ICAEW chart of the week: UK public sector employment

Our chart this week is on public sector employment, the cost of which is one of the largest components of the Spending Review in a few weeks’ time.

Chart showing UK public sector employment between June 2001 and June 2021.

See text below for description of trends.

One of the key drivers for any budget or business plan is the number of full-time equivalent employees (FTEs) and it is no different in the public sector, where staff costs in the order of £150bn constitute just under 40% of departmental resource budgets of £385bn in 2021-22 (excluding depreciation and COVID-related spending).

The chart illustrates how public sector employment has grown, fallen and grown again over the last 20 years. It starts with the largest employer in the country – the NHS – where the workforce has increased from 1,025,000 FTEs in June 2001 to 1,626,000 FTEs in 2021. This 59% increase in staffing is substantially greater than the 14% increase in the size of the UK population from 59m to 67m over the same period, reflecting how the combination of more people living longer but less healthy lives and more successful treatments for cancer (for example) have resulted in substantially more for the NHS and its workforce to do.

Education FTEs are up 16% from 997,000 twenty years ago to 1,113,000 this year, is more in line with the growth in the size of the population, although most of the increase happened before the financial crisis, with FTEs working in education still below the peak of 1,210,000 in March 2012.

Public administration is down from 20 years ago, with 966,000 FTEs in June 2021 compared with 998,000 two decades previously. FTEs increased to a peak of 1,081,000 in June 2005 before falling gradually to 1,010,000 in June 2010, followed by more significant falls following the financial crisis. Most of the net fall represents fewer public servants in local government since the financial crisis , with civil servants in central government only slightly below where they were 20 years ago at 465,000 FTEs in June 2021 compared with 492,000 in June 2001. The total would have been much lower but for a post-Brexit surge in the size of the civil service, which has grown by 20% from its nadir of 384,000 FTEs in June 2016.

Police and armed forces FTEs have fallen from 436,000 in June 2001 to 417,000 in June 2021, mainly due to a steady decline in the armed forces from 219,000 to 159,000 FTEs over that period. Police numbers (including civilian support staff) increased from 222,000 FTEs 20 years ago to a peak of 284,000 in September 2009, fell to 235,000 FTEs in December 2016, and then started to increase again over the course of the last two years to reach 258,000.

Other public sector workers, including community health and social workers and employees of public corporations such as the BBC, Channel 4, Crossrail and Ordnance Survey have fallen from 973,000 to 655,000 FTEs, having reached a peak of 1,322,000 in March 2008 following the nationalisation of a number of banks. Most of the fall since then is a consequence of transfers to the public sector, including housing associations, Royal Mail, Direct Line, Lloyds Banking Group and Northern Rock.

Overall, public sector employment grew from 4,429,000 FTEs in June 2001 to a peak of 5,292,000 FTEs in December 2009 before falling to 4,777,000 FTEs in June 2021, comprising net changes of +601,000 in the NHS, +116,000 in Education, -32,000 in public administration, -19,000 in the police and armed forces and -318,000 in other public sector employees.

Of course, staff numbers are only part of the equation as the 4,777,000 FTEs currently employed have to be multiplied by an average salary of around £34,000 a year to reach the more than £160bn estimate for total staff costs across the public sector. This is the average of total pay – the median full-time salary is lower than this at somewhere in the region of £26,000.

Pay is one of the key drivers, with a pay freeze for many public sector workers announced last year helping to constrain the growth in the wage bill. With the cost of living on the march upwards, it seems unlikely that the Chancellor will be able to justify as strict a pay freeze this year, although he will still be looking to constrain wage settlements as much as possible. Wage settlements in the private sector are also likely to be higher this year, another worry for the Treasury given the £230bn or so the public sector spends every year on external procurement.

The recent upward trend in public sector employment is a big challenge for the Spending Review, particularly the continual growth in NHS staff as more people live longer lives, in addition to commitments to recruit more police officers and to improve other public services. Higher wage settlements in both the public and private sectors could significantly affect the number of people the government can afford to employ to meet its policy objectives.

ICAEW chart of the week: public sector employment

25 September 2020: The #icaewchartoftheweek is on headcount in the public sector, which increased by 115,000 to 5,508,000 in the year to June 2020.

Chart showing change in headcount from June 2019 to 2020: NHS +88k, other health & social work -7k, education -9k, police +12k, forces +4k, civil service +11k, public admin +8k, other +8k = +115k.

Employment on a full-time equivalent (FTE) basis also increased over the last year, with an increase of 118,000 from 4,485,000 FTEs in June 2019 to 4,603,000 FTEs in June 2020.

The NHS workforce jumped by 55,000 in the first six months of 2020 and by 88,000 in the year to June as the coronavirus pandemic accelerated recruitment of health workers. The NHS is the one part of the public sector that has seen consistent headcount growth over the last decade, with 1,782,000 employees at June 2020 compared with 1,558,000 a decade ago. This has been partly offset by a fall in other health and social workers of 7,000 to 208,000 in the year to June, which is 191,000 lower than the 399,000 employed in June 2010.

Public employees working in education also fell by 9,000 to 1,487,000 in June 2020, bringing the total fall over the last decade to 198,000, driven by a combination of cuts in education funding and the reclassification of further education colleges to outside the public sector.

Police numbers (including civilian staff) have started to increase again, with a headcount of 261,000 in June 2020, up 12,000 over a year previously. However, this is still significantly below the 292,000 that were employed in June 2010. HM Forces numbers also started to increase again after a long period of decline, with the approximately 4,000 service personally added to reach 156,000 still substantially less than the 197,000 serving in June 2010.

Civil Service numbers increased by 11,000 over the year to 459,000, with Brexit being a major contributor to the increase from the low-point of 416,000 employed in June 2016, by still significantly below the 517,000 civil servants working in June 2010. Other public administration headcount increased by 8,000 to 614,000 in June 2020, down from 682,000 a decade previously.

The number of other public sector workers increased by 8,000 in the year to 541,000. This is substantially below the 1,105,000 employed in other categories in June 2010, principally because ten years ago the public sector included housing associations, Royal Mail, Direct Line, Lloyds Banking Group and Northern Rock all of which have since been reclassified to the private sector. (Royal Bank of Scotland and Bradford & Bingley remain in the public sector).

Adjusted for reclassifications, total public sector headcount is 215,000 lower than it was a decade ago, reflecting an increase of 224,000 in NHS employees and a net decline of 439,000 across the rest of the public sector.

With Brexit preparations accelerating and the NHS under severe pressure as we approach winter, it is likely public sector employment will continue to rise in the near future.

This chart was originally published on the ICAEW website.