Civil Service Compensation Scheme/Work of the Cabinet Office - Public Administration Committee Contents

Examination of Witnesses (Question Numbers 1-19)


27 JULY 2010

  Q1 Chair: Gentlemen, welcome. We have the privilege of welcoming you as our very first witnesses in this new parliamentary session at this new Committee. Could I first ask you for the record to say who you are.

Mr Noon: My name is Paul Noon. I am the General Secretary of Prospect.

  Mr Lanning: Hugh Lanning, Deputy General Secretary of the Public and Commercial Services Union.

  Mr Baume: Jonathan Baume, General Secretary of the FDA.

  Q2  Chair: Thank you very much. As a preliminary can you set out as briefly as you can your position on the question of compensation payments to civil servants taking redundancy or early retirement and explain to us why there is a difference of opinion between you on this?

  Mr Noon: Prospect has been involved in the negotiations along with the other unions for about two years now. It is not a recent thing; it is some time since the Government announced that they wanted to review the Civil Service compensation arrangements. Those discussions have taken place sometimes at a pretty slow pace but in more recent times we came to a position at the end of January/beginning of February where the Council of Civil Service Unions (the six unions involved) could not agree on a position. Along with four other unions we concluded an agreement subject to membership endorsement, with Tessa Jowell in the last administration which brought about changes to the Civil Service Compensation Scheme. We would have been prepared to sign up for that but in the meantime the PCS legal action took place which froze that. Our position now is that we are still prepared to enter into negotiations. We think that is the way to resolve the issues and we would want to do that with due expedition. We do not believe that the Money Bill, the piece of legislation which I understand is coming forward through the House, is a good way to do things because it looks to us like it is legislate first and negotiate afterwards and effectively by trying to introduce a compulsory cap in that way it puts a gun to our heads. We would rather negotiate without it but we are certainly prepared to negotiate.

  Mr Lanning: Firstly, we have always taken the view that the stance of the official side and the previous administration and now of the Government was wrong in trying to forcibly take away the accrued rights of staff, and we thought that they were acting unlawfully, and that is what the High Court found in the judicial review, that they did not have that power to take away those accrued rights. Also we want to explain the PCS's position. We represent nearly 300,000 civil servants, the majority of whom earn less than £22,000 and the sticking point for us in the last negotiations was over the level of protection there was to the lower paid in the Civil Service, and although much publicity goes to the big six figure sums and those sorts of things, that is not the norm. Our members have on average ten to 14 years' service and if you are low paid and it is ten to 14 years' service it is low amounts of money you get at the end of the day. Our particular problem is we represent the main administrative core of the Civil Service and they are the 100,000 that have gone and the ones at risk of redundancy. If I am being honest about it, there was a difference of interest between the different unions about who they represented and the scale, but the outcome that all the unions wanted was a negotiated settlement, and that is still what we want to do, to try and reach an agreement because we do not think this will be resolved by legislation nor do we think it will be resolved properly through the courts. The best way is to come to an agreement.

  Mr Baume: I agree with everything that Paul Noon has said. We did not want to see a particular change. Who does want to see a change that would lead to worse conditions? Nonetheless, we were willing to negotiate. It was over a lengthy period for the best part of two years. We felt that the balance was right in the agreement reached in February. We had protected over half the Civil Service and everybody under £20,000 retained pretty much the terms that they had, with the exception of some areas that everybody lost around pension enhancement which other unions had argued in the courts was discriminatory anyway.

  Q3  Chair: Most of Mr Lanning's members were protected?

  Mr Baume: Anyone who earned under £20,000 retained three years' pay and that is just under half the Civil Service on the figures we have seen recently. If you want the significant change, it was the higher earners and, to be fair, in particular, groups of people in their mid-40s who felt particularly aggrieved about the way that the balance worked out. A final comment on all of that was that if there was going to be change, what we wanted to do was to negotiate a package that did mean some got less, some retained existing terms and some actually benefited. There were no terms in place for anyone over 60 under the old arrangements and there were no redundancy terms in place beyond statutory for anyone who had joined since 2007 under what is called the Nuvos scheme, the career averaging arrangements that were brought in as part of the pension changes in 2007. We felt that although some got less, some got new rights for the first time, and we had a package overall that was fair and balanced and, as Paul has said, we still want to try and find a negotiated settlement through this. We are a union that is committing to trying to engage and reach negotiated outcomes.

  Q4  Chair: Mr Lanning, what proportion of your members was not protected by that agreement and why did you feel so strongly about that?

