Clause 3 — Final provisions

Banking and Financial Services (Community Investment) – in the House of Commons at 5:30 pm on 14th December 2010.

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Photo of Francis Maude Francis Maude The Paymaster General and Minister for the Cabinet Office

The amendments respond to concerns raised by Opposition Members on Second Reading in the other place about the potential for the caps in what is now clause 2 to be revived after being put into abeyance, which is what I propose to do next week before the House rises and before the new scheme is laid. The Government also proposed the amendments to respond to the comments about the unusual use of a sunrise provision in clause 3(4)(c) that were made in the third report of the House of Lords Delegated Powers and Regulatory Reform Committee, published on 28 October. My noble Friend Lord Wallace of Saltaire provided a full response to the Committee in his letter of 1 December. We are grateful to the Committee for its report.

The Committee also commented on the other provisions in clause 3 which would enable, by order, the caps included in clause 2 to be repealed and also to be extended by six months at a time. That would override the so-called sunset provision in clause 3(3), which would otherwise mean that the caps on civil service compensation provided in clause 2 would expire automatically after 12 months. The Committee said that "these arrangements are complex", but added that the two delegated powers

"do not appear to the Committee to be inappropriate".

However, the Committee was not so persuaded of the need for the power in clause 3 to revive the caps in clause 2, that being an unlimited power that would have been available to any future Government in circumstances that we cannot predict today. The amendments respond to that point. The Government accept that there should not be an unlimited power to revive clause 2. Lords amendment 6 therefore provides for subsection 3(4)(c) itself to expire three years after Royal Assent, which is in effect a sunset of the sunrise provision. I can see why some people might say that that was a bit complex, but I think that, when fully parsed, it makes perfectly good sense.

The sunset of the power to revive clause 2 would mean that it would be there, as the Government intend, as a fallback to revive the caps in clause 2, just in case they were needed because of future problems in implementing the new civil service compensation scheme. However, the introduction of the three-year time limit should provide a reassurance that the power to revive clause 2 would not be available indefinitely to future Governments.

The caps are there as a potential fall-back so that we can be certain-as both the last Government and we have wanted to be-that we can reform the civil service compensation scheme. We have an absolute obligation, in the public interest, to address the unfair and unaffordable nature of the current scheme, and we need to ensure that if a legal challenge is mounted to our revised scheme-and it has been suggested that that may well happen-there is a fall-back option, albeit one that we have absolutely no desire to use. We do not expect or intend to use the powers to impose the caps in clause 2; what we want is to see in operation as quickly as possible is the reformed civil service compensation scheme. We are determined that, if all else fails, there will be a fall-back position so that we are not left high and dry-as the last Government were-because of a legal challenge to the details of the new scheme.

Before the new scheme is laid before Parliament, I intend an order to be made under clause 3(4)(a) to repeal the caps in clause 2 in relation to any new scheme. We intend the order to include a saving provision so that the caps could be applied if, and only if, the old unreformed scheme had to be reintroduced. The saving provision would allow that to happen automatically, without the need to use the revival power by order under clause 3(4)(c). I should make it clear that this saving provision would apply only if there were an attempt to revert to the old scheme. An order under clause 3(4)(c) would be required, subject to the affirmative procedure, if it were ever proposed to revive the caps in clause 2 and to impose them over the new civil service compensation scheme that will be put in place following the completion of this Bill's passage.

Finally, unless further extended by order under clause 3(4)(b), clause 2 in its entirety-including the saving provision-will expire 12 months after Royal Assent. From that point on, any revival of the caps would have to use the order-making power in clause 3(4)(c), which, because of these Lords amendments, will only be available within three years of Royal Assent. I very much hope that by then the new civil service compensation scheme will be in place and be operating satisfactorily for all concerned-civil servants, departmental employers and the civil service trade unions-and that the taxpayers' interests and the proper interests of civil servants will be being met. Amendments 4 and 5 are consequential on amendment 6.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

The House needs to be aware of what this measure actually means, and I make it clear that I will press my amendment to a Division.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

Thank you very much for that advice, Mr Deputy Speaker. I get confused when we are talking about sunset and sunrise clauses.

