25%+ cut in allowances!

[Jumping_Jack]

SDSR ALLOWANCES SAVINGS MEASURES

ISSUE

1. Allowances savings measures.

KEY POINTS

• In his Strategic Defence and Security Review (SDSR) statement, the Prime Minister announced that there would be cuts in Service and Civil Service allowances amounting to some £300M per year. For the Armed Forces, this represents £250M, from an allowance spend of approximately £880M per year, by Apr 14. About £80M of savings will be achieved as a result of a reduction in military manning as well as measures to reduce the movements of personnel. The remainder will come from changes in allowance eligibility and rates.

• Changes are a necessary part of the Department’s contribution to the overall Government’s programme to reduce the deficit.

• The purpose of allowances is to reimburse personnel for justifiable expenditure incurred either when on duty or as a result of the unique nature of Army life. The current financial position has placed pressure on the level of allowances that are affordable. Whilst there will be some reductions and changes, appropriate allowances will continue in the future.

• The majority of changes will come into effect on 1 May 11. Where possible, measures have been mitigated by delaying the implementation of some changes by up to 2 years.

• Where possible, allowance savings measures have been taken in accordance with the following principles:

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  • all actual, unavoidable expenses incurred for Service reasons should be reimbursed;
  • where expense is incurred for Service reasons but there is some element of choice in incurring this expense, personnel should make a contribution towards it;
  • operations, mobility and separation should be the highest priorities for reimbursement;

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  • lower earners should be protected as much as possible.

· Changes will be painful for some and in many cases will require adjustments to lifestyle. Individuals who believe they will be placed in financial difficulty should inform their Chain of Command who will direct them to the appropriate area for advice.

· For those changes to allowances that will take effect from 1 May 11, any rates not yet published will be promulgated no later than 28 Feb 11. Where allowance changes will take effect from 1 Apr 12, rates will be published at the appropriate time.

· Changes to the Commitment Bonus Scheme will take effect, for new entrants only, from the date of this announcement - a separate ABN will be issued.

· Changes to the Specialist Pay Reserve Banding system will take effect from 1 Apr 12.

SUMMARY OF KEY MEASURES

3. Home to Duty Travel (Public) (HDT (Public)). The personal contribution to HDT (Public) will increase from 1 mile to 3 miles from 1 May 11, from 3 to 6 miles from 1 Apr 12 and 6 to 9 miles from 1 Apr 13. The HDT (Private) personal contribution will remain unchanged at 9 miles.
a. This will mean that Army personnel who live in publicly funded accommodation less than these distances from their Duty Station will receive no financial support for the commute to and from work. The personal contribution for Service personnel who live in publicly funded accommodation more than these distances from their Duty Station will be 89p per day from 1 Apr 11, £1.78 per day from 1 Apr 12 and £2.66 per day from 1 Apr 13, and they will receive a contribution to the remainder of their travel costs.
b. Although it is recognised that in practice personnel have very little choice where they serve and, if they live in Service accommodation, where they are housed, it is considered reasonable that they should expect to bear broadly the same costs as their civilian counterparts (9 miles is the average distance travelled by UK workers).
4. Disturbance Allowance (DA). The rates for Privately Owned and Privately Rented families’ accommodation will be aligned to the Service Families Accommodation (SFA) rate. All DA rates will be reduced by 10% to £966 for SFA and £83 for SLA. The child element will also reduce from £153 to £75 per eligible child. The new rates will apply to all moves which take place on or after 1 May 11, irrespective of when the claim for DA is submitted.
5. Incidental Expenses (IE). IE in the UK and Overseas will be removed, except for those Service personnel hospitalised as in-patients.
a. IE reimburses expenditure on laundry and dry cleaning, phone calls home, a newspaper, TV access, internet access etc during periods of temporary absence of up to 30 days. It is judged that, on the whole, when such expenditure is incurred it is primarily associated with personal choice, rather than specifically relating to a Service need. Therefore, it is no longer considered appropriate for the Service to provide recompense for such activity.
b. However, the allowance will be retained for hospitalised personnel[1] to assist their return to fitness. Significant additional costs can accrue while in hospital particularly telephone and television costs.
6. Day Subsistence (DS). The upper limit for UK DS will be reduced from a capped maximum of £26.28 to £25 per day (4.9% reduction). Overseas DS (which is currently set at different rates depending on the country) will be reduced by 4.9%, which is proportionate to the reduction in UK DS.
7. Local Overseas Allowance (LOA)[2].
a. From 1 May 11, worldwide changes to LOA are as follows:
(1) The element of LOA which covers 9 nights per year in hotel accommodation, in lieu of long weekends with friends and family in UK (known as “Bett Nights”), will be revised. In recognition of the introduction of Get You Home (Overseas)(GYH(O) in 2007, 3 of the 9 nights will be removed from the LOA construct, leaving provision for 6 “Bett Nights”;
(2) Revised UK spend data will be used to update the LOA rate tables. This will result in a reduction in LOA as the latest data indicates that the cost of living in the UK has risen;
(3) The current rank-based 13 level LOA Factor Plan will be revised to 3 bands of LOA per LOA Main Station[3]. This reflects the fact that LOA is designed to contribute to the necessary additional costs of living overseas, rather than compensating for personal lifestyle choices. The 3 bands of the new Factor Plan will be as follows:

