Superannuation Bill

John McDonnell Excerpts

Tuesday 14th December 2010 Commons Chamber

[John Hemming (Birmingham, Yardley) (LD)]

It is rather sad that, again, there are relatively few people in the Gallery when we are debating such an important issue. We need to value the work of people who work for society and all our public servants. Obviously the terms of the civil service compensation scheme do not affect those in the NHS or local authorities, who have varied schemes that are often much worse than even the proposed new terms of the civil service scheme.

This is an important matter, and I am pleased to support the Lords amendments. They make it very clear that we will be bound by good practice and enter into proper and meaningful consultations, with a view to coming to an agreement. Although one particular trade union may continue to try to veto the scheme, that does not mean that we should ignore the need to try to obtain an agreement using a reasonable approach. I am very pleased with the Government’s strategy of protecting people on lower incomes. That is an excellent thing to do, so I am pleased to support the Lords amendments.

[John McDonnell (Hayes and Harlington) (Lab)]

Lords amendment 1 requires the Government to consult with the aim of seeking agreement, and provides for a report to Parliament in due course. Lords amendments 2 and 3 will bring the Bill into force two months after Royal Assent and I find it extraordinary that the Government see that as some form of concession, because the bulk of the staff who will be made redundant in the coming period will be made redundant under a scheme that is still to be imposed. The Government intend that that scheme will be introduced within the two months after Royal Assent, so there will be no report to Parliament, no commitment to consultation and no commitment to take steps to reach agreement, as is embedded in Lords amendment 1. The terms of the scheme, as they stand in the original proposals in the Bill, will be imposed. So although Lords amendment 1 proposes a system whereby there is at least some commitment to parliamentary scrutiny of the willingness and commitment of the Government to negotiate and seek an agreed settlement, Lords amendments 2 and 3 take away that commitment, because we know that the scheme will be amended within the two months to which Lords amendment 1 does not apply.

I cannot think of a better mechanism to incite industrial action. It could be construed as an act of contorted bad faith. Although there have been commitments in ministerial written statements, there has been no commitment to adhere to Lords amendment 1, because it would not otherwise be virtually vetoed by Lords amendments 2 and 3. In my view, that will not only result in industrial relations deteriorating but enhance the potential for legal challenges. It certainly will not enhance the legal protections for which the Government were hoping as a result of the amendments.

The amendments do not address the problematic core of the Bill, which is the imposition of caps and limits on the compensation scheme without the agreement of the unions representing the members affected. I have heard a lot about the four out of the six unions agreeing or recommending the scheme that is being imposed. I remind the House, however, that of the two main unions that represent the vast bulk—more than 75%—of the members affected, one, PCS, or the Public and Commercial Services Union, has not agreed the scheme and is recommending that its members reject it in the ballot; the executive of the other, the POA, has recommended that its members reject the scheme in the ballot, too.

I find it an absolute irony that in any future negotiations, which will, I suppose, probably be relatively minor because the Government will impose the bulk of the change in the next couple of months, the House will have some form of scrutiny of the negotiations as a result of Lords amendment 1, but it will not be able to exercise it in those two months. The reason for that is that if there was a full exposure of what went on in the negotiations, it would provoke even more anger among PCS and POA members.

This has been the worst example of industrial relations practice that we have seen in years. First, there was the use of a “blunt instrument”—I use the Government’s own words—of the threat of a Bill’s being brought forward to impose such severe caps that many would have lost more than two thirds of the redundancy payments that they had acquired as accrued rights over the years. There was then an extremely crude attempt to divide and rule the unions. I believe that the POA is seeking some form of legal redress against the Minister for the Cabinet Office for some of his statements. Those practices have now resulted in the virtual chaotic breakdown of the formal negotiating structures that have held good under past Governments throughout the decades.

If Lords amendment 1 comes into force, at least there will be some reflection of the negotiations that took place—and it might be more accurate. As the Minister has dwelt on the process of the negotiations, perhaps I might put on the record an alternative historical account of what occurred. Yes, the civil service unions—all six of them—sought to negotiate some form of agreed settlement throughout the summer. They did that in the light of the threat of the imposition of a Bill that would cut significantly their members’ redundancy payments.

In September, the Treasury intervened to insist on a cash cap on the new scheme, so there was no room to manoeuvre to improve the scheme beyond that cap. I believe that that significantly undermined the potential for a settlement. On 28 September, the Minister declared that he was pursuing agreement with five of the unions, excluding the PCS, and on 4 October a formal offer was submitted. On 11 October, PCS and the POA held a constructive meeting with the Minister, focusing on the cap on redundancy proposals and making proposals to redistribute from high earners to the vast majority of civil servants, enhancing the protection for the majority.

