Lord McKenzie of Luton
Main Page: Lord McKenzie of Luton (Labour - Life peer)
Lord McKenzie of Luton
My Lords, I start by thanking the Minister for his explanation of this short Bill and some of the history associated with the compensation scheme and for his courtesy in facilitating meetings yesterday, which I found very helpful.
Despite its brevity, the Bill has the potential to impact the lives and aspirations of many. We approach it in a constructive manner that recognises the sensitivity of the issues that it is intended to address through the reform of the Civil Service Compensation Scheme. The Government have said that they put great stock in wanting to reach a negotiated settlement, and there was indeed a consensus in the other place that that would be the right course of action. However, it is our duty, in seeking to improve the Bill, to ensure that it reaches the statute book in a way that is practical, fair and in the long-term interests of the country.
Let me be clear: we agree that the current arrangements are in need of reform. That is why in February this year, when still in government, we brought forward proposals that would have saved £500 million over three years, protected the lowest paid, tackled the disproportionate settlements for some very highly paid people and ensured that the terms were not age discriminatory. Those proposals were underpinned by extensive negotiations with the trade unions concerned, five of which were in agreement but one of which—I refer to PCS, which represents the largest number of civil servants—was not. There followed, as has been set out by the Minister, a judicial review and the quashing of the reformed arrangements.
We accept that the position would have had to have been addressed by any incoming Government, but before commenting on how this Government have responded we might just reflect on the context in which these matters must be considered. We know that the Treasury predicts half a million public sector job losses over the CSR period. Of course, not all of those will be Civil Service jobs, but perhaps the Minister will update us on his latest estimates of how many will be. With PricewaterhouseCoopers predicting half a million private sector job losses caused by the spending cuts, the British Chamber of Commerce expecting unemployment to rise for the next two years and the CIPD forecasting that unemployment will not fall below 2010 levels for the whole of this Parliament, there will be a difficult alternative employment market for many civil servants who lose their jobs.
Being fair to those who lose their jobs is paramount. We must be fair not only in terms of compensation and pensions but in the support that individuals receive when they leave the service. Evidence given to the Committee in another place gave testament to how, through a range of sophisticated techniques—including redeployment, reskilling and, of course, good quality voluntary redundancy schemes—the service has successfully managed a headcount reduction of more than 80,000 over recent years. Fairness means ensuring a credible bridging policy for those individuals affected by the Government's cuts. The Minister's press release prematurely announcing the conclusion of negotiations with the trade unions also refers to significant changes that are planned to shorten the process for making staff redundant. Can the Minister confirm that, the CSR and the press release notwithstanding, the same levels and quality of support will be available for those who will depart the service over the next four years?
There is a perception that civil servants cope with such things because they are all on large salaries and feather-bedded pensions. This perception is false and is often fuelled by untypical examples that arise in the public sector at large being extrapolated to suggest that those examples are the norm. The reality is that pay in the Civil Service is substantially below that of the private sector or other parts of the public sector. The median salary is around £22,000 per year, with 40 per cent of civil servants paid less than £20,000 per year. For these people, enhanced protection for redundancy formed part of a package, which helped to ensure reasonable levels of job security and made it more palatable to accept lower levels of pay. At Second Reading in another place, the Minister himself referred to the great myth that all civil servants are highly paid.
We should also be mindful of the hugely important part that the Civil Service plays in our national life. Its professionalism and integrity make the process of government work. Through its commitment and work, government continues to function normally even during the heady periods of the electoral cycle and changes of political Administration. The Minister now has first-hand experience of that.
I turn to the specifics. As we have heard, the Bill has three clauses, and in their current form we have difficulties with each of them. Clause 1 was a rather rushed addition that the Government introduced late in the proceedings of the other place and that no one, including the Government, appears to be wholly satisfied with. The clause proposes to remove the statutory requirement on the Government to have the agreement of the Civil Service unions before decreasing any compensation benefits. The clause will amend Section 2 of the Superannuation Act 1972.
The trade unions are understandably concerned that, if the Bill is passed as drafted, their ability to engage meaningfully in negotiations will be undermined. In its current form, we cannot support that provision. We accept that, where a serious and concerted effort to reach agreement has failed, the Government should ultimately be able to compel a settlement. However, such a right should be exercised only on the basis of clear, systematic, open and proper negotiations with the workforce and its recognised trade unions, and the process should be reported to Parliament, which should be the arbiter of whether the process is fair and transparent.
