The fightback against public sector pay cuts begins

In a speech on spending cuts the prime minister, David Cameron, last week said the public sector had been "insulated" from the worst effects of the recession. If that were the case, it certainly is not so now, with public managers facing an onslaught of attacks on their organisations' budgets and the terms and conditions for themselves and their staff. But the fightback is under way. Today, the Chartered Institute of Personnel and Development (CIPD) has launched what it describes as a "robust defence" of performance-related pay in the public sector – including a call for more, not fewer, bonuses for public managers. The organisation argues that a "pathological fear" of the word bonus, post-banking crisis, has led to a counter-productive and misplaced objection to public sector bonuses, and that properly managed performance-related pay could help boost both change in the sector and delivery of the new government's policy commitments. "Politicians and, perhaps more importantly, more strident parts of the media need to stop seeing pay in the public sector as only a cost to be driven down," says the report. "Instead, used well, it can be a tool to drive up standards." The CIPD points out that it is possible to bring down the overall wage bill across the public sector but still be wasting many millions of pounds, by not using pay schemes in the right way – that is, as a carrot to incentivise and reward achievement. Performance-related pay is also called for in a separate report today from the Management Consultancy Association (MCA). The report deploys an interesting sleight of hand: in advance of the deep cuts in consultancy spending expected in next week's budget, it defends the use of consultants in the public sector, while at the same time agreeing with the government that money has been wasted on poor use of consultants. And guess who's to blame? Public managers, who have, according to the MCA, failed to improve their understanding of the marketplace, and have used interim managers "at an inflated price", where they should have used consultants, "to provide specialist skills not available internally". Plenty of fuel for debate about that distinction. But among such overt challenges to the government's cost-cutting plans, there are also more stealthy responses. The way in which people always find a way to work round financial incentives has been noted. Public servants have years of experience in getting round restrictions, and those talents are beginning to be flexed again. If all contracts above £25,000 have to be published, expect a glut of deals divided up into tranches each worth £24,999. Similarly, pressure on the use of consultants is producing innovative redefinitions across the public sector. Expect a lot more vague use of "services" in the future. Cavalier This is not to say that managers are being cavalier. On the contrary. Everyone in the public sector – and beyond (after all, private sector jobs depend on public sector spending) – takes seriously the prospect of deep cuts to public sector organisations. But blanket rules are a blunt instrument. There will inevitably be areas in which managers feel there are good reasons for, say, using external consultants. There are parts of government, for example, where there is not enough specialist expertise in a specific area but where it would not make good financial sense to make a full-time appointment. The skill is in using external specialist staff wisely. The MCA notes a previous National Audit Office report that said Whitehall needs to improve in this area. As managers face death by a hundred budget cuts, there will be a wide range of responses, and all will be interesting. • Jane Dudman is editor of the Guardian's Public website. cipd.co.uk/publicpolicy