Civil Service Compensation Scheme

Tuesday 19th March 2019 Westminster Hall

14:55

[Chris Stephens (Glasgow South West) (SNP)]

I beg to move,

That this House has considered the civil service compensation scheme.

It is a pleasure to serve under your chairmanship, Ms Buck. I refer to my entry in the Register of Members’ Financial Interests—I chair the Public and Commercial Services Union parliamentary group. I want to raise the important matter of the civil service compensation scheme, and will first outline how we have got to the present situation.

It would be fair to say that the civil service compensation scheme has had a troubled recent history. Having run smoothly and been untouched for decades, since 2010 it has been the subject of much change, acrimony and litigation, leading to three judicial reviews. The first judicial review was in 2010, when the then Labour Government introduced changes to the scheme that would cut the redundancy terms of civil servants. PCS launched a legal challenge to those changes, and on 10 May 2010 the High Court ruled that the judicial review had succeeded and that amendments to the civil service compensation scheme were to be quashed. In essence, Mr Justice Sales concluded that the Superannuation Act 1972 provided that the agreement of PCS was required in order for any changes to proceed. The Court quashed the changes because they had not been agreed by the union.

There was a further judicial review in 2011, when the Conservative-Liberal Democrat coalition established primary legislative changes to implement cuts to the civil service compensation scheme. The legislation was amended to the effect that the obligation to reach an agreement with the union on any changes was replaced with an obligation to consult with a view to reaching agreement. The proposals were agreed by the FDA, GMB and Prospect trade unions, but they were rejected by PCS, the Prison Officers Association and Unite the union.

At the time there was another legal challenge by way of judicial review. The primary grounds for the challenge were that the changes to the civil service compensation scheme constituted unlawful interference contrary to the rights of civil servants under article 1 of protocol 1 of the European convention for the protection of human rights and fundamental freedoms. In essence, the argument was that civil service compensation scheme terms were its members’ possessions and that depriving them could not be justified. Mr Justice McCombe ruled that the scheme terms did constitute possessions under the convention, but that the state could interfere with them within a margin of appreciation. The Government cited deficit reduction as the reason for the changes, so the Court ruled that the interference was reasonable and the judicial review application was dismissed.

At that time, the coalition Government made some commitments. The then Minister for the Cabinet Office, Francis Maude, said that

“constructive negotiations with the unions can work and the result is a package that is fair for civil servants and fair for other taxpayers.”

He went on to say:

“From the start, we said we would do everything we could to engage with the unions on the best way to reform a scheme, which was unaffordable and way out of line with private sector and…public sector schemes.”

[Mike Hill (Hartlepool) (Lab)]

By imposing changes and failing to consult the relevant trade unions, does the hon. Gentleman agree that the Government are left wide open to challenges from hundreds, if not thousands, of public sector workers?

[Chris Stephens]

The hon. Gentleman makes an interesting point, because that is exactly what happened. I will come on to that later.

Gus O’Donnell, the then head of the civil service, echoed Francis Maude’s comments, stating:

“It was important that we achieved a scheme which is sustainable, affordable and fair.”

However, those were hollow words, as just five years later the Conservative-majority Government elected in 2015 decided to proceed with further cuts to the civil service compensation scheme. On 8 February 2016, the Cabinet Office launched a consultation on reforming the scheme. During the consultation, it took the extraordinary step of debarring the trade unions that refused to agree cuts as a pre-condition for talks.

PCS balloted its members on the final offer and it was overwhelmingly rejected. Unsurprisingly, PCS again took the matter to the High Court. The primary argument was that, by debarring the union from talks, the Cabinet Office had breached its obligation to consult the trade unions with a view to reaching agreement. Mr Justice Sales and Mrs Justice Whipple agreed. They held that:

“The Minister could not lawfully exclude the PCSU from the consultation which ultimately mattered in terms of his statutory duty”.

They added that he

“was not entitled to impose additional entry conditions above and beyond those stipulated in the 1972 Act for participation in that consultation, in the form of the pre-commitments he required the unions to make.”

