Civil Service Compensation Scheme

Michael Ellis Excerpts

Friday 2nd December 2016 Commons Chamber

[The Deputy Leader of the House of Commons (Michael Ellis)]

I congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing this debate, and I welcome the opportunity to respond to his concerns. I know that, in his role as chair of the PCS parliamentary group, he takes a close interest, as do I, in matters relating to the civil service. I, too, greatly value and appreciate the work of the civil service. Now more than ever, the work of the civil service is vital to delivering the best service to the public and to allowing us to meet the challenges and opportunities that lie ahead.

To provide the best service for the public, the civil service needs to be ready to meet challenges and opportunities. The Government must therefore ensure that the civil service can recruit and retain the best people, but we must also ensure that there is an efficient and cost-effective compensation scheme in place to support civil servants when exits are needed.

As the hon. Gentleman set out, important steps towards this goal were taken during the last Parliament. My noble Friend Lord Maude, in his then role as Minister for the Cabinet Office, introduced important reforms to modernise redundancy arrangements in the civil service. A revised civil service compensation scheme was launched in December 2010, when my noble Friend Lord Maude set out his hope and intention that it would be a fair settlement for the long term.

In the years since 2010, however, it has become apparent to the Government that the reforms did not fully deliver on their aims. For example, we were concerned that the 2010 compensation scheme provisions for early access to pensions were no longer appropriate. These provisions allowed staff aged as young as 50 to retire and draw all their civil service pension without any reduction for early payment. This was often very expensive for the employer, and it is increasingly out of line with the Government’s wider aim of responding to very welcome increases in longevity by encouraging longer working lives.

More widely, the Government’s view was that, even after the 2010 reforms, the civil service compensation scheme was simply too expensive, when considered against the background of the current economic situation. We of course recognise the need to provide good financial support to bridge the gap into alternative employment or retirement—we of course recognise that—but the Government also have a duty to balance that against the wider financial situation and the interests of the taxpayers who ultimately fund the scheme.

The 2010 compensation scheme terms were becoming increasingly out of line with those the Government believe should be available more broadly across the public sector. For example, we have made it clear that we do not believe it is appropriate to pay six-figure compensation payments within the public sector, and we are legislating to put a stop to that. We are also embarking on reforms to compensation schemes across the main public sector workforces, so it is right that the civil service scheme is consistent with those wider reforms. For all those reasons, it was clear that further reform of the civil service compensation scheme was needed.

[Peter Dowd]

With public services under absolute stress and strain—many are at breaking point—what is modern and efficient about cutting wages, numbers and training, and massive negative restructuring, in the light of the chaos in the civil service that is about to unfold with Brexit?

[Michael Ellis]

The hon. Gentleman should not underestimate the skills of the civil service. In fact, the challenges and opportunities that lie ahead can and will be adequately dealt with by our excellent civil service, which we value greatly.

[Chris Stephens]

Will the Minister confirm that the six-figure cap will affect employees with long service who earn less than £27,000 a year, which is not a high salary? Are the Government considering how to address that?

[Michael Ellis]

It is not unreasonable for the Government to take the view that it is not appropriate to pay six-figure—£100,000—compensation payments within the public sector. We are legislating to stop that. As I have said, we must take the economic challenges and climate into consideration.

The Government launched a consultation on our proposals for changes to the civil service scheme in February and set out five principles for reform. I will not rehearse them now—they are on the public record—but it was an open consultation and we invited responses from all those who would be affected by reforms, including trade unions, employers, civil servants and other interested parties. The consultation ran for 12 weeks, but as well as that we held a series of meetings to discuss the proposed reforms with the civil service unions throughout the consultation period. Six such meetings were held during that period, attended by representatives from PCS, Prospect, the FDA, Unite, GMB and the POA. After the consultation closed in May, we gave careful consideration to all the responses we received and to the views expressed by the unions.

After the closure of the consultation, the Government did not stop our efforts to achieve agreement on a set of reforms. We invited all unions that had responded to the consultation to a series of further meetings. In order to give the best chance of reaching agreement, the participation of unions in the further meetings was made conditional on their acceptance that a proposed basic structure would form the starting basis of a reformed negotiated set of arrangements that could lead to a final agreement.

