Superannuation Bill

Matt Hancock Excerpts

Tuesday 7th September 2010 Commons Chamber

[Matthew Hancock (West Suffolk) (Con)]

The right hon. Lady made the comparison between civil service and other public sector redundancy packages. Can she also make a comparison between civil service and private sector mandatory redundancy packages?

[Tessa Jowell]

I am surprised that the hon. Gentleman feels it necessary to ask that question. If employers in the private sector use the basic statutory scheme, it is considerably less generous than even the proposals in the Bill. In a way, that is not the point, because the value that we attach to public servants, to the importance of the jobs that they do and to the commitment to invest in security to prevent turnover and to compensate for what are often lower levels of pay is one of the reasons that such provisions have traditionally tended to be more generous. It is worth reminding the hon. Gentleman—the Minister took us through the history—that the scheme was created by a Conservative Government and amended by a Conservative Government and that attempts at reform were made under a Labour Government. Now, under the coalition Government, we have what amounts to a hollowed out version of the original scheme.

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[John McDonnell]

Perhaps the hon. Gentleman was not listening. The period of six years has been used time and again to justify the measure. A tiny number of cases are involved, but we would like the exact number. If he can help us to extract that information from his own Ministers, that would be useful.

The vast bulk of civil servants who have been made redundant have been laid off on conditions of no more than three years’ pay, and the majority of them on considerably less. Under the terms of this measure, that will be reduced by two thirds. It is not about the tiny minority who receive six years’ pay, but about the vast majority who will lose up to two thirds of their payment.

[Matthew Hancock]

rose—

[John McDonnell]

I will press on, and give way to the hon. Gentleman shortly.

The position now is the worst of all worlds for civil servants, who are facing a double whammy. They enter a service in which they are paid less than the private sector, but at least they receive some benefits as a result of the security of pension and redundancy payments and so on, but their redundancy payments are to be cut while at the same time their pay is frozen or cut.

There is no protection in the Bill for the low-paid—we all agree about that. Members have appealed for details, but the ministerial response is that this is not the place to begin negotiations. The Bill begins negotiations, and it is a negotiating ploy. The Minister could at least set out the parameters or the options available to protect the low-paid. The argument goes that that will be negotiated with the unions in separate negotiations, but do Members of Parliament not have an additional responsibility to represent the interests of their constituents? When hon. Members vote on the Bill, they need security of information to protect their constituents’ interests. They need to know in more detail how their low-paid constituents will be protected as a result of the legislation. However no fragment of information has been given, nor have parameters been set by the ministerial words we have heard today.

When we deal with legislation of this sort, we need to consider the impact on people’s lives. The worst feature of the Bill is the Government’s almost brutal disregard of the human consequences. Tens of thousands of civil servants are likely to lose their job in the coming years. In the economic crisis, even if there is no double-dip recession, and we just rattle along the bottom for the next three years, most of those people will struggle to get back into work at all or find work offering similar wages. If we look at previous recessions, particularly for older workers, we can see that some of them never work again. We must recognise the devastating impact that that will have on individuals and families.

Most people in this country lack savings. Various reports by citizens advice bureaux show that even people in work lack savings beyond a month’s salary or wages. Most people have enough for only two months’ mortgage payments, so are close to default. Reducing redundancy payments in this way undermines people’s ability to survive the devastating impact of losing their job. It also undermines their ability to get back into work in many instances, because it is a costly exercise to travel around the country looking for work. The measure will introduce poverty and stress, and put pressure on people who have lost their job. The irony is that whatever savings are found will be significantly reduced by the benefits that we pay out. Many of the people we employ to administer unemployment benefits will receive those benefits themselves as a result of cuts in public expenditure.

