Restriction of Public Sector Exit Payments Regulations 2020 - Motion to Approve

– in the House of Lords at 4:20 pm on 23 September 2020.

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Lord Agnew of Oulton:

Moved by Lord Agnew of Oulton

That the draft Regulations laid before the House on 21 July be approved.

Relevant document: 25th Report from the Secondary Legislation Committee

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

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.

Photo of Baroness Bakewell of Hardington Mandeville Baroness Bakewell of Hardington Mandeville Liberal Democrat Lords Spokesperson (Environment, Food and Rural Affairs) 4:25, 23 September 2020

My Lords, I declare my interest as a vice-president of the Local Government Association. I have briefings from the LGA, the Association of Local Authority Chief Executives and the BMA. All have the same concern—that lower-paid staff will be adversely affected.

The Government’s aim to reduce the large redundancy payments made to highly paid staff in the public sector is one to which the public readily subscribe. But the way the Government are implementing this not only breaks the law but affects those on lower pay.

The pension strain payments should not be included in the cap. In 2019, ALACE indicated that including pension strain would affect long-serving staff earning well under £40,000. For these staff in their mid to late-50s, with service between of 35 and 39 years, earning between £31,000 and £34,000, the strain would exceed £100,000 if made redundant. Their redundancy payments would be well under £20,000. The regulations would mean that they would all suffer a reduced pension for the rest of their lives. I ask the Minister to confirm that this is, indeed, the case.

Junior doctors are similarly affected, in some cases having to make declarations for sums as small as £200. These are the very people who, up and down the country, are currently saving lives on the Covid-19 wards.

What the Government are proposing is for contractual arrangements between employers and employees to be broken and for those on very low earnings to be penalised. For local authorities, this is direct interference with the role and responsibility of elected councillors, who are well able to deal with these matters through full council. Instead, it will be dealt with by the Secretary of State.

This is at a time when MHCLG, as the Minister said, is currently conducting a consultation on the Local Government Pension Scheme. The regulations under this SI are due to come in immediately, well before the consultation on the LGPS has finished. It would seem that the right hand of government does not understand what the left hand is doing.

In addition to there being little communication between government departments, no equality impact assessment has been produced. Why not? Are the Government afraid that, if they produce one, it will be obvious that the bread-and-butter staff of public service are being caught in this trap?

However, I note that the Armed Forces and security services are exempt from this regulation. “Good,” many will say, “our service men and women deserve to be exempt”. But what of the rear admirals, air vice-marshals and lieutenant-generals, in cushy jobs at the Ministry of Defence, earning £120,000 to £150,000? Surely, they should not be exempt. The Government have got this wrong and should realise such and withdraw this SI.

Photo of Baroness Eaton Baroness Eaton Conservative 4:28, 23 September 2020

I declare my interest as a vice-president and former chairman of the Local Government Association. I am pleased to speak this afternoon.

The regulations before us bring into force the exit payment cap legislated for in 2015. I supported the principle of ensuring the best value for money by making payments to employees back when the House agreed this legislation, and that remains the case today. However, I have to raise concerns about the unintended consequences of the implementation of the regulations.

As my time is limited, I will focus on timing, which has been mentioned in part before. The regulations will come into force before the Ministry of Housing, Communities and Local Government is able to bring into force its changes to the pension regulations. The concern is that without the MHCLG regulations, the timing could lead to employees continuing to receive full pension payments despite the cap. This is because the exit payments the Government are seeking to limit are often made up of pension entitlements.

These regulations prevent the council paying the scheme the full cost of the employee’s redundancy entitlement but do not remove the employee’s legal right to the full pension payment. Therefore, the gap between what the council will pay and the amount that the employee will receive will need to be made up by the Local Government Pension Scheme until such time as the MHCLG pensions regulations are passed. That is clearly not the Government’s intention, and I would be grateful if the Minister could use this opportunity to provide some reassurances about the situation and about the legal confusion that today’s regulations are likely to cause.