Accordingly, the Court quashed the changes. That was a significant victory for civil servants, which forced the Government to restore the terms of the scheme so that many members achieved higher payments and the pace of job cuts in some Departments slowed.

Not content to leave it there, the Government announced in September 2017 a further consultation on reforming the scheme. It is believed that the consultation is another attempt to make cuts. The Government’s position will worsen even the proposed 2016 scheme terms that PCS members overwhelmingly rejected in a ballot and that were overturned by the High Court. Nevertheless, the trade unions engaged in talks with the employer.

PCS has been clear that there is no case for changing the terms of the scheme that were reinstated by the High Court. Notwithstanding that, it is engaging to protect its members’ interests, as would be expected. It is participating in talks alongside other unions—the GMB, the Prison Officers Association and Unite the union, which have also adopted the position that there is no case for cuts in the scheme. Those unions represent the overwhelming majority of trade union members affected by the scheme, and they have been in detailed discussions with the Cabinet Office since late 2017. The objectives of the negotiations are fair: to secure maximum protection for the lowest paid; to secure maximum protection for the greatest possible number of members—more often than not they are the lowest paid—and for those who want to remain in a job, thereby prioritising compulsory redundancy terms over voluntary exit and voluntary redundancy terms; and to eradicate the age discriminatory aspects of the current scheme.

I was sent a note by the Prison Officers Association, and I will reiterate its concerns. After prison officers are injured in the line of duty, how they are treated appears to be a lottery. In some cases, if the injury is judged severe enough—by outsourcers and privateers, naturally—they will be issued with a medical retirement, at which point they are entitled to their accrued pension. However, they can instead be issued with a medical inefficiency, which can have severe financial consequences. To be clear, we are talking about the same scenario: officers being so severely injured by prisoners that they cannot return to work. In one case they can retire and keep their pension, sometimes along with permanent injuries, while in the other they are often left in a position where they cannot even afford the urgent medical care they need.

The Prison Officers Association believes that the planned cuts to that scheme threaten to make an unfair situation even worse, by limiting further the number of weeks that critically injured prison officers can receive pay. That literally adds insult to injury, and this Government must act to make sure those brave men and women are not further penalised for working in such dangerous conditions while they diligently protect the public.

[Mhairi Black (Paisley and Renfrewshire South) (SNP)]

Does my hon. Friend agree that one of the problems that runs alongside this and most pension issues is a total lack of communication? A constituent who is affected by the changes contacted me; once my office got involved, it took four months to get any clear answers, excluding the amount of time that my competent constituent had spent trying to fix the problem on her own. There is a complete blame game between Departments, rather than an attempt to resolve things.

[Chris Stephens]

That is certainly my experience from some of my casework relating to the scheme. I hope that the Minister takes cognisance of my hon. Friend’s remarks about how we should try to fix these issues.

The Minister should be under no illusion that the crisis unfolding in our prisons is anything less than a health and safety emergency, with violence against staff not only at a record level but rising at a record rate. According to Ministry of Justice figures, there were more than 10,000 assaults against officers in England in the past 12 months—an average of 28 each and every day.

It is perfectly reasonable to argue that these days many roles and professions, from shop worker to firefighter, unfortunately involve some exposure to violence, and that there is nothing unique about prison officers facing assaults at work. That is true, and I wish to see proper pension protection for those workers too, but prison officers work in a uniquely violent environment. According to their trade union, which will hold a march and a rally on this issue at Westminster tomorrow, it is the most violent and dangerous workplace in western Europe.

Beyond the chaos and carnage that the Government unleashed by sacking 7,000 prison officers, which opened the gates to unseen levels of violence, we must accept that prisons are inherently violent institutions. They are places where hundreds of criminals, many of them guilty of violent crimes, are held against their will using the threat—and sometimes the application—of force. That makes prisons unique workplaces. We expect the brave men and women who serve inside them to confront violence when necessary. When prison officers are injured in the line of duty, protecting the public from dangerous criminals, we as a society have a special responsibility to protect them. Quite simply, if they are too badly injured to return to work, we must not add insult to injury by leaving them in financial as well as physical peril.

