Superannuation Bill

Baroness Jowell Excerpts

Wednesday 13th October 2010 Commons Chamber

[Mr Maude]

If my hon. Friend will allow me I shall come to that later, because I want to talk in a little more detail about the terms of the scheme that has been brokered by the negotiators for five of the unions.

I repeat that we want a long-term negotiated successor scheme. We want a package of reform that provides genuine protection for lower-paid civil servants, that caps the total amount that can be paid out, that provides protection for those closest to retirement and that reforms the accrual rates. It takes time to negotiate such a scheme and it has been a very intensive process. That is why the caps were put in place in the Bill—as a safeguard to ensure that if agreement could not be reached, we could at least limit the payouts in the short term. I have always been hopeful that we could reach agreement with all six unions by the time the Bill reached Report.

After the intensive negotiations throughout the summer, we reached an impasse. The same five unions that agreed the February deal with the right hon. Member for Dulwich and West Norwood came together once again and put to me concrete proposals for reform. Sadly, the PCS refused to join them in that approach. That was disappointing, but I made it clear to the PCS that it was welcome back at any stage if it was willing to put forward concrete proposals, and I wrote to Mark Serwotka, the general secretary, to that effect. In the meantime, my officials and I engaged productively with the remaining five unions to attempt to reach agreement. Last week, all five union negotiators, representing Unite, GMB, Prospect, the First Division Association and the Prison Officers Association, agreed terms with us that they were prepared to recommend to their executives. The terms of that agreement represent a reasonable outcome for everyone involved and deliver on our objectives of being fair, affordable and sustainable.

It is worth dwelling a little on the terms of the agreement. We reached agreement on a standard tariff in which each year of service would provide one month’s salary in the event of redundancy. That compares with one week’s salary for every year of service under the statutory redundancy scheme. The tariff would be capped at 12 months for compulsory redundancy and at 21 months for voluntary redundancy. All civil servants being made redundant would be entitled to a three-month notice period. That is in contrast to a cap, in some circumstances, of well over six years’ pay—six and two-thirds years—and paying up to three months’ pay for every year of service, as is the case currently. It contrasts with the current situation of having a six-month notice period for all compulsory redundancies, but no equivalent notice period for voluntary redundancies. The new scheme will be simpler, fairer and more affordable.

We also agreed on significant protection for lower-paid civil servants. Under the terms of the scheme, any civil servant on a full-time equivalent salary of less than £23,000 who was made redundant would be deemed to earn £23,000 when their redundancy payment was calculated. So for someone earning £13,000 in those circumstances, the multiplier by which the number of years would be multiplied to calculate the redundancy payment would be deemed to be £23,000. For the very lowest paid in the civil service, that is significant additional protection and, I have to say, better protection for the lowest paid than the February scheme. I say again that that would be a permanent feature of the scheme, not a transitional feature of it. It would be in place for all time, or for all time until some subsequent Government chose to revisit it.

Conversely, staff earning more than six times the private sector median average earnings, which is around £150,000, would have their salary capped at that figure for the purpose of calculating their redundancy payment. That would be an end to the mega-payouts, which have been highlighted in a national newspaper recently and which cause a certain amount of offence to taxpayers.

We also agreed on protection for staff who have reached the minimum pension age of 50, allowing them to opt for early retirement when they leave, in return for surrendering the appropriate amount of any redundancy payment. Again I stress to the House that under this proposal that will be a permanent feature of the scheme, whereas in the February scheme, which the right hon. Member for Dulwich and West Norwood attempted to impose, it was framed as a transitional arrangement that would run out over time.

I believe that that is a fair deal for civil servants and for taxpayers. Given that we had agreement from five of the six union negotiators on the terms of the new scheme, I therefore proposed an amendment—the new clause that we are now discussing—to allow the Government to impose that scheme, which is a power that the Government thought they had and used when the right hon. Lady was in office, but which was subsequently struck down by the High Court.

