Superannuation Bill

Bernard Jenkin Excerpts

Tuesday 7th September 2010 Commons Chamber

[Mr Maude]

That is completely right. My hon. Friend puts his finger precisely on the point. Our view is that one union cannot be allowed to prevent necessary reform of a scheme that is unsustainable and unaffordable—and, of course, that is precisely the view taken by the last Government. The order laid by the right hon. Member for Dulwich and West Norwood, which came into effect, I think, in April this year—before it was rapidly quashed by the judicial review sought by the Public and Commercial Services Union—was made on the basis that one union could not be allowed to hold up the necessary process of reform. However, I stress again that we seek genuinely to negotiate additional protection for the lower paid.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

I have been listening to these exchanges closely, but will the Minister tell me whether I have understood him correctly? Is he saying that, whatever special measures may be made for the lower paid, which he is not prepared to discuss now for the reasons he outlined, he has no intention of trying to impose them through legislation, and that they will be negotiated come what may, but that this legislation might become necessary in order to provide the framework for such a settlement? Is that correct?

[Mr Maude]

Indeed. I will say more about the relationship between the negotiations and the Bill in a little while. The aim would be to have a whole new negotiated scheme that would make this Bill redundant. Sadly, however, the experience of the last Government shows that it is impossible to place absolute reliance on the ability to achieve total consensus on that. Proper additional protection for the lower paid is a central part of our aim in the negotiations. I will say briefly as well that the other side of that coin should be a cap on payments for the highest paid. Again, it seems to us that basic fairness requires that.

Our second goal in the negotiations is to negotiate a higher cap for voluntary redundancy schemes. It is the essence of most redundancy schemes that there should be scope for voluntary redundancy terms to be more generous than those for compulsory redundancy. However, I would like to make it clear, if it needs to be made clear, that no one wants redundancies at all, but if they are unavoidable, which sadly I believe they will be—they were under the last Government, and in the current fiscal environment, they are even more likely—it will surely be much better to be able to offer more generous voluntary redundancy terms. That is simply impossible under the current scheme, because of its unaffordably generous terms.

We have made some progress in the talks, but they have not yet delivered an approach that is agreeable to all the unions involved and to the Government. If we can secure agreement with the civil service unions to introduce a comprehensive new scheme, we will implement that package rapidly. Until we reach that point, however, we would be failing in our duty to the tax-paying public—and to lower-paid workers outside the civil service who daily confront much less generous terms—if we were to allow the excesses of the current scheme to continue unchecked.

That is why we have introduced a Bill to limit the size of compensation payments. It has only two clauses, which cap the amounts payable under the current scheme. The first creates caps on the level of payment possible. Staff who depart on voluntary terms will receive payments calculated under the current terms, but limited to a maximum of 15 months’ pay. For those leaving on being formally dismissed—effectively, compulsory redundancy—the limit will be 12 months’ pay. Where the civil service compensation scheme terms provide for early retirement instead of or in addition to a severance payment, the total value of the package will be subjected to the same cap of 12 or 15 months’ pay. In these cases, if the actuarially assessed cost of the total package exceeds the appropriate cap, the Bill provides that those individuals will instead receive 12 months’ salary—or 15 months’ salary in the case of voluntary departures—and no change to their pension entitlement.

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[Tessa Jowell]

I am going to make a bit of progress.

In the current environment in which many civil servants are understandably concerned about their jobs, it is even more important for any reform package to be achieved in full consultation and, wherever possible, agreement with the work force. As a result of the Equality Act 2010, which formed such an important part of the last Government’s legislative programme, the Bill is subject to an equality impact assessment, which I took the time to study.

Against the commitments to full consultation and transparent negotiation, we might look at some of the evidence in the equality impact assessment. It asks:

“Does this policy affect the experiences of staff? How? What are their concerns?”

For staff, the following answer is given:

“Exit terms are set out in Civil Service Compensation Scheme, to be capped at levels set out in the Bill.”

That is a perfectly fair statement of fact. The impact assessment then asks whether the policy affects the experiences of staff networks and associations. The answer given is: “As above”—for staff—but also:

“(no consultation due to urgent need for affordable provisions).”

The answer for trade unions is the same:

“As above (but no consultation due to urgent need for affordable provisions).”

When the equality impact assessment looks at the impact on voluntary organisations, the conclusion is that that is “N/A”—not applicable. The impact on race is also deemed not applicable, as are the impacts on faith, disability rights, gender, sexual orientation and age. The impact assessment also asks:

“What were the main findings of the engagement exercise and what weight should they carry?”

That, too, is said to be not applicable.

