Restriction of Public Sector Exit Payments Regulations 2020 — House of Lords, 2020-09-23
Topic: Mixed Topics
Theodore Agnew (Conservative, Centre-right): My Lords, each year, hundreds of millions of pounds are spent on exit payments to public sector workers that exceed £100,000. The money funding these payments comes from taxpayers. This statutory instrument will fulfil the Government’s 2015 manifesto commitment to end six-figure pay-offs by capping public sector exit payments at £95,000. This House discussed the proposals in great depth when considering the parent Act, the Enterprise Act 2016 Public sector workers play a vital role in the running of our economy. Earlier this year, we accepted the recommendations of the independent pay review bodies and announced a significant, real-terms pay increase for around 900,000 public sector workers. For the majority, this was the third inflation-busting pay rise in a row. But we must ensure all aspects of public sector pay and renumeration deliver value for money for the taxpayer. It is our view that these large exit payments do not deliver that aim The coronavirus is having a very significant impact on the economy, labour market and fiscal position, and the Government will need to continue to take this into account in setting public sector pay and renumeration. Exit payments are important to an employer’s ability to reform and react to new circumstances. They are also an important source of support for individuals as they find new employment or as a bridge until retirement age However, these payments must be value for money and fair to the taxpayer. The high exit payments we have seen granted in recent years clearly breach this principle. That is why the Government are taking forward regulations to cap public sector exit payments as £95,000. The proposed cap, amounting to almost six times the maximum statutory redundancy payment entitlement, will still offer a significant level of compensation and support to employees The Secondary Legislation Scrutiny Committee noted these regulations as a statutory instrument of interest. I will address the points raised in its report. First, a number of bodies are exempt from these regulations. These include the armed services, the Security Service, the Secret Intelligence Service and the Government Communications Headquarters. This is appropriate due to their unique career requirements. Often, individuals working in these fields experience lifelong impacts, sometimes at early ages. It is right these individuals should be properly compensated, and their reward packages are typically designed to reflect that The regulations also outline which payments are deemed an exit payment for the purpose of the cap. The Government are clear that all payments conditional on an individual’s exit from employment must be in scope of the cap to avoid opportunities for manipulation, with a few exceptions. Payments such as death in service will not be capped and should be paid in full The second point raised by the Secondary Legislation Scrutiny Committee is that public sector pension schemes may need amending to account for these regulations. Where required, these changes are the responsibility of the parent department. Some of these amendments are already under way, with the Ministry for Housing, Communities and Local Government publishing its consultation on amendments to the Local Government Pension Scheme on 7 September this year Prior to amendments being made where the application of the cap would result in an employer being unable to make a pension strain payment due to pension scheme rules, it may instead pay the pension scheme member an equivalent cash sum. The aggregate of that cash sum and any other exit payments must not exceed the cap The Government accept that in some limited circumstances, it will be appropriate for employees to receive an exit payment that exceeds £95,000, including where imposing the cap would cause genuine hardship. To account for these circumstances, a waiver has been designed that ensures flexibility, while maintaining an appropriate level of scrutiny from Ministers Today, the Government are taking forward regulations that deliver a long-term manifesto commitment and ensure value for money for the taxpayer. The regulations do this in a proportionate and thorough way, while ensuring the flexibility to protect the most vulnerable. I beg to move.