Many of the PCS members I meet are desperate as a result of the anxieties engendered by the Bill, and they are becoming angry. When people perceive that an injustice has been done to them, they react. Boiling point has been reached as a result of the autocratic methods used by the Government to impose their way. They have introduced legislation before serious negotiations have taken place. It is like putting a cosh on the table before beginning a dialogue. The use of the money Bill device to prevent full parliamentary scrutiny is despicable. I have looked at “Erskine May”, and I urge other Members to do so. I cannot see how this can be defined as a money Bill. I hope the Speaker will rule against it after Third Reading. If it is passed as a money Bill, it will be implemented within a limited time scale, with no potential for amendment in the other Chamber.

The introduction of a sunset clause sends out a message that if the economic situation worsens, the Government will come back for more, and there will be further cuts in the scheme after that year. The Bill immediately soured the industrial relations climate under the new Government, and that does not apply just to the civil service. Across the public sector teachers, local government workers, health workers and those working in the emergency services are all on better terms than the terms introduced by the scheme in the Bill, so they see the legislation as the starting gun for an attack on their conditions and their redundancy payments.

Some have put a more sinister construction on the Government’s intentions. It is clear that the Government’s strategy is that the economic recession will be solved on the basis of cuts in the jobs, services, wages and conditions of employment of working people. For those of us who have been around a while, it smacks of the same old policies of the 1980s. In that period a Conservative Government decided that the unions had to be broken if the Government were to be able to force through harsher cuts. They took on the miners’ union, for which I worked at the time. It was an attempt to break a union as an example to others. The present Government appear to have identified the group of public sector unions as the modern day target. I am sure we will soon be hearing statements about enemies within and so on.

If that is the Government’s strategy, they are sorely mistaken. My sense is that the public servants who will be affected by such legislation will not take it lying down. Members have been lobbied already. They are aware of the growing anger, and there will be resistance. That will have public support, particularly as our communities begin to experience the impact of the cuts to their services and increasingly appreciate the scale of the damage that will be incurred by our society.

I appeal to the Government to pull back from this mistaken approach of imposition, which will lead to confrontation. I urge them to get back to the negotiating table and to agree a serious and sensible way forward. They should take the cosh of this legislative proposal off the table to allow proper negotiations. Ministers could sensibly withdraw the Bill tonight. Failing that, I urge Members to reject it because there is nothing in the Bill or in the words uttered by Ministers today that gives us the guarantee of the protection of our constituents that we require. The Bill will damage the civil service that we have all commended in today’s debate as an exemplar to the world.

I warn the Government that issues such as those raised by the Bill, which appear minor at first glance, become the combustible material that eventually brings down a Government. I urge Members to reject the Bill tonight.

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[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.

[Matthew Hancock]

The surprise that I express is due to the argument that, because not many people will receive enormous payouts, there is somehow not a problem. I also want to add a couple of facts to the debate. In the past three years at the Department of Health, the average payout has been more than £100,000 each year. The argument that large payouts amount to a couple of small examples contravenes the facts.

[Mr McCann]

I thank the hon. Gentleman very much for that intervention, but he is simply wrong. A minute number of individuals will attract substantial payments; the vast majority will receive a maximum three years’ payment under severance terms and, for early retirement, up to six and two thirds added years. The Minister nodded when I mentioned that the maximum is a six and two-thirds years’ enhancement.

The most important thing about the February 2010 proposals that the previous Labour Government put forward was that they would have protected the lowest-paid civil servants. The cap was two years’ salary, with a maximum payout of £60,000, but given that the average salary of a civil servant is £20,000—that figure has been bandied about a lot in the debate—Labour’s proposals would have protected those individuals. Under the Bill, they face a two-thirds cut, which is unreasonable and, with the greatest respect to Government Members, demonstrates that we are not all in this together. The Bill anticipates that, as a result of the comprehensive spending review, many thousands of civil servants will be made redundant in the months to come, and it effectively says, “While we give you the pain of making you redundant, we’ll also hammer you financially as you walk out the door.” That is unacceptable.

