Is the austerity programme causing brain drain at the Treasury?
The implimentation of the austerity programme has stripped out many very experienced staff at HMT. Could this explain some of the policy fiascos of recent weeks?
In his contribution to the Lords debate on the Financial Services Bill on Monday night, Gus (Lord) O'Donnell notably proposed that the big city institutions subsidise the salaries of those Treasury (HMT) staff working on financial stability issues.
I was not watching the debate, so do not know how seriously his remarks were intended. I very much doubt they would be welcomed by the city banks -- already criticised for paying their own staff too much. However, O'Donnell flagged a serious issue, which holds true for the entire Treasury workforce - and which the recent austerity drive is making particularly pressing - to the potential detriment of us all.
I left the Treasury last autumn after five very happy years. I can honestly say that I loved it right up until the point I left. The level of responsibility you can enjoy there is almost unparalleled. The stakes - both financial and political - can be staggering, and the access is unbelievable. Yet leave I did, as did many, many others of my cohort – those of reasonable service, broadly at the top of middle management, and, mostly male.
I would be willing to bet that the Treasury workforce is at least as highly qualified as those at the big city institutions or professional services firms. The scope of what you can work on, though, is much bigger, both in terms of financial impact and public profile. At no other institution could you recapitalise the banking system overnight; take 2.5 percent off VAT; or agree the departmental spending for MI6 or the Foreign Office. The Treasury more than holds its own on job satisfaction or workforce; the significant difference, then, between a Treasury career and one in the city (say) is pay.
HMT is, by some way, the worst-paid department in Whitehall - with the staff paid roughly £1000 less at equivalent grades than those in the Department for Culture Media and Sport. The argument for this is market dynamics: people want to work here therefore we can afford to pay less. This holds true to a point. One does not join the Treasury to become rich – and nor should one. Treasury officials are motivated by influence, power and an interest in politics (or economics or public policy in some cases). I'm not arguing that HMT salaries should keep up with the city. However, pre-bust, there was at least some compensation for seeing your pay fall way behind your non-HMT friends in knowing you were likely to be promoted more quickly. The explicit (so said the permanent secretary at at least one meeting I attended) Treasury career deal was that you traded lower pay for far higher influence - and accelerated promotion prospects.
When Osborne became Chancellor in 2010, he almost immediately announced a two-year pay freeze. This was accompanied by a squeeze on the administration budgets across the civil service – in HMT, the board agreed a quarter headcount reduction, which, because the Treasury has always had a notoriously high staff turnover, it decided to achieve through natural wastage rather than redundancies, taking the department down to under 1000 staff. This had the advantage of avoiding the demoralising effect of large-scale lay-offs - and, entirely coincidentally, saved them the cost of redundancy payments. The payroll was basically shrunk by abolishing posts when vacancies arose.
All this sounds fine if you work in a normal Government department. However, Treasury staff are highly marketable, being highly qualified and having done things few others would ever get to do. They are also, ideologically, far more likely to vote with their feet. Seeing their pay frozen and their promotion prospects wiped out, scores decided to try their luck elsewhere. The result was a huge exodus, particularly among those like me - men in their early thirties who might otherwise have expected promotion in the next few years. When you get to that age, your bottom line starts mattering more than the nation's.
So we left in, frankly, staggering numbers – taking our institutional memory and experience with us. We were broadly replaced with newly promoted people who, although very bright, were considerably less experienced. The impact across just the Treasury Financial Services Group – my last one before I left – was such that around 40 percent of the heads of policy branches – roughly five out of 13 people – left within the space of nine months. Coincidentally, this was the same group whose head was also the part time Director of Corporate Services. I'm not sure which bit of the job she paid more attention to, but the results in each case were certainly spectacular.
Across HMT, the numbers were similar, reaching such levels famously higher than McDonalds, to the point where that they actually had to recruit more policy advisers, to replace their overshoot in the head count reduction. These people were, for the most part, new graduates, with little experience of Government or economic policy making. Rumours were that up to 50 vacancies had to be filled.
This is not special pleading - you'd be hard-put to find an HMT staff member who does not support the austerity programme. No one I know thinks the Treasury should be different in this respect.
However, the implementation of it has decimated the Department charged with implementing some of the Government's most high-profile policies - stripping out many very experienced staff, at a time when the nation might otherwise need their skills. Whether that explains some of the policy fiascos of recent weeks, I don't know. I'd like to think not - but I suspect, one way or another, we will all pay several times over for it.
James Dowling is a former Treasury official. He is now a public affairs consultant working for Fleishman-Hillard, specialising in financial services and a member of the Conservative Party. He writes for commentator in a personal capacity
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