The Department's approach to reducing its headcount has been largely in accordance with good practice and, up to now, it has acted in a way that is consistent with value for money. However, the urgent need for the Department to cut costs means it is having to cut its headcount in advance of planning in detail how it will operate in the future, thereby risking making current skills shortages worse. The Department plans to cut its civilian workforce by 29,000 and its armed forces by 25,000. To meet these targets, the MOD has started a redundancy programme and a Voluntary Early Release Scheme, both of which run in several tranches. The most recent estimates by the Department are that the process will cost £0.9 billion and produce £4.1 billion in cost reductions (just over £3 billion net). The potential savings fluctuate with the timing of the redundancy tranches (a delay of three months to the second military tranche has reduced savings from this tranche alone by an estimated £100 million to £138 million to 2015). The Department now has to reduce the numbers in the Army by a further 5,000 by 2015 but has not worked out in detail how it will do this. Delays to the process erode the level of potential savings as the Department continues to pay salaries, benefits and contributions to pensions. Without real changes to ways of working, cutting headcount is likely to result in the Department's doing less with fewer people or, alternatively, trying to do the same with greater risk

The Ministry of Defence announced in the summer of 2010 that it had a funding gap of £38 billion over the next ten years. As part of the Government's efforts to reduce the deficit, the Department also needs to reduce its annual spending by 7.5% in real terms by 2015. It intends to achieve a significant proportion of its required savings by reducing its civilian personnel by 29,000 and its military personnel by 25,000, which it estimates will save £4.1 billion between 2011 and 2015. The Department is currently enacting a transformation programme to change its way of working in order to deliver on the Strategic Defence and Security Review priorities with fewer staff. However, the Department has put plans in place to implement reductions in its workforce before it has finalised its new operating model. The operating model will set out how the Department will meet its objectives in the future, but its reductions in workforce will be well advanced before the model is agreed. There is concern that plans to reduce the workforce have been determined more by the need to cut costs than by considering how to deliver its strategic objectives and that there is a risk of further skills gaps developing. This could make the Department increasingly reliant on external expertise with consultancy expenditure having already grown from £6 million in 2006-07 to £270 million in 2010-11.

This book explores the process by which defence policy is made in contemporary Britain and the institutions, actors and conflicting interests which interact in its inception and continuous reformulation. Rather than dealing with the substance of defence policy, this study focuses upon the institutional actors involved in this process. This is a subject which has commanded far more interest from public, Parliament, government and the armed forces since the protracted, bloody and ultimately unsuccessful British military involvement in Iraq and Afghanistan. The work begins with a discussion of two contextual factors shaping policy. The first relates to the impact of Britain’s ‘special relationship’ with the United States over defence and intelligence matters, while the second considers the impact of Britain’s relatively disappointing economic performance upon the funding of British defence since 1945. It then goes on to explore the role and impact of all the key policy actors, from the Prime Minister, Cabinet and core executive, to the Ministry of Defence and its relations with the broader ‘Whitehall village’, and the Foreign Office and Treasury in particular. The work concludes by examining the increasing influence of external policy actors and forces, such as Parliament, the courts, political parties, pressure groups and public opinion. This book will be of much interest to students of British defence policy, security studies, and contemporary military history.

The government published its Civil Service Reform Plan (the Plan) in June 2012 (www.civilservice.gov.uk/reform). It followed the publication of the 2011 Open Public Services White Paper (Cm.8145, ISBN 9780101814522) which called for a smaller, more strategic civil service that does less centrally, and commissions more from outside. The Plan has many themes in common with previous initiatives that attempted to reform the civil service, and adapt it to the changing needs of governments and public service users, but is arguably the broadest such reform programme since 1968. This Memorandum is intended primarily to inform the Committee's discussions with the leadership of the civil service about the Plan. Given that the Plan is less than a year old, it is not an evaluation of the reforms in the Plan, the progress made against them, or the implementation arrangements in place. It is designed to support the Committee to engage with the breadth of the Plan, so that they can use their influence to help ensure that its implementation improves efficiency, reinforces Parliamentary accountability and protects value for taxpayers and citizens. The Civil Service, in its present form as of 2012, employs 459,000 people across 106 departments and other bodies. The annual spend on Civil Service pay is £16 billion. The projected cost reduction for the Civil Service, between 2010 to 2015 is £80 billion and the projected reduction in the number of full-time equivalent civil servants over the same period is 110,000 representing about 23% of total staff.