I turn to the current talks and the counter-proposal that the trade unions have sent the Government. After a year of talks, during which the 2010 terms remained in place, to the benefit of civil servants, the Government took the position that they could bring the negotiations to a close unless the unions made a counter-proposal. The trade unions agreed to submit a counter-proposal to the Government’s plans, in line with their negotiating objectives.

The unions’ proposal seeks to redistribute the scheme so that those affected by office closures and other redundancy situations—those who require the compensation the most—receive the most from the scheme. In other words, they argue that people being forced out of their jobs against their wishes should be prioritised. The trade unions met the Minister on 6 February to present their counter-proposal. He undertook to consider those representations and then to respond formally. As I am sure he will tell us, a further meeting is scheduled for next week.

The onus is now on the Government. It is expected that the Minister will soon come to a conclusion about his approach. I ask him to take cognisance of the following key factors before he does so. First, the commitments given by Francis Maude following the 2010 changes should hold firm. Reneging on those commitments now would only lead people to conclude that the commitments of Conservative Ministers count for nothing.

Secondly, there is no majority in the House in support of the Government’s proposed changes; all parties, bar the Conservatives, oppose them. That includes the Democratic Unionist party, which—unsurprisingly, given the dangers that loyal, hard-working civil servants have been exposed to in its part of the world—supports the trade unions in this campaign and recognises that those workers should not be treated with contempt.

Thirdly, the counter-proposal put forward by the trade unions delivers the Government’s stated objective of producing significant savings for the taxpayer, while ensuring that those most in need of the scheme derive the most benefit from it. That is in line with the Government’s stated objectives of helping those who are just about managing and preventing excessive pay-outs at the top.

Fourthly, low-paid civil servants who work in towns and cities subjected to office closures will find it harder to obtain work. Take, for example, the office closure programme of Her Majesty’s Revenue and Customs. In many towns, HMRC is the largest employer. The highest-paid civil servants will be able to obtain other employment in the public sector, but it will be more difficult for those at the lower end, who will see the largest employer move out of the area, to obtain other work.

We call on the Minister to hold good to previous commitments and not to proceed with cuts to the civil service compensation scheme. Failing that, we call on him to adopt the counter-proposal put forward by the trade unions. I look forward to his response.

16:45

[Hugh Gaffney (Coatbridge, Chryston and Bellshill) (Lab)]

Thank you for calling me to speak, Ms Buck. I congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing the debate.

Here we are again, debating the negative impact of this Government’s policies on workers. Debates in Westminster Hall or in the main Chamber that lay bare the real consequences of the Government’s austerity agenda seem to be an almost daily occurrence, yet the Government very rarely recognise the need to address the problems caused by austerity. I suspect that this debate will be no different, in spite of the clear consequences of the Government’s proposed reforms to the civil service compensation scheme.

Civil servants have been fighting a continuous battle against reforms to the compensation scheme for years with successive Governments. The battle started in 2009 with the Labour Government, who sought reforms to the scheme that they believed would help control costs. Civil servants and their trade unions, particularly PCS, mobilised against those reforms and launched a successful judicial review against them in 2010. After the 2010 election, the Conservatives and the Liberal Democrats tried to cap payments for voluntary and compulsory redundancies, but the civil servants and their unions fought back, which resulted in higher caps.

This Government are continuing the trend of attempting to reform the scheme, but they are doing so by undermining the trade unions. The Government pursued a consultation process in all but name, imposing conditions on trade union participation. In the 2017 judicial review of the consultation, the High Court found that the Government’s reforms were illegal as a result of their failure to engage in proper consultation. However, an appeal has since been lodged against that decision, and we await the outcome from the Court of Appeal. Regardless of the outcome, let me put on the record that I will always stand alongside civil servants and their trade unions in opposing the Government’s attempts to railroad through reforms to the scheme without meaningful consultation. I will be out supporting them again tomorrow.

