Draft Restriction of Public Sector Exit Payments Regulations 2020

Wes Streeting Excerpts

Monday 21st September 2020 General Committees

[Wes Streeting (Ilford North) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Christopher. Although no one believes that huge exit payments from the public sector are right, and it is an issue that needs to be addressed, we are concerned about the way the Government are implementing the regulations. They are unnecessary, premature, unhelpful, place burdens on the public sector that are disproportionate to their purpose and, in some cases, present perverse disincentives, too.

I will outline those points in more detail. The Minister referred in particular to regulations implemented on a similar basis by the Scottish Government. Committee members will be aware, particularly if they were in the Chamber last week, that when it comes to challenging the Scottish Government, I certainly do not pull my punches with the SNP, but it would only be fair to acknowledge—as the Minister ought to have done—that one of the big differences between the approaches of the Scottish and UK Governments is the exemption of pension strain payments from the cap, which, as we have heard from many representations by trade unions and representatives of chief executives in local government, is one of the key problems and challenges when it comes to implementing the regulations.

Of course, that is not the only challenge. Without index-linking, the threshold will slowly reduce in real terms, catching more and more public sector workers within its scope. That sets in motion a steady ratchet on public sector workers. If the cap is necessary—the Minister has outlined the case for that on many occasions—it would be right for it to be linked to public sector pay, so that there is no erosion of the level of cap in real terms.

The provisions are presented as an attempt to exercise restraint on payments to the very highest paid public sector workers. However, as highlighted by so many of the responses and representations made by trade unions—who are not, by the way, famous for defending excessive levels of high pay, but are absolutely steadfast in defending public sector workers who receive ordinary or, in some cases, modest levels of pay—this is not something that will simply affect the highest-paid workers. It will catch an awful lot of ordinary workers on ordinary levels of pay, as a direct result of including pension strain payments in the cap. If the Government’s intent is simply to prevent higher-paid workers being paid large severance payments, a simple index-linked earnings-level exemption would provide that without most of the problems that the waivers create.

As my hon. Friend the Member for Bermondsey and Old Southwark said, there is no equality impact assessment for the scheme, and the list of included and exempted bodies also causes concerns. Why is the judiciary exempted, but not staff of the Crown Prosecution Service? The staff of those elements of the justice system have very different demographic profiles. As we heard very strongly from the TUC, the decision not to undertake a comprehensive equality impact assessment gives serious cause for concern. The TUC is of the view that the Government may well be in breach of their obligations under the public sector equality duty. The union GMB argued at the time that the Treasury’s 2016 equality impact assessment was seriously deficient. It is now also out of date. GMB is also concerned about the public sector equality duty.

The Minister mentioned the waiver process, which seems cumbersome and overcentralised, as all decisions by local authorities need approval from the Treasury. I would have thought, given some of the examples of public sector waste and profligacy as a result of Government incompetence and the bad management of contracts that we outlined this morning, that the Minister would welcome some of his time being freed up to ensure that more taxpayers’ money is more wisely spent. Maybe the regulations might keep his eyes focused on the wrong issue, so that we end up in a position whereby the Treasury is penny wise but billions of pounds foolish when it comes to some of the spending commitments and priorities that the Treasury has outlined in recent weeks and months. Although it is the Labour online conference week, I will not dwell too much on that, Sir Christopher, because you will no doubt rule that it is out of the scope of the regulations, and rightly so.

To go back to the ongoing consultation—led by the Ministry of Housing, Communities and Local Government —on changes to the local government pension scheme that are necessary to give effect to the provisions, if the Committee approves the regulations, local government employers will find it difficult to agree redundancy packages with staff and unions in the meantime, because of concerns about the legality of the exit payments. A £95,000 cash payment and no access to pension is not permitted by the regulations governing early access to unreduced pension in the local government pension schemes.

There is also a wider point about local government unions. I should say, having been in local government as an elected member, that I am also a member of Unison, which represents members of local government. Local government unions have in their collective bargaining on pay and conditions deliberately favoured positive pension concerns and priorities over other issues. Local government workers have given up other benefits to keep those pension terms. The regulations are an arbitrary attack on terms that have been secured through agreement between unions and employers.

The regulations also provide inadequate recognition of contractual notice periods. Although they exempt up to three months’ pay in lieu of notice, the Government will know that some public sector staff are contractually entitled to six months’ notice. COT3 settlements, which are ACAS-arranged compromise settlements, are mostly included in the scope of the cap—but not employment tribunal awards. That will have the utterly perverse effect of incentivising people to go to tribunal, and flies in the face of the Government’s push towards early conciliation, creating a much more costly process for everyone.

