Jobs threat as councils face up to cash freeze

Local authorities will have to slash their white-collar pay bill by £1bn or 10 per cent over the next three years if essential services are not be cut, the Audit Commission warned yesterday.

That is the logical outcome of the Government's declared three-year freeze on council running costs, and a remarkable expansion over six years of 90,000 white-collar staff in councils between 1987 and 1993. The number of senior posts, including those of deputies and chief officers, has shot up by 60 per cent, the pay bill has risen by 85 per cent, and too many councils that paid over-the-odds to recruit more senior staff in the overheated labour market of the late Eighties have not adapted new circumstances.

The findings, the commission said, will come as a surprise to local government which believes itself to have been subject to ever tightening restrictions.

But white-collar staff rose 15 per cent to 730,000 over a period when manual worker numbers fell 25 per cent or 150,000 as competitive tendering took effect, and as falling school rolls saw teacher numbers fall by 50,000 or 10 per cent.

Only about half the increase can be explained away by new duties such as the council tax replacing the poll tax, contracting out, the introduction of community care and other centrally imposed changes, the commission said.

"Recent growth in staff cannot continue now local government faces budget cuts," and members face a more difficult task than ever before in "squaring the circle". Pressure on budgets is such that "essential services will have to be cut unless urgent steps are taken," the commission said.

That will involve managing both pay levels and staff numbers better, with the implication of pay cuts, redundancies, and salary reviews across the board as councils face the same "de-layering" of middle management that industry has undergone. Improved productivity may well also involve using fewer but better-paid staff, the commission said.

Some councils when cutting expenditure impose incremental cuts across the board regardless of service need. "Senior HQ staff often escape unscathed while the council freezes vacancies or cuts the number of front-line staff."

Councils have to ask three essential questions: "How many staff do we need? How much should they be paid? How can we get the best from them?" with a rigorous review of numbers, pay and performance. The report's recommendations chiefly hit the posts of "principal officers" - people on £18,000 a year upwards.

The commission's massive study found huge variations in pay with some staff in the same council receiving twice as much for a similar-sized job while pay rates could vary by 50 per cent for similar staff groups in geographically close councils.

Automatic increments, which reward the passage of time and ignore performance, should go. Regradings should have to be fully justified because of their knock-on effect in a culture where colleagues know each other's pay rates and in which fairness is valued above competition between colleagues. Pay supplements and non-pay benefits introduced in the late Eighties should be dismantled, and information technology should be used to flatten management structures, cutting out deputy, unit and team leader posts.

Many councils have started down this road, the commission said, producing pay bill savings of five to 10 per cent or even better without affecting front-line services, and an overall five per cent saving would produce £500m to the £1bn that looks to be needed to be cut.

9Paying the Piper, Audit Commission, £10