“Payments made by the following bodies are excluded from the restrictions on public sector exit payments—
(a) Sellafield Ltd,
(b) Westinghouse Springfields Fuels Ltd,
(c) Magnox Ltd,
(d) National Nuclear Laboratory,
(e) International Nuclear Services,
(f) Atomic Weapons Establishment Ltd,
(g) Low Level Waste Repository Ltd,
(h) Dounreay Site Restoration Ltd,
(i) RSRL Winfrith and
(j) RSRL Harwell.”—(Kevin Brennan.)
This new schedule would exclude employees of the listed companies operated by the private sector from the scope of the proposed cap on exit payments.
Brought up, and read the First time.
With this it will be convenient to discuss the following:
“(1A) The restriction placed on public sector exit payments must be reviewed at regular intervals and, where necessary, be adjusted in line with inflation and earnings growth.”.
This amendment would ensure that the level that the restriction on public sector exit payments is set will be linked to inflation and earnings growth.
Amendment 15, in clause 41, page 57, line 10, at end insert “, including payments relating to employees earning less than £27,000 per year”.
This amendment would provide that regulations may exempt from the public sector exit payment cap those earning less than £27,000.
Amendment 16, in clause 41, page 57, line 27, at end insert—
“(10A) Nothing in this section applies in relation to payments made by the bodies listed in NS1.”.
This amendment would exclude employees of companies listed in NS1 operated by the private sector from the scope of the proposed cap on exit payments.
Government amendments 3 to 9.
This is the bit of the Enterprise Bill that has nothing to do with enterprise; it is largely about spin, to be perfectly honest. Let me make it clear, as I did in Committee, that Her Majesty’s official Opposition agree that excessive exit payments in the public sector should not be paid, and that any abuses in that regard should be ended. The problem with the Government’s approach is that they are attempting to govern by headline in a very complex area, and in so doing they are creating the sorts of anomalies and unfairnesses that I am sure we will hear about during this debate. Including a headline-grabbing figure—in this case £95,000—on the face of the Bill is, frankly, the worst kind of utterly vacuous government, and it is exactly the sort of rigid legislating that good civil servants advise against, and that bad Ministers promote.
The inclusion of that figure in the Bill is really about allowing the Secretary of State for Business, Innovation and Skills to have his tabloid headline about fat cats, which was one of the odious remarks he made on Second Reading. That was an insult to thousands of decent, hard-working people across this country, many of whom have never been paid anywhere near £30,000 a year, let alone the £3 million a year that the Secretary of State used to get when he worked for an investment bank. [Interruption.] That has a lot to do with it, because of the language he used.
If I was to accuse the Secretary of State of being a fat cat—I am not going to do that, Madam Deputy Speaker—the Minister would be huffing and puffing in her usual way, muttering “Outrageous” and “Disgraceful” from a sedentary position. She and the Secretary of State like to dish it out, but they do not like to take it when it comes back their way. She was quite content to sit there on Second Reading and cheer the Secretary of State on as he traduced public servants, including long-serving local librarians and even privatised nuclear decommissioning workers, and described them as fat cats. I wonder how they felt about the Secretary of State using that language. Actually, I know exactly how they felt, because they wrote to us in their droves to express their anger at his insulting rhetoric, and that evidence—there was a lot of it—was officially submitted to the Committee.
Amendment 15, tabled by the Opposition, seeks to protect those workers who earn less than £27,000 a year from the proposed exit payments cap—yes, those who earn less than £27,000 a year are the Secretary of State’s so-called fat cats.
I was present on Second Reading when the Secretary of State described long-serving public servants on low and average pay as fat cats. At the end of that debate, the Minister said at the Dispatch Box that the exit payments cap would not apply to civil servants earning less than £27,000. I hope that she will forgive us if we do not take her word for it, and that she will therefore accept our amendment today to ensure that the promise is in law.
There was a time when what Ministers said on the Floor of the House could be accepted, and I am prepared to accept that the Minister is sincere in what she has said. In fact, I am not sure that she said quite what my hon. Friend says she said. I think that she actually said that it could affect a small number of people on £25,000. However, I think that my hon. Friend is echoing what one of the Minister’s Treasury colleagues had said earlier. If I am not mistaken, the current Minister for Employment, Priti Patel, when referring to what would be in the Conservative party’s manifesto, said that the proposal would not affect anybody earning less than £27,000 a year. We have therefore taken her words, given as a promise from a Minister of the Crown, and put them into an amendment in order to hold the Government to their word. The fact that this Minister was not prepared to repeat that in those terms when she spoke on Second Reading can perhaps be explained by the Government’s refusal to support our very reasonable amendment.
Following the hon. Gentleman’s deliberations in Committee, and from his own analysis—obviously we are looking in the round at public expenditure on exit payments—can he advise the House on what proportion of that expenditure in, say, the last five years was for people earning less than £27,000, and what proportion was for people earning over £100,000?