We understand and have heard that the Government have committed to redrafting Clause 1 in consultation with the trade unions. The wording of any such amendment will be critical, so we will look at it in detail when it is introduced. We will be particularly interested in whether it incorporates natural justice elements and enables due process for consultation. We look forward to seeing the Government’s amendment in due course and to having sufficient time to consider its implications.
Clause 2 has been controversial from its introduction. It proposes to introduce a crude capping mechanism by placing a maximum amount of compensation payable to civil servants—12 months for compulsory redundancies and 15 months for voluntary redundancies. If implemented, that would produce dramatically worse outcomes for many civil servants in comparison with the existing scheme and the February 2010 scheme. Compared with existing arrangements, some civil servants could lose two-thirds of their current entitlement. That is particularly unfair to longer-serving individuals, given that current arrangements are based on years of service.
Those caps are punitive, unfair and unworkable. They were put forward without any consultation, have led to mistrust and have created real concerns among staff. It is clear from the evidence provided by the trade unions that the inclusion of the caps in the Bill was not helpful in creating a climate for negotiations and was demoralising for staff who see themselves assailed by redundancies, proposed extra costs of pensions and freezes on pay.
The Cabinet Office Minister referred to the caps—this has been repeated today—as a bit of a blunt instrument, which he recognised cannot represent a comprehensive, sustainable scheme. He stressed the importance of a negotiated settlement with greater protection for the low paid and caps on payments for the highest paid. If the Government do not see the caps in Clause 2 as a sustainable basis for maintaining the compensation arrangements, why introduce such caps, especially given that Clause 1 now gives the Minister the power ultimately to impose modifications to the scheme without agreement? The purpose of the caps is now redundant. If the Minister does not ultimately need agreement for changes to the scheme, as proposed in Clause 1, one has to ask why the caps should be retained.
As we have heard, things have moved on and an agreement has been reached with four or perhaps five of the Civil Service trade unions—including Prospect, FDA, Unite and GMB—which the Minister is minded to implement under the provisions of Clause 1, immediately following the entry into force of the Bill. As we have also heard, Clause 3 permits the Minister for the Civil Service to repeal Section 2 by order. If we are not able to convince noble Lords to seek the removal of the Clause 2 caps during the passage of the Bill, we might be comforted that it is planned to repeal the provision as soon as the Bill is passed. I think that the Minister earlier confirmed that that is the intention and that that will definitely happen.
Clause 3 also contains a sunset provision, so that while Clause 2 will otherwise expire at the end of 12 months unless earlier repealed by an order, it can also be either extended for a period of six months or, bizarrely, revived for six months following its expiry or repeal. Having been laid to rest, it can be brought back from the dead—it was rather aptly coined the “zombie clause” in the other place—so the effect is that the clause will be a continuing threat to those who might challenge the arrangements that the Minister will implement.
Like zombies, zombie clauses are not common—one of the few examples relates to emergency terrorist legislation—so can the Government explain why such a measure is now necessary and appropriate? If the Minister is not confident that the amended scheme that he has negotiated is secure, whether in its dealing with accrued rights or proper consultation, he should seek to amend it. To hold in reserve draconian caps as a continuing threat to the workforce, on the pretext that someone might challenge the amended scheme, is, frankly, unacceptable. The Clause 2 caps must not be a default position for the scheme. With the assurance of the Minister that Clause 2 is to be repealed the day after the Bill becomes law, we will seek to have the provisions that allow for the revival of the clause to be removed from the Bill.
We welcome the Government’s commitment to draft amendments to reinforce the obligation to consult and to make the process more transparent. We hope that those amendments will allay our concerns, and we look forward to the opportunity to consider them during the passage of the Bill. Like removal of the right to revive Clause 2, progress on an amendment to address Clause 1 would help to redress some of the fears which have been created during the process surrounding the Bill because of the arbitrary caps, the premature announcement of an agreement and the move to impose a scheme.
We have heard today an update from the Minister on negotiations with the trade unions and the extent to which agreement has been reached. Our preference would have been to see the February 2010 proposals as the starting point for an updated scheme, but this is not where we are now. The agreement being advanced is in some respects a less generous package, but we acknowledge that it contains improved protections for the low paid, which we support. The Minister, it is to be hoped, will be able to confirm that it addresses, in so far as it is considered relevant, the issues of accrued rights and the Human Rights Act.