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[Matthew Hancock (West Suffolk) (Con)]

It is a great pleasure to speak in this debate under your speakership, Madam Deputy Speaker. I shall concentrate on the issue of fairness, which has come up again and again today. It is central to the Bill, and an extremely important factor. We are debating a sobering situation, and the Bill is a response in part to the enormous fiscal deficit that we need to tackle. It is clear that the negotiations and the Bill will have an impact on many thousands of civil servants who have worked extremely hard for the good of their country. Like many other Members, I pay tribute to the excellent work of the British civil service, and I echo the view of the Minister that it is the jewel in the crown of our constitution.

That is why it is so important that we consider the consequence for fairness as the negotiations go forward and the Bill goes through. That view has been reflected in speeches from both sides of the House today. I shall address the issue of fairness in three different ways. First, we must consider the fairness of these measures, given what else is going to have to happen if we are to tackle the deficit. Secondly, we must consider fairness across society and the economy. Thirdly, we must take into account fairness within the civil service in terms of working practices, and the consequences of the current system for some of those working practices.

The enormous fiscal deficit has overshadowed many of the debates in the Chamber since the election. We on the Government Benches argue that dealing with the deficit is a fair and progressive thing to do. In the short term, failure to do so would lead to higher mortgage rates and interest rates as well as create the risk of a catastrophic economic failure, which we do not want to do. It would also be unfair to burden our children and grandchildren with levels of debt that we had failed to deal with. It is therefore fair and progressive to deal with the deficit. It is important, when considering all the different aspects of that process, to think about the Bill in that context.

How can it be fair to defend a system, as Labour Members have done, in which payments of more than £500,000 have been made to certain individuals at a time when we are having to take other measures—as Labour Members would have had to do, were they still in office—to deal with the deficit? How can it be fair that the average redundancy package in some Departments has been more than £100,000 for the past three years? In an earlier intervention, I gave the example of the Department of Health, in which the average redundancy package last year was £122,000.

When this country is tackling its deficit, it is difficult to say that it is fair to make such enormous redundancy pay-offs. The argument has been put by Labour Members that there are only a few of them so it does not really matter. However, we as a country are going through a difficult process, and having extremely unfair examples of public spending like that only makes it even more difficult. We cannot argue that simply because there is not an enormous quantity of such payouts, they do not matter. They do matter and reforming the system is crucial, as the Opposition Front Benchers seem to recognise, but Labour Back Benchers too often do not.

[Michael Connarty]

I am amazed that the hon. Gentleman is still quoting the figure of £100,000 when one of his hon. Friends who spoke earlier provided him with the true average of £60,000. He ignores reality again and again. Some people get huge payouts, and some Labour Members have argued against them for the last 10 years but we could not convince our own Government to deal with these people. If the hon. Gentleman’s logic had been applied after the second world war, the huge deficit this country would have had to carry would have meant no rebuilding and our people living in poverty for the next 50 years. The hon. Gentleman may be lucid, but he is certainly wrong.

[Matthew Hancock]

The hon. Gentleman answers his own question when he says that the previous Government did nothing about the problem over the last 10 years. As for this new argument I am hearing expressed by Labour Members, that we had a large deficit in 1945—yes, we did, but we also had large cuts in 1945 and not least to the military because we had just won a war. There are no such easy reductions now because of the mess left by the Labour party—[Interruption.] I will take no lessons from what the hon. Gentleman shouts out from a sedentary position. At one point in the last three years, £8 billion was spent on redundancy payouts. I do not know whether the hon. Gentleman is willing to defend very high payouts, but we seem to be getting a reaction on the Labour side against any change to anything. It is a great pity that Labour Members do not engage in the process of trying to deal with the deficit as we Conservative Members do.

[Claire Perry (Devizes) (Con)]

I would like to focus on the average rather than the outliers, as that seems to elicit cries of outrage from the Opposition. It is an incontrovertible fact that if we look at the average redundancy payout and average compensation, we find that the average cost in the private sector in autumn 2008 was £8,981, while it was £17,926 in the public sector—almost twice as much. That demonstrates that we have reached a position where, on average, people are being paid twice as much to retire from the civil service as they are to retire from the private sector. There is nothing fair about that.