I do not have that figure to hand, but we did probe the Government to try to get some idea of what calculations they had made of the impact on people earning less than £27,000 a year. I am afraid we have not been able to elicit a great deal of information from them on that subject, other than that they think it would be rare for those people to be affected. If it is that rare—I will come to this in a moment—why do the Government not accept our amendment, because it will not actually cost them much?
The hon. Gentleman makes a fair point. In the absence of data, he has his good judgment and his reasonableness, following his many years in Government before 2010. Do his instincts not say that the majority of people will be earning in excess of £100,000? That really is the target of what the Government propose, is it not?
That is what the Government say the target is. As the hon. Gentleman knows, I respect him greatly for his independence of mind and thought, and for his intellect on these matters. As I said at the outset, if abuses are going on in relation to public sector exit payments, we are perfectly willing to say they should be stopped, but we need to look at what the clause actually does. It picks the figure of £95,000 to generate a headline saying that the Bill will stop fat-cat public sector exit payments of more than £100,000. However, what it does not elucidate very well is that that £95,000 is not just a cash lump sum, but includes the so-called strain payments that are paid into workers’ pension funds when they are forced into redundancy before retirement age. That is money they will never get in their pockets—they are not walking away with £95,000. They are not fat cats earning more than £100,000, and some are on relatively modest incomes. The Bill will also capture many people in the private sector, which the Government were also not keen to elucidate on.
The hon. Gentleman is absolutely right. Clearly, large numbers of public sector workers, who have often given long service, might have to take redundancy—not surprisingly at a time of severe cuts in, for example, local government. The provisions in the local government pension fund require those strain payments to be made, and those will count towards the £95,000 exit payment.
My intervention very much complements that of Chris Stephens. One of the big concerns about the change, which I am sure my hon. Friend shares, is that the consultation was so inadequate. The Government have also failed to undertake any public sector equality duty review, as required under the Equality Act 2010. The changes could therefore have many unintended consequences, but the Government are not taking the time to explore them.
Yes. I will briefly touch on the inadequacy of the consultation later.
“those earning less than £27,000 will be exempted to protect the very small number of low earning, long-serving public servants.”
She was commenting on the Government’s plans to create the public sector exit payment cap.
Did the Minister for Small Business, Industry and Enterprise not take the Committee through a number of worked examples demonstrating that the Bill would not have the adverse effect on pensions that is suggested? For example, a prison officer earning £28,000 a year with 34 years’ experience could still retire at as young as 52 without being affected. Does that not illustrate that the hon. Gentleman’s concerns are not terribly well founded?
I recommend that the hon. Gentleman read more deeply into the report of the Committee stage. I commend to him the worked example I gave of somebody on a salary of £25,000 who had given long service in local government and who would be affected.
Obviously, the right hon. Member for Witham did not think at the time that these people were fat cats; she thought they should be protected, and we need to understand why that is not happening in the Bill. Why was a lower earnings floor not included, given that the Conservatives promised they would pursue only—again, I quote from their manifesto—the “best paid” workers? Of course, once the election was over, the Government ignored that.
Problems emerged because the consultation was so poorly conducted, as my hon. Friend Catherine McKinnell said. Usually, a full consultation takes 12 weeks; the Government did this consultation over four weeks in the summer—it began on
“What we do know is that there is a very small number of workers”— that is the figure she gave—
“in the public sector on about £25,000 who could be caught by this…But those are extremely rare conditions.”—[Official Report,
Vol. 605, c. 886.]
What we want to know, therefore—I think this is what Richard Fuller wanted to know—is how rare those conditions are. If they are that rare, why not exempt the lower paid?
My hon. Friend briefly mentioned the dates of the consultation—between July and August. Does it not occur to him that if the Government were genuinely keen to hear back from people potentially affected by, or interested in, this change, they would not have introduced the consultation for such a short time over the summer holidays?
My only assumption is that they think fat cats should not have holidays. That is probably why they thought it did not matter that there was only a four-week consultation. That is what they think of the people they were supposed to be consulting. The rhetoric used by the Government is shameful; the contemptuous, short nature of the consultation is shameful; and the way in which the policy has been introduced overall can only be described as shameful.
We are concerned about the Government’s reluctance to make the necessary exemptions to ensure that the unfortunate few—that is what the Government tell us they are: a few—are not disproportionately affected. If the low paid and average paid are affected only in rare circumstances, excluding them from the cap will not result in the Government losing a great deal of money, so what is the problem in exempting them?
I am listening intently to the hon. Gentleman. I was in the Committee, and I am wondering whether there may be a flaw in his argument—no pun intended. If we put the floor in at £27,000, what about the person at £28,000? How would we distinguish between the different groups? Is it not better to set a limit to the payment that is made and to be blind on the income that someone gets up to that limit?
