Restriction of Public Sector Exit Payments Regulations 2020

Baroness Kramer Excerpts

Wednesday 23rd September 2020 Lords Chamber

[Baroness Kramer (LD) [V]]

My Lords, the more time I spend looking at these regulations, the more concerned I have become. I start from a principle, as I suspect everyone in this House does, that employees in the public sector need to be treated fairly. We have all seen how incredibly effective and dedicated members of the public sector have been in dealing with the challenges of Covid.

These regulations were designed initially to deal with excessive payments to high-earning senior civil servants. I have not heard a single Member of the House object to that aspect of the regulations. However, again and again, one noble Lord after another has made it clear that the framing of the regulations is such that it impacts on public servants on modest incomes, whether through the issues raised by the noble Baroness, Lady Finlay, affecting junior doctors, or in the damage faced by mid-level local government workers who are made redundant, a point raised by nearly every speaker.

The biggest issue under these regulations is pension strain. Access to unreduced pensions for a worker made redundant after the age of 55 in local government is part of an agreement for local government workers enshrined in the Public Service Pensions Act 2013. We must keep in mind that salaries have been crafted with this benefit in mind. The relevant section requires the local government employer to contribute to the pension fund to offset the lost years of contribution created by a forced redundancy. That payment to the pension fund can easily exceed £95,000, even for a modestly paid worker. This is someone who gets only £14,000 or £20,000 as their redundancy payment. Now they are caught by the new cap, leaving them on a significantly reduced pension for the rest of their lives.

We understand that the Ministry of Housing, Communities and Local Government has begun a consultation on the consequences of the exit payment cap. It does not close until 9 November 2020 and regulations will take time to follow. It is beyond me, and I suspect most Members of this House, that the package has not been considered as a whole. These regulations should not be enacted without confirmation of what any mitigation might be.

I am worried by comments in the report from the Secondary Legislation Scrutiny Committee that HMT’s answer is to suggest that the redundant worker make up the contributions gap. Does it really think that a 55 year-old local government employee on a mid-level salary has a savings pot in the many thousands, especially as he or she faces redundancy? Does it then expect them to get high-paid work to enable them to contribute to make up the money that has not been paid by a local government authority?

In the original legislation, the local authority could waive the rule if approved by full council. That seems to me reasonable. Indeed, it is what the then Minister, the noble Baroness, Lady Neville-Rolfe, assured the House on 30 November 2015. Now the regulation gives that power solely to a Minister—in other words, the Secretary of State. The full council is overridden, and I join the noble Lord, Lord Wigley, in saying that this is entirely inappropriate. Taking back control is really starting to have an unpleasant new meaning.

To make matters more murky, the Government have not published their updated equality impact assessment, and women are expected to be among the hardest hit by this new regulation. None of us believes in rewarding failure, although we notice, interestingly, that the regulation makes an exemption for the banks owned by the Government. Apparently, those institutions are not to be bound by that same notion that failure should not be rewarded.

I am concerned that this regulation expresses a general hostility to civil servants, and we have seen that in other areas of government behaviour. The regulation makes exemptions for the Armed Services and for spies. I do not resent their luck in finding that they have exemptions, but that does not make it fair for others. I understand that whistleblowers and victims of discrimination are also exempt. Again, that is entirely appropriate, but, frankly, whistleblowers and victims of discrimination should not be made redundant in the first place.

This is a really badly crafted regulation. Its enactment needs to be halted so that a new version can be put in place once the whole picture is sorted and the various mitigations have been understood.