[Mr Maude]

The hon. Gentleman refers to a report of that meeting, but I can give him another account, because I was there—it was my meeting. No concrete proposals were made at that stage, and certainly not proposals that could in any way remotely or realistically redistribute benefits away from higher earners, whose payments are anyway capped under the scheme that we have agreed, towards the lower paid and particularly the lowest paid, who are much better protected now than they were under the previous Labour Government’s scheme of last February.

[John McDonnell]

My understanding is that on 11 October, PCS and POA tried to explore with the Minister opportunities to make the scheme fairer and more just for their members, and to set out certain parameters in which negotiations could take place. The PCS executive was scheduled to meet on 26 October to consider the next steps in its negotiations with the Government, but on 25 October it received a letter from the Minister, who told them that negotiations had been concluded and that he would implement the proposals that he set out on 4 October. I do not consider that an appropriate way to seek agreement.

As a result, PCS wrote to the Minister on 26 October to say that it was willing to submit proposals. He welcomed that offer and confirmed he would reopen talks if proposals came from the Council of Civil Service Unions, which is exactly what the PCS did—it submitted the parameters and proposals via the CCSU in a constructive approach to reach agreement. The Cabinet Office made no attempt to go into any detail on those proposals or to cost them, and on 9 November, the CCSU submitted terms to open the detail of talks with the Minister, who must have been aware of the background to that letter and of the detail of the PCS proposals. However, on 15 November, he said that the window for talks was closed. Although PCS sent a further letter on 16 November, it was informed that there would be no future talks.

That is a different historical account of those negotiations. The unions, which represented the vast majority of their members, were open to continuing talks to reach an agreed settlement. If amendment 1 had been in place before those talks, the House might have had a more objective historical account of the negotiations than the Minister or I have given—at least we would have had the opportunity of receiving a full report. However, the Minister’s amendments have denied us the opportunity of a report on those negotiations and allow a report only of future negotiations. That is extremely disappointing. It is another act that will undermine civil servants’ confidence that they are being treated fairly by the Government at this critical time in their lives—we are told that 360,000 of them will lose their jobs because of the comprehensive spending review and subsequently.

In addition to souring the industrial relations climate, the Government have opened up a vista of legal challenges—under article 11 of the European convention on human rights and article 1, protocol 1—which has occurred before. Amendment 1 is the Government’s attempt to find legal cover for their infringement of those articles, particularly article 11, but it does not go far enough. In fact, amendments 2 and 3 take away that cover completely in respect of the current negotiations. The Government’s proposals are legally precarious to say the least. I am sure that there will be a legal challenge from PCS. I believe that it will be successful.

In the previous Government’s negotiations, PCS threatened legal challenge, and it was advised by civil servants—they met us a week before the general election was declared—that the Government were confident of winning in court. The same civil servants advise this Government of the same thing. They were wrong before the election, and I believe that they are wrong now. In fact, PCS is yet to lose a case against the Government. We have the prospect of tens or perhaps hundreds of thousands of civil servants being made redundant. If the Government’s proposals are overturned, the civil servants who are made redundant under the imposed scheme could seek legal redress and compensation, which could run into many millions of pounds.

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[Mr Maude]

The right hon. Gentleman raises a good point, which is that it is by no means true that all civil servants belong to a trade union. The figures show that something in the region of 60% of civil servants belong to a trade union, but many are unrepresented. I am not sure that the Superannuation Act 1972 or what we are proposing in the Bill makes requisite any particular form of consultation with those who are unrepresented. However, he raises a good point that those who engage in future consultations should be alive to.

The hon. Member for Hayes and Harlington referred to his concern that, because the consultation requirement will not be commenced for two months, there will somehow be no obligation to consult. There has been extensive consultation. He raised concerns about the proposals that he claims were made by PCS and the POA, but the outline suggestions that eventually emerged from PCS, if implemented within the cost envelope, which I have always said exists and which would have existed under whichever Government were in power, would have had the effect of reducing the compensation available to those over pensionable age—that is, those over 50 and approaching retirement—and reducing the benefits available to the lowest paid. I say again that our primary concern has been to ensure that there is proper additional protection for those who are lower paid.

[John McDonnell]

I am sure that the right hon. Gentleman would not want inadvertently to mislead the House. Just for the record, that is contested by the unions themselves, because it was open to the discussions that the union was hoping to pursue with him, but which he declined.

