Baroness Donaghy
Main Page: Baroness Donaghy (Labour - Life peer)
Baroness Donaghy (Lab)
My Lords, with so many topics covered by the Bill, I will concentrate on public sector exit payments and then add brief references to cash retention and apprenticeships. I am concerned about the proposal to cap public sector exit payments. I have a fair amount of experience in this area and know that the measure will have unintended consequences which make reorganisation more difficult. It will mean less flexibility for redundancies and less certainty for staff—particularly those over 50—and, in the end, might cost the taxpayer more money not less.
In the Civil Service, the proposal cuts across a negotiated agreement. The then Minister for the Cabinet Office, now the noble Lord, Lord Maude of Horsham, described the agreement reached in 2010 as one which would be “lasting”; he said that it would,
“provide a fair balance between the interests of taxpayers and the interests of civil servants and protect those approaching retirement and the lowest paid”.—[Official Report, Commons, 14/12/10; col. 849.]
So what has changed?
The impact of the proposed cap will be on those with long service rather than on the highest paid. The Cabinet Office has confirmed that some civil servants earning less than £25,000 a year could be affected by the cap because they have worked for so long for the Civil Service. Conversely, some high earners with less service will not be affected, because the Civil Service Compensation Scheme is service-related and there is already a maximum pay limit. This maximum pay limit has meant that a number of employers have not been able to restructure their organisations or make the staff changes that they had planned. If the Civil Service had a viable redeployment process, it would provide better value for the taxpayer than an exit cap. It would also meet the ACAS guidelines for employers on redundancy handling.
In the health service, there is already an exit cap of £160,000. National Health Service trade unions have recently been in negotiations with employers and the Department of Health on further changes to the NHS redundancy scheme. The Department of Health has been keen to use this latest round of talks to introduce a staggered clawback of redundancy payments where staff were re-employed within 12 months, and a taper of redundancy calculations for staff approaching retirement age. The National Health Service trade unions have been keen to use the talks to limit the need for payments through establishing better scope for redeploying staff at risk of redundancy. While there are still issues to iron out, these talks have been productive. However, the announcement of the Government’s £95,000 cap has set this timetable back significantly and has the potential permanently to derail these talks—another unintended consequence, I am sure. If there has to be a cap, the figure must be increased and there must be a commitment to index-linking that amount.
The Local Government Association has indicated that the proposed cap may threaten essential future staffing restructuring in councils. The Bill also fails to provide certainty over when the cap will apply, which is unhelpful for staff and employers. A start date should be made clear. UNISON has also referred to necessary restructuring as a result of the dramatic cuts in local government budgets. UNISON described these reorganisations as,
“a staggered process over several years to maintain service delivery and to enable smooth transitions from old to new delivery models”.
The union made the point that,
“employers and employees may therefore have made dramatically different decisions in [the] initial stages of restructuring if they had been aware of the constraints proposed for future stages by this proposal”.
Under recently negotiated public sector pension changes, guaranteed not to be meddled with for 25 years, when a member of the local government pension scheme is made redundant over the age of 55 they are instantly entitled to draw their pension without the usual penalty for drawing it early. The employer makes a one-off lump sum payment known as a strain payment. The proposals in the Bill explicitly include payments made to a pension scheme. It would impact on those earning £35,000 a year and as pension age protections wither on the vine the pension strain payment will begin to affect staff on much lower incomes.
As UNISON pointed out,
“under these proposals, an individual staff member’s length of service and age could become the determining factors in employers seeking to avoid the complication of this arbitrary cap”.
That may be discriminatory. I hope that the Government will withdraw this clause altogether. If they are not minded to do that, I hope that there will be a protected period of two to five years where an employer can demonstrate that they are in the middle of an ongoing restructuring programme. The cap should be increased so as not to derail NHS joint negotiations. There must be a mechanism for index-linking, and pension strain payments should be excluded from the exit payment calculations. There should also be an exemption for low to moderate earners. My final point on this particular part of the Bill, particularly with the Trade Union Bill coming down the track, is that reneging on agreements reached after much agonising on both sides is a sure-fire method of creating havoc in employment relations and stoking up a lot of trouble for the future.
The Enterprise Bill provides an opportunity to return to the subject of cash retention, particularly in the construction sector. Some of us participated in a debate on the small business Bill but the previous Government were not minded to introduce some safeguards on this. The same Minister is presiding over this Bill and I hope that she will change her stance. I also hope that there will be support from across the House for a provision in the Bill that requires cash retentions to be placed in trust or that alternative security such as bank guarantees are provided. I am sure that the noble Lords, Lord Aberdare and Lord O’Neill of Clackmannan, are majoring on this important subject, so I will keep my contribution as brief as possible.
The Specialist Engineering Contractors’ Group has been calling for this provision for some time, and it is depressing to read about the companies that have gone under simply because of companies which owed money and did not pay up. As the SEC has stated, cash retentions are withheld from progress payments ostensibly as security against failure to remedy defects. In practice, they are deducted to support the cash flow of the paying party. Cash retention in the construction industry is a scourge which causes bankruptcies, loses jobs and reduces training. When I was preparing my report on construction fatalities six years ago it became clear to me that cash retention was part of the downside of the construction industry. Flexibility will always be a necessary ingredient for that industry’s success. While I was not able to prove a conclusive link between cash retention and safety in the industry, I feel sure that the uncertainty it causes, the cutting of corners, the massive strains put on subcontractors and those further down the supply chain make a negative contribution to safety. Cash retention is like an underground poker game. I urge the Minister to at least force these games into the fresh air.
I shall make a brief and final reference to Clauses 18 and 19 on apprenticeships. The commitment on paper is welcome, and I notice that the much-despised targets are back again. Unless the Minister has the powers of Prospero and can conjure up 3 million apprenticeships without any visible means of support for the public sector, I am very much afraid that this plan will be a Caliban. The levy could turn out to be a tax on training and could displace training budgets for existing workers. So I ask what plans there are for proper negotiation with employers and unions in its implementation. If the National Health Service is forced to take on more apprentices, where there is insufficient staffing capacity to provide supervision and mentoring, it could be very risky. The types of roles for which apprenticeships exist do not necessarily match up with the job vacancies. A healthcare assistant in the NHS wishing to become a nurse cannot currently do so through an apprenticeship and would require funding to support their progression. This could be a really important development if the Government were so minded and would provide real jobs at the end of the process.
Is it the Minister’s intention that the Skills Funding Agency continues to run and fund the National Apprenticeship Service, which co-supports the public sector? What information will be gathered on gender, age, ethnicity and disability in each region to ensure fairness? Will all apprenticeships receive the minimum wage and not just six out of seven as a recent BIS survey revealed? How will standards be streamlined? For instance, the level 2 healthcare support worker trailblazer apprenticeship does not require participants to achieve a level 2 qualification.
Finally, will the UK Commission for Employment and Skills report on the quality of apprenticeships being provided and produce a review of what social dialogue has taken place to help to ensure the success of these schemes? I look forward to exploring these issues further in Committee.