Public Sector Exit Payments (Recovery)

Tuesday 28th October 2014 Written Statements

[The Chief Secretary to the Treasury (Danny Alexander)]

We are today publishing the Government response to the consultation about provisions in the Small Business, Enterprise and Employment Bill which will enable the recovery of exit payments when high earners return to the same part of the public sector within 12 months of leaving.

These provisions will ensure that the taxpayer is not paying out large sums in redundancies only to incur the cost of re-employing the same person in a similar role elsewhere. This will underpin consistency and fairness across the whole of the public sector.

This measure follows a number of recent high profile cases where individuals have received large exit payments and quickly returned to public sector roles. The Health Select Committee found that among 19,000 NHS redundancies, 17% had been rehired, and most within a year. An Audit Commission report in 2010 found that of 37 chief executives who left by mutual agreement over a two-year period from January 2007, six had been employed in another council within 12 months. In such circumstances, the justification of financial support to bridge the gap to new employment is undermined and this represents poor value for money.

The consultation ran from 25 June to 17 September 2014 and received responses from 27 organisations ranging from health care bodies, local government bodies, trade unions and professional bodies. Engagements with Departments continued throughout this period, and representations were received from their arm’s-length bodies.

Respondents broadly agree that exit payments are primarily for a loss of employment, agreeing that it was reasonable to consider a recovery provision but advised caution over complexity. We have carefully considered all responses in deciding how to move forward with the legislation, recognising the diverse range of views which reflects different work force arrangements across the public sector. As a result of this, the Government have decided to continue with the main elements of this policy:

Require high earning public sector employees or office holders to repay a broad definition of exit payments should they return to the public sector within 12 months on a pro rata basis.

Apply these measures to employees moving between the same part—or sub sector—of the public sector, with the exact definition of these sub-sectors to be determined and consulted upon at a later stage.

Define higher earners as any individual earning above £100,000.

Make changes that represent a baseline legal requirement. Where employers’ existing or proposed policies go further these measures will support rather than replace them.

Following the responses we received, the Government have made the following changes to our original proposal:

Payments in lieu of notice will not be recovered, as these are not payments for a loss of employment.

Those payments that have a potential, if not actual, monetary value will not be recovered because the difficulty of attributing a value would add an administration complexity and the likely cost of doing so could not be justified.

A decision has also been taken not to include a lower earnings threshold for a taper because of cost and complexity.

Special severance payments will be subject to the recovery provisions because they include elements that are paid in respect of loss of employment such as payments made for efficiency reasons, as well as elements that could be attributable to employer fault. Waivers from repayment could be used where these agreements relate to elements of employer fault, such as out of court settlement of an employee’s claims against an employer.

The Bank of England and public broadcasters will be excluded from the scope of this policy, recognising their unique independent status. These organisations are to operate their own proposals which adhere to the spirit of the policy, and the BBC and Channel 4 have already put in place more stringent proposals.

In relation to the Office for National Statistics and some regulators, they will operate as independent individual sub-sectors responsible for their own waiver regimes. This is consistent with independence in the production and release of official statistics, and for some regulators a statutory basis for independence from central Government.

As far as the waiver regime is concerned, there will be no option to waive recovery of payments made to Ministers and their special advisers, and parliamentary post holders.

Further details of the changes to the policy are in the Government’s response to the consultation which has been published on the gov.uk site.

The Government have decided to proceed with legislating for framework powers enabling the recovery of public sector exit payments, and will draft regulations giving effect to the policy taking account of these changes.