I understand the point the hon. Gentleman is making. That would be all right if it was truly a payment that people were going to get in their pocket. The reason these people are captured, however, is that the figure includes the so-called strain payments that are made into the pension fund if they are made redundant before their normal retirement age. That is the unfairness, and that is the reason why, I presume, that the former Treasury Minister said that no one on under £27,000 should be affected. The Opposition have simply taken what the Government originally said their intention was, as elucidated by a Minister of Her Majesty’s Treasury, and put it in our amendment to test why the Government are not acting on what was said.
On Report in the Lords, Baroness Neville-Rolfe indicated that a drop of £500 would not be disproportionate for someone previously entitled to a pension of £12,500—the implication is that there could be a fall in the pension paid ultimately. All I would say is that a 4% drop in income for somebody on a relatively small income—it is lower, after all, than what one would receive on the minimum wage—would be highly significant on that low income. To say that a 4% cut is not significant is hugely out of touch with the reality of many people’s lives.
The Government’s case is that a leaving payment of £95,000 or above is a large amount for any employee, but they are perpetrating the myth that people will actually receive that money. Employees on low to average incomes will never see a large amount, because the payment includes compensation paid to the pension scheme. In fact, some of them will never even receive their pension, so they will never see that money in any way, shape or form.
The cap includes strain payments, and the pension shortfall is adjusted at the time of redundancy. Strain payments could make up a considerable amount of the £95,000. If so, long-serving, loyal workers could finish work with a significant shortfall in the amount that should have been allocated to them to deal with redundancy, unemployment and uncertainty. They will be left with little in their redundancy payment to pay for annuities to provide long-term security. I do not think that was the Government’s original intention, but the fact that they have refused to respond to the concern makes me wonder whether I am right about that.
We have been told that the Chancellor has withdrawn his pensions proposals, which would have raised £10 billion to pay down the deficit. In other words, he has moved swiftly so as not to offend better-off pensioners who might have been hit by the proposals. Why, then, will the Government not turn their hand to those who earn less than £27,000 a year, whose redundancy and access to a pension are threatened by the exit payment cap? The Chancellor has famously said that we are all in this together and that those with the broadest shoulders should bear the biggest burden, so the Government have a chance to prove that by supporting our amendment 15, which is, after all, based on their own words.
Amendment 16 would exclude from the provision employees of the companies listed in new schedule 1, which are operated by the private sector. Those who would be affected are principally employees of companies across the nuclear estate and elsewhere in the private sector, such as Magnox. Why are they affected by a measure that the Secretary of State told us on Second Reading is designed to hit “public sector fat cats”? According to the Secretary of State, Magnox workers who work in the private sector are “public sector fat cats”.
When companies such as Magnox were privatised, workers such as those at Trawsfynydd in Dwyfor Meirionnydd lost access to their public sector pension scheme, but they are now going to be included in a cap on public sector redundancy payments. Does the shadow Secretary of State agree that the Treasury is trying to have its cake and eat it at the expense of those workers?
I thank the hon. Lady for promoting me temporarily. I agree with her, and I know that she has been campaigning on that issue, as has my hon. Friend Albert Owen, who we may hear from later. She is absolutely right. The employees of these companies would never have imagined for one second that they would be hit by the Government’s proposals and the Conservative manifesto commitment to cap public sector exit payments. We raised the issue in Committee, but the Minister refused to guarantee that they would be excluded from the exit payment cap.
The companies listed are in a unique position. They are mostly engaged in managing the safe closure of nuclear facilities, which is a task of huge national importance. By its very nature, it involves working towards a specific end date, at which point the employees will effectively make themselves redundant, provided that they have done a good job. That is what they are doing: they are working to make themselves redundant.
Does my hon. Friend agree that it is completely inconsistent to include employees of companies operated by the private sector? My constituents who work at Sellafield are very worried about the proposed redundancy cap. I am concerned that it will lead to highly skilled, experienced workers leaving the industry, which would undermine our ability to deliver the safe decommissioning of our nuclear facilities.
I agree. My hon. Friend will have noticed that Sellafield Ltd is included in new schedule 1, for the very reason she has highlighted.
As I said, the workers in question are working towards making themselves redundant. They accept that their work is a task and finish activity of national importance. In order to get somebody with the necessary skills to commit to that kind of proposition in their early or mid-30s, we need to ensure that they know that they will be provided for if they successfully complete their task by the time they reach their mid to late 50s, when they might find it extremely difficult to find re-employment, given their very specific skills.
If the companies listed cannot afford the packages necessary to compensate someone for the loss of their role when their task has been completed, they will find it extremely difficult to prevent highly skilled workers, who are mobile in the earlier parts of their careers, from leaving. That in itself will drive up costs for the nuclear decommissioning industry and exacerbate an already difficult skills shortage in the sector.
