point to note is that this £205m when set against the total defence budget of £37.6bn represents approximately 0.5% of Defence spending. In other words, its an extremely large number, but in the context of Defence, this is still a very small number.

Secondly, this is a number that is getting smaller year on year. While the Mirror refers to a total spend of £205m, an Independent article from 2016 refers to a total spend of £222m. In the intervening two year period the MOD has managed to save £17m, or nearly 10% of its overall travel budget. Sadly the headline ‘MOD staff continue to operate globally while reducing travel expenditure by 10% in just two years’ is unlikely to make the front page.

 The MOD is a global organisation and it works across every continent on the planet, and has relationships with the majority of countries. As a business it has to cover everything from sending troops on exercises and operations, where they may need to be put up in hotels, to engaging in complex business contract negotiations or handling industry issues. It also works extensively in the international diplomatic environment, with many of its staff engaged in overseas talks and operations. Defence has a global vision, which means needing a global presence and a travel budget to support this.

But, having a global vision does not mean that the military and civil servants get to lead a life of luxury in glorious hotels around the world. It is not the case that civil servants lounge around all day trying to decide whether to justify a week in Paris or Tahiti, and whether to stay in the lovely 5* as usual or slum it in the more edgy 4* round the corner. Instead most defence travel involves travelling on the cheapest possible tickets (usually fixed time only trains) and ending up in remote budget hotels. If you listen to some of the horror stories of when the system has done the wrong thing, it has led to staff checking into some very ‘odd’ places indeed…

There are substantial checks and balances built into the system, particularly foreign travel, that make it very hard to abuse the system. Booking is done via a central booking organisation, which has a wide range of rates and hotel booking options. These are usually negotiated to combine the best value for money with the flexibility MOD staff sometimes require when making uncertain travel plans.

There are so-called ‘cap rates’ (e.g. budget ceilings) in place for every location which set out the maximum that can be spent on a hotel in a local area, along with subsistence rates too. These rates are usually low, and usually stretch to a travellodge or Ibis type experience at best. Please do not think that the normal business trip for an MOD member of staff involves utter hedonism and luxury.

So, why are there these reports that the MOD has managed to blow so much money on luxury hotels around the world – what could cause this to happen?  There are several reasons why travel may sometimes be more expensive than planned.

Firstly, last minute travel requirements can emerge – a pressing need to go to a long sought but impossible to pin down bilateral meeting, or an urgent technical issue emerges which needs to be resolved. If you must unavoidably book at the last minute, costs rise compared to booking months in advance on a fixed rate.

Secondly, depending on when and where you have to travel, there may be no cheap hotels left in town. If you must go to a location where a major event is going on, and there is only a finite amount of hotel rooms, then rack rates will rise to meet demand. If you need to go to Dubai the week of the Air Show, then the chances are that rates will be significantly higher than the week before or after. What this means is sometimes, even if you have a cap rate, the only places which have rooms left are the really expensive places.

The same applies in the UK – if you discover a pressing need to be in a UK town in a hurry on a night when a lot is going on, then whether you want to or not, you’ll need to pay the going rate for a room. If you review the data at this link for October last year for senior staff travel and open the full spreadsheet, there is a helpful comment showing why policies were breached. It shows most cases were to take the cheapest possible accommodation or travel option.

The third issue is more practical, and that is staff safety. MOD staff are required to travel across the globe, often into countries where there is a substantial risk to their personnel security. In these regions there may well be local advice from the Embassy or High Commission to only stay in certain areas, or in certain hotels, due to their meeting the necessary security precautions.

Anyone who has been to major hotels in the Middle East will be familiar with the layered security, checkpoints and other deterrence effects put in place to prevent audacious attacks. While the cost may be higher, the litany of attacks by terrorists on various locations frequented by Westerners, such as hotels, across the world, means that there is a real risk.

As an employer MOD has a duty of care to its staff and needs to ensure that if they travel for work purposes then they will not be put at undue risk. This means staying at locations where staff will be safer. This means not staying in some hotels which may be cheaper, but which also pose substantial risks to staff safety and security.

Finally, there is a practical point around subsistence. The figures quoted for the stays will almost certainly include full food costs. The reality is that hotel stays, particularly in the Middle East, are expensive. A cost of £40 for a hotel buffet meal is about normal – and while it may be easy to say ‘oh but go outside and get something off site’, the reality when you are in a remote hotel away from the main part of town and don’t speak the language is that this is great in theory, less appealing in practise. As such, expenses get racked up by staff looking to get their breakfast and evening meals – not to kick the arse out of it, but merely eat as normal.

It is very easy to sit here and be ‘outraged’ that this money gets spent, but the reality is this sort of ‘luxury’ travel is experienced by very few MOD or military staff.  Please don’t think MOD staff are sitting in pools right now contemplating how to make squaddies lives even more miserable, because that simply isn’t true.

Global travel underpins global work- Image by Ministry of Defence; © Crown copyright

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Business travel expenditure is a significant expense for practically every business, and when you have a workforce of nearly 250,000 people (regular and reserve military and civil service), based across the globe, then its perhaps unsurprising that money needs to be spent on it. Frankly, the fact that the amount spent is so small relative to the total budget and staff headcount is quite impressive.