Let me explain what this measure means. Despite all we have heard today from the Government about their willingness to achieve a negotiated settlement on a new compensation scheme and their wish to ensure that all the trade unions are signed up to it and that it is acceptable both to members of those unions and to people not in those unions, the fact is that they will retain the power, over a three-year period, to impose the caps set out in the Bill.

We should remind ourselves of what those caps are: for a compulsory redundancy, an amount equal to a person's earnings for 12 months, and that amount for 15 months for a voluntary severance. We heard in evidence in Committee-this has been repeated in the Chamber time and again-that that will mean a cut of up to two thirds in the redundancy payments of many civil servants; 60% to 70% was the figure cited by the Joint Committee on Human Rights. Any Government will have the power to impose those caps at a later date, and to impose that level of penalty on civil servants who are made redundant.

If the Government are confident of being able to negotiate an agreed solution under the new scheme in this coming period, why do they need the right, over a three-year period, to impose these caps unilaterally? I still think that if they sought to do that, it would be subject to a legal challenge, but why would a Government seek to retain that power if they were entering into negotiations with good will, genuinely seeking an agreement, and taking every reasonable step to secure one?

My amendment simply seeks to reduce the period to 12 months, as an act of good will on behalf of this House in respect of its employees in the civil service. I believe the Government have set the period at three years because they want to maintain their original purpose for the Bill, as previously described: to use it as a blunt instrument to bludgeon the unions into submission so they agree to the Government's proposals. That is unacceptable. I also think this will be another factor that leads to people rejecting the overall scheme in the ballots that are currently taking place, and instead moving on to take action to stop the scheme being imposed upon themselves and their fellow trade union members.

I urge the Government to think again, as 12 months should give them sufficient time to negotiate and introduce a new scheme, and to introduce any reforms or amendments that might be needed to hone it to make it more workable if there were any problems with its implementation. It is unacceptable for the Government to have the threat of this blunt instrument to hold over civil servants for three years. Introducing this measure would be another contributory factor to the deterioration in the relationship between the Government and their staff, who are meant to implement, with high morale, the policies they introduce.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley 5:45 pm, 14th December 2010

As someone who interests himself in procedural issues, perhaps I could think of the clause as being more like a supernova clause after which the sun will not rise again. Not being a Government Minister, I have the advantage of having no confidential knowledge whatever of the Government's strategy. The interests of judicial review are relevant given that one would expect a judicial review when the order for the new scheme is laid, as it would be laid under the Bill relatively soon. In those circumstances, the Government will not want to take a completely new piece of legislation through the House because of a judicial review. It is possible to accelerate the proceedings of a judicial review, and the courts would probably look on such an approach favourably given the situation for the country and the importance of having legal certainty, but it is quite important to have the facility to deal with such a situation if it arises. However, I support the idea of having a supernova clause because there is a point at which the sun need not rise again.

Photo of Liam Byrne Liam Byrne Shadow Minister (Cabinet Office)

I want to speak briefly about Lords amendments 4, 5 and 6, as well as amendment (a), tabled by my hon. Friend John McDonnell. During proceedings on the Bill, my right hon. Friend Tessa Jowell has consistently raised concerns about the arbitrary caps that the Government introduced at the start of this process, which now form the body of clause 2. I confess that we are still not clear about why the caps are still in the Bill given that clause 1, which was newly introduced on Report, effectively gives the Government the power to impose any settlement after the consultations that we discussed earlier have been completed. We heard, in the Minister's helpful update to the House, that there is a degree of agreement with at least some of the trade unions, which the Government have declared will supersede the terms in the Bill. Why then do they not seek to introduce a sharp instrument containing the specific terms they have agreed with the trade unions, rather than the blunt instrument containing general powers that is the Bill before us?

We are pleased that the Minister has given a clear commitment, in a letter to right hon. and hon. Members, that it is his ambition to

"repeal the caps in clause 3 insofar as they could impact on the new civil service compensation scheme".

His letter also says that if the caps were ever revived he

"would table an order...so as to increase the caps to such a level that would...reflect what would otherwise apply under the new scheme."

Most of us will welcome that good progress.

