CB(13)12
CIVIL SERVICE COMMISSION
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FINANCE OPTIONS
Issue
1. In endorsing the budget for 2013/14, the Board agreed that it should take a detailed look at the options for efficiency gains and cost reductions at a future meeting. This paper considers:
· How might we reduce our costs and improve efficiency?
· How can we stay within our allocated budget if our workload increases?
· What will be the least damaging way to accomodate a 8% cut to our resources in 2015-16?
Timing
2. Routine.
Recommendations
3. Since our last discussion the Cabinet Office has confirmed that there will be no change to our budget allocation until 2015/16 when they will be looking for an 8% reduction. This is, therefore, very much a preliminary look at where we spend our money and the scope for savings. No decisions are needed at this stage. Final decisions will need to be taken in the context of two years time.
4. We recommend that the Board:
· notes the main areas of expenditure in which savings may need to be made, and the options and limitations associated with them;
· agrees that the question of billing departments direct for the cost of Commissioners’ competition fees be discounted at this stage (paragraph 14a);
· agrees that the Secretariat should work with departments, on a pilot basis, to see whether it is possible to construct a reliable forecast for the number of competitions in 2013/14 and evaluate that in light of experience (paragraph 14b);
· agrees to work with the Secretariat to refine the estimate of what a reasonable length of a competition is, to see whether there is scope to define a baseline against which over-runs could be billed to departments (paragraph 14c);
· tasks the Secretariat and the First Commissioner to review the impact on other Commission business of the First Commissioner taking on more competitions (paragraph 14d);
· tasks the Secretariat to review the risks and advantages of not chairing external Pay Band 2 competitions (paragraph 14g) and of targeting the competitions we decide to chair towards high risk departments (paragraph 14h);
· agrees that further discussion of the possible opportunities for efficiency gains and cost reductions should take place in the following timeframe:
o Commissioner Board remuneration (paragraph 12) – in July, as part of the wider review of the Commission’s governance structures;
o internal competitions (paragraph 14e) – in September, as part of the wider review of the protocol on senior appointments;
o pooling the resources of OCPA/CSC (paragraph 14f) – in September, as part of the wider review of the integration arrangements;
o compliance monitoring (paragraphs 15 and 16) – June and December, in line with the review of KPMG’s performance and results;
o Code audit (paragraph 17) – May, as part of the wider consideration of Code issues; and
· in respect of staff resources (paragraphs 18 to 20):
o notes the complex nature of the Commission’s finances, because of the way we currently account via the Cabinet Office on our own budget and that of the other independent offices;
o endorses the Chief Executive’s recommendation that, if Cabinet Office is willing, the four budgets should formally be merged and accounted for as a single block; and
o agrees to consider opportunities for greater efficiencies and cost savings in light of revised Board report format and performance against targets.
o agrees the Secretariat reviews the option of maintaining its own bank account and its own accounting processes (paragraph 21).
Detail
The role of the Commission
5. The rest of this paper looks at the detail of the current budget and at how and where savings might be made. Its underlying assumption is that the next round of savings will be made by finding efficiencies from a number of Commission budgets.
6. There is, however, the prior question of the Commission’s role and at what level of resource the Commission’s work becomes unsustainable. The last substantive cuts in the budget (20% cut across the “Independent Offices”) were achieved largely by putting the roles of Commissioner for Public Appointments and First Civil Service Commissioner in one person (about a 40% saving on salaries) and by merging the two secretariats (about a 30% saving on staff salaries). It seems unlikely that anything further on this side is available, so we may well need to examine over the next two years more fundamental questions about the Commission’s core functions and what we regard as the irreducible minimum of chairing competitions and audit to enable us to fulfill our legal obligations.
7. None of the options is very palatable, but we should timetable in a more fundamental discussion of our role over the next year to inform the discussion about efficiency savings. This may be prompted in any case by the Triennial Review (time and form still unknown).
The current budget
8. The Commission currently has a gross budget of £1,496,664 (increased for 2012/13 to £1,563,664) of which £363,664 represents the top-sliced portion retained by the Cabinet Office to cover the cost of accommodation, IT and other facilities management services. We therefore have a net budget of £1,133,000 for 2013/14, broken down as at Annex A. We have the same net budget for 2014/15 but need to look to achieve 8% savings in 2015/16 (a reduction of £90,640 to £1,042,360).
9. The major costs are staff salaries (£661,784 before recharges to other independent offices – about which, more below), Commissioner Board fees/First Commissioner salary (£179,224 before recharges, £131,326 net[1]), Commissioner competition fees (£245,835) and the audit arrangements (£256,050, of which the lion’s share is tied up with the KPMG contract). While we can – and should – look to make savings across the board in the smaller budget heads, it is within these four areas that we will need to make the greatest inroads in order to achieve the £90,640 savings for 2015/16.
Commissioner Board fees/First Commissioner salary
10. Commissioner Board fees – the fees that Commissioners receive for attending and preparing for monthly Board meetings and Standing Committee meetings but NOT for chairing competitions – have remained static since before 2008. The First Commissioner’s salary has remained static since David Normington was appointed as the first dual post-holder of the role of First Commissioner and Commissioner for Public Appointments in April 2011; and his salary is 40% less than that of his two predecessors.
