Opinion: New law needed to tackle millions wasted on public sector redundancy and rehiring

Those of us who exited the NHS as whistleblowers, given the bum’s rush and no cash, would not be expected to have much sympathy for the small army of re-tread NHS managers who have been ‘made redundant’ and then re-hired, sometimes doing essentially the same job in essentially the same area, having recently received a small fortune for notional ‘redundancy’.

3,950 NHS staff were made redundant between May 2010 and November 2013 and later re-hired, 2,570 of them on a permanent basis and 1,380 on fixed contracts. Last week’s published Department of Health accounts show that the average cost of redundancy packages since 2010-11 has been £40,646 while there have been 370 payouts of over £200,000, 596 of between £150,000 and £200,000 and 1,693 of between £100,000 and £150,000. The total cost, so far, is about £1.6 billion against estimates that it would be just half of that.

The reason behind the staggering cost of this management re-organisation lies in the creation, years ago, of the ludicrous ‘NHS Trusts’ which fragmented the legal entity of the NHS for all sorts of contractual purposes in an attempt to reduce the accountability of the Government for errors and underperformances in various parts of the NHS throughout the country.

Neither the scale and level of these pay-outs, and the demoralising effect which they have had upon both the public and the majority of the NHS workforce, were purely the outcome of performing this restructuring exercise within the prevailing ‘Trust’ structure.

The NHS Reorganisation legislation was not set about over a weekend and enacted the week after. I was ground out over two years. Whatever you think of the merits of the new system, there were, surely, simple measures which could have been taken to keep the vast amount of this money now used for second homes and endless cruise holidays within the public service. All that was necessary (and it should, arguably, still be done now in preparation for the next pointless reorganisation) was a simple Bill defining ‘public service management’ and declaring that, from a certain date, any pay-offs made to such persons who were re-hired in a similarly-designated position (be it in any Local or Central government department as well as any NHS Trust or regional arm) should have any prior redundancy payments severely-discounted according to a published scale.

* Councillor Tony Dawson is Lib Dem Shadow Cabinet member for Health and Adult Care on Sefton MBC . He is a former NHS middle manager and whistleblower who, in 1991, won a Judicial Review in the High Court against the NW Regional Health Authority for their improper dismissal of him.

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  • The money wasted by the NHS and other public bodies in this manner is an indicator of the astonishing level of managerial incompetence in the public sector. Worst of all, I believe is when senior managers of hospital trusts leave under a cloud with huge pay-offs then pop up in similar posts elsewhere within a matter of weeks.

  • Another important issue is of people’s jobs being redefined, or entire swathes of individuals being forced to ‘reapply’ to ‘new’ jobs with functionally identical roles but significantly reduced wages, pensions or other conditions. This predominantly seems to have affected individuals at middle and lower ends of the scale. When it comes to large organisations like the NHS, there needs to be a recognition at the highest levels that after any reorganisation the institution will need a recovery period measured in multiple years.

  • Peter It does not show managerial incompetence at all – at least not in cases where people are not re-recruited in similar posts as consultants. What it shows is the astonishing ability of accountants and their conventions to operate in self-contained silos, and the all-encompassing power of money values assigned to bend and direct policy. Declaring an interest, I retired early as a local government officer 15 or so years ago – I did not take any related consultancies. This was as a result of a reorganisation of my department calculated to save money. I would not be at all sure that it did save in the longer term, but I have little evidence one way or the other. As a Personnel professional, I believe John makes an important point. It is also worth saying that the evidence on performance related pay for complex jobs is that it doesn’t work. We are engaged in a race to the bottom, which has already been a disaster for many people.

    May I congratulate Tony Dawson on his whistleblowing – it is good to hear that some people go through with it. It can cut both ways, of course.

