Enterprise Bill [Lords]
Debate between Lord Brennan of Canton and Richard Fuller
Kevin Brennan
There was a time when what Ministers said on the Floor of the House could be accepted, and I am prepared to accept that the Minister is sincere in what she has said. In fact, I am not sure that she said quite what my hon. Friend says she said. I think that she actually said that it could affect a small number of people on £25,000. However, I think that my hon. Friend is echoing what one of the Minister’s Treasury colleagues had said earlier. If I am not mistaken, the current Minister for Employment, the right hon. Member for Witham (Priti Patel), when referring to what would be in the Conservative party’s manifesto, said that the proposal would not affect anybody earning less than £27,000 a year. We have therefore taken her words, given as a promise from a Minister of the Crown, and put them into an amendment in order to hold the Government to their word. The fact that this Minister was not prepared to repeat that in those terms when she spoke on Second Reading can perhaps be explained by the Government’s refusal to support our very reasonable amendment.
Richard Fuller
Following the hon. Gentleman’s deliberations in Committee, and from his own analysis—obviously we are looking in the round at public expenditure on exit payments—can he advise the House on what proportion of that expenditure in, say, the last five years was for people earning less than £27,000, and what proportion was for people earning over £100,000?
Kevin Brennan
I do not have that figure to hand, but we did probe the Government to try to get some idea of what calculations they had made of the impact on people earning less than £27,000 a year. I am afraid we have not been able to elicit a great deal of information from them on that subject, other than that they think it would be rare for those people to be affected. If it is that rare—I will come to this in a moment—why do the Government not accept our amendment, because it will not actually cost them much?
Richard Fuller
The hon. Gentleman makes a fair point. In the absence of data, he has his good judgment and his reasonableness, following his many years in government before 2010. Do his instincts not say that the majority of people will be earning in excess of £100,000? That really is the target of what the Government propose, is it not?
Kevin Brennan
That is what the Government say the target is. As the hon. Gentleman knows, I respect him greatly for his independence of mind and thought, and for his intellect on these matters. As I said at the outset, if abuses are going on in relation to public sector exit payments, we are perfectly willing to say they should be stopped, but we need to look at what the clause actually does. It picks the figure of £95,000 to generate a headline saying that the Bill will stop fat-cat public sector exit payments of more than £100,000. However, what it does not elucidate very well is that that £95,000 is not just a cash lump sum, but includes the so-called strain payments that are paid into workers’ pension funds when they are forced into redundancy before retirement age. That is money they will never get in their pockets—they are not walking away with £95,000. They are not fat cats earning more than £100,000, and some are on relatively modest incomes. The Bill will also capture many people in the private sector, which the Government were also not keen to elucidate on.
Kevin Brennan
My only assumption is that they think fat cats should not have holidays. That is probably why they thought it did not matter that there was only a four-week consultation. That is what they think of the people they were supposed to be consulting. The rhetoric used by the Government is shameful; the contemptuous, short nature of the consultation is shameful; and the way in which the policy has been introduced overall can only be described as shameful.
We are concerned about the Government’s reluctance to make the necessary exemptions to ensure that the unfortunate few—that is what the Government tell us they are: a few—are not disproportionately affected. If the low paid and average paid are affected only in rare circumstances, excluding them from the cap will not result in the Government losing a great deal of money, so what is the problem in exempting them?
Richard Fuller
I am listening intently to the hon. Gentleman. I was in the Committee, and I am wondering whether there may be a flaw in his argument—no pun intended. If we put the floor in at £27,000, what about the person at £28,000? How would we distinguish between the different groups? Is it not better to set a limit to the payment that is made and to be blind on the income that someone gets up to that limit?
Kevin Brennan
I understand the point the hon. Gentleman is making. That would be all right if it was truly a payment that people were going to get in their pocket. The reason these people are captured, however, is that the figure includes the so-called strain payments that are made into the pension fund if they are made redundant before their normal retirement age. That is the unfairness, and that is the reason why, I presume, that the former Treasury Minister said that no one on under £27,000 should be affected. The Opposition have simply taken what the Government originally said their intention was, as elucidated by a Minister of Her Majesty’s Treasury, and put it in our amendment to test why the Government are not acting on what was said.
On Report in the Lords, Baroness Neville-Rolfe indicated that a drop of £500 would not be disproportionate for someone previously entitled to a pension of £12,500—the implication is that there could be a fall in the pension paid ultimately. All I would say is that a 4% drop in income for somebody on a relatively small income—it is lower, after all, than what one would receive on the minimum wage—would be highly significant on that low income. To say that a 4% cut is not significant is hugely out of touch with the reality of many people’s lives.
The Government’s case is that a leaving payment of £95,000 or above is a large amount for any employee, but they are perpetrating the myth that people will actually receive that money. Employees on low to average incomes will never see a large amount, because the payment includes compensation paid to the pension scheme. In fact, some of them will never even receive their pension, so they will never see that money in any way, shape or form.
The cap includes strain payments, and the pension shortfall is adjusted at the time of redundancy. Strain payments could make up a considerable amount of the £95,000. If so, long-serving, loyal workers could finish work with a significant shortfall in the amount that should have been allocated to them to deal with redundancy, unemployment and uncertainty. They will be left with little in their redundancy payment to pay for annuities to provide long-term security. I do not think that was the Government’s original intention, but the fact that they have refused to respond to the concern makes me wonder whether I am right about that.
We have been told that the Chancellor has withdrawn his pensions proposals, which would have raised £10 billion to pay down the deficit. In other words, he has moved swiftly so as not to offend better-off pensioners who might have been hit by the proposals. Why, then, will the Government not turn their hand to those who earn less than £27,000 a year, whose redundancy and access to a pension are threatened by the exit payment cap? The Chancellor has famously said that we are all in this together and that those with the broadest shoulders should bear the biggest burden, so the Government have a chance to prove that by supporting our amendment 15, which is, after all, based on their own words.
Amendment 16 would exclude from the provision employees of the companies listed in new schedule 1, which are operated by the private sector. Those who would be affected are principally employees of companies across the nuclear estate and elsewhere in the private sector, such as Magnox. Why are they affected by a measure that the Secretary of State told us on Second Reading is designed to hit “public sector fat cats”? According to the Secretary of State, Magnox workers who work in the private sector are “public sector fat cats”.