As I said at the start, I support in principle the Government’s aim of ensuring that taxpayers’ money is spent wisely. In my time as a council leader, I took pride in how efficiently and effectively my council was run. However, it cannot be sensible to create entirely avoidable uncertainty for council employees or to put additional strain on the Local Government Pension Scheme and limit councils’ ability to restructure or reorganise at a time when local government faces significant financial pressures and many councils are looking to work differently. I hope that the Minister can use the opportunity today to reassure the House on the timing of the regulations, as they are causing a lot of concern in local government.

Photo of The Earl of Devon The Earl of Devon Crossbench 4:31, 23 September 2020

My Lords, this is not my area of expertise but since April I have been assisting Exeter City Council with its Covid response, chairing a visitor economy recovery group, from which I have learned first hand about the dedication and diligence of local government staff, the current unprecedented demand for their services and the budgetary cliff off which they are being driven.

These regulations come at a challenging time for local government. Although I generally support the aim of reining in six-figure public sector pay-offs to high earners, that is not the concern. The worry is the impact, as discussed by the noble Baroness, Lady Bakewell, of the pension strain payments for long-serving local government staff earning under £50,000. Those who have worked for many years in housing, benefits, environmental health or social work, and those who might have turned down much better-paid private work to continue their dedicated public service, stand to lose out on pension benefits that they have worked towards for decades if they are made redundant or seek early retirement after the age of 55. Why is that?

This is not a new issue. I see from Hansard that it was raised a number of times in November 2015, along with the serious concerns being raised now by the Local Government Association and the ALACE, which were well rehearsed nearly five years ago.

Local government is staring into a very bleak winter, with redundancies looking inevitable. The regulations as drafted will hit the pensions of the longest-serving and the most modestly paid. They will remove much-needed staffing autonomy from local councils, and, given that there is no equality impact assessment, they may well impact certain groups disproportionately, but we do not know that. Exeter City Council, for example, has over 700 staff members, whose average age is over 50. Why has no EIA been published?

I understand that the Government’s preferred solution is to change the Local Government Pension Scheme to avoid significant pension reductions. However, the MHCLG consultations commence this month but do not close until November. Why do these changes to local government pensions not take place at the same time as the regulations, and why wait until now to begin a consultation?

Loyal long-term local government employees are being poorly treated and taken for granted. This is not the message that the Government should send out just as they tighten the lockdown. What assurances can the Minister provide?

Finally, I understand that the medical professional bodies, such as the GMC, are concerned that they might be included under these regulations. Will the Minister please provide some clarification on that point?

Photo of Lord McCrea of Magherafelt and Cookstown Lord McCrea of Magherafelt and Cookstown DUP 4:33, 23 September 2020

My Lords, although I recognise that these regulations will not apply in Northern Ireland, the fact that devolved policy on public pensions and compensation is broadly benchmarked against terms in GB means that they remain of clear relevance to employers and employees in the Province.

I agree with the Government that it is important that public sector exit payments are proportionate and fair to the taxpayer. There has been an increasing number of six-figure sums paid out that exceed three times the average annual salary. However, at the same time, I would not favour a blanket cap that fails to allow circumstances to be considered on a case-by-case basis. The safeguards built into this legislation to waive the cap in cases of illness, death and statutory redundancy pay, for instance, are therefore positive.

The role of exit payments is vital to an employer’s ability to make reforms and broaden the skills and talent base for the future. The use of exit payments as part of early retirement arrangements often incentivises young people to enter a specialism where there will be gaps in the skill base in the future. I think, for example, of the previous scheme for mental health nurses in Northern Ireland, which allows those who entered the scheme several decades ago to retire at 55 without detriment. This positive role that exit payments can play should be retained, albeit with a recognition that we need to balance it against the interests of the public purse.

