Enterprise Bill [HL]

Baroness McIntosh of Hudnall Excerpts

Wednesday 4th November 2015 Grand Committee

[Baroness Hayter of Kentish Town (Lab)]

My Lords, Amendment 53ZH is in my name and that of my noble friend, Lord Stevenson. I will also speak to the other amendments in the group, which go to the heart of the exit payment problems.

It is not that we are particularly against what the Government said that they wanted to do in curtailing the very large exit payments made to a tiny handful of public servants who then re-enter the service of the state, albeit in a different guise. Indeed, as I am sure the Minister does not need reminding, the original words in the Conservative Party’s manifesto—on page 49, I think, if she has a copy here—were:

“We will end taxpayer-funded six-figure payoffs for the best paid public sector workers.”

Best paid? No, the cap will affect those with long service rather than those on the highest pay—hence our probing amendment to discover what exactly the Government are out to achieve. This is not aimed at the “best paid” of our public servants. The Cabinet Office confirmed that some earning less than £25,000 a year could be affected because of their long service—that is, serving the public, often for salaries below those in the private sector.

We assume that this was not the Government’s initial intention, especially given that they said in their memo to the Delegated Powers and Regulatory Reform Committee that the regulations would only prevent “vast benefits” being paid to “a few individuals”. That is not what we have, so why has it changed? Has the Government’s intention changed or is this just poorly thought-out legislation, which ends up hurting long-standing rather than highly paid staff?

Will the noble Baroness give the explanation that I think is due to us and, indeed, to all public servants? Does she consider that £25,000 equates with “best paid”? Has the intention changed, so that the Government want long-serving workers to be caught? Is this just a rather nasty, crafty little device that they have alighted on simply to help to reduce the deficit, given that the Chancellor seems to be having difficulty with it, by hanging that deficit around the neck of their own employees? Or is this just mistaken drafting, which the Minister will be happy to amend on Report?

As I suggested, the impact assessment suggested that the cap could save “low hundreds of millions” over given years, as if anticipating relatively small numbers being caught. However, no formal impact assessment was undertaken,

“as there are no obligations or costs imposed on business”.

Of course, an impact assessment is always possible and the impact on the people concerned, or indeed on the efficiency of government, should have been a central concern, although it was clearly not to Ministers.

We will come later to the particular impact of “strain payments”, but in the mean time we would like some clarification of why the particular figure was chosen. Was it simply to be under the “six-figure” that had been mentioned in the press? What thought was given to the impact across the public service? Were medium-or even lowish-income employees meant to be caught by it? Also, why is there a disparity with the NHS figure?

Furthermore, if the Government are really intent on dealing with the mischief of some super-payouts in this rather crude formulaic way via a cap, then not only should the Minister consider whether the figure is correct, but she should also give a commitment to index-link the amount before even Foreign Office cleaners are included. The Local Government Association supports the amendment to ensure that the figure is re-evaluated on an annual basis, so as to take into account differences in pay increases in separate areas of the public sector.

I am sure that the Committee is familiar with the figures as to who could be caught by the cap. According to the Cabinet Office, more than 20,000 in the main Civil Service and many more in arm’s-length bodies would be. It is the combination of age, and length of service rather than high pay that trap these people. The examples given have included a librarian, with a career average salary of £25,000—perhaps 34 years with the council when its library closes—and she is redundant at 55. It is a bit late to start a new career, and there are not a lot of private libraries to which she can move. She will be caught by the cap. Similarly, a 52 year-old tax inspector, or indeed a prison warder, who has worked for 25 years, or a 50 year-old health and safety officer with 20 years’ experience, or a 56 year-old school inspector after 16 years with Ofsted, or perhaps with FOS, if PPI ever got sorted.

Other groups include educational psychologists, mostly employed by local government, earning between £40,000 and £50,000 a year. They do not consider themselves the “best paid” in society, and I share their view. However, again, they will be caught, not because of their pay rate but because, if they are over 55, of the so-called strain payments—money which, of course, does not go to the person concerned but to the pension scheme, as we will come on to in later amendments. Can the Minister therefore say what thought the Government gave to the public servants who do such valuable work for all of us?

The cap as it is in the Bill at present covers compulsory redundancies, where of course the individual has no choice as to whether to walk and no opportunity to weigh up the pros and cons of leaving the service, but will simply lose the rights and reasonable expectations built up over a career. They—and we—deserve to know why this figure was chosen, and whether it really was aimed at these “good and faithful” colleagues. I beg to move.

[The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)]

My Lords, I inform the Committee that if this amendment is agreed to I cannot call Amendments 53ZJ to 54BC inclusive by reason of pre-emption.

[Baroness Donaghy (Lab)]

My Lords, Clause 26 sits rather oddly in a Bill about enterprise, a bit like a carbuncle on the end of a nose. I am not sure whether it belongs here; however, as I want the whole clause deleted, I will not suggest where it should go, except through the door market “Exit”. After a minimal consultation, a misleading manifesto statement and an all-round rubbishing by the Delegated Powers and Regulatory Reform Committee, the Government still seem to want to go on to attack public service workers. One thing I ask—plead, even—is that if this clause is not deleted, the Government must announce the date when the cap is to be applied. This uncertainty is causing anguish to a lot of individuals and uncertainty to the reorganisation plans of employers.