In earlier debates, we raised concerns that the Bill would allow the revival of caps at any time in the future even after a negotiated settlement was in place. We fear that the relevant measure, which the Government call a sunrise clause, would put an undesirable amount of power in their hands during negotiations, as they could simply threaten to revive statutory powers whenever they ran into any dispute on any matter, not just issues of redundancy. Given that it would allow the Government to resurrect the terms of a long-dead provision, it is not so much a sunrise clause as a zombie clause, which would live on for ever. Whatever we call it, the measure is entirely without precedent in a Bill of this nature. Indeed, the only recorded precedent of such a measure is in the Prevention of Terrorism Act 2005.

We are pleased that there will be a limit of three years on the caps if they are revived, and that the Government cannot extend that period. Given what the Minister has said this afternoon, however, I do not see how he can argue that the correct balance of time and the correct limit to any revived power should be three years. The whole House will welcome what the Minister said this afternoon about his ambition that the revival of the caps should never be triggered. If that is true-and I am prepared to accept that it is-I do not see why he cannot accept the very sensible amendment tabled by my hon. Friend the Member for Hayes and Harlington. Although we are happy to accept amendments from the Lords, we shall support amendment (a).

Photo of Francis Maude Francis Maude The Paymaster General and Minister for the Cabinet Office

Mr Byrne asked why we needed to keep the caps at all. The answer is simple. The caps will be established in primary legislation, but the new civil service compensation scheme, which I hope to lay before Parliament next week, before the House rises, does not have the full force of primary legislation, despite the changes to the Superannuation Act 1972 made by clause 1.

I shall be frank. We want to avoid being in the position that followed the High Court judgment in May this year, which resulted in the previous Government's February scheme being quashed. The effect of the scheme being quashed is that the existing scheme remains unreformed and in force. Indeed, the old scheme-unaffordable, unsustainable and unreconstructed-is in force today. Of course, in preparing the new scheme we were at some pains to ensure that it would be legally robust, and we shall vigorously defend any legal challenge to it. However, as was apparent from the litigation against the previous Administration's scheme, there can never be guarantees in litigation. Even litigation that is destined ultimately to fail can be disruptive, because of the uncertainty it causes until the case is concluded.

Photo of John Martin McDonnell John Martin McDonnell Labour, Hayes and Harlington

Could we clarify what the Minister has just said? Is the provision he supports simply a device to be used to prevent UK courts from quashing the Government's proposals?

Photo of Francis Maude Francis Maude The Paymaster General and Minister for the Cabinet Office

I shall be clear: both sides of the House have accepted that the current scheme is unsustainable and needs to be reformed. With the possible exception of the hon. Gentleman, everyone, and certainly Opposition Front Benchers, has accepted that it is unacceptable for it to be possible for a union, or two unions, to veto reform of the scheme. It must be possible for the Government and Parliament to effect reform of the civil service compensation scheme. If there is a successful legal challenge to a new civil service compensation scheme-unlikely though that may seem-we cannot have the position where the old scheme trundles on in its unsustainable, unaffordable and unfair form. That is why there must be a fall-back position for a limited period. We have listened to the arguments and we have accepted that it will be a limited period, so that caps on the use of the old scheme will be in existence, should the new scheme be quashed as the previous Government's scheme was, by order of the High Court.

What is the right period for the power to revive the caps? Is it one year, three years, five years or 10 years? There is no precise science, because no one knows how long the period is beyond which we could be sure that a successful legal challenge would not be raised. It is our judgment that three years is the right period. That is the view that we have taken. That is why we urged the Lords to agree, and I urge the House to accept that view today. We would thus be agreeing with the Lords in their amendments, and disagreeing with the amendment proposed by the hon. Member for Hayes and Harlington.

Lords amendment 4 agreed to.

Lords amendment 5 agreed to.

Amendment (a) proposed to Lords amendment 6.-(John McDonnell.)

Question put, That the amendment be made.

The House divided: Ayes 225, Noes 313.

Division number 155 Banking and Financial Services (Community Investment) — Clause 3 — Final provisions

Aye: 225 MPs

No: 313 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Lords amendment 6 agreed to .

Lords amendment 7 agreed to.