It is clear to me that the real intention behind the Government’s reforms is to erode the terms and conditions of our civil servants. Just look at the differences between the 2010 compensation scheme terms and those that the Government seek to introduce. Civil servants are guaranteed a tariff fixed at one month’s salary per year of service in both voluntary and compulsory redundancies. The Government seek to reduce that fixed tariff to just three weeks per year of service. The maximum amount payable to civil servants in a voluntary redundancy is 21 months’ salary. The Government seek to reduce that to 18 months’ salary. In a compulsory redundancy, the maximum amount payable currently stands at 12 months’ salary, but the Government wish to reduce that to nine months’ salary. Notice periods are generally around six months, but the Government seek to reduce that to just three months for new starters.

The Government continue to pursue these reforms in spite of overwhelming opposition from the 3,000 respondents to the consultation, who were told by the then Minister for the Cabinet Office that the 2010 compensation scheme terms were both “fair” and

“right for the long term”.

These reforms must be opposed by all of us in this House who value workers, value good terms and conditions, and value our public services.

While I am speaking in support of civil servants, let me say that it is time the Government treated our civil servants with respect and dignity. Civil servants are dedicated, professional and hard-working, just like all those who work in our public services, such as doctors, nurses, teachers and, as my good friend the hon. Member for Glasgow South West mentioned, prison officers. However, they continue to be denied a fair pay rise as a result of this Government’s ongoing decision to limit civil service pay rises to between 1% and 1.5%. Civil servants received one of the lowest pay increases in the public sector in 2018-19. I call on the Minister to scrap the cap and give our civil servants a proper pay rise. They deserve much more than they are getting from this Government.

16:50

[Tommy Sheppard (Edinburgh East) (SNP)]

It is a pleasure to serve under your chairship, Ms Buck. I am not sure if it constitutes an interest under the legislation, but I am a member of the Public and Commercial Services Union. In the interest of full disclosure, I am happy to declare that before I begin my remarks.

I support my hon. Friend the Member for Glasgow South West (Chris Stephens) in bringing forward this motion and I associate the third party with the body of his remarks. I have some additional points. First, it is really not a good look for the United Kingdom Government that three times over the last nine years, under three different Governments of different political complexions, the Government workforce has found it necessary to take its employer to court, and on two out of those three occasions the workforce has won. That does not speak well about good will and industrial relations inside the civil service, or about relations between the Government and those on whom they depend to implement their policies. Something is awry and it needs to put right.

That is even more true when we consider what is about to befall the public sector, if Brexit goes ahead. The degree of upheaval, change and restructuring that will be necessary to cope with leaving the European Union will undoubtedly require the good will and support of the workforce. I implore the Minister to try to do what he can to diverge from the attitude and the work of his predecessors.

I support the principles that underline the trade unions’ counter-proposal on the compensation scheme. I do not want the Minister to disclose his negotiating hand—it is proper that he responds to the trade unions directly on 25 March—but will he indicate whether these principles find support with him? I am minded to support them—not just the provisions that focus compensation towards those on the lowest incomes or those who are being made compulsorily redundant, rather than opting for voluntary severance, but most of all the idea that compensation should be related to the status of the employee who is being made redundant. After all, we are talking about not a bonus or a pension scheme, but compensation for losing livelihoods. Therefore, compensation ought to take into account the consequences for the individual and their ability to survive after they leave the civil service.

In that regard, although I cast no aspersions on such people as workers, a distinction has to made between a relatively high-paid civil servant working around the corner in Whitehall who is made redundant in the centre of the capital city and who has the experience and opportunity to readily seek alternative employment, and someone working at a basic administrative grade in Gateshead or somewhere else where there may be more challenges in the labour market. I commend that principle to the Government in their approach.

Finally, as with so many other things, I ask the Minister to look north for inspiration and see what is happening across the border in Scotland. Scottish civil servants, if they are working directly for the Government, are under the auspices of the same scheme, but they constitute only a small part of the public sector national workforce in Scotland. With regard to the rest, the Scottish Government are undertaking a consultation about severance arrangements in the public sector more generally. In Scotland, they have proceeded on the basis of consultation. The Government are not being taken to court and there is a not an imminent dispute with the civil servants’ trade unions. If this can be done correctly in Edinburgh, perhaps the Minister can take inspiration from that and make sure it is done correctly in Westminster.