Possibly one of the most surprising elements of Clause 26 is that there is no impact assessment—or at least, it took me two days and the support of the Printed Paper Office to find a small footnote contained in an annexe to the main impact assessment. It is the size of an office ruler—that is the impact assessment for this clause. As my noble friend Lady Hayter already indicated, this very brief reference said:

“No Impact Assessment required as there are no obligations or costs imposed on business”.

This is extraordinary. Even with the legislation on dangerous dogs there was a 50-page impact assessment. This tiny statement goes on to say that,

“the cap could result in savings in the low hundreds of millions of pounds over the course of this Parliament. This is about ensuring tax payers get a fair deal”.

That is as scientific, objective and factual as this impact assessment gets.

The Delegated Powers and Regulatory Reform Committee has made its view clear. It recommends that,

“the affirmative procedure should always apply to regulations made under new section 153A(1) to (3) of the 2015 Act (inserted by clause 26 of the Bill)”.

The committee indicated that:

“Given that the regulations could potentially affect large numbers of persons, we believe that the affirmative procedure should always apply”.

The committee accepted that it was,

“feasible that the … powers would apply only to a relatively few public sector employees leaving their jobs in closely defined circumstances, and that the type of exit payments prescribed may be very limited”.

It went on to say:

“However a future Government could recast the regulations so that they applied to all or most types of public sector employees and exit payments”.

In response to the Delegated Powers Committee, the Government suggested that the regulations would operate only to prevent “vast benefits” from being conferred on “a few individuals”, as my noble friend Lady Hayter has already said. The committee disagreed and thought that the number of individuals affected was,

“potentially far more significant than implied”.

Lastly, the committee did not agree with the Government’s statement,

“that Clause 26 … merely raises ‘questions of management of public service workers that have traditionally been a matter for Ministers’. The regulations could override accrued contractual or legislative entitlements to exit payments calculated in a particular way. This is not, we believe, simply a management of personnel issue that requires only a modest level of Parliamentary scrutiny”.

I add that Clause 26 is proposing to amend an Act that is less than a year old. The Delegated Powers Committee’s statement that a future Government could recast the regulations more widely could also apply to this current Government, if they are constantly going to amend new legislation before it has had time to take effect. The Government want to give themselves and future Governments Henry VIII powers to overturn negotiated agreements, renege on current ones, create anxiety and stress among thousands of public service workers and make it more difficult for employers to reorganise.

I turn to the consultation document. The consultation that took place did not adhere to the Cabinet Office principles, which state:

“Timeframes for consultation should be proportionate and realistic to allow stakeholders sufficient time to provide a considered response and where the consultation spans all or part of a holiday period policy makers should consider what if any impact there may be and take appropriate mitigating action”.

The footnote to this principle makes it clear that the “holiday period” includes August. The consultation was launched on 31 July 2015 and concluded on 27 August 2015. That covers the entire holiday period. The Government have said several times in their response to the consultation that few alternatives to their proposals were put forward. That is hardly surprising when most people would not have seen the significance of the proposed cap in many industries, or how complex contractual or pension rights might be affected.

It is a credit to those organisations that did respond—over 4,000, according to the summary document—and it was clear that a significant number were not in favour of a cap, given other reforms to public sector terms and conditions. It was also clear that a significant number of respondents disagreed with the Government’s intention to include early access to unreduced pensions within the scope of the cap. Having had some experience of these consultation exercises that Governments in power, irrespective of party, indulge in, I know that the statement that “a significant number” object to something usually means that a proposal is very unpopular indeed.

I welcome the fact that the Government intend to exclude payments for untaken annual leave within the scope of the cap, just as I welcome the fact that the Government are currently minded not to include individuals with protected TUPE terms. However, they will include payments in lieu of notice. This gives employers less and less flexibility to deploy their staff, particularly during periods of constant reorganisation. It also means that employees may not budge until they are thrown out by means of compulsory redundancy because of the inflexibilities that this provision provides. It will be a game changer in most public services and there is bound to be a reaction, but perhaps that is what the Government want. I believe that the Government set out with the intention that the headline severance figures for the top brass in some sectors should be curbed, if only as a DMA—a Daily Mail appeaser. All the public statements made seem to point that way. I am beginning to wonder if the Government have changed their focus and see this as a golden opportunity to impose another hit on public service workers and public services, and thus to undermine national agreements and clawbacks on central control, with quite shocking Henry VIII powers.

I have been involved in collective bargaining in the public sector for more than 40 years and I know for a fact that every agreement reached in the public services is crawled over by the home department. It knows to a farthing how much a deal will cost. To adopt a shock-horror approach now to deals that have previously been agreed by government departments is disingenuous. The Government pretend to represent working people, but that is a hollow boast, and will be seen as such by thousands of loyal and long-serving public servants in their fifties whose life plans will change dramatically as a result of this clause. Far from representing working people, the Government are in danger of undermining them both in terms of their morale and their bank balances. Moreover, public sector authorities are crying out for an announcement by the Government on when the cap might be introduced. As the Local Government Association has said, workplace restructuring plans for 2016 and beyond will already be under way in local authorities, and any further delay on this will restrict councils from taking important decisions.

I should just say that the figure I suggested in one of my amendments simply reflects a set of agreements already negotiated in the National Health Service. It has taken two years to reach and would probably solve quite a lot of the problems that we are talking about here. Alternatively, of course, if some indication can be given about longevity of service, that might provide peace of mind to some people. Finally, I urge the Minister to give us some reassurance about annual re-evaluation. Given the earlier discussion on pubs and the difficulties in that area, again, having something in the Bill to that extent might go a long way to relieving some of the individuals affected.