Baroness Hayter of Kentish Town
Main Page: Baroness Hayter of Kentish Town (Labour - Life peer)Enterprise Bill [HL]
Baroness Hayter of Kentish Town Excerpts“( ) Regulations shall make provision to require prescribed public sector authorities to consider, prior to making a public sector exit payment—
(a) whether the payment being paid is appropriate; and(b) whether the payment would provide value for money.”
Baroness Hayter of Kentish Town (Lab)
My Lords, in moving Amendment 70ZG, which stands in my name and that of my noble friend Lord Mendelsohn, I will speak to the other amendments in the group, which deal with the unintended consequences of the Government’s rush to cap high exit payments.
We are not against what the Government said that they wanted to do. The words in the Conservative Party manifesto were:
“We will end taxpayer-funded six-figure payoffs for the best paid public sector workers”.
Best paid? No, the Bill will affect those with long service rather than with the highest pay. It does not just curtail payments to the “best paid” public servants but to some who earn only £25,000, despite the impact assessment having suggested that the cap would save in the “low hundreds of millions” over five years—which sort of anticipated that only small numbers would be caught. We now know that over 20,000 could be affected in the Civil Service and many more in arm’s-length bodies.
We have heard, I am sure like other noble Lords in this House, from some long-standing public servants, most in their mid to late 50s, with up to 30 years’ service behind them, who face possible unemployment but have specialist skills—such as Magnox engineers or librarians—or are in areas of high employment, who are unlikely to find equivalent work again but who will lose what they had reasonable expectation of being paid should cutbacks happen.
We have had strong representations from local government, which will be cutting expenditure by merging back-office functions or reducing departments, but whose ability to manage such restructuring will be hampered by not being able to negotiate with staff in a way that best meets the organisation’s interests and the individual’s need to retain a reasonable income to pay the mortgage or support a family.
What is more, if the £95,000 figure is not uprated, it will gradually affect more and more grades until, presumably, finally even Foreign Office cleaners will be included. Although we have not retabled our amendment on this, we ask the Government to consider re-evaluating it annually, perhaps using the same uprating as for public sector pensions. Similarly, we ask the Minister to open discussions with relevant stakeholders on technical considerations, such as whether the cap will include other means by which an individual can access an unreduced pension—such as on compassionate grounds.
I will add one other point. Since this provision was first mooted, housing associations have been classified as public bodies by the ONS. It would therefore be helpful if the Minister could confirm the position of housing associations as affected by Clause 26. Given the Government’s commitment to bring forward measures to deregulate housing associations, with the aim of returning them to the private sector in the future, can the Minister clarify whether the Government plan to add housing associations to the list of exempted bodies?
This group of amendments aims to achieve four things, each recognising that the Government themselves acknowledge that there will be hard—or inappropriate—cases caught by the cap, in that Clause 153C empowers Ministers to make exemptions. These amendments spell out where and how such discretion might be exercised. First, Amendment 70ZG aims to help local authorities and other public services, be they housing associations—if they are to be included—Magnox, or whatever, by requiring that any guidance on the waiver should include the ability to get “value for money”, thus enabling management to take the best decisions in voluntary redundancy to fit its objectives.
Secondly, we want any public body caught by the cap, not just local government, to have the ability to exercise a waiver, albeit with the approval of its governing body, much as for local authorities as set out in the draft statutory instrument. Under the Bill, only Ministers or the Scottish Government could agree a waiver, although the draft statutory instrument extends this to the Welsh Assembly and local authorities. However, we think that this needs to be for all relevant bodies, which otherwise will have no ability to exercise a waiver on the cap. These might be a fire and rescue authority, Magnox, the Forestry Commission, schools—where relevant governing bodies have their own decision-making powers—as well as all the others, which may not even realise that they are about to be caught by this provision. Hence Amendment 73A.
Thirdly, as set out in Amendments 70C and 70D, tabled by my noble friend Lady Donaghy, those earning below £27,000 or with long service should not be caught by the cap. After all, only the combination of their age together with their length of service, rather than high pay, includes them under the cap. We do not believe that that was the Government’s original intention. What is more, in January this year Priti Patel said that,
“those earning less than £27,000 will be exempted to protect the very small number of low earning, long-serving public servants”.