It is important that those whose early retirement could be disrupted by these arrangements are not disadvantaged by being unable to re-enter the workforce to apply their skills to temporary roles in our hospitals and schools that desperately need to be filled —although without, of course, taking jobs from young people who desire full-time employment. We need to see a close and regular review of the impacts of the regulations. Back in Northern Ireland, it will be important for local Ministers to review the changes in England to ensure that public sector roles and payments in Northern Ireland are both competitive and fair.

Photo of The Bishop of Worcester The Bishop of Worcester Bishop 4:36, 23 September 2020

My Lords, the attempt to address egregiously large public sector exit payments is undoubtedly a good thing and I applaud it. However, to enact regulations without attention being given to unintended consequences for lower-paid staff is surely not.

Reference was made by the noble Baroness, Lady Bakewell, to the LGA’s concerns with the regulations as drafted. The LGA believes that employees in scope of them could be earning far less than the Government have suggested. I am standing up because individuals in my diocese have expressed grave concern about this. They are frightened because pension strain is included in the £95,000 cap, as has been mentioned. The regulations could have lasting negative impacts on long-serving staff who do not earn large sums of money. The Minister mentioned cases of genuine hardship, and I would be pleased to hear what he means by that.

As the noble Earl, Lord Devon, made clear, in these economically uncertain times pension strain is particularly significant, as large numbers of public servants only a few years below pensionable age are increasingly likely to be made redundant. These regulations could penalise low-paid, long-serving, loyal public servants.

When the Scottish Government implemented similar regulations, they intentionally opted not to include pension strain payments, stating that

“including employer pension costs in any severance payment cap may unduly expose longer-serving and lower-paid employees to the cap”,

and that they have

“therefore decided to exclude these costs from the cap.”

Following in Scotland’s footsteps might be a positive way forward in protecting lower wage earners at the heart of our public services.

It is of course right that high exit payments are brought to acceptable levels. However, it is surely vital that proper attention is paid to the unintended consequences that these regulations could have for lower-paid public servants who have dedicated decades in local authorities and public bodies to the common good. I would welcome any clarifications or assurances that the Minister is able to give.

Photo of Baroness Falkner of Margravine Baroness Falkner of Margravine Crossbench 4:38, 23 September 2020

My Lords, I begin by assuring the Minister that I too have no objections at all in principle to the imposition of a payment cap on public sector employees. I only wish that the private sector would voluntarily incorporate some form of limit on what employers pay as golden goodbyes, but I fear that that is not imminent. However, I am troubled by the immediacy of these regulations, by their seemingly sweeping application—particularly as it impacts older workers on modest levels of pay—and by the burden imposed on individuals.

The rush to implement these regulations within 21 days seems inappropriate. Surely a longer period is required for the plethora of public sector bodies to examine the implications and communicate with employees who might be affected in the next several months, when finances and workloads will be particularly stretched. Why not pause the implementation for a reasonable period while HMT deals with the significant concerns that employers have and issues appropriate guidance after listening to those concerns?

I turn to the human rights implications. The briefing from West Midlands Employers concerns the impact on employees who might be caught by these regulations, who are mainly long-serving but on relatively modest incomes and disproportionately female. When the original legislation was passed in 2015, we expected it to deal with high-earning executives, but it now appears that it will also catch those I have mentioned due to pension strain costs. This is an issue on which almost every speaker has commented. The briefing gives an example of an employee who

“on a salary of £40,000, with 37 years of service, on early retirement, would require the county council to pay approximately £97,000 into the fund, without adding redundancy pay, notice, or holiday pay.”

The Minister has mentioned that a waiver might be available for a limited number of cases. Could he indicate whether guidance will be issued to explain what those circumstances might be?