16:54

[Christian Matheson (City of Chester) (Lab)]

It is a great pleasure to serve under your chairmanship, Ms Buck. I do not intend to detain the Chamber for too long; I am sure Members are more interested in hearing what the Minister has to say.

I pay tribute to my good friend, the hon. Member for Glasgow South West (Chris Stephens). One reason why I do not need to speak for too long is that he gave such a clear exposition of the problems faced by workers in the civil service, and members of the PCS and other trade unions, because of the changes to the civil service compensation scheme. The matter has been particularly prominent recently in the area that he represents because of the changes to benefits offices and jobcentres, as a result of which low-paid workers are being offered jobs that may be many miles away from their settled workplace. They cannot take those jobs, and the only option available to them is to take a pay-off under the civil service compensation scheme, which is now being cut.

I do not want to go into too much of the excellent detail that the hon. Member for Glasgow South West set out, but I will make two points. The first point was touched on by my hon. Friend the Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney). If this change were being made on its own, it would be a matter of sadness and there would be some hope that perhaps an agreement could be reached with the trade unions. Unfortunately, however, it appears to be part of a pattern when it comes to how the Government and the senior management of the civil service deal with their members.

In 2010 the Government implemented a two-year pay freeze, which was followed by a six-year pay cap of 1%. During that period, average salary levels in the civil service fell in value, in comparison with inflation, by between 8.8% according to the CPI calculation and 15.2% according to the retail prices index. Average pay in local government, health and education—all areas that we know have suffered from Government cuts and depressions in pay—has seen increases higher than those in the civil service; the Government have capped civil service pay rises at between 1% and 1.5%.

The Government spending review, which we are currently looking at, has set departmental budgets until 2020. The chief executive of the civil service recently told union negotiators that for 2019, funding for pay increases was 1%. He said that Departments could negotiate higher pay increases by sacrificing terms and conditions. An example of this approach arose in the Ministry of Justice last year. The management proposed a pay increase of 11% over five years, in exchange for a longer working week, cuts to overtime and cuts to sick pay. I make those points about civil service pay because my concern is that a pattern is emerging where, to put it bluntly, civil service management—or, dare I say it, Ministers—seem to have an agenda of driving down terms and conditions across the civil service.

[Chris Stephens]

The hon. Gentleman makes an excellent point. Does he agree that the changes to civil service pay, civil service pensions and the civil service compensation scheme are a triple whammy for civil servants, many of whom are low paid? Is it not ironic that the directors of all these UK Government Departments have agreed that there should be a 1% pay rise for civil servants, and does that not make a mockery of the 200 different sets of pay negotiations in the civil service?

[Christian Matheson]

The hon. Gentleman is absolutely right. He mentioned the civil service pension changes, which complement and add to the pattern of behaviour that I am identifying. It gives me great concern that there is an agenda out there of driving down civil service pay. Suffice it to say that the official Opposition hope that an agreement can be reached with the trade unions. I remind the Minister that trade unions represent many tens of thousands of Government employees. They have a legitimate role in representing their members.

We keep being told that we are coming out of the tunnel after 10 years of depression, that austerity is over, that the Government are being extremely successful in their management of the economy and that sunlight is beaming down through the dark clouds. If that is the case, now is the time to start treating the Government’s own employees more fairly and, in the context of this particular debate, acceding to the requests of the trade unions that represent the Government’s own employees. That means sorting out this dispute—it is, dare I say it, a needless dispute—on the civil service compensation scheme and giving those civil servants a decent pay rise. That decent pay rise will be a percentage of a much smaller amount than it would have been, because their pay has been depressed for so long, but I urge the Minister in the meeting on 25 March to take this matter seriously, to take his employees the civil servants seriously and to give them a fair settlement.

17:00

[The Parliamentary Secretary, Cabinet Office (Oliver Dowden)]

It is a pleasure to serve under your chairmanship, Ms Buck. I congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing this debate, and welcome the opportunity to respond to the points he has made.