That undertaking has not been kept. Let us take the example of a librarian with a career-average salary of perhaps £25,000 who has worked for 34 years with a council when its library closes and is made redundant at 55. It is a bit late to start a new career and there are not a lot of private libraries around. Similar examples include a 52 year-old tax investigator who has worked for 25 years, a 50 year-old health and safety officer with 20 years’ experience, or a 56 year-old school inspector after 16 years with Ofsted. Were these really the people the Government wanted to catch under the exit cap?
A 58 year-old Whitehall civil servant wrote to me to say that he has given 28 years of public service but now finds that he cannot take his department’s early exit offer as his full package would be over £95,000. Someone else wrote to me who has worked in the electricity supply industry for 35 years, mostly on shift, often over Christmas and New Year’s Eve, generating safe nuclear power. His ability to end his shift working because of his failing health is now in doubt because the cap would reduce what he could take to replace his income.
Therefore, having a disregard for those earning below £27,000 or setting a maximum number of years of service for the calculation would not undermine the purpose of the provision. Certainly there should be an exemption for those close to retirement who have been working with some expectations and who need time to adjust to a tougher regime. While the Minister has written that this whole clause will not be introduced until late 2016, that is still very soon for someone in their late 50s to be able to make alternative provision for their retirement.
Fourthly, and perhaps most importantly, we must exclude what are known as “strain payments” from the cap, which especially affect long-serving public servants. These are actuarial adjustments, made by the employer to the pension scheme, to compensate the scheme for the early pension taken by the person leaving the service. These strain costs are not paid to the individual, and are therefore qualitatively different from other payments included in the cap. Where a pensions strain compensation cost is paid, the individual will only experience the benefit over a number of years as they gradually draw their pension. Even then, the impact on their pension is not great. For example, if their employer paid £10,000 as strain compensation, the individual would get only about £500 in additional pension but would have lost £10,000 from their exit payment.
Baroness Hayter of Kentish Town
I had anticipated some clarification on housing associations. I thought that had been arranged, but we will put it to one side.
Baroness Neville-Rolfe
I am extremely sorry if that was the noble Baroness’s expectation. I will write to her, but I do not have the information that is needed.
Baroness Hayter of Kentish Town
I thought that our relevant teams had coped with that. I think the answer the Minister is going to give will be very acceptable, but maybe we will get it in writing.
We have one voice between two tonight—we are sharing it. But on behalf of us both, I thank the Minister, particularly for the work she did on the examples I gave in Committee.
I hope I heard her wrongly when she said that, as a result of this, someone’s pension would be reduced “only” from £12,500 to £12,000 and from £19,000 to £17,000. If those are the figures, I think that that makes the case. For someone earning £12,500, to lose £500 a year is an enormous amount. Maybe not to thee and me, Minister, but for people on those sorts of earnings trying to hold together a family, changing their pension from £12,500 to £12,000 is serious. That, basically, is what we were trying to get at in our swathe of amendments, one way or another. If it is £19,000 to £17,000—although I may have got that wrong—that will have a very serious impact.
The other problem is that the Minister said that £95,000 is a lot of money, but they will perhaps never see £10,000 of that because it is a compensation paid to the pension scheme. So they cannot go off and use that money to live on while trying to retrain or move or find another job; it is an actuarial payment that never comes near their bank account. That is why Amendment 70B, which we will maybe have to come back to later, is so serious. This is not a sum of money they can use to buy themselves an annuity to help train or move or anything else—it is money they never see. I am really sorry that the Government have not responded to that.
If it is right that 5% would be caught, a lot of these waivers are going to go to the Minister. Well, I hope the Minister has more than seven days in her diary per week, because there are going to be a lot of applications for waiver. We are talking about schools and all sorts of small organisations.
The Government are making a mistake on this, not in their intention but in their approach. Luckily, the Bill has another House to go to yet, and I hope that further thought can be given to it because I really do not think that this measure is right or was the intention. It is not fair to take away some people’s anticipated income.
I will say only one other thing on the point that the noble Lord, Lord Stoneham, made. If local authorities are not allowed a bit of wriggle room, they will find all the 58 year-olds still there and all the youngsters going. That may not be the best way to merge departments or to get the best restructuring. Again, it seems to me a rather short-term view.
I hope the Government will take further thought on this but, for the moment, I beg leave to withdraw the amendment.