  • “Performance related pay for complex jobs does not work”. I never thought I would find myself defending PRP but it depends on what you are referring to when you say it does not work. Provided the objectives set by the boss are fair, achievable and measurable, there is no reason for it not working. I was an R&D director and I was subjected to PRP even though it was not known whether some of my projects were scientifically possible.

    PRP can be applied badly, for example, if performance ratings within a team have to fit a Gaussian distribution (to prevent them all being average) then that can sometimes be unfair to force fit. It can also lead to bad decisions for short term gain. Handled with care, it can be a good system. There are not many alternatives and they have their own problems.

    I do agree that people regularly having to re-apply for their own jobs is a nasty way of doing things.

  • The reason I compared PRP (for complex jobs) with PRP is because it has the same effect, ie focusing on one part of a job to the exclusion of others. It also, similarly, a bias towards things which are easy to measure, and although I know we can introduce surveys to examine qualitative features, it is not as effective in that area.

  • Stephen Donnelly 28th Jul '14 - 7:37pm

    Many of the new positions, some of them at very senior levels, have not been advertised. This adds insult to injury, not only has tax payers money been wasted, but we cannot be sure that best people have been chosen for key positions.

  • Tony

    I agree with your sentiment about the high payouts (£100k+). However “manager” is an often widely applied description.

    If you strip out those very high payments what is the redundancy payout to the rest? Significantly less than the £40,646. Some of the “more junior” members of staff may have been laid off and subsequently rehired after a gap or potentially doing a role where pay is less. I wouldn’t begrudge a junior or mid level member of staff who may have lost a job and either lost out on pay (or less security) or suffered a period with no income.

    The treatment of whistle blowers is a separate issue and best not conflated with restructuring. That is a huge issue that should be addressed separately.

  • Eddie Sammon 28th Jul '14 - 10:18pm

    A good article Tony and hopefully people with the power over these matters will do something about it.

  • Matthew Huntbach 29th Jul '14 - 9:35am


    Provided the objectives set by the boss are fair, achievable and measurable, there is no reason for it not working.

    Provided …, yes. Now how do you make sure the objectives ARE like that? As opposed to unfair and unachievable and designed to “performance manage out” someone from their job, perhaps because they are so good at their job that they are showing up their boss, and even more so if they made the mistake of challenging the boss in public.

  • Personally I think these payouts are a good thing. Consider them a cost of governments engaging in needless top-down re-organisations of the NHS. You know, like the one the Tories promised not to…

  • Matthew Huntbach 31st Jul '14 - 12:09pm

    Ian Sanderson (RM3)

    Even when they are touted as ‘efficiency’ reorganisations come with an upfront cost; staff may be entitled to redundancy payments and/or early retirement and also the organisation may suffer slow-downs as new methods of working are brought in.

    Yes, in my experience a lot of reorganisations are just about someone new coming into power (could be a change in (local) government, or a change in managers) and feeling they have to “do something”. Sometimes the “something” they do is just the reverse of whatever the last person who felt they had to “do something” did. Sometimes “do something” meant “bring in some management consultants to advise” and whoever heard of a team of management consultants saying “Your organisation is fine, leave it as it is, now where’s a our big fat fee for telling you that?”.

    The overhead of reorganisation in terms of time and energy spent doing it, dealing with the upsets and redundancies and the like, and getting used to the new structures is enormous. So it’s something which should not be done on a whim, as it often is. In my opinion, the reorganisation of the NHS is the point where the LibDems should have said to the Tories “No, it’s contrary to the coalition agreement, and should not be a priority when we are trying to reduce the deficit, if you insist on it, we will say that is breaking the coalition agreement, so we’re out of it”. Even if one could give a convincing argument that in the long-term the reorganisation would save money (and most people involved in actually working in the NHS were absolutely sure it would not), the overhead involved in doing so was such that it should have been left until the immediate deficit problems were resolved.

  • Stephen Hesketh 2nd Aug '14 - 8:24am

    Pertinent post and experiences. Totally agree with Tony Dawson and others.

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