Employee Pay (DWP)

Jim Cunningham Excerpts

Wednesday 18th November 2015 Commons Chamber

[Chris Stephens]

I do not know the reasons for that, but I think that it should have been possible. As my right hon. Friend will know, in Scotland those earning less than £21,000 a year have received a £250 pay rise over the last couple of years.

Between 2012 and 2015, all DWP staff received a 1% increase, and the Chancellor has announced his intention to limit civil service pay increases to 1% for the next four years.

[Mr Jim Cunningham (Coventry South) (Lab)]

I am sure the hon. Gentleman agrees that, if inflation is taken into account, that 1% increase effectively amounts to a 6% or 7% wage cut, and women in particular are bearing the burden.

[Chris Stephens]

The hon. Gentleman is correct, and I will come on to the fact that it is estimated that what has taken place in the DWP is effectively a cut of £2,245.

There is also the issue of no pay progression within the Department. Since 2009 there has been no mechanism for DWP staff to move from the bottom towards the top of the pay range for their grade. This has meant staff have become frozen at the bottom of the pay range with no means of ever progressing further. Around 70% of DWP staff are in this position.

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[Chris Stephens]

I agree with that, because if there is a pay range and scale, there should be natural progression through experience and training.

With pay increases limited to 1% year on year, simply not enough money is available to create meaningful pay progression and give all staff some annual pay increase. The Treasury has consistently prescribed that any pay progression must be funded from the 1% increase and no additional funds have been made available. My first question to the Department is this: will the DWP change its attitude towards pay progression and allow employees to move up the pay grades and scales?

Let me turn to the increase in pensions and national insurance contributions. DWP staff are members of one of the civil service pension schemes and since 2010 members’ contributions to the pension schemes have been steadily increasing, averaging 3.2% by 2015. These increases have, effectively, eroded the value of the recent 1% pay rise. This has meant that DWP staff take-home pay now has hardly increased at all since 2012. DWP staff also expect to see an increase of around 1.4% in their national insurance contributions in 2016, when the new state pension comes into effect.

Some 40% of DWP staff are on tax credits. The DWP has told the PCS that 40% of DWP staff have to rely on tax credits to supplement their low rates of pay. This is clear evidence of how low pay rates are in the DWP. If the measures to reduce tax credits that were announced in the July Budget were ever to be implemented, there would be a significant impact on DWP staff.

The Government have made many public statements saying that employers should pay a living wage and not make their employees rely on tax credits to supplement low pay. It is ironic, therefore, that so many DWP employees are made to rely on tax credits because the Government will not pay their own staff a decent salary. Furthermore, the Government have justified tax credit cuts by declaring that when their employees lose their tax credits, employers will naturally pay higher wages. However, if the Government rely on tax credits to subsidise the low pay of their own workforce and they are unwilling to compensate these workers who stand to lose from changes to tax credits and the 1% pay cap, it is hard to see how other employers can be expected to practise anything different.

DWP pay is an equality issue. Some 69% of staff are female, predominantly employed in the lower grades.

[Mr Jim Cunningham]

There is a contradiction. On the one hand, Government policy is equal pay for women, but on the other hand they reduce women’s wages at the DWP and other Departments.

[Chris Stephens]

I entirely agree, and I am sure the hon. Gentleman will agree with me that we are seeing an increase in the pay gap between male and female workers.

Low pay in the DWP therefore has a detrimental effect on women. As the highest paid grades in the DWP have a majority of male staff, this has created a significant gender pay gap in the DWP. My next question is this, therefore: what equality impact assessment has been carried out to ensure the DWP complies with the Equal Pay Act 1970 and is not at risk of equal pay claims?

There have been increased workloads and efficiency, but no reward. Time and again, Ministers and those running the Department thank DWP staff for their hard work in keeping the Department afloat and delivering welfare reform. Recognition is always welcome, but DWP staff feel that the thanks need to be translated from mere words into a form of recognition visible in their pay packets.

Furthermore, the DWP workforce has been cut by 30% since 2010, so the pressure on those remaining has increased. In March 2015, the Secretary of State told DWP staff that productivity had increased significantly. He cited record levels of employment, faster processing, fewer calls chasing progress, and an annual operating cost £2.5 billion lower than in 2009-10, yet none of those improvements in productivity has been reflected in increases in DWP pay.

The DWP is one of the lowest paid Departments in the civil service. Prior to civil service pay being delegated to individual Departments, all civil service grades were paid the same, irrespective of which Department they worked in. However, as a consequence of pay delegation, pay levels now vary greatly from one Department to another, and DWP pay is particularly low. There are now well over 100 pay bargaining units across the civil service, and the DWP, as the largest Department, does not do well compared with other civil service Departments.