Legislating now to override the long-standing arrangements in the nuclear industry, as the Government are doing, when employers have kept their end of the bargain faithfully, is, to be frank, unconscionable. How can it be right that workers who have stayed with a company to deliver successfully the safe decommissioning of a site see the Government renege on their promised redundancy compensation when it is due to be paid?
My hon. Friend’s argument is powerful, and I am genuinely at a loss as to why the Government do not take heed of it. The proposal will not only cost individuals in the long term; it is also a betrayal of trust and will only benefit, to a small degree, the company involved. It will not actually benefit the Government, so I do not understand why they do not take action to right what is clearly a wrong.
Exactly. The Treasury’s justification is that, even though the companies have been privatised, the workers are still deemed by the Office for National Statistics to be on the Treasury books, because of the nature of their work. It is understandable that their work needs to be underwritten by Government, because they are decommissioning nuclear sites and no one can get an insurance policy for that.
That technical, statistical designation, however, does not mean that applying the cap to those workers is fair or that it necessarily represents value for money for taxpayers in the long term. There is no proof that taxpayers will receive any benefit, as the private operators of the companies often receive higher incentive payments in their contracts as a result of this kind of change. Unless the Government decide to act, employees in the sector will note that the Treasury has excluded them from the public sector when it comes to pension provision and other issues, but considers them within the scope of the capped exit payments.
If the Government fail to take heed of this issue and that of the pensions of women who were born in the 1950s, I think that the mantra for the 2020 election will be, “You cannot trust the Tories on pensions.”
My hon. Friend is absolutely right. I hope that the Government will have a last-minute change of heart. Why is a privatised banker not given the fat cat treatment under these provisions?
I will in a moment, but first I will repeat my question, just in case Members did not hear it: why is a fat cat banker not being given the same treatment as nuclear decommissioning workers?
The shadow Minister well knows that the Government have capped the pension contributions of higher earners at £44,000 a year, and that those on the highest incomes of more than £200,000 have had their contributions capped at £10,000 a year. The Government have taken a lot of action in this area, as the shadow Minister well knows.
What the hon. Gentleman may not realise is that the workers of the banks that have been taken into public ownership will be specifically excluded from the exit payments cap under the Government’s plans. That might change his mind, so he might like to join us in the Lobby later. Yet again, it seems to be “Up with the bankers and down with the workers”. What a shocking value-free zone this policy is, if the Government stick to it.
We have received strong representations on the matter from Magnox workers, from trade unions including Unite and Prospect, and directly from the workers. The bodies that we have included in new schedule 1, which are affected by the “public sector fat cat” policy, are Sellafield Ltd, Westinghouse Springfields Fuels Ltd, Magnox Ltd, the National Nuclear Laboratory, International Nuclear Services, Atomic Weapons Establishment Ltd, Low Level Waste Repository Ltd, Dounreay Site Restoration Ltd, RSRL Winfrith and RSRL Harwell. I note that none of the companies in that list is called “Fat Cats Ltd”, but they are all included on the list of companies with workers that the Government are, by their own admission, treating as fat cats.
The Public Bill Committee received dozens of letters from Magnox workers, and I congratulate them on the quality of the representations that they made. I quoted in Committee from a letter from one of the workers, and I will quote it briefly again. Ian Milligan, who works at Bradwell as a waste engineer, said:
“I should like to start with a definition quoted from the Oxford English Dictionary, the dictionary that has sat on my desk for the duration of my career within the Nuclear Industry which has spanned over 20 years. The question I had was, what does the term a fat cat infer? The answer: A Fat Cat—a wealthy person, a highly paid executive or official.”
He goes on to say:
“I, and many of my work colleagues employed by Magnox Ltd, are likely to be ‘caught’
in the proposed Exit Payment Cap of the Enterprise Bill, to which I, and my work mates across the board were shocked to discover, as we are ordinary working class people and do not consider ourselves to be Fat Cats by any stretch of the imagination.”
Will the shadow Minister confirm that on Second Reading, the Secretary of State used the term “public sector fat cats” in his closing remarks in support of the Bill? Is that not in contrast to the workers whom the shadow Minister is talking about, who work in a physically taxing environment for many years?
The hon. Gentleman is absolutely right. I know that it is difficult to believe—presumably, that is why the hon. Gentleman had to check before making his intervention—but the Secretary of State actually said that the measure was intended to hit fat cats in the public sector, which therefore includes everybody affected by it.
This confirms the understandable anger that is out there. My hon. Friend the Member for Ynys Môn might add examples of workers from his constituency. Agreements have been made and guarantees have been given. We were told that the provision was to hit public sector fat cats, not employees in the private sector. We have tabled the new schedule, which would exempt the companies listed from the Bill. If the Minister has another way of doing it, as I said to her in Committee, I would be interested to hear it. In Committee she was not able to offer any comfort whatever to the workers of the companies listed in new schedule 1. Her response was disappointing, given the weight of evidence submitted to the Committee and the strength of feeling among hon. Members and their constituents. Workers have made their plans and taken life decisions on the basis of promises that were made to them. As far as we can surmise from the limited information that the Minister is prepared to provide about the Government’s intentions, the Government are going to take action that will affect those workers.
