The Emergency Budget will bring cuts of 25 per cent in budgets and a two year pay freeze for the majority of public service workers. The Budget was preceded by the announcement of a review to examine the pay of public service managers and a commission to find ways to make pensions more affordable and sustainable. The effect of these developments will be to change the public service employment landscape beyond recognition.

Nicola Linkleter, Managing Director, at recruitment consultancy, Badenoch & Clark, said: “Cost reduction of the scale outlined today does not happen without causing significant upheaval across every aspect of an organisation. The public sector has progressed significantly over the past five years in terms of its ability to attract and retain top talent against strong private sector competition. Now it must work to safeguard its reputation as an employer of choice and not damage the work done in recent years to improve its ability to attract new talent and skills.”

The Chartered Institute of Personnel and Development has highlighted the enormous management challenges associated with delivering the cuts through a workforce demoralised by redundancies, pay restraint and pensions reform.

Dr John Philpot of the CIPD said: “We’ve warned consistently that the public sector may be numerically overmanaged, but it is qualitatively undermanaged. To get the best from a workforce cowed by the harsh winds of fiscal restraint will require a step change in management capability in the public sector. Those who lose their jobs are only part of the story – how the ‘survivors’ are managed will determine if the story has a happy ending for the UK’s public services.”

Charles Cotton of the CIPD said: “In the short term, while a pay freeze will stop the public deficit getting any worse, it will do little to help the deficit get any better. For that to happen we need to review what public sector services we need, what delivery structures are most appropriate, what skills, behaviours, attitudes and performance we need from public sector workers and how we should reward and recognise these. At the moment, however, serious joined-up thinking about how to reform pay and benefits to get the best from public sector workers is being drowned out by the incessant, monotone noise of the deficit reduction calls.”

He added: “The government also needs to be wary of the dangers of a prolonged squeeze on public sector pay. Keeping the lid on pay for year after year would cut costs at the expense of severe public sector recruitment and retention difficulties. This would harm the quality of public service provision as public sector employers would have to make do with lower quality staff, while history suggests that periods of tight pay restraint are subsequently followed by periods of significant public sector pay inflation when earnings are raised to competitive rates.”