Realisation of financial savings
3.4 The must cut headcount within a fixed timetable to achieve the required financial savings. This is a greater challenge for the Army redundancy tranches which are occurring on a greater scale than the Royal Navy and RAF and may continue up to 2015. The has not yet determined in detail how it will reduce its headcount by the additional 5,000 Army personnel as required by the three month exercise, nor has it finalised the financial savings to be made as a result. There are several factors which may revent the realising the required savings (Figure 7):
• Delaying the tranches.
• Phasing of departures by year.
• Changing the profile of the personnel expected to leave.
These would delay and/or lower the savings that can be achieved as the would continue to pay salaries, pension contributions, and benefits for longer. The required savings will then need to be found from elsewhere in the .
| Figure 7 Factors which can affect financial savings from the tranches | Factor | Detail | Military impact | Civilian impact | | Delays to tranche | Decreases and delays savings as will continue to pay salaries, pension contributions, and benefits for longer. | Military tranche two has been delayed by three months to consider broader changes in the . It estimates a reduction in savings of £100 million to £138 million by 2015, 4 to 5 per cent of the target savings, equating to up to 1,055 personnel to 2015. | Our analysis shows a similar delay in the civilian tranches will reduce savings by £175 million by 2015, equating to 1,915 personnel, and 12.5 per cent of the target savings. The likelihood of such a delay has diminished as the first tranche is now closed and the second tranche underway although this will not end until March 2014. | | Phasing of departures by year | If more personnel leave in later tranches. | The has to reduce the numbers in the Army by a further 5,000 as a result of the three month exercise. It has not yet profiled the numbers of people that will go through natural wastage or through redundancy. Delays to planning increases the likelihood of redundancies occuring in later rather than earlier tranches. | The civilian tranche one is now closed. The revised its initial prediction of 4,000 redundancies to 8,000 based on a high level of applicants. 5,900 applicants have accepted the offer for early release; above the original target but below the revised target. Financial impact is not yet calculated. | | Changes in profile of leavers in tranche | If make-up of personnel differs from the assumptions in the models. | In tranche one there were greater numbers of non-applicants made redundant than originally profiled. Non-applicants have up to 12 months to leave and so are more expensive than applicants. | The grades and therefore salaries of people who have applied for early release in tranche one are lower than that assumed in the profile. If the profile is amended to reflect this difference the has estimated that proposed savings will decrease by some £190 million. | Source: National Audit Office analysis based on Departmental models and analysis of data provided by the |