In Committee, the Minister rehearsed arguments about all sorts of scares that may have been put about by mythical people whom she was not prepared to name, but going by the evidence submitted to us, the workers in question will be affected to quite a large extent. We represented the workers’ arguments in Committee and made their case on their behalf, but all we got from the Minister was a response to issues that had not been raised in the workers’ letters or, indeed, by us, and a vague reference to secondary legislation at some later date that will name some as yet unknown entities that may be excluded from the cap. In other words, all we got was an empty sheet of paper. I am afraid that that is not good enough.
We in the House need to know what the Government’s intentions are, and we need to be able to tell constituents who have written to us, and who are directly affected, whether they will be hit by the exit payment cap. Those hard-working people are the definition of strivers. They are the beating heart of this country. Their letters reveal that they are not swivel-eyed lefty loonies or fat cats but ordinary working people, many whom live in the constituencies of Conservative Members.
Ministers have put things in the Bill that are meant to get them a headline in the Daily Mail and The Sun. That is fundamentally why the proposal is so flawed. The reality, when we lift the stone and look underneath, is that it will affect all sorts of people whom the Government did not indicate that they intended to hit. Hard-working people are being betrayed by their Government. They would have made very different assumptions about what this policy meant when they read the Daily Mail headline or even the Conservative party manifesto. That is why, if the Government will not stand up for those workers, we will.
I am pleased to follow the shadow Minister, Kevin Brennan. I have constituents who work at the Atomic Weapons Establishment in Aldermaston, at the Defence Science Technology Laboratories in Porton Down and elsewhere, so I have an enormously high regard for those extraordinary public servants who contribute so much to the security of our country. I therefore have some sympathy with new schedule 1.
It is easy for the newspapers to produce graphic headlines such as “Civil service pen-pushers get massive pay-offs”, but I am talking about slightly different people. They are not ordinary people in the sense the shadow Minister was talking about; they are really rather special. They work at the forefront of technology to ensure that the nation remains safe and that our realm remains secure. I know from talking to my constituents that people at the AWE, which has been privatised, are very unhappy indeed. The AWE is a unique and important facility. It is the only place capable of designing and producing the successor to our Trident nuclear missile system, and indeed of maintaining Trident until its successor comes into force. I am told that morale at the AWE is at rock bottom. To remove the last major benefit of working there—pay has been historically low because of the decent benefits—risks the nuclear deterrent, in some people’s opinion.
These people are not the only ones to be affected. A constituent of mine who works at DSTL came to see me at my surgery on Saturday. He is a leading scientist, and he brought with him examples of ceramic armour that he had personally developed for the protection of our troops. I do not know how many Members in the Chamber have been to see any of our defence science laboratories. I represent Farnborough, the home of the former Royal Aircraft Establishment, which is now the headquarters of QinetiQ. I have met some of its employees, who used to work in some pretty shabby conditions—no wall-to-wall carpeting, rubber plants or anything of the sort—although they have rather fine offices now in Farnborough, and I have been struck by the fact that they could get a lot more money in the private sector. When I asked them, “Why do you work here?” they replied, “Because we want to give something back to our country.” Those scientists show an extraordinary sense of patriotism, dedication and loyal commitment to our country; in my view, they contribute disproportionately to the defence of the realm.
My constituent told me on Saturday that for decades he had been
“Paying my taxes…Saving hard…Avoiding debt…Obeying the law” and, of course, “Working hard” to develop these life-saving technologies for members of our armed forces. He went on to say:
“in spite of this…I have received below inflation pay rises since 2004…My pension contributions have doubled…My retirement age has increased from 60 to 67...My redundancy terms &
conditions have been degraded significantly…My pay is now 20% lower than MOD colleagues outside of Dstl”.
He drew my attention to the 2015 review of the MOD’s science and technology capability by Sir Mark Walport, the Government’s chief scientific adviser, who said:
“We understand that staff retention is difficult in the mid-career stage. We were surprised that Dstl are able to retain staff (let alone good staff) given the comparative low-pay offered.”
Conditions have not improved owing to the austerity measures that we have had to take, which I understand, but that did not stop the chief executive of DSTL receiving a 30% remuneration increase. In those circumstances, it is understandable that these people do not feel that they have been treated as well as they should have been. The other point about them is that, as Crown servants and the kind of people they are, they do not go around protesting; they come to our surgeries or write us a private letter. They will not write to the national newspapers or stand outside with a placard, because they just want to get on with their jobs. I say to my right hon. Friend the Minister that there is a risk that we may be taking for granted people whose contribution to our national security is, as I said, rather significant.