I want to make it absolutely clear that there will be an obligation for the Government to consult properly before any scheme is imposed. I believe that that obligation already exists in section 1(3) of the Superannuation Act 1972, but lest there be any doubt, I undertake that we will introduce a further amendment in the other place to put the matter beyond doubt. In the intervening period, I shall want to discuss with the right hon. Lady and with the unions how we can frame that measure in a way that gives the necessary comfort that this is a serious process. That commitment is there. There is already in the existing Act an obligation to consult the unions. It is not framed in quite that way, but that is the effect of it. We shall introduce further amendments if they are regarded collectively, by us all, to be necessary to put the matter absolutely beyond doubt.

I want now to make it absolutely clear what the new clause does. It does not create any unprecedented power for me that has not been available to my predecessors. It simply recreates precisely the power that the right hon. Lady had when she imposed the February scheme. It does not go one whit beyond that. It is rigorously framed so that it goes no further at all than the power in the original Act, on the basis of which the right hon. Lady—in good faith, and with our full support—acted before the election.

Let me say a word about the PCS. I have no wish at all to exclude the PCS from the negotiations. Late last week, the leadership of the PCS came back to me and indicated that they would like to return to the negotiating table. I welcome that and have told them that I am looking forward to seeing their proposals. The other five unions have been making constructive proposals for some little time now, and those suggestions have formed the basis of the proposed new scheme brokered and agreed by the negotiators for those five unions. I have stressed to the PCS that any changes to the proposed scheme cannot exceed the cost envelope of the scheme already agreed, and that any changes must be agreed with the other unions, which have already worked hard to reach this agreement.

May I say a word about the Opposition amendments, which have been grouped with the Government new clause and amendment? The Opposition amendments would effectively invalidate the effect of the Bill, as they would remove the caps, which are the essence of the Bill. There is nothing more to say about that. On Second Reading, I set out the reasons for having the Bill at all, and I have reiterated them today. I say again that no one would be more happy than I would if, the day after Royal Assent is given to the Bill, should it get that far, I am able to put those provisions into abeyance; I do not want us to be in a position whereby those caps are what applies in practice. I want there to be a new scheme—ideally agreed by six unions, but if not, agreed by as many as possible, and imposed using the powers that the right hon. Lady herself used, which the Government new clause will put into effect and allow to be used.

I earnestly hope that a successfully negotiated new scheme agreed by all six unions will follow from today’s debate. I stress that I remain completely committed to achieving that. If we can achieve it, neither the caps in the Bill nor the power contained in the new clause will be needed, but if there were no such agreement, it would be wrong for the PCS to be able to veto any changes to the current scheme, because that scheme has been universally agreed in the House to be unsustainable. This amendment will simply put the current Government in the same position as the previous Government—committed to consultation and to negotiation, but able, in the end, to decide. I commend it to the House.

[Tessa Jowell (Dulwich and West Norwood) (Lab)]

I shall speak against Government new clause 1 and in favour of the amendments standing in my name and that of my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins). I give notice that I intend press amendment 4 to a Division, subject to your will, Mr Speaker.

I also want to put on record my appreciation of the conciliatory tone in which the Minister has addressed the House today and note what I think was very constructive scrutiny of the Bill in Committee, which gave the opportunity to hear witnesses.

I would like to identify the common ground that we share, but also what still divides us. We agree that the civil service compensation scheme is in need of reform—as the Minister observed, I spent many hours trying to secure that reform—but it is also important that new legislation take account of the conclusions of the judicial review. It is important, too, that that is done in the right way, giving the 500,000 or so civil servants who are liable to be affected the confidence that the process will be fair and that the fairness of that process is institutional.

The legislation represents very high stakes for the 500,000 or so civil servants whose lives stand to be directly affected by its provisions. The Bill is not simply a blunt instrument for negotiating purposes. For those 500,000 civil servants, it could be a matter of their keeping their home, helping their children through university or averting financial hardship while they look for a new job. We heard eloquent evidence of that anxiety from witnesses who appeared before the Public Bill Committee.

To summarise, we have two central problems with the Government’s position on the Bill. The first problem, as we argued from the outset on Second Reading, is with the unacceptable caps set out in clause 1. Our amendment 4 is intended to deal with that. The second is the unbridled powers that the Government are seeking to impose on any new scheme that fails to secure a negotiated agreement. We will take every step we can to insist that a requirement for consultation and due process appears in the Bill.