Factor
Ranks
1.0
Cpl and below and 2Lt/Lts
1.1
Sgt – WO1, Capts and Majs
1.2
Lt Cols and above

(4) The Exercise or Field Conditions rate of LOA will reduce from 50% to 40% of the single/unaccompanied rate, and the Temporary Duty LOA rate will reduce from 75% to 60% of the single/unaccompanied rate. This will result in a reduction in Exercise or Field Conditions and Temporary Duty rates in all locations;
(5) LOA will no longer be paid for dependant children over 18 or those who have completed the A level stage of education.
b. From 1 Apr 12, additional worldwide changes will be made to LOA Conventions as follows:
(1) Decreased mileage and vehicle ownership in UK as identified in the DASA UK Expenditure and Lifestyle Survey will be introduced into the Conventions;
(2) The current 20 minutes of peak-time telephone calls will be replaced with an indexed overseas package in all LOA Main Station areas;
(3) The babysitting provision will be reduced by 50% in all LOA Main Station areas;
(4) The Domestic Assistance element of LOA will be removed.
The overall effect of these global changes to conventions is that LOA rates in most locations are likely to fall, subject to FFR changes and other calculations.
c. From 1 Apr 12, additional changes will be made to LOA Conventions for North West Europe (NWE)[4] as follows:
(1). The Car Buy/Sell element will be removed from the LOA Conventions for NWE. Although this will result in a reduction in this element within the LOA rates in NWE, it will be compensated for by the introduction of an entitlement to claim duty travel costs on assignment to and from UK to NWE;
(2) The remaining 6 “Bett Nights” will be removed from the LOA Conventions for NWE. This will result in a reduction in this element within the LOA rates but will be compensated for by the provision of an additional 2 GYH(O) journeys per year.
8. Living Out Supplemented Rates to LOA (LOSLOA). In future the daily rate of LOS will be aligned to the UK Food and Incidentals Allowance (FIA) rate, adjusted by the indexed LOA shopping basket food element, less that already paid in the single/unaccompanied rate of LOA. Eligibility criteria will also be adjusted to ensure that maximum use of Service messing, where appropriate, is made. Personnel accommodated within 3 miles of their Unit’s Service messing facilities will not be paid LOS. This will lead to personnel, with reasonable access to Service messing, losing their current entitlement from 1 May 11.
9. School Children’s Visits (SCV). The parental contribution to SCV will be increased from 50 miles to 100 miles per single journey, and the allowance will be withdrawn for children who have completed the A level stage[5] of education.
10. Motor Mileage Allowance (MMA). All 3 MMA rates will be aligned with the lower HMRC approved mileage rate, currently 25p per mile. The MMA Private Car Rate (MMA(PCR)) has been set at this level since 1 Apr 10, and MMA Converted Leave Rate (MMA(CLR)) will also be aligned to the lower HMRC approved mileage rate. Official Duty Rate (ODR) will be removed from the regulations.
11. Get You Home (GYH). All GYH allowances are generated by MMA CLR and will reduce accordingly to 25p per mile (from 26p for GYH (Travel)(GYH(T)) and 31p for other GYH rates).
12. GYH (Early Years) (EY) and GYH (Early Years) (Overseas Assistance) (EY)(OA) will be removed at the end of Phase 1 Training or at the age of 18, whichever is the later. This measure will retain the allowance for those young personnel who need it most, whilst reducing provision for older persons on the trained strength.