I am pleased to say that five employee representative bodies—Prospect, the FDA, Unison, GMB and the Defence Police Federation—agreed to take part in further meetings at that time and on that basis. The Government held a total of 13 further meetings with those bodies between June and September to discuss the detail of the proposed reforms. Those highly constructive meetings played a big part in shaping our thinking and the final offer we made to unions. However, I should make it clear that we do not in any way accept that the PCS or any other union was barred from those discussions, as has been claimed. The decision not to participate was made solely by the unions concerned and not by the Government.

Following the conclusion of the discussions with the unions that chose to participate, the Government made a formal offer of revised compensation schemes. The offer reflected the constructive discussions between June and September. As such, we proposed a number of improvements on the package of reforms set out in the consultation, including taking more account of longer service, which is only right and fair; increased protection for the lower-paid, which is also appropriate; greater flexibility for those over the minimum pension age; and improvements to the terms for inefficiency compensation. The consultation and discussions therefore worked.

[Chris Stephens]

Will the Minister refresh the House’s memory? I did not say that the trade unions were barred from those talks; I said that they had to sign up to preconditions before them. Does he agree?

[Michael Ellis]

The arrangements for the talks were satisfactory to eight trade union organisations; they were not satisfactory to the PCS, but that is a matter for it. However, the offer reflected the points that I have made and those improvements. Nevertheless, the offer was made on equal terms to all civil service unions—all of them—including those that had not taken part in the talks.

All unions were then also given the same amount of time to consider the Government’s offer and to ballot their members. I am pleased to say that eight unions were able to make a formal response to the Government by the requested date of 31 October and I am also pleased to say that all eight of those unions responded to say that they accepted the Government’s offer. As such, my right hon. Friend the Minister for the Cabinet Office considered that the Government’s offer had been accepted by a sufficient number of trade union organisations to constitute an agreement.

A revised civil service compensation scheme, consistent with the terms of the Government’s offer, was therefore laid before the House on 8 November and took effect from 9 November. However, I regret to say that, unlike other unions, the PCS and the POA did not feel able to ballot their members and respond to the Government within the requested timeframe.

I understand that it can take time for unions to make such arrangements. However, the PCS gave no indication that more time would be required at the time the offer was made. Indeed, the issue was not raised at all until more than half the time intended for union consideration had elapsed, and even then a formal request for an extension to the deadline was not received by the Government until some time after that. By that point, the Government did not consider any extension to the deadline to be either practical or fair on the other unions, which had made strenuous efforts to respond in time.

Since then, I understand that the PCS has balloted its members with a recommendation to reject the Government’s proposals, and that they have done so. While the Government will of course take note of the result of that ballot, that does not change the fact that the Government’s offer of revised compensation scheme terms was accepted by the large majority of unions consulted, or that the new scheme has now taken effect.

[Chris Stephens]

rose—

[Michael Ellis]

I am very conscious of the time; if I may, I will just carry on a bit more and then give way.

To summarise all that I have said so far, the Government are very clear that the reforms to the civil service compensation scheme were carried out in an open and consultative fashion. The process benefited greatly, as such processes do, from the constructive approach of the unions that chose to participate fully, and the benefits can be seen in the improved terms I have referred to, which were able to be adopted as a result. So, while it is regrettable that not every union sought to participate in a constructive manner, that is a matter for them and it will not discourage the Government from our belief that it is right to seek to reach negotiated agreements in such matters, wherever that is possible.

[Chris Stephens]

I thank the Minister for giving way and I will be brief. He has mentioned individual trade unions, which is fine, but I would be curious to know what percentage of civil servants those unions represent. If he could write to me on that, I would be obliged.

[Michael Ellis]

I am always very happy to write to the hon. Gentleman.

Turning quickly to the reforms themselves, I fully accept, as I have said, that any change of this sort can be difficult for those affected and as a result will often be unwelcome. However, I am clear that the revised terms of the 2016 civil service compensation scheme represent a good deal for civil servants. The new scheme strikes the right balance in achieving the savings that are required while reflecting the nature of the civil service workforce and the benefits of reaching a negotiated agreement. Also, the new scheme will continue to meet its main objective, which is to provide a good level of support to help to bridge the gap into new employment or until retirement, where that is necessary, when exits are unfortunately required.

Because of all of that, the Government believe that these are sustainable reforms and therefore I will close by echoing the words of my right hon. Friend the Minister for the Cabinet Office in his written ministerial statement of 8 November, in which he described the reformed compensation scheme as providing

“a firm foundation for the management of the Civil Service and its people for a generation”.

Question put and agreed to.