  Mr Lanning: On our calculations about half of our membership was not protected by the agreement. Why we felt strongly about it was because it was about half of our membership. That is over 100,000 people that we represented. I do not like to make digs at other unions because we do share the majority of the view, but it is the PCS that represents the overwhelming majority. We do get somewhat annoyed by the idea that it is five unions versus one union. You have to look at the scale of representation and the numbers we represent and the people whom they represent. If you look at the 100,000 who went under the last administration, as I say, most of them were PCS members and the ones at risk under the current administration when you talk about the 25 to 40 per cent are going to be people in the mainstream lower paid grades. There may be many low paid redundancies and we want a fair deal for them.

  Chair: Thank you and my apologies to your two absent friends. I am sure you will do a very good job for them. Nick?

  Q5  Nick de Bois: Mr Lanning, do you think that you might be operating in a bit of a vacuum when it comes to the not unreasonable perception of many of the public that those who would have perhaps 25 years' service in the private sector earning on or around the average salary that you say you represent would be lucky to walk away with a statutory redundancy of maybe £6,000 or £7,000? Indeed, someone on just under £30,000 a year with 25 years' service would get just over £9,000, and therefore do you not think a period of reflection is worthwhile and that having scuppered those previous agreements, which were frankly very generous in the eyes of many people, that was a big mistake?

  Mr Lanning: No, we do not because it was the administration that was found to have acted unlawfully and the reason why they did was because they tried to take away without agreement people's accrued rights, and that is effectively trying to replicate people's contracts. It is a bit fortunate that maybe BP have made the point for us today that in the private sector people would be protected normally by their contracts on what they are entitled to on redundancy, and that was not available to people in the Civil Service. The main difference you find is actually between the low paid and high paid. We are not opposed to dealing with the exceptions that get quoted in the press, but we do not think you should penalise the majority in order to deal with the problems which are the exceptions rather than the generality. What we are keen to do is a fair deal.

  Q6  Chair: So you do not think you are going to finish up with a worse outcome as a result of winning the court action?

  Mr Lanning: We do not think so because we think what they are doing is still unlawful. The proposition of the capping at 12 months and 15 months, according to our legal advice, falls foul of exactly the same issue, although under a different law, where the administration is trying to take away the accrued rights under human rights legislation. Pensions are regarded as possessions and we think this will be as well. We do not think it will be a workable scheme. What the administration and the Cabinet Office need to do is come together and have an agreement. There is all this focus always on the terms. The best way to reduce staff is through natural wastage and not through compulsory redundancy, and we did that for about 100,000 people and that would be the best way to save money going forward.

  Q7  Robert Halfon: With the Bill looming in the background, do you think that ministers will be prepared to engage in constructive negotiations?

  Mr Lanning: I think what is being proposed at the moment is an unreal process to say we are proposing 12 months and 15 months and putting a Bill through a speedy process—and we have not heard of a Money Bill being used for these sorts of purposes in the past—and then expecting there to be free collective bargaining to come to an agreement with that gun to our heads. We think it will produce the reverse effect and it has certainly gone down very badly amongst the ordinary civil servants out there. We want and have said regularly let us have proper talks. We recognise the need for change, we recognise that there are bits that are discriminatory and we recognise the need to save money, but there also has to be recognition about the protection of people's accrued rights.

  Q8  Robert Halfon: And would you be prepared to accept the terms of the February 2010 deal and, if not, why not?

  Mr Lanning: We come back to the fact that there was a lot in that that we did find acceptable and we thought if we had carried on a bit further we would have been able to come to an agreement. We did not feel that the cash protection for the lower paid went far enough but if there was movement and change around that area that would be a basis for discussion for us.

  Q9  Robert Halfon: The chap who wrote in The Guardian Daniel Calder, one of your members, said Mark Serwotka should leave because of the failure to accept the February 2010 deal. What do you say to that?

  Mr Lanning: Go and listen to the High Court judge. It just seems wrong that the union gets pilloried for using the due processes of the law. It was not the union that was found to have acted wrongly. If it had been the other way round, if the union had been found to have acted unlawfully, I am sure it would not be everyone saying the administration were wrong to go off to court. We felt the Cabinet Office in the last administration was wrong and the reason is this need or wish to try and forcibly take away people's accrued rights. If that was not the basis of discussions then I think we would have a much more productive discussion.

  Q10  Michael Dugher: On a broader point, if I may, what in your view is the extent of engagement that you have had with the Cabinet Office and particularly new ministers in terms of these negotiations? Do ministers have an open-door policy with yourselves? Are conversations real and meaningful or do you think that you are just brought in occasionally to "be handled"?

  Mr Noon: I also chair the Council of Civil Service Unions, although I am not here in that capacity today, and I would say we have had meetings. We asked for a meeting with the Minister, Francis Maude, and that was arranged with due expedition. I would also say I have not personally experienced anything but courtesy in the discussions, except it would have been much better, and this is a point that I think all the unions made with some force, if we had been consulted first and then if the Minister had come to a decision that he had to legislate or wanted to do something else, that would have happened. Colleagues can speak for themselves but certainly there is no complaint from me about process in the sense of availability of ministers or officials.