This sort of constant sniping for expenditure without setting accurate context is unhelpful because it does not reflect what is going on. If anything Defence is perhaps too controlling to prevent people wasting money on travel. For example, Humphrey once witnessed a 3* officer must personally request approval from a 4* officer to fly on a £65 budget carrier flight overseas to comply with the approvals process.

While this level of top down control has relented a little, there is still a strong sense of only spending the bare minimum necessary to get the job done. Sometimes this can be taken too far, for example a loyal desire to book a hotel within a capitation rate resulting in a bigger than planned spend as this rate didn’t include breakfast which needed to be purchased, or was outside or walking distance to ensure that a taxi had to be taken instead. Sometimes the desire to keep the headline cost down can lead to inadvertent cost rise overall.

There is perhaps one final point here that may be unpopular but does need to be considered and it is that of staff morale and retention. As noted, most stays are in cheap budget locations which provide a basic functional presence and get the job done, which is fine for a night. But for military and civilian staff expected to travel a lot, asking someone to spend a lot of time on the road in a cheap hotel away from family and friends, and on a very tight subsistence budget, this can over time eat into the bank of goodwill.

If you want your workforce to feel motivated and valued, even when away a lot, sometimes making their life slightly easier (e.g. paying an extra £10 a night for a slightly closer in hotel with bigger room, versus saving up front but incurring £20 of taxi costs) generates a bit of intangible goodwill that makes people feel valued.

The feeling valued part is critical because the MOD is in a constant battle for retention of talent. The sort of thing that makes people leave is not the big stuff, but the little things – the unnecessary hassle to get rebates for legitimate expenses, or the sense of being expected to spend large amounts of time on the road in often poor accommodation without anything in return. People want to feel valued, but also trusted – an overly controlling parsimonious approach can backfire and make people leave and go elsewhere – taking years of experience and contacts with them, and costing more in recruitment and retraining costs.

A similar issue occurs with the subject of civil service bonuses, a perennial source of complaint from the media and public, but something where the reasons for its existence are simply not properly understood – or communicated effectively.

The bonus scheme emerged in the mid 2000s under the then Labour Government who wanted a means to reduce the pensionable pay bill of the Civil Service and save money in the medium term. The result was the invention of a scheme that took money that previously would have been awarded in the annual pay rise, and thus qualified for pensionable earnings, and instead made it a non-consolidated lump sum payable in a variety of ways.

The system is intended to reduce the total bill to the taxpayer, but has caused considerable upset among many civil servants, many of whom are on low paid jobs and struggling financially. The article goes onto state that the Civil Servants get these bonuses, yet the military do not, and that the military have apparently faced years of defence cuts and pay freezes.

Sadly, this is where the article becomes more questionable in its accuracy. The reality is that the Armed Forces already enjoy the highest pay scales of any part of the Public Sector. They also enjoy effectively twice yearly pay rises, as they move up the annual pay spine (progressing up a point gaining increased salary) and also get an annual pay award too, which has been similar to the rest of the public sector.

No one begrudges the military the pay they receive – it is well deserved and earned for often very difficult and dangerous work. But to suggest that the civil service is somehow sitting there getting huge bonuses while the troops do not get anything is dangerously close to a lie.

The military and civil service overall packages are also extremely different, with the military qualifying for a large range of benefits such as deeply subsidised housing, railcards, a good health system including dental treatment and a lot of other benefits that the civil service do not get.

That is accepted as part of the deal -you stand ready to put your life on the line, and the nation provides you perks and benefits. But, to civil servants, many of whom earn far less than their military peers and for whom the idea of a mortgage, or paying off student loans seems a far off pipe dream, the idea that they are somehow fat cats will provoke snorts of derision.

The biggest irony is that were you to speak to most MOD civil servants, they would overwhelmingly vote to scrap the bonus system in a hearbeat. They understand and accept that it is government policy but speak to them candidly and there is enormous frustration, and indeed upset, at what the phrase ‘bonus’ means for them personally. Many don’t like it; they didn’t want it inflicted on them and they’d rather get the money in their annual salary and its long term pension uplift and not as a one off taxable lump sum.

To many junior staff, they have reported being seen by their non-government peers as being somehow in receipt of bankers levels of bonuses, or seen as fat cats. The fact that the average junior bonus is, at best a few hundred pounds before tax (full amounts paid by grade can be found here) is irrelevant – in the eyes of their friends and neighbours, they are ‘fat cats’.

This then brings the final challenge together – plenty of civilian and military staff have enough of the challenging travel constraints or being expected to spend long periods of time away in not great conditions. They tire of the abuse they get from friends for being ‘fat cats’ and instead think why not leave and go somewhere that values me?

The risk is that the more people who leave, the weaker the corporate memory becomes, and the more skills gaps emerge in the work force. As experience walks away, and you have to recruit and retrain staff, the more expensive the total cost for your budget. In these circumstances, saving a few quid on a hotel bill quickly becomes a false economy if it has bigger impact on your overall workforce and skills.

It is absolutely right and proper that due diligence is exercised with travel – the MOD is spending public money and must not abuse this. But, it is equally important to understand that MOD travel is not about a tiny clique of fat cat civil servants swanning around the world in a life of luxury while squaddies starve. It is about securing the best possible use of resources to travel, only when travel is necessary and appropriate. It is not a life of excess and hedonism.