It is not the most comfortable position to have to proceed without agreement with all the trade unions. It is to be hoped that there is a chance yet for all six to be part of a negotiated way forward, but we are under no illusions about how difficult this would be. The Government could yet contribute to that end by removing from the legislation the Clause 2 caps and by ameliorating its approach to imposing a scheme. We hope that they will do so and that we will ultimately be able to support the Bill.
Lord Wallace of Saltaire
I shall come in a moment to Clause 3, which is of course different. I am advised that Clause 2 is useful and necessary for spelling out the minimum that, under any conditions and without negotiation, the Government would offer. In answer to the point made by the noble Lord, Lord McKenzie, it is the Government’s intention to repeal Clause 2 by the time the new scheme is in force. Clause 3 allows for the Bill to lapse once the new scheme is fully in operation. That is the timescale under which we will allow the Bill to fall in the sunset clause.
Lord McKenzie of Luton
Can we be clear on that? Is the Minister saying that if there is a repeal of Clause 2 once the settlement is under way, he will be amenable to the removal of the revival provision in Clause 3, which could bring back the sunset clause?
Lord Wallace of Saltaire
The question of the zombie clause, the revival clause, or however one wants to put it, needs to be discussed further in Committee, when the Government may wish to return to that question in some detail with new proposals. All of us who have looked in detail at the legislation understand that sunrise clauses and revival clauses are a delicate issue for Parliament as a whole.
On turnover and natural wastage, I confirm that the Civil Service is suffering something of the order of 7.5 per cent a year. We nevertheless anticipate that the reduction in some areas will be a good deal more than that and that it will be necessary to ensure that the provisions set out in the Civil Service protocol for redeployment and assistance when people become redundant will be thoroughly available for all those who go through this scheme. Our preference is, where possible, for voluntary redundancy and redeployment, and we will be working extremely hard with the unions and with different departments to ensure that that is the case.
The noble Baroness, Lady Noakes, also remarked that there has been an explosion in public sector pay and that the private sector finds it difficult to accept the levels of compensation provided in the Civil Service. I noted in the PCS briefing, which was helpfully sent round to all of us, that the 1972 Act was intended to bring pubic sector packages up to the level of the private sector. The evidence to the Public Bill Committee from the Hay Group was that public sector packages are now in many areas better than those in the private sector. We are doing our best to keep them roughly in parallel. In the higher levels of the Civil Service, of course, the comparative level of award falls away, but this is partly because the narrower distribution of pay levels within the Civil Service does not compare to top executive pay.
On compensation, any statutory arrangements in relation to employment provide a minimum underpin for all workers. However, the Government are attempting, through negotiation, to provide an example to other employers of good practice in staff issues. Again I emphasise that negotiations are continuing and that a much more generous package than the minimum is on offer.
The noble Lord, Lord McKenzie of Luton, asked about human rights issues and accrued rights. The Government’s human rights analysis has been set out in the Explanatory Notes to the Bill. In sum, we do not consider that Civil Service benefits are possessions within the meaning of Article 1 of Protocol 1 of the European Convention on Human Rights. Even if, contrary to the Government’s view, the changes we propose are seen as representing an interference with possessions, we believe that such interference is fully justified in light of the pressing need to reduce the budget deficit.
As I understand it, the judgment of Justice Sales was not about accrued rights but about the form of agreement under the existing legislation. This legislation therefore removes the basis for the judgment of Justice Sales. In any event, I emphasise that the limits in Clause 2 do not apply to departures agreed before the Bill comes into force. We are not trying to take away from staff a right that has been upheld by the court, because the court did not rule that staff had a right to the current terms. The question is about the nature of the negotiations and the right of the unions to veto any agreement made. Again I stress that we have been, and continue to be, close to an agreement and I hope that we will succeed in reaching one.
Our intention is to provide amendments that both reinforce the requirement for the Government to consult and ensure that the extent and outcome of the consultation is made more transparent. This will be further informed by points raised today before we present the necessary amendments to your Lordships’ House in Committee.
I confirm that the level and quality of support offered to surplus civil servants who are made redundant will continue at the current level and that a copy of the April 2008 protocol for handling surplus staff situations is now in the Library of the House. That protocol will be updated to reflect the additional measures that the Government intend to introduce.
I hope that I have covered the points made by noble Lords in a serious and sober debate about what we all recognise is a difficult issue. I look forward to further discussions in Committee.