The BMA highlights different issues and I hope the Minister will reclarify its main charge—that the regulations are unlawful because they capture individuals who have claims against their employer which arise during their employment. These might relate to claims for damages for race or sex discrimination, or any form of discrimination under the Equality Act 2010. They point out that this is a significant change from the 2015 statutory wording. My interpretation of Regulation 6(f) is that such payments would come under its terms. Could the Minister clarify what would happen if an employer settled a claim without resorting to a tribunal—that is, where Regulation 6(f) is too narrow in its scope and does not take into account this kind of settlement?

Why are such onerous terms of a requirement to inform placed on the individual by Regulation 9, rather than on the employer, as required by the 2015 Act? Here I have sympathy with the example of junior doctors frequently moving between NHS employers, particularly as the sums concerned are nowhere near the £95,000 cap. I look forward to the Minister’s reply.

Photo of Lord Wigley Lord Wigley Plaid Cymru 4:42, 23 September 2020

My Lords, I first declare an interest as a vice-president of the Local Government Association.

I do not object to the principle of a cap, but these regulations erode the rights of councils to decide workforce changes. Regulation 11 requires Treasury consent for a full council decision in such matters. It is inconsistent with the Government’s claimed support for devolving power to local authorities.

These regulations represent yet another government somersault. The Government have abandoned the values they defended back in 2015, when the noble Baroness, Lady Neville-Rolfe, referred to the need for full council approval to relax the cap without any Treasury consent. Will the Minister confirm that these regulations undermine the 2013 agreement between unions and employers on the Local Government Pension Scheme, and the 25-year guarantee of no change in the Public Service Pensions Act 2013?

Where are the transitional arrangements to protect people from the cliff edge of the cap? Pension strain payments should not be in the cap because that can reduce people’s pensions for life. The Treasury’s approach would mean that key local government workers, earning £30,00 to £40,000 a year, could, if made redundant, suffer pension reductions of up to a staggering 40%. These regulations do not affect only the highest paid staff. Can the Minister assure us that the regulations, if passed, will come into force at the same time as changes to the local government pension schemes? The Government’s consultation ends on 9 November. It is essential not to have a gap between the two sets of regulations.

The Treasury’s equality impact assessment was not published when the regulations were tabled. Why not? Is it because paragraph 2.4 of the assessment says that the

“target scope of this policy … is the high earners in the public sector workforce”?

The reality is that these regulations will damage the pensions of long-serving key workers earning between £30,000 and £40,000. That, surely, is unacceptable.

Photo of Baroness Finlay of Llandaff Baroness Finlay of Llandaff Deputy Chairman of Committees, Deputy Speaker (Lords) 4:44, 23 September 2020

My Lords, I declare that I am a former BMA president. The BMA is so concerned that it is seeking a judicial review of the regulations, having sent a letter before action on 17 August 2020, setting out why these regulations would be unlawful, but received no reply. It believes that the regulations will force public bodies to act unlawfully. NHS staff have contracts of employment that, in the event of redundancy, contain clauses defining the level of contractual redundancy payments, which can exceed £95,000.

How can the Government justify extending the scope of the definition of exit payments to include payments made to compensate an exiting employee for an infringement of their legal rights during their employment, before their exit? The BMA believes that doing so is unlawful. What about a person with an equal pay claim that goes back years, who leaves before the back pay is settled? How can Government justify preventing public bodies paying money owed to an exiting employee—payments such as a contractual redundancy payment, to which the employee is entitled under existing lawful contracts of employment negotiated in the proper and recognised way? Again, the BMA believes this is unlawful.

Junior doctors rotate as part of their training, moving from one trust to another, often with varying overtime payments owing them a few hundred pounds. These complex calculations will now fall to the trainee, keeping them away from clinical work. Therefore, how can the Government justify imposing a reporting duty on all exiting employees, regardless of the amount due to them—even for £200—as would be the case for thousands of junior doctors who change employer regularly through their training and will frequently be owed sums by their former employer nowhere near the £95,000 limit? The BMA believes that this is unlawful and it is clearly irrelevant to the statutory scheme.

I gave prior notice of these questions. NHS staff are public sector, have worked above and beyond to tackle Covid-19, and must not be demoralised by these regulations, which appear unlawful.

