New Clause 1 — Consents required for civil service compensation scheme modifications

Part of Bill Presented – in the House of Commons at 1:02 pm on 13th October 2010.

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Photo of Francis Maude Francis Maude The Paymaster General and Minister for the Cabinet Office 1:02 pm, 13th October 2010

In my statement to the House in July and again on Second Reading in September, I made it clear the Government's intention is to make the civil service compensation scheme affordable, and I set out our intention to legislate to underpin the negotiations to achieve that. However, I have made it clear at all stages-and I make it clear again today-that our principal aim has been to reach a negotiated settlement with all six civil service unions to introduce a new successor scheme that would provide, in particular, better protection for lower-paid civil servants.

The current civil service compensation scheme is unaffordable and completely out of kilter with practice in the rest of the public sector, let alone in the private sector, and it actually makes more likely redundancies among the lowest paid and shortest-tenured civil servants. The previous Government recognised that and engaged in protracted negotiations over many months-indeed, over several years-with the Council of Civil Service Unions to try to reach agreement on a successor scheme. I pay tribute today, as I did on the previous occasion, to Tessa Jowell and her predecessors, who persisted in trying to get full agreement from all members of the Council of Civil Service Unions.

Despite those months of negotiations, the previous Government were unable to achieve full agreement. I understand that it looked as though an agreement was there, but at the last minute the PCS-the Public and Commercial Services Union, the largest of the civil service unions-pulled out, leaving a proposed new scheme in place that had been agreed by five unions, but not by the sixth.

Given the extensive consultations and negotiations that took place, which gained agreement from five out of the six unions, the previous Government felt and concluded-I said at the time that I agreed-that it was only right that one union should not hold the right of veto on any change. So in April the previous Government imposed a new compensation scheme that reflected the agreement with the five unions. But for the action of the PCS, that might have been where the story ended, but the subsequent actions of the PCS have led us to where we are today.

The PCS challenged in the High Court the right of the Government to impose a settlement in such circumstances and the Court subsequently quashed the February scheme. So almost literally on my first day in office after the election, I was confronted with a situation in which the previous civil service compensation scheme was still in force and had not been reformed at all. That scheme, as I have said, is completely unaffordable, inherently unfair and in urgent need of reform. It was striking that on Second Reading, when this issue was extensively and thoroughly debated in a constructive and open spirit with no element of partisanship creeping in, every Member who spoke agreed that the current scheme was unsustainable and needed reform. There was complete consensus across the House.

The current compensation scheme is extremely generous compared with the rest of the public sector, let alone private sector, equivalents. A comparison with the statutory redundancy scheme shows that payouts, particularly for lower-paid workers in the private sector, are capped at 32 weeks' pay at a maximum weekly pay that is still, I think, capped at £380. The maximum that can be paid out to anyone under that scheme is less than £12,000. By contrast, the maximum value under the civil service scheme is the equivalent of six years and eight months' salary. Typical schemes in the private sector-particularly the statutory scheme-pay one week's salary for each year worked. The civil service scheme pays at least four times that amount-a month's salary for each year worked, and in some cases up to three months' salary for each year of service.

The previous Government spent £1.8 billion on civil service redundancy payouts in the last three years, including a number of spectacular six-figure settlements for individuals. The result of the scheme's being so generous and unaffordable is that Departments cannot afford to make civil servants redundant, even if they are willing to go voluntarily, if they are highly paid and of long tenure. If Departments need to save money-as they had to under the previous Government and as they will have to under the coalition Government-through redundancies, they simply cannot afford to choose those individuals on high pay and long tenure. In order to make the same savings in salary terms, they need to make many more lower-paid and shorter-tenured staff redundant. The unjust effect of the current scheme's being so badly structured and unsustainable is that if it were allowed to remain in place, more civil servants would lose their jobs and more civil servants on lower pay would lose their jobs. The coalition Government are not willing to see that happen.

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