[Mr Maude]

The right hon. Lady describes the powers that we are seeking in the new clause as unbridled, but does she accept that they would be precisely the same powers as she had and exercised only eight months ago?

[Tessa Jowell]

I accept that only in part, in that the scheme set out in the Bill, with the caps, is substantially less generous than the scheme that we negotiated with the trade unions only a few months ago.

[Mr Maude]

I am not talking about the scheme; I am talking about the power in the new clause for the Government to impose a new scheme, which the right hon. Lady has just described as an unbridled power. I am asking her to agree what is certainly the case: that the power that the new clause would give to me is precisely the same power as she had and exercised when she held my job eight months ago.

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[Tessa Jowell]

Let me come back on that point. When I was responsible for the negotiations, they were long, as the Minister outlined, and involved a serious and concerted attempt to reach a negotiated agreement. New clause 1 is a necessary way of dealing with the unexpected outcome of the judicial review earlier this year. Had we been returned at the general election, we would no doubt have had to amend the 1972 Act in the light of that, but the critical difference is that we would not have introduced legislation simply to impose a settlement in the absence of a clear commitment in the Bill to negotiation in good faith in order to try to achieve a proper agreement. That is why I stand by my description of the powers, as drafted in the Government’s new clause, as unbridled.

We recognise the need for an amendment to the Superannuation Act 1972. The High Court judgment made a clear case for ensuring that the Government are able to compel a settlement and that no union should be able to veto changes. That is a position that we would support.

[John Hemming]

The right hon. Lady’s amendment (a) would mean that the unions would have to consult their members in accordance with the rules before any new scheme could come in. Does she agree that that would provide the opportunity for a trade union to veto any changes merely by refusing to negotiate or consult its members?

[Tessa Jowell]

If the hon. Gentleman reads the amendment carefully, it will be clear to him that it is intended not to give the trade unions a veto, but to require a report to Parliament on the progress of the negotiations where the power is intended to be used, giving the effect of the imposition of a settlement in the absence of the agreement of all six unions.

[John Hemming]

The amendment states that the Minister must lay

“a report of the consultations that have taken place with the workforce and their recognised representative trades unions with a view to agreement”

and that the report should contain

“a statement that the representative trades unions have consulted their members in accordance with their rules”.

The report cannot include such a statement unless that has happened. That, in essence, would revert to a veto for the trade unions. I should think amendment (a) should not be moved.

[Tessa Jowell]

The approach is intended to ensure that what appears in the Bill when it receives Royal Assent represents a right and proper balance between the responsibility of the Government to secure a settlement and the entitlement of the trade unions to be properly consulted. However, as the hon. Gentleman may not quite be aware, in Mr Speaker’s wisdom he did not select that amendment for debate.

I return to our clear view that no one union should be able to veto a change to the civil service compensation scheme that is the result of negotiated agreement with the majority of unions. The Government’s ability to compel a settlement should be the course of last resort, once it is clear that common agreement cannot be reached—

[John Hemming]

rose—

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[Tessa Jowell]

I shall make progress. Many Back Benchers want to speak in the debate and the hon. Gentleman will have a further opportunity.

We cannot support the Government new clause as drafted because it allows the Government to impose changes to the scheme at any point, without the contingent obligation to consult the work force or their representative trade unions.

[Mr Maude]

To be absolutely clear, the Superannuation Act states, at section 1(3):

“ Before making any scheme”—

this would refer to the schemes that we are discussing—

“under this section the Minister . . . shall consult with persons appearing to the Minister . . . to represent persons likely to be affected by the proposed scheme”.

So there is an explicit obligation in the 1972 Act to consult representatives of staff affected by any new scheme. That is absolutely explicit. It was the obligation that the right hon. Lady herself followed scrupulously when holding the job that I now hold, and it is the obligation that I absolutely undertake we have been following. If there is any doubt about it, we will make that even more explicit with an amendment tabled in the other place.