“Does this policy have the potential to cause unlawful direct or indirect discrimination? Does this policy have the potential to exclude certain groups of people from obtaining services, or limit their participation in any aspect of public life?”

That is not applicable as well.

“How does the policy promote equality of opportunity?”

That is not applicable also. I could go on.

That is not by any stretch of the imagination a proper assessment of the impact of the proposals on the work force, taking account of the obligations that sit on the coalition Government to recognise equality of opportunity.

[Mr Jenkin]

I am interested in what the right hon. Lady is saying, but I think it is incumbent on her to explain to the House why she thinks the Bill might be discriminatory in some way, rather than just advert to a negative and say that that is not good enough. Does she honestly believe that the measures could be discriminatory in some way? If she could explain that to the House, it would be very helpful.

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[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

I am grateful for that comment, Mr Deputy Speaker, and I will truncate my remarks as best I can. Perhaps it is just an irony that the PCS is the single union that held up the agreement and a representative of the PCS held up the debate for 21 minutes after being implored to speak for only eight minutes. I reflect on that.

The Public Administration Committee, which I chair, recently took evidence from my right hon. Friend the Minister for the Cabinet Office and the principal civil service unions about the provisions of the Bill and the prospects for a negotiated settlement of the dispute about ongoing compensation for civil servants who are forced to leave their jobs or voluntarily accept redundancy. The hope then was that the parties would reach a negotiated settlement, but regrettably that settlement has not been reached.

It is appropriate at this stage to remind ourselves of why we are having this debate. We are here because there was no agreement. The agreement reached with the five other unions by the previous Government was challenged in the courts, and we finished up with the courts ruling that the compensation payable represents legally enforceable rights. That was never the intention of the original legislation, and that is why we have this Bill. We are not undoing previous legislation; we are undoing the work of the courts on previous legislation. In my view, it is about the culture of judicial review and judicial activism that we now live in. It is unfortunate but it is where we are.

Let us have no illusions about why this is necessary from an economic viewpoint. We are facing the worst public expenditure crisis since the 1930s. It is inconceivable that compensation arrangements that were reached as part of voluntary arrangements between Government Departments and civil servants, and have become legally enforceable by accident, should be respected as though they were contracts entered into and signed in blood. I do not accept what the hon. Member for Southport (Dr Pugh) said about these arrangements. They were intended to be flexible and negotiable, and the Bill is attempting to restore that position, albeit now putting in place a statutory baseline that is harsh—let us have no illusions about that. It is sobering to reflect how harsh these arrangements are in comparison with the existing arrangements.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

Will the hon. Gentleman give way?

[Mr Jenkin]

I hesitate to give way because we are very short of time, but I will do so briefly.

[Michael Connarty]

This is obviously a very brief Bill, and the hon. Gentleman will have read it; I have read it also. Could he tell me where it says that this is in any way negotiable and flexible?

[Mr Jenkin]

The hon. Gentleman misunderstood me. The Government have made it clear that they want a negotiated settlement, and that they are not prepared to talk about the terms of that settlement in this debate. Obviously, however, what we enact here provides a legally enforceable baseline that ultimately is not negotiable—the hon. Gentleman is quite right. The point is that the Government have made it absolutely clear that they want a negotiated settlement. With five of the six unions having negotiated in good faith, I hope that the PCS will also do so, whether or not the Bill passes on to the statute book and comes into force.

The need to reform the civil service compensation scheme is well understood. In fact, all the evidence that we received from the trade union representatives conceded that we need to deal with it as a matter of urgency in the current economic climate. This short Bill is simply a reflection of the accumulated mess that successive Governments and successive decisions in the courts have got us into. If there is one thing I regret, it is that there is not more understanding from the official Opposition of the mess that they were in on this same subject and that we cannot present more of a united front, but that is the prerogative of opposition and our democratic process, and I respect that.

I have two particular concerns about the Bill, and I would be grateful if the Minister could address them when he winds up. The first is technical and raises an important issue of principle. Clause 2 provides for early termination or an extension of the 12-month applicability of the legislation. Of course, sunset clauses are not unknown, and in many respects they are welcome provisions because they provide an opportunity to declutter the statute book. However, this Bill is unusual in providing what one might call a “sunrise” clause whereby, if desired, the legislation can be revived by an order under the affirmative resolution procedure in this House. The only similar provision was made in relation to section 13 of the Prevention of Terrorism Act 2005. I worry that the matters in this Bill are hardly in the same category, and that the ability of this House properly to control the law is being excessively compromised for nothing more than the managerial convenience of the Government. Can the Minister explain what the special circumstances are that justify such a provision in this case?

