Superannuation Bill

Harriett Baldwin Excerpts

Tuesday 7th September 2010 Commons Chamber

[Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)]

May I declare an interest? In the Chamber tonight, I am representing thousands of civil servants who live and work in my constituency, home to Her Majesty’s Revenue and Customs, the Department for International Development and the Department for Work and Pensions. Many other constituents work in the Scottish Court Service, the Scottish Prison Service, the Forestry Commission and many other Departments, agencies and non-departmental public bodies throughout Scotland.

I have another interest to declare: I was a civil servant between 1982 and 1992; I became a full-time official with the Civil and Public Services Association, a predecessor of the Public and Commercial Services Union; and then I became a senior full-time official for the PCS. I know all the protagonists in this debate very well indeed, including the aforementioned Mr Serwotka.

The motto of the new coalition Government is, “We are all in this together,” and I should like to put that to the test by asking them to put their motto into actions rather than words, because, despite what was said amid the heady atmosphere of the Queen’s Speech debate, every Member recognises that we have to tackle the fiscal deficit. The difference—well, there may be more than one—between Opposition and Government Members is how we do so. The Opposition believe that there are other options, that the Government are going far too far, far too quickly and that the damage that occurs will create more problems for the economy.

The proposal before us is the first real acid test of the Government’s plans for deficit reduction, because we all know that the whole economy of the United Kingdom benefited from the economic bail-out. The private sector, the public sector and what people call the third sector all benefited, and in order to reduce the deficit every part of the economy must contribute. I shall argue strongly that that contribution must be proportionate and depend on how much people can afford. For example, the bankers, who perpetrated the biggest crime against our country’s economy, must pay the most in order to rebalance our books.

We know from the Budget that people will be asked to pay a 20% VAT rate, and that there will be what Opposition Members regard as a puny levy on the banks. We must also consider the proposal before us, and taking matters in the round I have reached the judgment that we are not all in this together, because we are asking those who can least afford it, those who are vulnerable and public sector workers to pay the largest price. That is the collective impact of the proposal. Despite what the Minister said, that is the message that the Government are sending out. I appreciate his point about the negotiations, but, having taken part in many negotiations over the years, I now recognise when I had the upper hand and when the employer did, so I recognise that in the current negotiations the employer—the Government—has very much the upper hand.

Ministers still have an opportunity to reach a common-sense resolution for the civil service compensation scheme, however. A lot of inaccurate information has been put out in the press, and there is a great deal of confusion about the difference between severance and early retirement. For example, on the BBC’s “Today” programme, I heard that some civil servants would receive six and two-thirds years’ payments after they had been made redundant. That clearly confused severance with retirement, because severance is simply based on length of service and salary, and the maximum payout under the current CSCS scheme is three years. In respect of retirement, the terms are for the over-50s, involving an enhancement, through added years, to their pensions.

The Labour Government’s comprehensive proposal to the civil service unions would have saved between £500 million and £650 million—not inconsiderable amounts of money, I hope Government Members will agree—and protected all the different bases in respect of early severance and early retirement.

[Harriett Baldwin (West Worcestershire) (Con)]

I want to clarify the hon. Gentleman’s point about severance, because the Library research paper states that early severance can cost “6 years’ pay” under the 1987 terms. Is that the case?

[Mr McCann]

The hon. Lady is absolutely correct, but earlier contributors made it clear that that refers to a very tiny proportion of the civil service staff; the vast majority are under the terms that I have given the House—[Interruption.] The hon. Member for West Suffolk (Matthew Hancock) shakes his head, but it is absolutely true that the vast majority will receive severance terms based on a maximum three years’ payout. [Interruption.] His colleagues nod in agreement, so he seems to be in the minority.

--- Later in debate ---

[Harriett Baldwin (West Worcestershire) (Con)]

I wish to add to the comments of Members on both sides of the House my recognition of the work that our civil servants do throughout the country. I have spent my working life so far in the private sector. Until I read about this legislation and the background negotiations that brought us to this point, I had not realised that there were still jobs in this land in which people could expect at redundancy to receive a payment of several years’ pay. As we heard, in rare cases people can receive up to six years’ pay. Most of my constituents would be astonished to learn that some who are faced with redundancy—it is inevitably shocking and stressful—are cushioned by a payment of several years’ salary.

I thought I might share with the House some observations from the labour market in the private sector. Redundancy is always a very difficult decision for an employer to take. In my experience, most employers will try very hard to help employees to move within the organisation or reduce their hours. There are many examples in the current downturn of people accepting less work and remaining employed. We acknowledge that redundancy is very expensive, not only financially but in human terms, and that all good employers will go out of their way to try to avoid it. However, we can also see that in a flexible, modern and changing economy, redundancies will occur. Therefore, the provisions are significantly more generous than one would see in private sector employment today.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

I can think of many privatised companies, as I am sure many colleagues can—I am thinking of British Energy and others—that have generous, multi-year severance packages, so it is wrong to say that we find them nowhere in the private sector.

[Harriett Baldwin]

I thank the hon. Gentleman for his intervention. I have obviously been in completely the wrong line of work, given that I was unaware of such significant redundancy packages.

We all recognise that people are reluctant to make employees redundant, and that they would make every effort to move people to new jobs. However, the Minister made an important point when he said that when redundancies need to happen, people want to avoid the situation in which the most recently hired and lowest paid are let go because decision making is distorted by the packages that must be offered to more highly paid people who have been with a company for a long time.

We can also acknowledge that when redundancies are made in the civil service—I gather that in the three years from 2005, there were 16,500 redundancies, which cost the public purse about £1 billion at an average of about £60,000 per redundancy—the money must be found from the taxpayer. I differ from my colleagues who said that the decision to introduce the Bill was made because of the deficit. I submit that even if we did not have a deficit, the sums of money being paid out in redundancy would seem no less huge.

We have talked a lot about fairness in today’s debate. Is it fair that some of the taxes paid by an individual who finds work after being made redundant in the private sector—the average redundancy payment in the private sector is approximately £9,000—go to pay significant redundancy payments in the civil service? We all agree that something must be done, and as the right hon. Member for Dulwich and West Norwood (Tessa Jowell) said, the CSCS is simply not appropriate for a modern civil service.

It would be right to do something about the situation in good times, just as it is right to do something in tough times, but it would clearly be better, as everyone agrees, if the unions and the Government successfully negotiated a change. It would be more attractive if the redundancies that are being discussed were voluntary. It is often the case that managing a redundancy process that has a significantly more generous voluntary element makes the process much less painful for the work force. In addition, it would be better if we negotiated a change so that the public sector is more vigorous and stronger when new jobs are created. It is one of the counter-intuitive laws of economics that companies that have very generous severance terms tend to hire fewer people than companies that are more flexible. It is also counter-intuitive that the mobility of staff within organisations that have more flexible employment terms is improved. That can often help with morale and job satisfaction.

We have spoken today about protecting the lowest-paid, but perhaps we should talk less about protecting them and recognise that the more junior staff are often able to move up. In other words, instead of talking about protecting junior staff, let us talk about promoting and creating more opportunity for mobility for them within the organisation.

It is also been observed that similar counter-intuitive laws of economics apply to countries. Countries that have more flexible employment laws have much stronger periods of job creation when they move into economic recovery.

I agree with colleagues on both sides of the House that it is a shame that we have to discuss the Bill and that it would be much better if we came to a successfully negotiated conclusion. Let us hope that while the Bill goes through Parliament, the negotiations bring about a more reasonable scheme that is both affordable for the public purse and fair to the very many valuable public servants who are covered by the current scheme.