[Matthew Hancock]

It is always dangerous to give way to my hon. Friend, because she usually puts the point far more lucidly than one could oneself.

I was going to come on precisely to that point—my second point about fairness. Not only is it fair to deal with the deficit and, I think, unfair to give enormous payouts when we have to achieve other very difficult things, but fairness across the economy and across society is also important. The maximum payout in the mandatory private sector compensation scheme, for which this House legislated, is £11,400, yet the proposal is nowhere near that figure within the public sector.

It was interesting to note that when the shadow Minister, the right hon. Member for Dulwich and West Norwood (Tessa Jowell), responded to an intervention about whether it was fair to have a similar sort of payoff scheme in the private sector as in the public sector, she effectively said that she was not in favour of equality. I thought that Labour Members were in favour of equality, but obviously not when it does not suit.

[Tessa Jowell]

I am not quite sure what point the hon. Gentleman is trying to make. If the question is whether I agree the case for parity between the public and the private sector on these matters, the answer is that parity cannot be willed. We are not going to peg the public sector to the private sector other than in an indicative way. There are different incentive structures in the remuneration packages of people who work in the two sectors and they are in different ways reflected in aspects such as the compensation for redundancy that we are discussing this evening.

[Matthew Hancock]

I thank the right hon. Lady for her intervention. In some cases, it seems, one can talk about parity, and in other cases about equality. If one is favour of it, one might use one word, but if one is against it, use the other. The important point here is that we need to look at overall compensation packages and overall pay, including pensions and other terms and conditions of work.

That brings me back to the issue of fairness across the sectors. If we are to have a modern civil service and a modern flexible economy that work in the future, we also need to allow transfer between the two sectors. Bringing into line the working practices in the two is no bad thing; nor is bringing into line the redundancy payoffs as the Bill does—and, indeed, as the right hon. Lady’s former proposals did. The hon. Member for East Kilbride, Strathaven and Lesmahagow (Mr McCann) raised an interesting point when he argued that we should put the members of the unions ahead of the rest of our constituents. I think that the most important thing for a new MP to do is to represent all of their constituents, not just those who are members of a union.

My final point is about fairness in employment practices. I asked the House of Commons Library about the concept of priority posting pools, which are groups of civil servants who are given nothing to do, but cannot be let go because of the cost of the redundancy package. The Library determined that there were a total of 1,946 such civil servants. When people working for their country have completed their jobs and their projects, it cannot be fair to tell them, “We would like to pay you to do nothing. We cannot find anything useful for you to do. We do not think you would be any good at doing anything else, but we cannot afford to get rid of you, so we are going to carry on paying you.” As of January 2010, there were 1,946 such people in the civil service. I believe it is unfair to them not to have a flexible employment system so that we can have a grown-up and modern civil service working for the future.

Such is my argument. We are here to look at the fairness of this Bill as well as other aspects of it. If we want to spend public money fairly, rebalance our economy fairly and try to improve the fairness of working practices in civil service employment, we should support the Bill. The alternative is defending £500,000 payouts, an unbalanced economy and out-of-date working practices. I do not want to defend those things, so I will support the Bill this evening.

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[Mr Hurd]

I understand the argument. It is based on the fact that this is about money and public expenditure, but as the hon. Gentleman knows the main point is that my view is irrelevant because it is the judgment of the Speaker that counts and the Speaker will make his judgment before the Bill completes its passage through Parliament. It is ultimately a matter for the Speaker to decide.

[Matthew Hancock]

Whatever the result of the vote on the amendment, the Minister is right to say that the tone of the debate all day has been in favour of reform of some kind, so is he as surprised as I am that we have just heard from the Opposition Front Bench that they will vote against the whole Bill, which means they will be voting in favour of £500,000 payouts to some at a time of such economic difficulty?

[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.