13. Recruitment and Retention Allowance (London) (RRA(L)). From 1 Apr 12 RRA(L) will be removed from all Sgts and above. The continued retention of RRA(L) for Cpls and below will be subject to AFPRB recommendations.
14. Food and Incidentals Allowance (FIA). FIA will be reduced from £12.41 to £8.50 per day.
a. The insurance and cleaning elements are to be removed from the FIA formula, the absence factor increased and the food basket priced from outside Central London, resulting in the new rate.
b. Service personnel accommodated within 3 miles of their Unit’s Service Messing facility will be ineligible for FIA.
15. Special Messing Allowance (SMA). SMA will be benchmarked at 75% of the rate of Subsistence Allowance for the relevant country.
16. Privately Arranged Passage (PAP). All PAP claims will be based on pre-booked non-flexible economy class air fares only, with accommodation and subsistence elements removed from the formula.
20. Specialist Pay. Specialist Pay Reserve Banding (RB) is currently paid at 100% of Specialist Pay for the first 3 years, 75% in year 4, 50% in year 5 and 25% in year 6, after which Specialist Pay ceases to be paid.
a. From 1 Apr 12, Specialist Pay RB will be reduced from the current 6-year system to a 3-year system where a rate of 100% of Specialist Pay is paid for the first 2 years, 50% in year 3 and zero in year 4.
b. From 1 Apr 12, the Premature Voluntary Release (PVR) rate of Specialist Pay will be reduced from 50% to 0%.
c. JSP 754 will be updated in Apr 11 to reflect this future change.
d. Separately, all current forms of Specialist Pay will be reviewed by the AFPRB during 2011.
21. Commitment Bonus (CB). There will be no change to the Enhanced CB scheme for personnel who started Phase 1 training prior to the date of this announcement (these personnel will be entitled to the full benefits of this scheme). From the date of the announcement, the CB 2010 scheme will be introduced for ORs who begin Phase 1 training on or after this date. A separate DIN and ABN outlining this change will be published shortly. The CB 2010 scheme for new entrants will be set at a maximum value of £7,500 (gross) for eligible personnel.
22. Financial Incentive Schemes. Recognising that Force Structures will be changing as a result of recent SDSR announcements, Financial Incentive Schemes (eg Golden Hellos, Financial Retention Incentives, Rejoin Bounties and Transfer Bounties) are now being reviewed to ensure that the requirement is extant. Information on changes to any existing schemes will be promulgated as soon as reviews have been completed. Personnel should be clear that whilst they may be able to demonstrate eligibility to receive such awards, it is for DM(A) to determine entitlement based upon suitability and structural requirement.

[1] Hospitalised in the UK or overseas but not when hospitalised in British Field Hospitals which are provided with Deployed Welfare Package (DWP) facilities.

[2] All predictions on LOA rate reductions/increases are predicated on existing Fixed Forces Rate of exchange, which fluctuate.

[3] The Factor Plan for Small Stations will be considered separately during FY 11/12.

[4] This provision relates to France, Belgium, Germany and Netherlands.

[5] This also includes ‘Highers’ in Scotland.