Loosening Defence Equipment & Support pay controls has brought down salary bills, says Jon Thompson, UK’s outgoing MoD perm sec

By on 06/04/2016
Jon Thompson, former permanent secretary at the UK's Ministry of Defence and now the CEO and first permanent secretary at UK's HM Revenue & Customs

Liberating Defence Equipment & Support (DE&S) from cross-civil service salary controls has cut the Ministry of Defence (MoD) agency’s staffing bill even as its workforce grows, outgoing MoD permanent secretary Jon Thompson has told Global Government Forum.

“The freedoms we’re giving to DE&S to set a new pay structure, to recruit staff, actually have seen DE&S begin to grow in numbers of people and the consultancy bill come down,” said Thompson in an exclusive interview.

“The deal we did with the previous chief secretary [to the Treasury] was that we thought the overall cost of DE&S could be reduced by 25%, but we needed the freedom to recruit more contract managers, client-side people, engineers, project managers, and wean ourselves off what was an enormous reliance on long-term contractors and third parties.”

At that time spending on consultants and contractors comprised half the total staff costs, explained Thompson: “That’s just not a sensible way to run a business. So we very specifically targeted key skills and put more money on the table – nuclear engineers, for example, we instantly increased the amount we pay by quite a significant amount, and unsurprisingly more people came to work for us.”

Since 2010, Treasury-imposed spending controls have capped pay rises, limited recruitment and constrained salaries across the civil service, leading to severe skills shortages in some fields; and the chief secretary to the Treasury’s approval is required in order to pay any civil servant more than the prime minister’s salary of £143,000. The measures were designed to bring down government spending – but the former chief of defence materiel, Bernard Gray, argued that they make it difficult for DE&S to recruit permanent employees with the skills it needs, forcing it to rely on highly-paid contractors and consultants and ultimately driving up staff costs.

After a failed bid to turn DE&S into a ‘GoCo’ – a Government-owned, Contractor-operated company – the 2010-15 coalition government approved a ‘DE&S+’ model under which the agency escapes many of these spending controls and may pay 25 people salaries greater than the prime minister’s. “We went to the market for a chief executive with a really significant salary,” commented Thompson – new DE&S boss Tony Douglas’s salary has been reported to be £285,000, with an additional bonus almost as large.

“We’ve just gone to the market for a really heavy-hitting director general of commercial,” Thompson continued. “This week we’ll go for a director general of nuclear who could earn more than £300,000 – but in a world where that’s running a multi-billion pound programme, overall the value for money argument for getting someone who’s got the capacity to do that is very, very strong.”

DE&S is meanwhile “making good progress” in improving its management of defence procurement, said Thompson, pointing out that “the National Audit Office will no longer do an annual report on the Defence Equipment Plan; rather, it’ll be put into the bigger [departmental] portfolio. That’s a really significant achievement for us in terms of controlling the supply chain and the Equipment Plan; it’s a significant endorsement of how far we’ve come”.

Read our full interview with Jon Thompson and watch a video of him answering five questions on learning from overseas.

https://youtu.be/m-dyTQo1ysQ

For up to date government news and international best practice follow us on Twitter @globegov

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About Matt Ross

Matt is a journalist and editor specialising in public services, policymaking, government and management. He was the editor of trade title Civil Service World from 2008 to 2014, serving an audience of senior UK officials; and the features editor of weekly news magazine Regeneration & Renewal between 2002 and 2008, covering urban regeneration, economic growth and community development. He has also been a motoring and travel journalist, and now combines his role as editorial director of Global Government Forum with writing for other publications including The Guardian and Planning magazine.

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