Photo of Baroness Kramer Baroness Kramer Liberal Democrat Lords Spokesperson (Treasury and Economy) 4:47, 23 September 2020

My Lords, the more time I spend looking at these regulations, the more concerned I have become. I start from a principle, as I suspect everyone in this House does, that employees in the public sector need to be treated fairly. We have all seen how incredibly effective and dedicated members of the public sector have been in dealing with the challenges of Covid.

These regulations were designed initially to deal with excessive payments to high-earning senior civil servants. I have not heard a single Member of the House object to that aspect of the regulations. However, again and again, one noble Lord after another has made it clear that the framing of the regulations is such that it impacts on public servants on modest incomes, whether through the issues raised by the noble Baroness, Lady Finlay, affecting junior doctors, or in the damage faced by mid-level local government workers who are made redundant, a point raised by nearly every speaker.

The biggest issue under these regulations is pension strain. Access to unreduced pensions for a worker made redundant after the age of 55 in local government is part of an agreement for local government workers enshrined in the Public Service Pensions Act 2013. We must keep in mind that salaries have been crafted with this benefit in mind. The relevant section requires the local government employer to contribute to the pension fund to offset the lost years of contribution created by a forced redundancy. That payment to the pension fund can easily exceed £95,000, even for a modestly paid worker. This is someone who gets only £14,000 or £20,000 as their redundancy payment. Now they are caught by the new cap, leaving them on a significantly reduced pension for the rest of their lives.

We understand that the Ministry of Housing, Communities and Local Government has begun a consultation on the consequences of the exit payment cap. It does not close until 9 November 2020 and regulations will take time to follow. It is beyond me, and I suspect most Members of this House, that the package has not been considered as a whole. These regulations should not be enacted without confirmation of what any mitigation might be.

I am worried by comments in the report from the Secondary Legislation Scrutiny Committee that HMT’s answer is to suggest that the redundant worker make up the contributions gap. Does it really think that a 55 year-old local government employee on a mid-level salary has a savings pot in the many thousands, especially as he or she faces redundancy? Does it then expect them to get high-paid work to enable them to contribute to make up the money that has not been paid by a local government authority?

In the original legislation, the local authority could waive the rule if approved by full council. That seems to me reasonable. Indeed, it is what the then Minister, the noble Baroness, Lady Neville-Rolfe, assured the House on 30 November 2015. Now the regulation gives that power solely to a Minister—in other words, the Secretary of State. The full council is overridden, and I join the noble Lord, Lord Wigley, in saying that this is entirely inappropriate. Taking back control is really starting to have an unpleasant new meaning.

To make matters more murky, the Government have not published their updated equality impact assessment, and women are expected to be among the hardest hit by this new regulation. None of us believes in rewarding failure, although we notice, interestingly, that the regulation makes an exemption for the banks owned by the Government. Apparently, those institutions are not to be bound by that same notion that failure should not be rewarded.

I am concerned that this regulation expresses a general hostility to civil servants, and we have seen that in other areas of government behaviour. The regulation makes exemptions for the Armed Services and for spies. I do not resent their luck in finding that they have exemptions, but that does not make it fair for others. I understand that whistleblowers and victims of discrimination are also exempt. Again, that is entirely appropriate, but, frankly, whistleblowers and victims of discrimination should not be made redundant in the first place.

This is a really badly crafted regulation. Its enactment needs to be halted so that a new version can be put in place once the whole picture is sorted and the various mitigations have been understood.

Photo of Lord Tunnicliffe Lord Tunnicliffe Opposition Deputy Chief Whip (Lords), Shadow Spokesperson (Defence), Shadow Spokesperson (Treasury), Shadow Minister (Transport) 4:52, 23 September 2020

My Lords, public sector workers carry out vital work each and every day. Over the past six months, their importance has become ever more apparent as they have provided the essential services that have kept the country running. To introduce these measures at a time when we appear to be entering a second wave of Covid-19 is not only unnecessary but, frankly, extraordinary.