[Mr Maude]

The concern raised by the unions at the time was that there was insufficient compensation in the scheme that we were developing with the other unions for those who were above the £23,000 salary underpin. We could have increased the compensation payments for them only by taking away from others. The only ways in which that could have been achieved—these suggestions were canvassed—would have been by lowering the £23,000 underpin so that all those earning less than that would have been penalised, or by taking away the significant protection that rightly continues to exist for those over 50. I recognise that someone who started work as a civil servant as a teenager straight after leaving school, and who has worked as nothing else until leaving the civil service in their 50s, might not find themselves in a fantastic place in the labour market. It is therefore right that there should be proper protection for people in those circumstances. That is why protecting those approaching retirement and the lowest paid people in the civil service was an absolute priority for us. I believe that the scheme that we have put in place meets those commitments and priorities.

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[Mr Maude]

It is really hard to do that, because, as I pointed out in the letter that I sent to all Members, there were only outline suggestions made by PCS. Back in September, five of the unions—the five not including PCS—wrote to me with some proposals that they had signed up to, and that PCS had declined to sign up to. At their request, we entered into discussions with the five unions, and the ensuing proposals formed the basis of the new scheme that we have developed. They are not totally reflected in the scheme, but they formed the basis for it. I constantly and consistently urged PCS to join that process and to make concrete proposals, but it had declined to sign the letter that the other five unions had signed, despite being asked to do so by the five unions.

That protracted process involved meetings with Mark Serwotka of PCS and Steve Gillan of the POA, at which I urged them to make concrete proposals that would enable us to work towards a full agreement. All that emerged, however, after protracted delays, were outline suggestions. When asked how any additional protection for higher-paid people—not highly paid people, but those above the £23,000 underpin—was to be paid for, the only suggestions were either to lower the underpin, which would have meant that all lower-paid workers would have been penalised, or to reduce the protection available to those over 50. We were not willing to do that because providing protection was a priority for us.

[John McDonnell]

Following on from an earlier point, the Minister will know better than most of us that these negotiations are complex. He has said that it was difficult at times to calculate the overall consequences. That is why the Public and Commercial Services Union—through the Council of Civil Service Unions as the Minister requested—put forward outline proposals for detailed negotiations with staff. However, the Minister for the Cabinet Office then closed the window for those negotiations, just as they were becoming productive. There are complexities and if the Minister objected to issues like that, those points could have been taken up in the next round of negotiations.

[Mr Maude]

I have to take issue with the hon. Gentleman’s phrase about the process just beginning to become productive, because it was not. The outline suggestions were vague and the only way of paying for them would have been by taking money away from lower-paid workers or people approaching retirement. We explored whether there was any other source from which those funds could be redistributed, but it turned out that there were no alternatives.

[John McDonnell]

If that is the right hon. Gentleman’s only concern and his only objection to the position of PCS, supported by the POA, why can he not simply reopen negotiations now to resolve the matter?

[Mr Maude]

The hon. Gentleman talks as if this were a trifling consideration, but it is not. This process has been going on for three years. If the Bill goes through the remainder of its stages and on to the statute book, the new scheme that I hope to lay before Parliament before we rise for the Christmas recess, superseding the current scheme, will have been the product of many months—indeed, years—of protracted discussions. I know that he disagrees, but I have to say that despite repeated requests, the PCS has been tardy, to say the least, in coming forward with proposals and has, at best, made outline suggestions but never concrete proposals that could have formed the basis of an agreement. The other five unions did, and I am grateful to them for their engagement, which enabled us to forge a new scheme—as I said, we hope to lay it before Parliament next week—that will provide a fair balance between the interests of taxpayers and the interests of civil servants and protect those approaching retirement and the lowest paid.

[John McDonnell]

I am grateful to the Minister for giving way. Let me quote to him his statement to the House on 30 October, when he gave a commitment that he would “strain every sinew” to achieve a negotiated settlement. What I am suggesting is that, if he has identified an issue as an impediment to a negotiated settlement, he should now adhere to his commitment to strain every sinew and meet the unions again. It is no use repeating over and over again the fact that five out of six unions have agreed a settlement. They have not. The two unions that represent the vast majority of members have rejected the Minister’s proposals. Surely it behoves him now to go the extra mile and strain that extra sinew to seek a negotiated settlement before he provokes industrial action or legal challenge.