My hon. Friend is absolutely right. Instinctively, I am entirely sympathetic to his argument, which applies to not just Crown employees, but those in the security services. However, could not his argument about such concerns easily be made about everyone working in the public sector? That is why the Government’s instinctive view is against drawing the distinction that he would like to make.
I have enormous respect for my right hon. Friend and I understand his point, but the place I represent is the home of the British Army, as well as the birthplace of British aviation, and it is steeped in technology. I know these people—I did so when I was a Defence Minister, as I have throughout my constituency experience in Aldershot—and I value them. I am afraid that I think they are rather special and that they have been neglected. I have specifically pointed out that their grades have not been made up to MOD grades, because they are busy in their laboratories doing what they like doing—inventing and helping to protect us all—so I will not resile from singling them out. My hon. Friend is entirely right to say that I am doing so, but I hope he will accept my apology for that.
The point about the entire public sector is a reasonable one, but it would be stronger if the Government had not specifically exempted parts of the public sector, namely those in the City of London, such as the privatised banks, and particularly the compensation schemes in what are public sector bodies, such as the Financial Conduct Authority.
My hon. Friend David Mowat will appreciate that the intention is that many of the parts of the City of London that are currently in the public sector will not be there for very long. The idea is to get them out of the public sector in double-quick time. I should say to my hon. Friend Sir Gerald Howarth that I am the son of Army soldier. In my younger life, I lived in Aldershot, as well as in Fleet, which used to be in his constituency, and I have a lot of sympathy with what he says. I am not in any way trying to fob him off. I totally agree about those in military service and our intelligence services, many of whom could get multiples of what they earn if they left GCHQ, for instance, to work in the private sector. None the less, if we are to draw a line, perhaps we should draw it in a sensible place; otherwise, we should not draw it at all.
As my hon. Friend David Mowat implies, the sensible place to draw the line would include these people on the list of exemptions, but there we go.
Earlier today, I had a meeting with officials from Prospect. They acknowledge that one of our manifesto commitments was to
“end taxpayer-funded six-figure payoffs for the best paid public sector workers.”
They accept that the Government have a mandate for that, but it is worth putting what they say on record—forgive me for doing so, Mr Deputy Speaker—because they feel that the Government did backtrack on the agreement signed in 2010. They use the word “renege”, but let me say “backtrack”. They say:
“just four years before the Conservative party’s announcement that it would seek to renege on that agreement. The minister stated at the time: ‘what the new scheme shows is that constructive negotiations with the unions can work and the result is a package that is fair for civil servants and fair for other taxpayers’. He also said: ‘I believe we now have a scheme which is fair, protects those who need the most support, addresses the inequities in the current system and is right for the long term.”
I put it to my right hon. Friend the Minister that, despite the use of the phrase
“right for the long term”,
the scheme has not lasted more than six years. I will not vote against the Government today, but I urge her to have a discussion with the Treasury to determine whether this matter can be looked at again, because it is not fair on some of our most dedicated scientists who, as I say, are working to keep us secure.
I rise to speak to amendment 18, which is in my name and that of my hon. Friend Hannah Bardell. The amendment perfectly complements amendment 15, which would add specific protections to part 9. As Kevin Brennan said, as it stands, and given the rhetoric accompanying it, part 9 is a classic populist move by the Tory Government. They are playing up to the perception of fat cats, saying that people get huge pay-outs that are not comparable with private industry pay-outs, but they are not taking account of long-serving, lower-paid workers.
As I have implied, there is a lot of smoke and mirrors behind this scheme. The £95,000 cap includes pension payments that go not to the workers, but to the pension funds, including in the form of strain contributions for those on ill-health retirement. It is absolutely amoral that somebody who has to retire on the grounds of ill health, having worked hard, perhaps in a manual job, will have their pension capped because of this scheme.
I really do not understand how the Government cannot recognise the impact of the scheme. It was interesting that the House of Lords asked for an impact assessment, but it was not forthcoming. Back Benchers have asked the shadow Minister about the impact, but it is not for Opposition Members to provide that; it is the Government’s responsibility to do so at the outset.
The Government have admitted that this provision could affect workers who earn less than £25,000, which includes librarians, midwives, NHS workers and other long-serving employees. Those people are worlds away from the horror stories that we sometimes read about failed chief executives who walk away with massive lump sums. I understand a curb on pay-outs for those people. Even worse, some people receive a massive pay-out and then pop up in another council as a highly paid consultant. Again, I agree that there should be cap on that. I also suggest that the situation I have outlined is more of a problem in England, given that Scotland has only 32 local authorities, but I understand the concept of trying to control that.
The sum of £95,000 is a lot of money but, to put it in perspective, it is only three and a half years of an average salary, and a pay-out potentially puts someone out of the marketplace for good. We already know that many women who have previously taken early retirement are now suffering financially because they were not informed about the increase in the state pension age. Those women are now being forced into work programmes, but they are struggling to get back into work, which illustrates how difficult it can be to get back into work at a certain age. We should not be imposing exit caps that affect life choices for lower-paid workers who are trying to weigh up their options, given their realisation that they will have to work much longer than they had planned or been notified about by the DWP.