The Government claim that the regulations are about ensuring value for money when spending public funds. That is a noble cause, and the Labour Party certainly does not believe in huge public sector exit payments for the sake of them. However, we have fundamental objections to how this policy is being implemented. It does not appear to be fully thought through.

We are told not to be concerned as the vast majority of those affected by the cap will be those who are highly paid. Indeed, the manifesto commitment was clear: the cap was for “the best paid public sector workers”. However, it is simply not the case that only high earners will be affected. Contrary to previous promises, the cap will quite easily capture midwives, social workers and librarians who have served their communities for decades and who, when nearing retirement, happen to find their employment being terminated through no fault of their own. Does the Minister really think it is fair to arbitrarily limit the settlement that these workers would receive?

Noble Lords will be aware that there is no index-linking on the cap, meaning that the threshold will slowly reduce in real terms. The figure of £95,000 is the same amount floated by the Government back in 2015. How does the Minister justify the decision to set the limit at this level, which represents a real-term decrease on when the policy was announced?

Paragraph 10.4 of the Explanatory Memorandum mentions the introduction of a new waiver system

“for use in exceptional circumstances”.

How will this operate in practice? Will figures relating to its use be published and, if so, in what form? Paragraphs 10.6 and 10.7 outline two options—an earnings threshold and a phased implementation—which were considered by the Government but either not consulted on or not taken forward. Does that not suggest that the 2019 consultation and the department’s meeting with the Trades Union Congress were mere box-ticking exercises rather than an attempt to find a mutually agreeable way forward?

The Scottish Government took the decision not to include pension strain costs when implementing a similar regulation. The UK Government’s decision to include such costs means that the regulations are likely to affect far more people than might have been expected. Has the department undertaken modelling on this point, and if so, what was the outcome?

I understand that no equality impact assessment was undertaken for the scheme, which strikes me as problematic. While the judiciary is excluded, staff of the Crown Prosecution Service are included. Can the Minister confirm whether his department looked at the demographic profiles of staff in these different elements of the justice system before that determination was made?

I hope the Minister can also provide a justification for including nuclear decommissioning workers within the scope of the regulations. He will know that such workers are often employed by private sector organisations which assist in the realisation of public policy. Why should the Government interfere in the redundancy arrangements of such workers, when their very success is defined by making themselves redundant?

We will not be formally opposing this instrument, as it is not the role of your Lordships’ House to do so. However, I simply cannot understand why the Government have decided to proceed now when there is more work required, and at a time when implementing this change will send such a negative message to the public servants we rely on. Just yesterday, the Prime Minister talked of how our collective compliance with the coronavirus guidance forms a protective ring around the NHS and other public workers. Why, then, is the Minister still seeking approval for an instrument that would unfairly penalise thousands of them? I hope he will urge his colleagues to pause this process, think again and do the right thing by those who were never supposed to be subject to this arbitrary cap.

I have dealt with many statutory instruments, and I have rarely experienced such unity among those taking part. The important point about this unity is that the individuals involved all have in-depth understanding of this environment. The hostility to these regulations surely should cause the Minister to pause the process, think again, take account of all the points made today and bring these regulations back in a much healthier form.

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office) 4:58, 23 September 2020

I thank noble Lords for their contributions to this debate, and I will seek to address their comments and queries in my closing speech.

The noble Baroness, Lady Bakewell, together with several other Peers, raised the issue of pension strain. All payments relating to exit should be in scope of the cap. The option of employer-funded early retirement is often the most costly element and is ultimately funded by the taxpayer. There is of course a difference between redundancy and early retirement, and I think they can often be conflated.