Further to the point raised by the hon. Member for City of Chester (Christian Matheson), I want to put on the record right from the beginning that of course the trade unions have a valuable and important part to play in debates around civil service terms and conditions. Indeed, I have met them frequently—both PCS and the other principal unions, Prospect and FDA, as well as GMB and others.

I know that in his role as chair of the PCS parliamentary group, the hon. Member for Glasgow South West takes a close interest in these matters, and I pay tribute to him. Whatever our political differences, I know he is a strong and effective advocate for the trade unions and for PCS, and he has demonstrated that again today. In my experience both as a Minister in the Cabinet Office and in my previous time working at 10 Downing Street, I have worked with some of the most committed, talented and hardworking public servants in our country.

At a time when the nation faces significant challenges, those public servants’ work is more important than ever, so I am happy to join hon. Members, in particular the hon. Members for Coatbridge, Chryston and Bellshill (Hugh Gaffney) and for Edinburgh East (Tommy Sheppard) in paying tribute to them. As the hon. Member for Edinburgh East said, we need their skills more than ever at this time, as we face Brexit.

I certainly share hon. Members’ belief that all civil servants should be rewarded for the work they do, so that we can attract the best and brightest into the heart of Government. This debate relates principally to the compensation package available to civil servants when they are made redundant, but since hon. Members, particularly the hon. Member for City of Chester, have raised the question of pay I want to address that briefly before addressing the rest of my remarks to the substance of the debate. The hon. Gentleman raised the point about the Government’s fiscal position and the spending backdrop against which we are making these decisions. I am glad he has recognised that the Government have made considerable progress in reducing the deficit. He is right that we have made a lot of progress: the deficit is down by four fifths since 2010, from about 10% of GDP to about 2%. None the less, the Government are still borrowing more than £40 billion every single year, so the pressure has not gone away and we must still take some difficult decisions.

The reason we must take those difficult decisions is that we spent over £50 billion on debt interest last year. That is more than we spend on schools, and more than we spend on our police and armed forces combined. There is still a strong countervailing pressure from the need to continue to bear down on expenditure. Pay forms a large part of Government expenditure, so pay has to be part of that mix.

The overall approach taken to pay is that the Chief Secretary to the Treasury has made it clear that the overall cap has been lifted, but given the financial constraints within which we are operating, which is what the chief executive of the civil service was alluding to, it remains the case that central Government Departments have pencilled in—in fact, penned in—their funding. It is very clear from the Treasury how much budget has been allocated for pay rises, and in the coming financial year that is 1%.

That does not mean that Departments cannot go beyond that, but if they do, they must find efficiency savings to do so. In respect of all delegated levels of pay—that is to say, below the senior civil service—the process for determining pay awards is that it is up to each different Department to determine its pay award.

[Chris Stephens]

I am hoping to secure a separate debate on civil service pay, but since we have touched on it, I am sure the Minister remembers, as he was on the Front Bench, that we debated this last year and he agreed to look at the situation of having 200 separate pay negotiations across UK Government Departments. I think he is sympathetic to my view that that is a bit foolish. Given that permanent secretaries have agreed a joint position, as I understand it, of 1% to 1.5% across Departments, is it not better to have one pay negotiation for the whole civil service?

[Oliver Dowden]

I should say from the outset that no decision has been taken or agreed by permanent secretaries. There is a very clear process for this, which is that for delegated pay, which is that for civil servants below senior civil service level, the framework is set by the Cabinet Office in conjunction with the Treasury and then it is up to each individual Department to make individual decisions.

On the point about co-ordination, the Chancellor of the Duchy of Lancaster and I want to ensure that we have a proper process of engagement with the principal trade unions as we set the delegated framework, but it is important to say that that is not a pay negotiation. We need to understand their position, but the individual pay negotiation must be done by each individual Department. I think having each Department make its individual determination is the right approach, but I am keen to ensure that we engage with the trade unions and others as we consider the overall approach to delegated pay. As I understand it, correspondence is ongoing with the trade unions on the best way of doing that.

