Government is right to start tackling the knotty issue of civil service pay

Amid leadership chatter and reports of Westminster in stasis, chief secretary to the prime minister Darren Jones has been pushing ahead with some welcome changes to the way the civil service works. The most recent news, coming on top of the announcement of two taskforces and new departmental delivery units, takes up the IfG’s longstanding recommendation for performance-related pay progression.

The current pay system is a mess

Current civil service pay structures incentivise damaging behaviour. In theory, there are ‘bands’ of pay for every grade. External hires to the civil service can make use of those bands, negotiating their starting salary within them. For most civil servants through, those bands are a fiction. You start at the bottom and stay at the bottom. No matter how effective you are at your job, the existing structures don’t allow any movement up that band.

Pay increases (uplifts to the band) do happen each year, but for many years were below inflation, so real terms pay has fallen for all civil servants, and by 24% for senior civil servants since 2010.

As rational people, you can expect civil servants looking for a pay increase – or simply to avoid seeing a fall in their real terms pay – to take action. Realistically this means moving departments (some pay more than others for jobs at the same grade, and if you move back to your original department you can keep the higher salary), or seeking promotion – but getting promoted within an existing team is incredibly difficult; it’s not enough to be good – usually a vacancy needs to become available at the grade above, as the amount each team can spend on headcount is tightly controlled. 

Two things happen as a result ,and both are highly damaging for the civil service. The first is grade inflation – where civil servants are promoted more quickly, or jobs advertised at a higher grade than they might otherwise have been, in order to compensate for pay restriction and stop people leaving altogether. The second is high turnover, which has long been a problem in the civil service. It damages institutional memory, expertise and productivity, and brings with it higher costs of recruitment and training. 

The government’s most recent announcement is a good start

Darren Jones has announced a change to that messy system, introducing performance-related pay progression for senior civil servants. In practical terms, it makes pay bands a reality for top civil servants, and so adds a third option to moving departments or seeking promotion: perform better. 

Jones said in January, and again this week, that this is about “rewarding the doers, not the talkers”. It’s a laudable goal, but these changes are obviously insufficient to get there.

The money involved is small (1% of the overall senior civil service pay bill), and the culture around performance management is weak, especially so at senior levels and in the centre of government. The rewarded doers should not be those who either ‘fit the mould’ – looking, sounding, and acting like their seniors – or  those who pull off impressive feats of personal heroism without developing their teams and stewarding the system around them. More work is needed – including new models of performance management and a change in culture to take it seriously – to avoid that happening. And there remain many other urgent issues – from pay falling behind comparator groups to the development of a clear strategy for the size and shape of this top cohort.

The vast majority of civil servants are also not in the senior civil service. The Cabinet Office has said it would look at extending pay progression to all grades, and it should either do so now, or run and publish a quick evaluation of the current changes to inform a wider roll out.

However, it can be far too easy to pick holes and point out flaws. This is a good move by the government, and one we should all welcome.