[Mr Maude]

Those are not concerns that have just arisen; they have been there throughout. I have been forthright in ventilating them with the leadership of the PCS and POA, and they know that. We have been clear about the envelope within which it would be possible to make changes because increasing protection for one group can be done only at the expense of other groups. There is no way around that. That is the basis on which we have formulated the new scheme, which I hope to lay before Parliament before the Christmas recess. That is the basis of my case.

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[Mr Maude]

The amendments respond to concerns raised by Opposition Members on Second Reading in the other place about the potential for the caps in what is now clause 2 to be revived after being put into abeyance, which is what I propose to do next week before the House rises and before the new scheme is laid. The Government also proposed the amendments to respond to the comments about the unusual use of a sunrise provision in clause 3(4)(c) that were made in the third report of the House of Lords Delegated Powers and Regulatory Reform Committee, published on 28 October. My noble Friend Lord Wallace of Saltaire provided a full response to the Committee in his letter of 1 December. We are grateful to the Committee for its report.

The Committee also commented on the other provisions in clause 3 which would enable, by order, the caps included in clause 2 to be repealed and also to be extended by six months at a time. That would override the so-called sunset provision in clause 3(3), which would otherwise mean that the caps on civil service compensation provided in clause 2 would expire automatically after 12 months. The Committee said that “these arrangements are complex”, but added that the two delegated powers

“do not appear to the Committee to be inappropriate”.

However, the Committee was not so persuaded of the need for the power in clause 3 to revive the caps in clause 2, that being an unlimited power that would have been available to any future Government in circumstances that we cannot predict today. The amendments respond to that point. The Government accept that there should not be an unlimited power to revive clause 2. Lords amendment 6 therefore provides for subsection 3(4)(c) itself to expire three years after Royal Assent, which is in effect a sunset of the sunrise provision. I can see why some people might say that that was a bit complex, but I think that, when fully parsed, it makes perfectly good sense.

The sunset of the power to revive clause 2 would mean that it would be there, as the Government intend, as a fallback to revive the caps in clause 2, just in case they were needed because of future problems in implementing the new civil service compensation scheme. However, the introduction of the three-year time limit should provide a reassurance that the power to revive clause 2 would not be available indefinitely to future Governments.

The caps are there as a potential fall-back so that we can be certain—as both the last Government and we have wanted to be—that we can reform the civil service compensation scheme. We have an absolute obligation, in the public interest, to address the unfair and unaffordable nature of the current scheme, and we need to ensure that if a legal challenge is mounted to our revised scheme—and it has been suggested that that may well happen—there is a fall-back option, albeit one that we have absolutely no desire to use. We do not expect or intend to use the powers to impose the caps in clause 2; what we want is to see in operation as quickly as possible is the reformed civil service compensation scheme. We are determined that, if all else fails, there will be a fall-back position so that we are not left high and dry—as the last Government were—because of a legal challenge to the details of the new scheme.

Before the new scheme is laid before Parliament, I intend an order to be made under clause 3(4)(a) to repeal the caps in clause 2 in relation to any new scheme. We intend the order to include a saving provision so that the caps could be applied if, and only if, the old unreformed scheme had to be reintroduced. The saving provision would allow that to happen automatically, without the need to use the revival power by order under clause 3(4)(c). I should make it clear that this saving provision would apply only if there were an attempt to revert to the old scheme. An order under clause 3(4)(c) would be required, subject to the affirmative procedure, if it were ever proposed to revive the caps in clause 2 and to impose them over the new civil service compensation scheme that will be put in place following the completion of this Bill’s passage.

Finally, unless further extended by order under clause 3(4)(b), clause 2 in its entirety—including the saving provision—will expire 12 months after Royal Assent. From that point on, any revival of the caps would have to use the order-making power in clause 3(4)(c), which, because of these Lords amendments, will be available only within three years of Royal Assent. I very much hope that by then the new civil service compensation scheme will be in place and be operating satisfactorily for all concerned—civil servants, departmental employers and the civil service trade unions—and that the taxpayers’ interests and the proper interests of civil servants will be being met. Amendments 4 and 5 are consequential on amendment 6.

[John McDonnell]

The House needs to be aware of what this measure actually means, and I make it clear that I will press my amendment to a Division.

[Mr Deputy Speaker]

The hon. Gentleman will be able to move his amendment formally later.

[John McDonnell]

Thank you very much for that advice, Mr Deputy Speaker. I get confused when we are talking about sunset and sunrise clauses.

Let me explain what this measure means. Despite all we have heard today from the Government about their willingness to achieve a negotiated settlement on a new compensation scheme and their wish to ensure that all the trade unions are signed up to it and that it is acceptable both to members of those unions and to people not in those unions, the fact is that they will retain the power, over a three-year period, to impose the caps set out in the Bill.