This report finds that central government departments have spent around £600 million gross on the early departures of 17,800 staff in the year from December 2010. These costs are around 45 per cent lower than they would have been under the previous Scheme. After meeting the initial costs, departments will save an estimated £400m a year on the paybill. The time it takes departments to start seeing these savings depends on how quickly they can eliminate headcount-related costs, such as on IT and property. The net present value of the early departures to the taxpayer will be between £750 and £1,400 million over the spending review period, depending on the ability of departments to eliminate costs. This figure will also be affected by whether those leaving find comparable work and pay tax, or claim benefits. Of those departments that are reducing staff numbers, the proportion of staff released ranges from less than 1 per cent at the Department of Energy and Climate Change to around 16 per cent at the Department for Communities and Local Government. Departments used large-scale open voluntary exit schemes to release staff as quickly as possible, though this meant departments could not predict accurately which staff would leave. Older, more senior staff are leaving in the first tranches. This is partly because of deliberate restructuring, but also because those staff who have worked in the civil service for longer, or who are over 50, gain more financially from taking voluntary exit or voluntary redundancy.

This report by the National Audit Office on progress by central government departments in reducing costs concludes that departments took effective action in 2010-11, cutting spending in real terms by 2.3 per cent or £7.9 billion, compared with 2009-10. The analysis of departments' accounts supports the Efficiency and Reform Group's estimate that Government spending moratoria and efficiency initiatives, including cuts to back-office and avoidable costs, contributed around half of the figure, some £3.75 billion. However, the report warns that departments are less well-placed to make the long-term changes needed to achieve the further 19 per cent over the four years to 2014-15, as required by the spending review. This is partly because of gaps in their understanding of costs and risks, making it more difficult to identify how to deliver activities and services at a permanently lower cost. Fundamental changes will be needed to achieve sustainable reductions on the scale required. It is unclear how far spending reductions represent year-on-year changes in efficiency, or whether front-line services are affected; and the departments' forward plans examined by the NAO are not based on a strategic view. Departments' financial data on basic spending patterns is sufficient to manage budgets in-year, but information about the consequences of changes in spending is less good. Longer term reform is a Cabinet Office priority and departments will need to look beyond short-term cost cutting measures and make major operational change. Cost reduction plans also need to build in contingency measures to cover unexpected risks.

The Ministry of Defence is buying more inventory than it uses and not consistently disposing of stock it no longer needs. Between the end of March 2009 and the end of December 2011 the total value of the inventory held by the armed forces and in central depots of non-explosives increased by 13 per cent, from £17.2 billion to £19.5 billion. The Department estimates that for raw material and consumable inventory, such as clothing or ammunition, it has spent £4 billion between April 2009 and March 2011, but did not use £1.5 billion (38 per cent) worth. The NAO estimates that the costs of storing and managing inventory were at least £277 million in 2010-11. Furthermore, over £4.2 billion of non-explosive inventory has not moved at all for at least two years and a further £2.4 billion of non-explosive inventory already held is sufficient to last for five years or more. During 2010 and 2011, the MOD identified inventory worth a total of £1.4 billion that could either be sold or destroyed, but it was unable to information on the value of the stock that had been destroyed. MOD has already introduced improvements but strategies and performance reporting do not yet focus on effective inventory management. There are also few targets for monitoring the efficiency of inventory management. The Department has commissioned a review to establish and sustain more cost effective inventory management and plans to implement its recommendations by March 2013