Lord Stoneham of Droxford
My Lords, I have a specific point for the Minister. These two amendments raise important issues and I am broadly supportive of them. In Committee, the Minister said that, where a whistleblower successfully brings a case to an industrial tribunal, the cap will not apply to the award made. That relates to the point raised by the noble Lord, Lord Low, that if you have the cap lifted only for tribunal cases and awards, it will encourage that process rather than a settlement, which would be quicker, probably cheaper and simpler. I therefore again put to the Minister the point made by the noble Lord, Lord Low: can we have a mechanism that does not confine this only to employment tribunal awards? Will it apply to tribunal conciliation settlements? More importantly, it would be helpful if it could apply to general settlements in cases where whistleblowers are particularly vulnerable. As the noble Lord, Lord Wills, said, often in public cases these people do not work in the sectors in which they have made their sacrifice.
Baroness Hayter of Kentish Town
My Lords, the case for the amendments has been made by both my noble friend Lord Wills and the noble Lord, Lord Low. I merely re-emphasise that undermining everyone’s desire to outlaw discrimination or to encourage whistleblowing in the public interest—which is good for patients, consumers and fellow workers—by including any compensatory payment in the cap would be yet another unintended consequence of this clause.
The point raised by the noble Lord, Lord Stoneham—and, in a way, by Amendment 70A, although not formally moved—is the general worry that a court-approved or ordered settlement would be exempted. We support what the Government are trying to do elsewhere to get early settlements, including by ACAS, but we are worried that unless those sorts of settlements are excluded there will be a perverse incentive to go to tribunal or court because, otherwise, the settlement could disappear under the cap. This could be for unfair dismissal, harassment or victimisation in addition to discrimination and whistleblowing.
If the Minister agrees to discussions on this issue and how we can support what the Government are trying to do elsewhere—which is to achieve settlements before going to court and not at the court gate—it would be very helpful.
Baroness Neville-Rolfe
My Lords, I am grateful to the noble Lords, Lord Low and Lord Wills, for their careful scrutiny and for these amendments. I say from the outset that this clause is not intended to disincentivise employers from entering into appropriate settlement agreements, nor is it intended to limit the payments that are available to aggrieved individuals in whistleblowing or discrimination claims.
I agree with the points around the importance of these matters made by the noble Baroness, Lady Hayter, and the noble Lord, Lord Stoneham. However, I repeat the point I made in my letter to the noble Lord, Lord Low, that there is an important difference between payments that have been directed by a tribunal and payments made under a settlement agreement. If a claim is successfully brought to tribunal, there is a clear finding of fault. I make clear today that payments directed by a court or any tribunal will not be within the scope of the cap. The draft regulations will be specific on that point, and we do not need to put it into the Bill.
However, in the case of a settlement agreement, this is of course only a potential claim and we will not know whether it in fact has merit. As the noble Lord, Lord Low, has said, guidance on relaxing the cap will clarify that these are the kinds of circumstances in which it may sometimes be appropriate to make settlement payments above the level of the cap. The Treasury guidance on relaxation of the cap will make it clear that such payments should be made only after appropriate scrutiny. Otherwise, if we were to exempt certain categories of claim from the cap as proposed in the amendment, we would actually create a loophole that could encourage some people to make unmeritorious claims in order to avoid the effect of the cap. This could lead to payments in excess of the cap being made in cases where that is clearly not appropriate. I stand by the point. I have said that the draft regulations will exclude all tribunal-directed payments from the scope of the cap.
We have no desire to encourage claims to proceed to tribunal where settlement is more appropriate. It seems to me that, if some types of settlement on the grounds of whistleblowing or under the Equality Act were excluded, that would complicate employment law proceedings in just the way that the noble Lord, Lord Low, described. I fear that, if we were to proceed as proposed, we might discredit genuine claims by whistleblowers and of unlawful discrimination by association with a legal loophole, so our clauses include such payments within the scope of the cap but allow for the restrictions to be relaxed in appropriate cases.
Amendment 70AA raises the important topic of whistleblowing. The Government take this issue extremely seriously.
Baroness Hayter of Kentish Town
My Lords, I spoke to this amendment when addressing an earlier group. It is the amendment that would leave out from the exit cap the “strain payments”, if you like: compensatory payments made by an employer to a pension scheme which do not go to the person leaving the service. I beg to move the amendment at this point, and I wish to test the opinion of the House.
Baroness Hayter of Kentish Town
My Lords, as we moved them in Committee, I do not think the Minister will be very surprised to know that we are delighted with these amendments.