Secondly, I should like to focus on the possibility of a further legal challenge to the provisions of the Bill given the High Court’s decision to quash the earlier agreement. In his judgment, Mr Justice Sales took the view that compensation payments under the scheme should be taken to be accrued rights in the same way as pension entitlements. In his answers to me about the Bill’s compatibility with the European convention on human rights, the Minister for the Cabinet Office was, if I may say so, not entirely persuasive that he had addressed the legal point made by the unions and potentially to be made in a future action. The PCS argues that the Bill is unlawful because it offends against the principles of the ECHR, namely that the legitimate expectations about compensation rates that the current state scheme gives rise to, are legally possessions of which individuals cannot be deprived.

In the explanatory notes, the Government declare the Bill’s compatibility with the Human Rights Act 1998 because payments under the civil service compensation scheme cannot be considered to be a possession. In any case, they say, even if they were to be considered possessions, since the cap on compensation rates does not apply until a redundancy notice is issued or a voluntary departure is agreed—that is, after the Bill has come into force—it does not therefore amount to the deprivation of an existing possession. That is all very elegantly argued, and no doubt the Government have had the benefit of legal advice, but if the Bill is enacted and subsequently challenged in the courts, the consequences could be extremely significant. Even if the challenge were not successful, if it went to the European Court of Human Rights for a determination, the delay and dislocation would be considerable. How sure is the Minister that the rights generated by the legitimate expectation of civil servants about their terms and conditions with regard to redundancy payments will not be regarded as possessions?

I understand that there is case law in the ECHR suggesting that mere claims to possessions are capable of being interpreted as property rights when there is sufficient basis in national law, for example when there is settled case law in the domestic courts confirming that. Precisely that confirmation was provided in the case that was adjudicated in May. Is the Minister confident that, even if the accrued rights are considered possessions, the Government are justified in interfering with those rights in the wider public interest, and therefore lawfully able to do so? In short, is he satisfied that the unions will not have a claim against him for not exercising his discretion in a fair and proper manner in failing to recognise existing entitlements?

That is an important matter, not some arcane point. A legal challenge could run for a very long time in Strasbourg, perhaps for years, and if the Government lost having gone ahead with job reductions on the terms set out in the Bill, it would potentially saddle the public purse with a huge liability at some future date, to say nothing of the subsequent complications in trying to repay individuals long after the event. I point out that Governments of both parties have a long history of wishful thinking when it comes to such cases. I speculate that it appears that the easier course in the short term is often to risk defeat in the courts sometime in the distant future rather than to confront the legal realities and their implications immediately. That is not conducive to better governance and decision making, and if it continues to happen under this new Administration there will perhaps be a case for the Public Administration Committee to launch an inquiry into why the Government’s legal advice has so often proved deficient in such cases. I place the Government on notice about that.

Subject to those qualifications, I support the Bill and will vote for it. What Ministers do will be taken as a reflection of the regard in which the civil service is held, and that will have an effect on the morale of the public service at a time of great uncertainty and change, and therefore on this Government’s relationship with civil servants. Nobody listening to this debate can be under any illusion about the seriousness of the measures that we are discussing and the impact that they will have on people’s lives. I commend many of those who have spoken from both sides of the House for alerting us to those concerns.

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[Mr Hurd]

My hon. Friend makes an important point about the lack of coherence in the Opposition’s position. They have set out clearly, and confirmed today, that they recognise the need for reform—and we have paid full tribute to the very honest effort they made when in government to reach an agreement. They recognise the reality of the situation, which is that effectively one union is holding the situation and the process hostage, and in all responsibility to the taxpayer we cannot let that continue. We have to break the deadlock, and that is the purpose of this Bill. It is needed in case we are unable to reach an agreement with the unions. It introduces caps so that we can limit the costs of the current scheme and we can go about the very serious business of reducing public expenditure while we discuss the contents of the new scheme. The critical point is that the Government’s aim is to reach an agreement that is sustainable through negotiation. Those negotiations are ongoing and vigorous, and they are being held in good faith.

[Mr Jenkin]

Will my hon. Friend take this opportunity to correct the Opposition on one other point, which is that it would not in fact be possible to return to the February settlement because that has, effectively, been nullified by the courts? Even if all the unions now agreed to the February settlement, that settlement has been kyboshed by the courts, and even if they had agreed to it at the time, had there been a challenge in the courts and it had been successful—and it would have been—that would have nullified the settlement. This Bill is therefore indispensible.

[Mr Hurd]

My hon. Friend makes an extremely good point and he states a fact that I have placed on the record before: that the previously agreed terms were struck down by the courts and were not accepted by the Council of Civil Service Unions. The deal failed, and there is no guarantee that it would succeed in future.