This provision will also hit middle-income earners, who are not meant to be the target. The local authority that I belonged to periodically operated a teacher refresh scheme to allow older, more experienced teachers to be considered for early retirement and replaced by younger teachers. That represents a virtuous circle of creating vacancies for young teachers, protecting the pensions of retiring teachers, and saving the taxpayer money overall due to the lower wages that are paid to new starts. Good governance is needed, not an exit cap that, in its current format, is too much of a blunt instrument.
Given the forced austerity that has been imposed on us, the Scottish Government have implemented a policy of no compulsory redundancies. In Scotland there have been zero compulsory redundancies in the NHS, but in England there have been more than 17,000 since 2010. If the Government really want to play the popularity game, as the hon. Member for Cardiff West said, they should extend this measure to other publicly supported companies, such as those banks with public money behind them. It beggars belief that we have a Chancellor who will stick up for annual bankers’ bonuses against the rest of Europe, but is happy to stand back on important matters such as exit payments and to let lower-paid workers suffer.
My hon. Friend mentioned the Scottish Government’s record on avoiding compulsory redundancies. In my previous experience as the leader of one of Scotland’s biggest councils, we could not have managed the substantial reduction in our workforce without compulsory redundancies if we had not had the flexibility to offer severance packages that were proportionate to the service that people had delivered. Without that ability, councils in Scotland would have faced large numbers of compulsory redundancies that would have been inhumane in our workforce.
I agree with that fine point completely. I went through the same experience as a local councillor on East Ayrshire Council. Although some of the payments made would be caught up by this payment cap, they were demonstrated to be value for money because of the payback period of two years. We were able to show good value for the taxpayer.
The Minister for Employment originally pledged to protect workers earning less than £27,000. Amendment 15 would allow that protection to be put in place, while amendment 18 would allow the cap to reviewed and increased in line with inflation. As the Bill stands, that cap is another part of the ongoing erosion of terms and conditions, given that inflation levels and the cost of living is clearly going to rise. The measures allow the Government to maintain a charade of being a party for workers. That is why we will push amendment 18 to a vote, and hopefully the party of workers on the Government Benches will support us.
I congratulate my hon. Friend Kevin Brennan and Sir Gerald Howarth on the eloquent way in which they spoke to new schedule 1. I will not repeat what I said on Second Reading, except to reiterate the point that the people and companies listed in that new schedule are in no way fat cats. I think we need an apology from the Government about that because these are hard-working, ordinary people who have worked in difficult circumstances for many years, and signed up to agreements in good faith with the Government of the day.
I want the Government to honour their promise to safeguard the conditions of service that were agreed between companies and employees over many years, and I will touch on the definition of public sector workers. In no way are the people listed in the schedule public sector workers. Many of them work for private companies. If this cap is imposed on them, it will not benefit the Treasury at all; it will benefit the private companies that have taken on the contract. There will be no great saving, but there will be a breach of trust, and a considerable loss to those individuals who have been given protection.
I know that this Minister listens to reason and I am sure she agrees that many people will be caught unintentionally under the Bill. The protected status goes back to the privatisation of the electricity industry in the 1980s, and regulations were introduced in 1990 to protect many of the categories listed. More than 120 Magnox workers have written to me. As Sir Gerald Howarth said, they were given protection, with other nuclear industry employees, under schedule 8 to the Energy Act 2004. When the recent pensions Bill was going through Parliament and their conditions were threatened when a vote in the House of Commons took away their protected rights, an amendment in the House of Lords restored that protection. Those protections were given to the workers by Mrs Thatcher and Cecil Parkinson in the 1980s, and they were honoured by other Conservative Ministers.
It is also important to point out that the Treasury did not actually allow the employees of those companies to remain in public sector pension schemes when they were privatised, so it is completely inconsistent now to call them in.
There is huge inconsistency because the workers I am referring to were protected in 2004. They were given that protection in statute. The Government are using a crude analysis by the ONS that these are public sector workers and fat cats, and that they should be treated all the same, but they are breaking their own promises. That is the strong feeling I got in the letters I received from the employees. The safeguards given by previous Governments during privatisation are now being taken away on a whim. I say to Conservative Members that taking away the protected status of these people was not in the Conservative party manifesto. The opposite is the case: it talked about city hall fat cats. Many of us agreed that people should not be rewarded for failure, but the people we are talking about are doing dangerous work now. The measure is due to come in in October, and many private companies are refusing to put through redundancies now. They are holding them back until October so that the workers receive reduced conditions of service. That is wrong.
Surely the biggest safeguard of all is that an occupational pension scheme is deferred pay. The hon. Gentleman’s constituents could have made more money working for other companies, but they chose to stay where they were because they were going to get a good occupational pension scheme.