[Tessa Jowell]

I am grateful to the Minister for that clarification, but as nearly 30 years have passed since the Superannuation Act was introduced, both the terminology and the reference to the negotiating structure could be updated to make the two commitments clear—the right to impose in the absence of unanimity among the unions, but a right that is exercised only on the basis of clear, systematic, open and proper negotiation with the appropriate trade unions and work force representatives.

The other underlying issue is the lack of confidence in the process so far. The Bill was published before the civil service unions had even met the Minister or his officials. None of the work force had the opportunity, unlike during the negotiations that we undertook, to comment on the proposed reforms, despite the fact that they marked a significant and detrimental departure from the previous package. The obligation to consult the work force at every stage is missing from the Bill.

Given the powers that the Government have asked the House to grant them through the new clause, it is only right that safeguards be put in place to ensure a fair and reliable process whereby the work force have a right to be consulted, the Government are obliged to seek an agreement with the representative trade unions and the House is the arbiter of whether that process has been fair and transparent. If those safeguards had been put in place, we would have supported the Government and not sought to vote against the new clause.

We have outlined a very clear basis for our opposition to the proposed change, but we make it equally clear that if the Minister for the Cabinet Office seeks to introduce in the other place a revised amendment that addresses the judicial review and puts consultation and proper process in the Bill, we will support him. That is dependent on Mr Speaker taking his usual principled and pragmatic view and not judging the Bill to be a money Bill, which would eliminate the possibility of any such constructive amendment and scrutiny in another place.

[Mr Maude]

To be absolutely clear, I am advised that if the new clause were not agreed to and the Bill remained as drafted, it would be possible for Mr Speaker to exercise his discretion—and it is a discretion—and certify it as a money Bill. However, I am also advised that if the Bill were to include the new clause and amendment that I have tabled, the question of its being a money Bill would not even arise. So, if the House were to carry our proposed changes, there would be no question of the Bill’s continuing to be a money Bill for the purposes of the other place; it would go through the full and usual processes there.

[Tessa Jowell]

The Opposition would very much welcome full and further scrutiny, as the negotiations are ongoing.

The issue is about the right reforms, which we seek to put forward through our amendments 4 and 5, whose purpose is to strike out the arbitrary caps that the Government introduced at the start of the process. Those caps have led to an improved offer, as my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) said, as a result of negotiation, and we welcome that. There is now an improved offer on the table, so we do not understand why the Government oppose our amendment. Given that new clause 1 would give them the power to impose any settlement, why have the caps, which have caused such distress and anxiety to civil servants, remained in the Bill?

We are pleased that the Government claim to have reached an agreement with at least some of the trade unions, and the Government have declared that that will supersede the terms before us. To echo the Minister’s language, I note that he has managed to introduce a “sharp instrument” to replace the “blunt” one, but that leads us to question why the Government persist in wanting those terms to remain in the legislation.

The caps are simply out of kilter with the subsequent agreement that the Minister claims to have reached. He, his colleagues and his officials have told us that he wants a negotiated settlement, and on both sides of the House the consensus is that that would be the right course of action. Instead, however, the Government want to proceed to impose the arbitrary caps that they sought to impose at the beginning of the process. For those reasons, we ask the House to oppose the Government’s proposed changes and to support our amendments 4 and 5.

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[John Hemming]

This has been a rather depressing debate, because the Opposition have demonstrated “oppositionism” at its worst. Everybody recognises that there is a problem and, basically, we cannot afford to pay six and two thirds years’ redundancy payments to some senior civil servants. The Government are trying to look after the low-paid, and our proposals are better than the Opposition’s. The Opposition’s amendment, which admittedly has not been selected, would have reinstated a veto for the trade unions on any proposals for change, something that the Opposition disagreed with when they were in government.

[Tessa Jowell]

Will the hon. Gentleman explain why the proposals in the Bill provide a better deal for low-paid civil servants earning less than £20,000 a year than the proposals in the February 2010 package?

[John Hemming]

I accept the shadow Minister’s point that the Opposition’s proposals are the same as those in the negotiations, but the whole point of the Bill is that it is not supposed to be the end result. Civil servants have not made any estimate of the savings as a result of the Bill, because it is not supposed to be the end result. This legislation is what the civil service has advised us to undertake in order to break the legislative logjam that the previous Government created. It is about making progress.

On the issue of how we manage the civil service, I think that we should try to look after our employees and aim to minimise redundancies. In the absence of the Bill, however, that would become harder and harder. One thing that must be recognised is that reorganisation has essentially come to a halt, because we will not be able to save money if we have to pay six years’ redundancy to somebody. Paying six years’ redundancy will mean that we increase the deficit.

[John Hemming]

The question is about what we add to the deficit—the actual cash costs. That is the key. The proposals that the previous Government tried to impose were struck down by a judicial review, so we have reverted to the original scheme.

In essence we are trying to reduce the deficit and reduce borrowing, and, if by making redundancies we increase borrowing, that will not get us anywhere at all. That is the reality of life. Underlying that, however, things can be done to reduce the full-time equivalent headcount without reducing staff—finding ways in which people can go part-time and so on. But, there is a legislative logjam that needs to be broken, and we need negotiations. Indeed, the 1972 Act requires them. The Public and Commercial Services Union argues in its briefing that there needs to be a trade union veto because there is no contract. However, those people who have contracts can find that their contracts are changed.

To be fair, I should take a very different view if there were any threat to pension rights. Pension rights are different, but an unaffordable redundancy scheme, in which we cannot reorganise organisations and save any money, is one that we cannot deal with in these circumstances—much that the priority has to be otherwise. To that extent, new clause 1 is the right way forward. I am surprised that the Opposition have taken the view that they would rather this were a money Bill than not, because their amendment would create the situation whereby it suddenly became a money Bill.

[Tessa Jowell]

We want the Bill to have full and proper parliamentary scrutiny in both Houses of Parliament.

[John Hemming]

I thank the shadow Minister for saying what her objectives are. In the past, the Opposition have often had objectives that they failed to achieve. Their objective was to remove the trade union veto, but the amendment would reinstate it. Their objective is for this not to be a money Bill, but by voting against new clause 1 they would, if successful, make it a money Bill. I accept that the shadow Minister has particular objectives, but what she does tends not to work; that is the reality of the situation.

We have to be effective in terms of running Government. We must do things that work—that achieve results. This Bill is about achieving results: it is about creating a situation whereby there can be negotiations with the trade unions in which we can deal with difficult cases where individuals are suffering particular hardship. In the Public Bill Committee, there was an attempt to negotiate through discussions with the trade unions. That was dreadful—it was almost impossible to get anywhere, and I find it rather sad that anyone tried. The reality is that negotiations have to work in a particular way; one cannot negotiate through a process of producing legislation. We need a blunt instrument that creates an environment in which a negotiated settlement can be arrived at. To that extent, I support new clause 1.

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[Richard Graham (Gloucester) (Con)]

I am puzzled by the logic of the Opposition’s position this afternoon. At the beginning of the Bill’s passage, it was agreed throughout the House that every party recognised the need for change. The right hon. Member for Dulwich and West Norwood (Tessa Jowell) tried to bring it about. She introduced her Bill, but she was blocked and prevented from taking it through. The ball passed to the coalition parties, and we have now introduced a new Bill that recognises the bluntness of the instrument required to achieve a negotiated settlement.

We have heard this afternoon from my right hon. Friend the Minister about the deal on the table, which, if I understand it correctly, will offer up to 21 months’ pay on voluntary terms, plus a notice period of three months, making a maximum total of 24 months’ redundancy pay for all civil servants earning less than £23,000 a year, but based on that £23,000 figure. That is a better deal than the one that the Labour party offered civil servants earlier this year. When the right hon. Member for Dulwich and West Norwood said that she would oppose new clause 1 on the basis that our civil servants deserve better, I was left wondering which civil servants she meant. The truth is that the debate clearly shows that those of us who support new clause 1 do so precisely because we want a much better deal for lower-paid civil servants, which is the whole exercise of the Bill.

[Tessa Jowell]

Again, I would be grateful if the hon. Gentleman were quite specific on the respects in which the Bill’s provisions or those of the improved offer, which are not in the Bill, are better than the February 2010 offer?

[Richard Graham]

The right hon. Lady asks in which ways the Bill’s provisions are better. My understanding is that under the new deal that is being negotiated, a lower-paid civil servant—for example, one on a salary of £10,000—would receive up to 24 months’ statutory redundancy payment based on a salary of £23,000, which is better than the deal put on the table by the Labour party.

[Richard Graham]

My hon. Friend is absolutely right.

If I may continue where I left off—

[Tessa Jowell]

Will the hon. Gentleman give way?

[Richard Graham]

May I make some progress first?

[Tessa Jowell]

rose—

[Richard Graham]

I will give way to the right hon. Lady for the third time.

[Tessa Jowell]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Is the hon. Member for Gloucester (Richard Graham) giving way?

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That slender logic completely self-destructed when the right hon. Lady said that she would oppose new clause 1. If the House did as she urged, it would not only remove the caps in the original Bill, but deny the Government any power to impose a new scheme in any event. The Government would therefore have no ability reform the existing scheme, which is what she and everyone who has spoken accepts is needed. Frankly, I am at a loss to understand how she can reconcile her opposition to my new clause and her support for her amendments.

[Tessa Jowell]

For the record, I think I have made the position absolutely clear. The Minister’s words were more of a debating game than a substantive discussion of policy. We oppose new clause 1, because it creates no specific obligation to consult. Removing the caps would remove the structure of a settlement that the Opposition believe is profoundly and fundamentally unfair. The settlement is substantially detrimental to 500,000 civil servants compared with our February 2010 scheme, which has been grossly misrepresented by Government Members.

[Mr Maude]

This is not a debating game. The Bill is deadly serious for hundreds of thousands of hard-working, dedicated public servants. The fact is that the right hon. Lady has today proposed removing everything—the ability to create caps on the existing scheme, which she says needs to be changed, and the Government’s ability to impose changes.

Let us look at what the right hon. Lady has argued on new clause 1. She accepts that my new clause is necessary and needed—both words that she has used at times to describe it—but she plans to vote against it on the grounds that it is, she says, an “unbridled power”. It is exactly the same power that she herself exercised earlier this year. Did she feel then that it was an unbridled power? Of course she did not, because there is already on the face of the Superannuation Act 1972 a clear and explicit obligation on the Minister to consult trade unions before imposing a scheme. Sadly, she seems to be unaware of that, so I am happy for the opportunity to enlighten her. She followed that obligation, and I undertake to follow it as well.

In the spirit of good will that has—broadly—dominated these deliberations, I have made a clear commitment that if further amendments are needed to make it clear in the Bill that proper consultation must take place before a scheme is imposed, they will be introduced in the other place. However, it must be recognised that as a “bridling” of this power—to adopt the right hon. Lady’s word—the legislation already contains an obligation to consult, and it has done so for nearly 40 years.

This new clause is necessary to give effect to a successor scheme to the current unsustainable, unaffordable and frankly unfair scheme, and the whole House accepts the need for that change. I stress again that it is the Government’s aim—we will strain every sinew towards it—to achieve a negotiated scheme that is supported by all six trade unions, in which case neither the caps nor this power will need to be exercised. However, to have any chance of reaching that point, it is necessary to reject the right hon. Lady’s amendments and to support the new clause.

Question put, That the clause be read a Second time.

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[Tessa Jowell]

I agree with much that the Minister said, particularly the extent to which the prospects for negotiated settlement on behalf of 500,000 civil servants, although not necessarily the Bill itself, have improved as a direct result of the parliamentary process to date and the probing questions asked by the Opposition. The offer now on the table is substantially improved, and I welcome the Minister’s commitment to introduce further amendments in the other place that will substantially improve what we believe to be a profoundly flawed Bill. I also welcome the Minister’s commitment to avoid redundancy in every available circumstance. I think that the civil servants who service so diligently the purpose of government will be listening closely to what he says.

Perhaps my final piece of advice is to remember that this settlement will have to remain in place for these kinds of negotiations for a very long time, so I urge the Minister to resist the pressure he is doubtless getting from the Treasury to reach the quickest and cheapest settlement, as that will not extend to those deserving civil servants the treatment that not just they but the country expect.