Beyond the delegated framework, there is also potential for further efficiency savings to allow for higher pay rises. I have signed them off as a responsible Minister; for example, the Foreign Office recently agreed a two-year pay deal funded by efficiencies, allowing for a 6.4% average uplift for non-SCS staff. It is possible, through smarter ways of working, to fund higher pay awards. I hope that gives hon. Members an overall sense of the approach the Government take to pay.

[Christian Matheson]

Can the Minister describe some of the smarter ways of working that helped to encourage the signing off of that particular pay rise?

[Ms Karen Buck (in the Chair)]

Order. May I encourage the Minister not to stray too far from the subject matter of the debate in responding to that intervention?

[Oliver Dowden]

Thank you, Ms Buck; I will take that injunction seriously and, if I may, I will write to the hon. Gentleman to set out the policy in more detail, so that I do not detain Members any longer on this point. Following your lead, Ms Buck, I turn to the substance of the debate.

The Government have a responsibility to ensure that the civil service is both efficient and cost-effective, and that includes the compensation scheme to support civil servants when exits are necessary—the hon. Member for Glasgow South West outlined the overall history. Important steps towards this goal were taken in 2010 when Lord Maude, then Minister for the Cabinet Office, introduced important reforms to modernise redundancy arrangements in the civil service. A revised civil service compensation scheme was launched in December 2010; at that time, Lord Maude set out his hope and intention that it would be a fair settlement for the long term. I fully acknowledge that point.

However—this is the key point—over the years since 2010, it has become apparent to the Government that those reforms did not fully deliver on their aims. If hon. Members will allow me, I will set out the reasons for that. Part of the rationale for the 2010 reforms was cost savings, and it has become clear that the expected cost savings did not fully materialise. The average compensation entitlement under the 2010 scheme is considerably higher than was intended when the scheme was first introduced. In 2010, the average compensation entitlement for voluntary exits and voluntary redundancies was expected to be £33,754, but by 2017 it was estimated to be £40,513.

More widely, it has become clear that other aspects of the scheme were not appropriate. To give an example, the compensation scheme provisions for early access to pensions for staff aged as young as 50 enable them to retire and draw all of their civil service pension without a reduction for early payment. That is often very expensive for the employer and is increasingly out of line with the Government’s wider aim of encouraging longer working lives.

In recognition of those concerns, the Government introduced new civil service compensation scheme terms in 2016, which, as the hon. Member for Glasgow South West highlighted, were challenged by way of judicial review in 2017. It is important to point out that the court accepted the Government’s reasons for making the reforms, but it found that the Government had not fully met their obligations with regard to how the consultation process was carried out. The 2016 terms were accordingly struck down and the 2010 terms reinstated.

Although the Government of course accepted the court’s judgment—as we must—we still believe that the 2010 compensation scheme reforms have not fully met their objectives, and that there remain good reasons for reforming the scheme. Accordingly, we launched a new consultation on reforming the civil service compensation scheme in September 2017, which set out the Government’s objectives. Principally, the objectives are to align with the principles of the compensation scheme reform expected across the wider public sector; to support employers in reshaping and restructuring their workforces to ensure that they have the skills required for the future; to create significant savings on the cost of exits and ensure the appropriate use of taxpayers’ money; to ensure that any early access to pensions remains appropriate; to ensure that efficiency compensation payments are appropriate for the modern workplace; to support the flexible use of voluntary exits; and, where possible, to implement a set of reforms that are agreed by the trade unions.

The consultation also set out a proposed new set of civil service compensation scheme terms that the Government believe would deliver on those objectives. In summary, those are a standard tariff of three weeks’ salary for a year of service, voluntary exit and redundancy payments of up to 15 months’ salary, compulsory redundancy payments of up to nine months’ salary, employer-funded pension top-up payments allowed only from the age of 55, increasing in line with the state pension age, and that the efficiency compensation tariff should align with the compulsory redundancy tariff.