We should remind ourselves of what those caps are: for a compulsory redundancy, an amount equal to a person’s earnings for 12 months, and that amount for 15 months for a voluntary severance. We heard in evidence in Committee—this has been repeated in the Chamber time and again—that that will mean a cut of up to two thirds in the redundancy payments of many civil servants; 60% to 70% was the figure cited by the Joint Committee on Human Rights. Any Government will have the power to impose those caps at a later date, and to impose that level of penalty on civil servants who are made redundant.

If the Government are confident of being able to negotiate an agreed solution under the new scheme in this coming period, why do they need the right, over a three-year period, to impose these caps unilaterally? I still think that if they sought to do that, it would be subject to a legal challenge, but why would a Government seek to retain that power if they were entering into negotiations with good will, genuinely seeking an agreement, and taking every reasonable step to secure one?

My amendment simply seeks to reduce the period to 12 months, as an act of good will on behalf of this House in respect of its employees in the civil service. I believe the Government have set the period at three years because they want to maintain their original purpose for the Bill, as previously described: to use it as a blunt instrument to bludgeon the unions into submission so they agree to the Government’s proposals. That is unacceptable. I also think this will be another factor that leads to people rejecting the overall scheme in the ballots that are currently taking place, and instead moving on to take action to stop the scheme being imposed upon themselves and their fellow trade union members.

I urge the Government to think again, as 12 months should give them sufficient time to negotiate and introduce a new scheme, and to introduce any reforms or amendments that might be needed to hone it to make it more workable if there were any problems with its implementation. It is unacceptable for the Government to have the threat of this blunt instrument to hold over civil servants for three years. Introducing this measure would be another contributory factor to the deterioration in the relationship between the Government and their staff, who are meant to implement, with high morale, the policies they introduce.

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[Mr Maude]

The right hon. Member for Birmingham, Hodge Hill (Mr Byrne) asked why we needed to keep the caps at all. The answer is simple. The caps will be established in primary legislation, but the new civil service compensation scheme, which I hope to lay before Parliament next week, before the House rises, does not have the full force of primary legislation, despite the changes to the Superannuation Act 1972 made by clause 1.

I shall be frank. We want to avoid being in the position that followed the High Court judgment in May this year, which resulted in the previous Government’s February scheme being quashed. The effect of the scheme being quashed is that the existing scheme remains unreformed and in force. Indeed, the old scheme—unaffordable, unsustainable and unreconstructed—is in force today. Of course, in preparing the new scheme we were at some pains to ensure that it would be legally robust, and we shall vigorously defend any legal challenge to it. However, as was apparent from the litigation against the previous Administration’s scheme, there can never be guarantees in litigation. Even litigation that is destined ultimately to fail can be disruptive, because of the uncertainty it causes until the case is concluded.

[John McDonnell]

Could we clarify what the Minister has just said? Is the provision he supports simply a device to be used to prevent UK courts from quashing the Government’s proposals?

[Mr Maude]

I shall be clear: both sides of the House have accepted that the current scheme is unsustainable and needs to be reformed. With the possible exception of the hon. Gentleman, everyone—and certainly Opposition Front Benchers—has accepted that it is unacceptable for it to be possible for a union, or two unions, to veto reform of the scheme. It must be possible for the Government and Parliament to effect reform of the civil service compensation scheme. If there is a successful legal challenge to a new civil service compensation scheme—unlikely though that may seem—we cannot have the position where the old scheme trundles on in its unsustainable, unaffordable and unfair form. That is why there must be a fall-back position for a limited period. We have listened to the arguments and we have accepted that it will be a limited period, so that caps on the use of the old scheme will be in existence, should the new scheme be quashed as the previous Government’s scheme was, by order of the High Court.

What is the right period for the power to revive the caps? Is it one year, three years, five years or 10 years? There is no precise science, because no one knows how long the period is beyond which we could be sure that a successful legal challenge would not be raised. It is our judgment that three years is the right period. That is the view that we have taken. That is why we urged the Lords to agree, and I urge the House to accept that view today. We would thus be agreeing with the Lords in their amendments, and disagreeing with the amendment proposed by the hon. Member for Hayes and Harlington.

Lords amendment 4 agreed to, with Commons financial privileges waived.

Lords amendment 5 agreed to, with Commons financial privileges waived.

Amendment (a) proposed to Lords amendment 6.—(John McDonnell.)

Question put, That the amendment be made.