3.5 The Department's forecasting of cost reductions predicts that both civilian and military personnel will leave through natural wastage and this is taken into account when planning headcount reduction. Natural wastage includes several factors: personnel choosing to leave the organisation; retirement; and in addition for military personnel specifically, the Department not renewing employment contracts when they expire.
For both military and civilians, leaving the Department voluntarily is the predominant factor in natural wastage. The Department also takes into account reduced military recruitment and a recruitment freeze for the civilian workforce. These factors combine to give an overall assumption that 30 per cent of headcount reductions will be made through natural wastage and reduced recruitment by 2015. The Department's original modelling predicted fewer people would want to leave voluntarily in the earlier stages of the programme because of difficult economic conditions, or a preference to leave through redundancy or early release because of compensation. The Department has refined its forecasts and assumptions based on the experience to date.
3.6 The Department currently forecasts that natural wastage of civilian personnel (which is predominantly people leaving voluntarily) will double from 2 per cent in 2011-12 to 4 per cent by 2014-15. The Department's latest forecast assumes that military personnel leaving voluntarily will increase from 3.8 per cent in March 2011 to 4.3 per cent in March 2015 (Figure 8). The number of people leaving voluntarily generally depends on the wider economic environment. With the UK economic environment uncertain and a high unemployment rate, relying on individuals leaving voluntarily is a risky strategy as it is to a large extent outside the Department's control.
3.7 The Department has analysed the sensitivity of its predictions of people leaving the military voluntarily and determined that a 1 per cent decrease in people leaving will lead to a 5 per cent reduction in savings. There is a greater impact if natural wastage among the civilian workforce reduces below the level expected. Our analysis of the civilian model shows that a 1 per cent decrease each year in natural wastage reduces cumulative savings by 8 per cent. The Department is aware of this risk.