11. The Board is aware that David has decided – in the first instance – only to make one new Commissioner appointment this year, rather than two to replace the two Commissioners whose term comes to an end in July, but to keep the situation under review. This will create a small reduction in the expenditure under this heading (£8,000), though not as much as 8%. The total size of the Commission after July 2013 will be 10 Commissioners compared to February 2010 when there were 13 Commissioners (and 1 Commissioner vacancy unfilled).
12. More generally, the ARC recommended that Commissioner remuneration be reviewed as part of the wider review of the Commission’s internal governance arrangements (scheduled for July). We recommend that further consideration of the scope to make efficiencies in this expenditure heading is deferred until the July discussion so that the issues can be considered in the round.
Commissioner Competition Fees
13. This is the most volatile element of expenditure (it is dependent entirely on the number of competitions) but it is also the one over which we have the least control (the number of competitions is dictated by Departments rather than by the Commission).
14. We have identified eight possible options for managing expenditure under this heading, each of which have a mixture of pros and cons:
a) Transfer the cost direct to Departments
On the basis that he who calls the tune should pay the piper, it has occasionally been argued that Departments ought to be expected to pay direct for the services of a Commissioner chairing one of their Boards as an incentive to them to make efficient use of the ‘service’. (This is what happens in the public appointment contexts where Public Appointments Assessors chair competitions.) Commissioners have, however, been wary about this option in the past, on the grounds that departments in effect paying their regulator direct could be perceived as inappropriate. It is also possible that charging Departments for Commissioners’ involvement would lead departments to decide to withdraw from the Top 200 Protocol, under which the Commission regulates all internal competitions at PB3 and above. We recommend that the risks of charging departments being misconstrued outweigh the possible advantages and that this option should not be pursued further at this time.
b) Agreeing an expected quota of competitions per department and charging them for additional ones
To make costs more predictable, an alternative might be to agree with individual departments at the start of the year how many competitions they anticipated in the year ahead and charging them for any competitions over and above this level. This would have the advantage of reducing the volatility of the Commission’s costs in this area (we would be able to predict with certainty what costs we were going to incur) but would have some of the same problems associated with it as option (a) albeit only where forecasts prove wrong. And for small departments, the scope for significant fluctuations arising from a single person’s personal circumstances creating a vacancy might make this an unworkable option. We recommend that the Secretariat work with Departments on a pilot basis to see whether it would be possible to develop a reasonable forecast at the start of 2013/14 and to assess this, at year end, against experience. Depending on the outcome of that pilot, this option to be considered for future financial years.
c) Transfer the excess costs to Departments
A further variation on option (a) would be to charge Departments for any excess costs associated with competitions. At present, we estimate that an external competition will take four days of Commissioner time and an internal competition will take three days. If Departments were charged for over-running, this might be an incentive to greater efficiency in the process. For that reason, this is an attractive option – it doesn’t have the same level of risk associated with it as transferring the whole cost to Departments and could have an incentivising effect. In reality, however, it is likely to make only a marginal difference to our expenditure – the number of competitions that have run over the 4 (or 3) day estimate so far in 2012/13 is six, so would save only £4,400. Given the need to administer the system of billing departments, it is possible that the actual saving to the Commission would be even less. For this reason, it is recommended that this option is not pursued for the moment, but that the number of competitions over-running the three and four day limits be kept under close review over the course of the next year. In addition, we recommend that Commissioners work with the Secretariat to review the estimate of what is a ‘reasonable’ length of time for a competition to take to see whether three and four days remain the appropriate figures to base our budget estimates (and any future charging for ‘excess’) on.
d) First Commissioner doing more competitions
Unlike the other Commissioners, the First Commissioner is paid a fixed salary and the costs associated with him are therefore unaffected by the number of competitions he chairs. If he did slightly more competitions, that would reduce the number of competitions for which other Commissioners were required and therefore the cost in competition fees for those competitions. However, there would be an opportunity cost in this, which we would need to work out carefully before assuming that it is a viable solution: time spent by the First Commissioner chairing competitions is time not spent on other business, so we would need to examine carefully the likely impact on other objectives in the business plan. In addition, each competition chaired by the First Commissioner also takes up a proportionate amount of Principal Policy Lead time providing secretarial support, again, this would be time not spent on other business. We recommend that the Secretariat and First Commissioner review the impact of this option and, if there are ways of implementing it without significant adverse impact on other areas of the Commission’s business, it should be pursued.
e) Not chairing senior internal competitions
At the moment, the Commission has agreed with the Government that it will – in addition to the functions assigned to it on the face of the Constitutional Governance and Reform Act 2010 – chair internal competitions at Director General and Permanent Secretary level. This year so far, we have been asked to chair 8 internal competitions in addition to the 129 external competitions. There would be a cost saving associated with withdrawing from internal competitions altogether (estimated saving £9,600 per annum). Equally, however, there could be a reduction in the Commission’s overall effectiveness if its visibility of the totality of senior appointments was reduced. The Board agreed, as part of its business plan for 2013/14, to review the Protocol that governs its involvement in internal competitions by September. We recommend that the question of whether – and how – to achieve cost savings in this area is considered as part of that Review.