Public Sector Exit Payments (Limitation) Bill

Tulip Siddiq Excerpts

2nd reading
Friday 3rd March 2023 Commons Chamber

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

We on the Labour Benches fully recognise the importance of achieving the best possible value for our taxpayers. I remind the hon. Member for Christchurch (Sir Christopher Chope) and everyone who has spoken in support of the Bill, however, that the Government introduced a public sector exit payment cap in 2020 and it did not work. The cap failed to provide value for the taxpayer, it had numerous unintended consequences, and it adversely affected dedicated, long-serving public servants who earned relatively low salaries, often less than £25,000 a year. Indeed, due to those failings, in March 2021—less than a year after introducing the regulations—the Government were forced to U-turn and revoke the cap.

Let me take each failing in turn. First, far from saving taxpayers money, the cap produced additional costs. Because the regulations treated payments under a settlement agreement, but not employment tribunal awards, as an exit payment, they created a perverse incentive for people to go to tribunal. An employment tribunal is a time-consuming and costly legal process for a public sector employer to go through, and I remind hon. Members that that cost is passed on to the taxpayer.

Secondly, the cap had other unintended consequences—for example, it did not take into account an individual pension contribution, so through no fault of their own, long-serving staff over the age of 55 who were facing redundancy were hit by the regulations. They were obliged to take their pension if they lost their job, so their final exit payment, when combined with their redundancy pay, could easily exceed the £95,000 cap under the regulations.

Finally, when they introduced the cap, the Government initially said that the regulations were designed to prevent large exit payments to so-called public sector fat cats, but in reality the cap hit low-paid workers hardest. Long-serving local government workers, who earned as little as £23,000, were pulled into the cap when their pensions were taken into account.

All that was foreseen by public sector unions, including Unison, Unite, GMB, Prospect and the Public and Commercial Services Union, when the cap was first proposed, but Ministers refused to listen. The unions were left with no choice but to take the Government to judicial review, which wasted more time and more taxpayers’ money, before the Government finally admitted that the cap had unintended consequences and should be revoked.

The Labour party will therefore not support the Bill today. I advise the Government to do the same to avoid further embarrassment.