It would be helpful, particularly given the intervention made earlier by my hon. Friend the Member for Bermondsey and Old Southwark, to clear up the issue about settlements in discrimination cases, and how they are treated. It would also be helpful if the Chief Secretary would elaborate on why health and safety settlements are not exempted from the cap. They are unlimited if people go to tribunal. The Government need to clear up the issue of where they stand on settlements in discrimination and health and safety cases. Both are treated as unlimited if people take them to the employment tribunal.

As we have already argued, the inclusion of pension strain costs means that long-serving workers on lower salaries, and not just the highest-paid, will be caught out. The Local Government Association has given figures and examples showing how, on its estimate of the methodology for calculating pension strain costs, the cap of £95,000 would, as a result of the pension strain issue, hit certain people leaving with a severance payment. They would include a woman leaving the scheme at age 55 on 31 March 2019, after 35 years’ service, earning £23,500—not a particularly large amount of money—with a severance payment based on statutory weeks multiplied by actual weekly pay, multiplied by 1.5.

Moving on to people leaving with a redundancy payment, the LGA highlights the example of a woman leaving the scheme at age 55 on 31 March 2019 after 35 years of service, earning £25,100, with a redundancy payment based on a maximum weekly pay of £525. Therefore, the idea that it is only the highest-paid public sector workers who are targeted simply does not hold water.

There are some basic questions about fairness and impact. It is no good Members standing on their front doorstep clapping the public sector workers among their fellow residents on the street, and getting their mobile phone out to enjoy a few retweets, if in the middle of the pandemic we arrive back in Parliament to attack the conditions of the very public sector workers who are supporting our country through the crisis. For those reasons we cannot support the Government. We shall oppose the statutory instrument and it is a source of deep regret that the Government have listened, as the Chief Secretary said, to some concerns, but that they have not addressed some of those fundamental concerns we have raised this afternoon.

--- Later in debate ---

[Steve Barclay]

The reality, without wanting to stray into the issue of litigation, is that this is a cap on payments, so a body representing members may have concerns about that. The issue before the Committee is what constitutes value for money for the taxpayer. I remind the Committee of the fact that payments can be more than six times the national living wage and four times the average earnings. During the time of coronavirus, those are very substantial payments. You will be familiar with, Sir Christopher, some of the payments that were read out on the Floor of the House—those of NHS managers for example, who receive very large payments and then reappear elsewhere in the NHS very shortly.

[Wes Streeting]

Of course, it is easy to point to those examples. I wonder how the six-figure pay-off to Mark Sedwill could have been considered value for taxpayer money, and how much the wider cull of top civil servants under the Government is costing the taxpayer.

[Steve Barclay]

I was going to come to local authorities, but to address the issue of senior civil servants, that flowed from the decision to split the role of the Cabinet Secretary and the head of the civil service with that of Sir Mark’s other role as National Security Adviser, which meant that he was stepping down before the end of his tenure. It was therefore appropriate that Sir Mark was compensated in line with the civil service compensation scheme, and the sum is in line with the normal rules governing civil service pensions and compensation. Since 2015, in anticipation of the introduction of a cross-public sector cap on exit payments, any civil service exit costing more than £95,000 requires approval by Cabinet Office Ministers to ensure that it provides value for money to the taxpayer. As someone who worked with Sir Mark, particularly in my role as Secretary of State for Exiting the European Union, I place on the record what a fine public servant he was and how much I valued working with him during his time in office.

The hon. Member for Bermondsey and Old Southwark, who made a number of interventions—I hope that comment is not untoward—also raised a legitimate point about local authorities. As I say, it is something I looked at in particular. Local authorities’ ability to restructure should not be dependent on six-figure taxpayer-funded payouts. Councils will still be able to restructure and exit staff in any way they wish, provided the sum of any exit payment does not exceed £95,000. The Government accept that there might be instances where it is in the interests of urgent workplace reform to relax the restriction imposed by the regulations, so there is flexibility within the system.

Finally, the hon. Member for Ilford North raised the issue of index-linking. The point is that we want to retain the flexibility to revalue the cap both upwards but also downwards. If one looks at the economic consequences of coronavirus, ensuring that there is flexibility in the system is a prudent way to manage the public finances.