The Government took the view that those terms would meet the objectives set out in the consultation document, and considered that the scheme would offer a good level of support to civil servants to bridge the gap until they found new employment or entered retirement, and would provide the flexibility needed to support employers in reshaping and restructuring their workforces to meet the challenges that they will face. It will also be fair to taxpayers, who ultimately fund the cost of civil service exit payments, as Members know.

I recognise that this is an area in which trade unions rightly have strong views. The Government are therefore carefully consulting with unions with the aim of reaching an agreement if at all possible. The consultation has already stretched for more than 18 months—a very long period—and has included numerous meetings between my officials and union representatives and between my predecessor and union representatives, and I myself have now held two rounds of meetings with union representatives, which have been extremely useful in helping me to understand the unions’ positions on the proposed reforms.

I am pleased to say that throughout the process PCS and all the other unions engaged openly and constructively with the consultation, notwithstanding their overarching position, which I acknowledge, that the Government should not be reforming the compensation scheme. I place on the record my thanks to all the unions—Prospect, FDA and PCS—for their work in engaging constructively with the process.

As well as engagement through meetings, unions have also put forward detailed counter-proposals setting out their alternative vision of what a reformed scheme should look like. As has been highlighted by hon. Members—particularly the hon. Member for Glasgow South West—those proposals are detailed and well thought through and reflect the considerable effort that has clearly gone into their preparation. Again, I thank the unions for that constructive engagement.

As a result of the meetings and counter-proposals, I am left in no doubt as to the unions’ positions. I understand the areas that they consider priorities for reform, their concerns about the Government’s proposals and their preferred alternative reforms. Contributions to the debate have further increased my understanding of the position of PCS and the other unions it is working with on this consultation. I am very grateful to hon. Members for their contributions.

[Chris Stephens]

The Minister has been most generous in giving way. If the trade unions put forward a counter-proposal that met the Government’s expected savings target, would the Government be more sympathetic? Does he understand the principles behind what the trade unions have put forward, including looking after those who are lower paid rather than those at the top?

[Oliver Dowden]

I certainly understand what the trade unions are trying to put forward and I completely understand their concerns about lower-paid workers. However, it should be noted that there is already provision for a minimum payment that covers lower-paid workers, although a discussion about the level at which to set that forms part of the consultation.

I do not want to pre-empt my final determination, but I am concerned about the scale of the cost savings. At the moment, I still have significant questions about whether what has been proposed by the trade unions meets the cost-saving requirements of the reform that we have set out. That is one principal consideration that will affect my final determination. However, I am very much conscious of the arguments that have been clearly put forward by the trade unions on these points, particularly on help for the lower-paid.

As I have said in recent meetings with union representatives, I am now genuinely carefully considering the counter-proposals that all unions have made. I remain keen to reach agreement with the unions if at all possible, and I am considering whether the Government’s proposals can be adjusted to help to facilitate that, while remaining consistent with our overall objectives for reform. As Members have noted, I intend to make a decision on any amendments to the Government’s proposals shortly. Following that, my intention is then for a period of further consultation with the unions, in advance of the Government’s making a formal offer of revised terms to the unions in the hope that they are accepted.

I conclude by repeating that the Government greatly value the work of civil servants. We are keen to reach agreement on a set of compensation scheme terms. I believe that the consultation proposals are fair and provide a good level of support to civil servants, while recognising the need for continued reforms and savings. I once again thank hon. Members for their contributions and I hope I have set out the Government’s approach clearly.

17:17

[Chris Stephens]

I thank the Minister for his detailed response. As many supporters are likely to be elsewhere at the moment, I hope the Minister does not underestimate the support across the House for civil servants. Given their pay and pensions policies, the Government should not want to make a mistake in relation to the civil service compensation scheme. As has been said, this issue has been to court three times. I hope that, on Monday 25 March, the Minister will positively engage with the trade unions’ counter-proposals, to ensure that civil servants are treated fairly if they are made redundant or have to suffer a voluntary exit.

Question put and agreed to.

Resolved,

That this House has considered the civil service compensation scheme.

17:18

Sitting adjourned.