This will be brought into sharp focus with the roll-out of universal credit, when 2,000 HMRC colleagues, earning considerably more than DWP staff, will transfer into the DWP and will be earning a lot more for doing the same work. For example, 40% of staff in the administrative officer grade in the DWP earn less than the HMRC administrative officer grade minimum. Anyone who joins HMRC on its administrative officer minimum will come in more than halfway up the DWP administrative officer pay scale at £18,415.

People who work in the private sector are better off. This Government seek to justify public sector pay restraint by spreading the myth that life in the public sector is altogether cosier than in the private sector, but the truth is that pay for those in the DWP is now so low that some people in the private sector employed on civil service contracts are leaving them behind. For example, in Steria, the company that won the contract for HR shared services, where some DWP workers saw their work privatised, members have just been awarded a 2.3% pay increase. In Maximus, another DWP contractor, members have recently accepted an offer that will give the majority of them increases of over 15%, with the lowest paid receiving an increase of nearly £5,000.

Increases for private sector workers on DWP contracts are therefore considerably in excess of the 1% awarded to DWP staff. Of course, those pay increases in private sector contracts are funded by the taxpayer every bit as much as DWP pay is funded by the taxpayer. We commend the pay increases for those staff, but we fail to see the logic of the 1% pay cap being so rigidly imposed on public sector workers when that is not the case for private sector workers delivering Government contracts.

We fear that there is discriminatory performance-related pay in the DWP. The Department also pays some staff a non-consolidated payment each year. This is worth 1.9% of the annual pay bill—around £44 million. The payments are distributed based on performance appraisal markings and grade. Staff who have received a “must improve” box marking—around 8% of DWP staff—receive no non-consolidated payment. Other non-consolidated payments vary from £450 for an administrative assistant to £1,750 for a grade 6 employee. These non-consolidated payments have been shown to be discriminatory in many ways. You are more likely to receive the higher award if you are full time, white and under 60, and more likely to receive no non-consolidated payment if you are over 60, BME or part time.

Terms and conditions are also diminishing. At the same time as pay increases in the DWP have been subject to central Government pay restraint and caps, DWP staff have seen a gradual erosion of other terms and conditions. This has taken the form of increased pension contributions and changes to pension entitlements, repeated attacks on the civil service compensation scheme, restricted access to flexitime, a draconian approach to attendance management, and cuts in staffing.

The sense of anger among DWP staff is high. When the 1% pay award was imposed on DWP staff in July, more than 5,700 protest letters were sent to the Secretary of State and the permanent secretary. The PCS receives constant feedback from its members on the impact of pay restraint. My next question therefore is: what assessment has been carried out to ensure that DWP staff reach the so-called living wage target? Or will steps be taken to ensure that this is delivered earlier? Some DWP staff reported regularly borrowing from credit cards to make up the shortfall in their wages and being unable to afford to tax their cars.

My last question is: do Ministers believe that the enormous improvements in productivity that DWP staff have achieved on their watch should be rewarded with an additional pay increase above the 1% cap?

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[Justin Tomlinson]

I thank the hon. Gentleman for his intervention. My next bit will specifically address the under-25s. Our pledge is that the national living wage will go over £9 by 2020. From my recollection at the general election, the Scottish National party pledged to pay about £8.60 or £8.80, and Labour pledged £8. I think that we can all support our decision to get the figure to over £9 by 2020.

Crucially, on the point about the under-25s, DWP will meet its statutory requirement and pay the national living wage to all employees regardless of age. That will include those under the age of 25. All Members will welcome that.

DWP will raise the pay of around 600—0.7% of our staff—who will fall just below this level from April 2016. The Department is ensuring that our contracted staff will also be paid at the new national living wage from April 2016 onwards, as we are conscious that we have large supply chains and people with whom we have direct work. For the remainder of the Parliament, all increases in employees’ salaries will be in line with the guidance from Her Majesty’s Treasury.

[Mr Jim Cunningham]

Can the hon. Gentleman tell me how many agency people the Department employs, how many consultants it does business with and how much that costs?

[Justin Tomlinson]

I thank the hon. Gentleman; I will be providing a written update in answer to that very good question.

I was asked about pensions. As changes are made to pensions, we have made sure that the lowest paid see the smallest increase and that those paid more contribute more progressively, but it remains a good pension scheme, with a defined end. As for promotion through the pay scales, for those who can get promoted through the bands—there is typically a 10% difference between them—that remains in place.