I will address the points on the impact assessment a little later. The noble Earl, Lord Devon, also raised the issue of pension strain, which I have addressed. The noble Lord, Lord McCrea, also mentioned the waiver system. This allows us to look at the application of the cap on a case-by-case basis to consider whether an uncapped exit payment would be appropriate, as I mentioned in my opening remarks. We have that there to ensure that there are not cases of genuine hardship.

The right reverend Prelate the Bishop of Worcester is concerned about lower-paid people. The guidance document outlines situations where the waiver system may be used. It explicitly states that the discretionary waiver may be exercised with the approval of the sponsoring department and the Treasury if capping a payment would result in genuine hardship.

The noble Baroness, Lady Falkner, asked about the BMA judicial review. It is now a matter subject to litigation so I am not able to comment. However, we have certainly considered the issues that have been raised on that; no doubt they will come out further in due course.

The noble Lord, Lord Wigley, again asked about the waiver. The power to waive the cap is delegated to the full council as the decision-maker for local government pay. If the full council approves a waiver case, sign-off is required from the Ministry of Housing, Communities and Local Government, and then the Treasury if the waiver is discretionary. We believe that the waiver system as currently designed is appropriate, as the Government need to maintain oversight of how the system is being used. Any cases put forward for relaxation will be considerable sums of money and need to be properly scrutinised. Of course, we will ensure that cases are processed in a timely manner.

The noble Lord, Lord Tunnicliffe, addressed a number of points. I reiterate what I said in my opening remarks: we are very grateful to public servants for the work they do. The noble Lord is correct that we are in difficult times at the moment and public servants have had to go beyond the call of duty on many occasions. However, these regulations are simply about ensuring that rewards and remuneration provide value for money by capping exit payments at £95,000. These payouts are funded using taxpayer money so it is right that we take action.

Since the beginning of the Covid-19 outbreak, the Government have agreed specific pay and pension packages for a number of public sector workforces—including the NHS—both to increase system capacity and, importantly, to recognise their work. As we respond to the financial impacts of Covid-19, the inappropriateness of large exit payments is reinforced. Ensuring that rewards are proportionate and taxpayer money is spent fairly must be prioritised.

Like many others, the noble Lord referenced the system—I hope that I have addressed this—in relation to the guidance and directions outlining the situations where the cap must be waived, including where a payment is made to settle a discrimination grievance, and where it may be waived, such as instances where implementing the cap may result in genuine hardship. Guidance and directions explaining the way the systems were published at consultation—and updated versions of these documents—will be published in due course.

Similarly, the noble Lord suggested that no equality impact assessment was undertaken. However, the Government did conduct and publish an assessment of the primary legislation. The previous impact assessment was linked to the 2019 consultation document. In addition, the 2019 consultation asked for comments and information related to impacts; an updated impact assessment has since been conducted based on the final regulations laid before Parliament and will be published in due course. We outlined this in the published consultation response.

As is also outlined in that response, we do not propose changing the level of the cap, as we still view £95,000 to be an appropriate level. However, the primary legislation allows for the figure to be changed in the future, taking into account the full contextual factors. The inclusion of the nuclear workers in the scope of these regulations has been debated extensively throughout the passage of the primary legislation and in a recent Commons Committee debate on Monday. I refer the noble Lord to Hansard, where some extensive passages deal with that.

We are able to exercise our own judgment, but, for the most part, the scope has been guided by the ONS, which makes objective judgments independently from these regulations. Based on the ONS classification, it is appropriate that the Nuclear Decommissioning Authority and its site licence companies are within the scope of these regulations. However, we have listened to concerns, and a mechanism to waive certain pension-related payments upon redundancy has been designed. This was agreed by the Treasury, BEIS, unions and the Nuclear Decommissioning Authority in 2017.

I believe that the Government are right to take this course. We are strongly of the view that these regulations will deliver value for money for taxpayers and put a stop to excessive payouts, which we have unfortunately seen too often in recent times. After a long period of consultation, it is now right that this policy comes into force.

Motion agreed.

Sitting suspended.