Restriction on public sector exit payments

Part of Enterprise Bill [Lords] – in a Public Bill Committee at 3:45 pm on 23 February 2016.

Alert me about debates like this

Photo of Kevin Brennan Kevin Brennan Shadow Minister (Business, Innovation and Skills) 3:45, 23 February 2016

As I understand it from the Secretary of State, they would be affected only if they were officially classified as fat cats. If they are not affected, they are not officially fat cats in the eyes of the Secretary of State and if they are affected, they are officially fat cats according to the Secretary of State. It remains to be seen whether those employees are fat cats under the Government’s own definition.

Amendment 112 would subject the amount of the cap to an annual re-evaluation. Amendment 122 covers a similar subject. It is vital that any proposed cap is flexible and updated on a regular basis to take into account differences in pay and increases in separate areas of the public sector. In considering the scope and impact of the policy, it is important to note that the proposal to make the cap effective at £95,000 means that it will not just impact on higher paid senior managers.

If the £95,000 figure is not uprated, it is likely to affect more and more grades, so we ask the Government to consider re-evaluating it annually, perhaps using the same uprating as for public sector pensions. Similarly, will the Minister open discussions with the relevant stakeholders on technical considerations such as whether the cap will include other means by which an individual can access an unreduced pension, such as on compassionate grounds?

Uprating is important if workers are not to fall further behind. Having the uprating enshrined in primary legislation rather than being devolved to secondary legislation would ensure that it is reviewed annually. I would be interested to hear the Government’s explanation for why they are not picking this route and why they want to do it through secondary legislation. We will listen to that explanation with an open mind.

Amendment 114 would exempt from the cap those earning below the national average wage, who, by definition, could not be called the best paid—they would, however, be called fat cats by the Secretary of State. It is hard to see how the Government can include that group of workers if that is really what they think the measure is about. What are the specific reasons for not including people earning below the national average wage in an exemption from the exit cap? The only way those workers could get up to the cap is through decades of long service, and surely that kind of loyalty is not something the Government want to punish.

How many workers earning below the national average wage will be included in an exit cap of £95,000? I would be interested to hear the Government’s figures. I am sure they will have crunched the numbers carefully in considering and developing the policy, and I presume the Minister will have the figures to hand and examine them carefully before deciding whether to oppose our amendment.

It has been widely mentioned—this is really important and I will come back to it later—that the then Exchequer Secretary to the Treasury, Priti Patel, said in January 2015 on exit payments:

“This commitment, which will be included in our 2015 General Election manifesto, will cap payments for well-paid public sector workers at £95,000.”

I give her credit for her clarity on that. She went on to say:

“Crucially, those earning less than £27,000 will be exempted to protect the very small number of low earning, long-serving public servants.”

That commitment was given by a Treasury Minister a year ago. When the Conservative party manifesto came along, it said on page 49:

“We will end taxpayer-funded six-figure payoffs for the best paid public sector workers.”

On Second Reading in the House of Commons, the Secretary of State for Business, Innovation and Skills said that the measures were needed because

“Too many public sector fat cats are handed six figure pay-offs when they leave a job”—[Official Report, 2 February 2016; Vol. 605, c. 817.]

If someone is affected by this provision, according to the Secretary of State they are a fat cat. The amendments will allow us to explore exactly why that is a dreadful thing to say.