I am listening carefully to what the hon. Gentleman says and I have a lot of sympathy with it, but I do not follow one point he made regarding private companies versus public companies. If they really are private companies, how can the Bill apply to them? Am I missing something?
It is very confusing. This has not been made clear, but my understanding is that if these people were to leave today, they would be given the full package, yet the companies have been told that the measure will apply from October and those very companies are now saying that people cannot go until then. That is what is being said by the hon. Gentleman’s constituents and my constituents who have been writing in.
The Minister could end the confusion today. She could say that she will honour, as Mrs Thatcher and other Tory Ministers did, the protected rights and status of these individuals, and we could have a vote. Lawyers will argue about whether people can be protected, but we should not leave it to the lawyers—the House of Commons has the opportunity to act today. I hope that Members across the House will support new schedule 1.
Government amendments 3 to 9 will enable Welsh Ministers to make regulations on exit payments that they feel are suitable and devolved to them through the Government of Wales Act 2006. That has been agreed with Welsh Ministers through the Welsh Assembly, and I am grateful for that.
The Conservative manifesto was very clear that we would introduce the cap and that we would set it at £95,000. It is extremely important to remember that this relates to redundancy pay. The cap will curb only the top end of exit payments—just the top 5% in value of all exit packages across the public sector. Amendment 15 is merely a device based on an article in The Daily Telegraph written by my right hon. Friend Priti Patel back in January 2015. It was not part of the manifesto promise that was made. There is no honour, if I may say, in putting that forward as anything other than a junior Treasury Minister praying it in aid in an article she wrote in The Daily Telegraph.
I want to make it absolutely clear that the cap will not affect a classroom teacher earning the maximum of the upper pay range of £38,000 with a normal pension age of 60. It will not affect anyone working in the NHS earning below £47,500 or firefighters. I am told that police officers cannot be made redundant, and in any event no police officer earning below £54,000 would be caught by the cap. The Cabinet Office has confirmed that no civil servant earning below £25,000 will be captured. Some earning around £25,000 may be captured, but we can find no such example. A librarian earning £25,000 with 34 years’ experience could still retire on an unreduced pension at the age of 55.
We also think it unlikely that anyone earning less than £27,000 would be hit by the cap. It is important that we remember that it is extremely rare in the private sector for anyone on a wage of £25,000 to expect, on redundancy, a payment of £95,000—nearly four times their annual earnings. Having said all that, my hon. Friend Richard Fuller, who is no longer in his place, made one of the most important points: it is right that we look at the value of the cap, as opposed to the salary or income someone is earning when they leave.
Finally, I want to address the important points about new schedule 1 and ask hon. Members not to support it. I listened with great care to the excellent points made by my hon. Friend Sir Gerald Howarth—I pay tribute to the workers he mentioned—and Albert Owen. I must make it absolutely clear, however, that we oppose the new schedule because we think it wrong to put the exemptions in the Bill. The relaxation provisions allow for special circumstances but only after proper ministerial scrutiny. I can assure them that I will continue to speak to right hon. and hon. Friends in the Treasury.
I agree with the helpful and wise interventions from my right hon. Friend Mark Field, and I hear the points hon. Members are making. I will continue to speak to them, but now is not—
No, there may be reasons. There is no need to interrupt.
Now is not the time to do what some hon. Members propose. There are other ways of doing it, if it is the right thing to do. It is right, however, that we be true to our clear manifesto commitment to set the cap at £95,000.
Mr Brennan, I think it is for me to decide. I am sure it was going to be about time, and I am sure we are all aware of the time and what time the debate has to end.
I was bobbing up and down like a
I believe that all points have been made, and based on everything I have said, I urge hon. Members to support the Government’s new clauses and to reject all the other amendments; they are not necessary.
Order. It was going to be about time, but it is not for me to tell you how much time is left, as you know better than I do.
On the comments by the former Treasury Minister, now the Minister for Employment, Priti Patel, I thank the Minister today for confirming to the House that we cannot believe a word Ministers say. I thank her for putting that officially on the record.
The record will confirm that I did not say that a Minister’s word could not be trusted. I was talking about a comment in a newspaper that does not form part of Conservative party policy and was not in the manifesto. That is what matters the most.
It was not in a newspaper that the policy was announced. As I said, we cannot believe a word Ministers say.
Let me say simply that, as in Committee, the Minister has confirmed nothing at all that will give any comfort to these workers. I am therefore going to ask my hon. Friends, and other hon. Members if they support these workers, to support us in the Division on new schedule 1.
Question put, That the schedule be read a Second time.
The House divided:
Ayes 266, Noes 291.
Question accordingly negatived.
More than three hours having elapsed since the commencement of proceedings on the programme motion, the proceedings were interrupted (Programme Order, this day).
The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (