National Audit Office says reduced salaries and conditions have deterred applicants from private sector and led to gaps
Cuts to the pay and conditions of senior civil servants have deterred private sector managers from taking up Whitehall jobs and could result in an exodus of talent, the government's independent auditor has warned.
A report by the National Audit Office concludes that there are "clear capability gaps" in the senior civil service and the situation "does not represent optimum value for money".
The findings will concern ministers, who have called for private sector managers to apply for senior civil service posts and have reassured the public that they can deliver cuts without losing senior staff.
The report finds there has been a 17.4% real-terms reduction in the base salary for senior civil servants from 2009 to 2012.
It also finds that just four out of 15 permanent secretaries at government departments in December 2012 had significant commercial experience.
Union leaders said civil servants must be better rewarded or ministers should be prepared to watch their most talented employees leave.
Dave Penman, general secretary of the FDA, the senior civil servants' union, said: "It is becoming increasingly clear that a lack of action to address the issue of pay and reward could have serious consequences for delivering reform."
The report warns that an upturn in the economy could lead to "an exodus of the most talented and marketable senior people, just at the time that effective corporate leadership is needed to deliver the challenges of the remainder of the parliament".
The number of people joining the ranks of senior civil servants from the private sector fell in 2009/10 and had yet to recover, the report said.
It added: "The Government has explicitly committed to open up the service, with more internal transfers and more free flow of skills to and from the private sector, but there are several barriers to progressing this.
"Many civil servants below SCS [senior civil service] level are entitled to pay increments, while the base salary for the SCS has reduced by around 17% in real terms over four years, making promotion to the SCS less attractive for experienced, talented people.
"Evidence from departments and the recruitment sector suggests that restrictions on pay and conditions, coupled with concerns about unclear objectives and lack of autonomy, may be restricting the pool of people willing to join the SCS in mid-career from the private sector," the report said.
Auditors also found problems with the way that mandarins are organised, calling for a culture change to create a "unified, corporate leadership group that can work across departmental silos and make the most of the full range of its skills" but "it is not clear how this shift will be achieved".
NAO head Amyas Morse said that the real challenge is to shift the long-standing culture in the civil service to create a leadership group with the full range of skills needed for future success.
"This is far easier said than done," he said.
Separately, the government has been urged to change the way that jobcentres are run after MPs found that in two out of five cases, they do not know whether those who stop claiming benefits have actually found work.
The public accounts committee said counting the number of people who stop claiming benefits was a "flawed measure" of jobcentres' effectiveness.
The MPs also expressed surprise that there were only 522 disability employment advisers covering 740 jobcentres.
The Department for Work and Pensions (DWP) was urged to review support for disabled claimants, particularly in light of low numbers finding jobs through the work programme.
The MPs noted that about 40% of people reclaim benefits within six months of stopping, and about 60% within two years.
"The department should identify which indicators it will use to ensure it has a full understanding of the performance of jobcentres under universal credit and the destination of claimants, and use this information to better understand whether its interventions are delivering a long-term reduction in the number claiming benefits," said the MPs.
Margaret Hodge, who chairs the committee, said: "On its own, the number of people who stop claiming benefits is a flawed measure of how effective jobcentres are.
"Jobcentres should have a degree of flexibility to deal with local priorities but the DWP does not know enough about what works and why."
PCS general secretary Mark Serwotka said: "We do not believe that sanctions work, they should be scrapped, and ministers should start fixing our broken economy and stop blaming those who are suffering as a result of their failed policies."