Enterprise Bill [HL] — House of Lords, 2015-11-30
Topic: Government Operations
Dianne Hayter (Labour, Centre-left): My Lords, in moving Amendment 70ZG, which stands in my name and that of my noble friend Lord Mendelsohn, I will speak to the other amendments in the group, which deal with the unintended consequences of the Government’s rush to cap high exit payments We are not against what the Government said that they wanted to do. The words in the Conservative Party manifesto were: "We will end taxpayer-funded six-figure payoffs for the best paid public sector workers" Best paid? No, the Bill will affect those with long service rather than with the highest pay. It does not just curtail payments to the "best paid" public servants but to some who earn only £25,000, despite the impact assessment having suggested that the cap would save in the "low hundreds of millions" over five years—which sort of anticipated that only small numbers would be caught. We now know that over 20,000 could be affected in the Civil Service and many more in arm’s-length bodies We have heard, I am sure like other noble Lords in this House, from some long-standing public servants, most in their mid to late 50s, with up to 30 years’ service behind them, who face possible unemployment but have specialist skills—such as Magnox engineers or librarians—or are in areas of high employment, who are unlikely to find equivalent work again but who will lose what they had reasonable expectation of being paid should cutbacks happen We have had strong representations from local government, which will be cutting expenditure by merging back-office functions or reducing departments, but whose ability to manage such restructuring will be hampered by not being able to negotiate with staff in a way that best meets the organisation’s interests and the individual’s need to retain a reasonable income to pay the mortgage or support a family What is more, if the £95,000 figure is not uprated, it will gradually affect more and more grades until, presumably, finally even Foreign Office cleaners will be included. Although we have not retabled our amendment on this, we ask the Government to consider re-evaluating it annually, perhaps using the same uprating as for public sector pensions. Similarly, we ask the Minister to open discussions with relevant stakeholders on technical considerations, such as whether the cap will include other means by which an individual can access an unreduced pension—such as on compassionate grounds I will add one other point. Since this provision was first mooted, housing associations have been classified as public bodies by the ONS. It would therefore be helpful if the Minister could confirm the position of housing associations as affected by Clause 26. Given the Government’s commitment to bring forward measures to deregulate housing associations, with the aim of returning them to the private sector in the future, can the Minister clarify whether the Government plan to add housing associations to the list of exempted bodies This group of amendments aims to achieve four things, each recognising that the Government themselves acknowledge that there will be hard—or inappropriate—cases caught by the cap, in that Clause 153C empowers Ministers to make exemptions. These amendments spell out where and how such discretion might be exercised. First, Amendment 70ZG aims to help local authorities and other public services, be they housing associations—if they are to be included—Magnox, or whatever, by requiring that any guidance on the waiver should include the ability to get "value for money", thus enabling management to take the best decisions in voluntary redundancy to fit its objectives Secondly, we want any public body caught by the cap, not just local government, to have the ability to exercise a waiver, albeit with the approval of its governing body, much as for local authorities as set out in the draft statutory instrument. Under the Bill, only Ministers or the Scottish Government could agree a waiver, although the draft statutory instrument extends this to the Welsh Assembly and local authorities. However, we think that this needs to be for all relevant bodies, which otherwise will have no ability to exercise a waiver on the cap. These might be a fire and rescue authority, Magnox, the Forestry Commission, schools—where relevant governing bodies have their own decision-making powers—as well as all the others, which may not even realise that they are about to be caught by this provision. Hence Amendment 73A Thirdly, as set out in Amendments 70C and 70D, tabled by my noble friend Lady Donaghy, those earning below £27,000 or with long service should not be caught by the cap. After all, only the combination of their age together with their length of service, rather than high pay, includes them under the cap. We do not believe that that was the Government’s original intention. What is more, in January this year Priti Patel said that, "those earning less than £27,000 will be exempted to protect the very small number of low earning, long-serving public servants" That undertaking has not been kept. Let us take the example of a librarian with a career-average salary of perhaps £25,000 who has worked for 34 years with a council when its library closes and is made redundant at 55. It is a bit late to start a new career and there are not a lot of private libraries around. Similar examples include a 52 year-old tax investigator who has worked for 25 years, a 50 year-old health and safety officer with 20 years’ experience, or a 56 year-old school inspector after 16 years with Ofsted. Were these really the people the Government wanted to catch under the exit cap A 58 year-old Whitehall civil servant wrote to me to say that he has given 28 years of public service but now finds that he cannot take his department’s early exit offer as his full package would be over £95,000. Someone else wrote to me who has worked in the electricity supply industry for 35 years, mostly on shift, often over Christmas and New Year’s Eve, generating safe nuclear power. His ability to end his shift working because of his failing health is now in doubt because the cap would reduce what he could take to replace his income Therefore, having a disregard for those earning below £27,000 or setting a maximum number of years of service for the calculation would not undermine the purpose of the provision. Certainly there should be an exemption for those close to retirement who have been working with some expectations and who need time to adjust to a tougher regime. While the Minister has written that this whole clause will not be introduced until late 2016, that is still very soon for someone in their late 50s to be able to make alternative provision for their retirement Fourthly, and perhaps most importantly, we must exclude what are known as "strain payments" from the cap, which especially affect long-serving public servants. These are actuarial adjustments, made by the employer to the pension scheme, to compensate the scheme for the early pension taken by the person leaving the service. These strain costs are not paid to the individual, and are therefore qualitatively different from other payments included in the cap. Where a pensions strain compensation cost is paid, the individual will only experience the benefit over a number of years as they gradually draw their pension. Even then, the impact on their pension is not great. For example, if their employer paid £10,000 as strain compensation, the individual would get only about £500 in additional pension but would have lost £10,000 from their exit payment.