The real cost of redundancy

Audit Scotland has published a report on the cost of early departure schemes to meet the staffing cuts caused by austerity economics. However, the real cost to local services and the economy is much greater.
The report ‘Managing Early Departures from the Scottish Public Sector’ states that:

“Scotland’s devolved public sector has been spending about £280 million a year on early departure schemes. This has helped reduce the size of its workforce, encouraging over 14,000 staff to accept early retirement in 2010/11 and 2011/12.”

They make a number of reasonable recommendations on best practice in managing early departure schemes. They also highlight the disproportionate amount spent on early retirements for senior staff. Packages averaging over £100,000 represent 40% of the total cost. There are also variations between services as this exhibit shows.

This is all very useful, but it is only part of the picture. We know that over 50,000 jobs have gone from the public sector in Scotland since greedy bankers caused the crash in 2008. This means that most of the staffing cuts have come from natural wastage. The consequences of not filling vacancies can be seen in local services. Delays in planning applications, the 15 minute care visits and of course pot holes in the roads. These are just a handful of examples highlighted in the media in recent weeks.

It is also poor value for money. UNISON has consistently argued for an alternative to austerity economics. Growing our way out of trouble: UNISONs alternative budget for jobs and public services published in March says:

• on average every redundancy creates £29,400 in additional costs to the public sector as well as undermining morale and productivity

• most of the cost of employing a public service worker is recouped by the state through increased tax revenues and reduced benefit payments

• economic research shows that for every pound spent on local public services, 64 pence is re-spent in local economies, supporting jobs and businesses

Every job lost also costs the local economy. These workers no longer have the cash or the confidence to spend in the shops and on services. It is that lack of demand, as the IMF highlighted yesterday, that is holding back growth and has resulted in the longest and deepest recession this century. Putting the human cost to one side, this is real cost of redundancy.