  Q11  Charlie Elphicke: One thing that troubles me is you have a lot of hard-working public sector workers like border guardians and they are facing a big loss and yet we seem to have a situation where senior mandarins wander off with large bonuses. Is that justifiable?

  Mr Baume: Shall I answer that one?

  Mr Lanning: Go on!

  Mr Baume: There is a lot of misunderstanding about so-called bonuses out there. The Senior Civil Service, which is governed by the Senior Salaries Review Body, which as MPs you know very well, has a pay system actually introduced by Michael Heseltine back in 1996 that has what are called in the press "bonuses" which are a fixed part of the pay bill and which are non-consolidated performance pay awards. These are paid to about two-thirds of senior civil servants of varying sums but the average payment is about £8,000 a year. The average salary, by the way, for the Senior Civil Service is around £78,000. That is slightly more than a basic MP's salary, I realise that, but it is not up in the stratosphere. These annual payments are built into the overall pay bill. It is just a fixed pot of money that is allocated each year. Certainly the FDA has never been particularly keen on this scheme for all sorts of practical reasons which we have occasionally talked about before this Committee. We welcomed the Prime Minister's view earlier in the summer that these should continue to be paid for this year, but what particularly we do not want to see is that money stripped out of the pay bill so, in other words, you just reduce the pay bill at a stroke. I should add that the Senior Civil Service is now facing a three-year pay freeze, not a two-year freeze because there is a pay freeze operating this year. I realise there are a lot of people out in local government, even at very junior levels, who are in much the same position, but they are unique in the Civil Service in facing no pay increases for three years.

  Mr Lanning: Could I comment briefly on the point about pay-outs. If you look at the figures from the Compensation Scheme and the payments, the thing which we tried to address in the negotiations is that relatively few numbers of people on high salaries with large periods of service take large amounts of money out of the pot, and so we do not think there is a fair distribution. That was something we were trying to tackle through the protection last time around and I think that is something that we would be very keen to do going forward. The impact of one year is not the same if you are earning £10,000 as opposed to if you are earning £100,000.

  Mr Baume: Can I make one caveat to that. One of the great strengths of the Civil Service is that everybody from Sir Gus O'Donnnell to an administrative officer is in the same pension scheme, they are in the same redundancy scheme and they get exactly the same terms and conditions. The salaries are different and people will obviously have varying lengths of service, but I think one of the strengths is it is exactly the same pensions arrangements and redundancy arrangements. We were willing in the February agreement to actually load the benefit towards lower paid staff, but I certainly would not want to see a situation where we started to put people in senior positions on different types of arrangements to the generality of the Civil Service as a whole.

  Q12  Charlie Elphicke: If there is such galit and fraternit in the Civil Service should not senior civil servants all be in it together with Mr Lanning's members and take their hit on bonuses as his members are taking a hit on compensation?

  Mr Baume: Actually the Senior Civil Service is taking a hit two-fold, firstly, because there is a three-year pay freeze, not a two-year pay freeze operating and, as I say, these bonuses are part of a pay system that was designed by the Senior Salaries Review Body (it is not something we are particularly supportive of) but actually in a way that is already a form of hit because it is money that does not count towards pension entitlement or carry forward year by year. It is not money that somehow appears on top of the pay system. It is an integral part of how the pay system is structured. As I say, it is not one that I am particularly keen on but it is one that has been in place now for about 15 years.

  Q13  Kevin Brennan: In considering the route you took of going to court over this and the implications of that, did you factor in the possibility of a change of government?

  Mr Lanning: Yes, we would have been silly for it not to be in the minds. There was a general election looming. It was bound to be a possibility, the last administration was not that popular, but actually what was driving us was to try and find a fair solution. That is still the case and we have to deal with whoever the administration is at the time.

  Q14  Kevin Brennan: So you thought you would get just as good a deal from an incoming Government as from the previous one? That was your strategic thinking on this?

  Mr Lanning: We did not know what the in-coming Government would be.

  Q15  Kevin Brennan: Well, not a Labour Government obviously if it was going to change.

  Mr Lanning: Let us first be clear, we are not party politically affiliated.

  Q16  Kevin Brennan: I understand that; that is not the question.

  Mr Lanning: And what we felt was that the deal on the table at that time was not acceptable to about half of our membership.

  Q17  Kevin Brennan: I understand that but I am just asking did it strategically enter your mind that an incoming Government that was not a Labour Government might want to deal on different terms altogether?

  Mr Lanning: It did.

  Q18  Kevin Brennan: It was not an important matter?

  Mr Lanning: It was not the overriding factor. The overriding factor was, I think, to try and achieve a fair outcome and whether us signing up to a deal at that point was the right thing for us to do; we felt not.

  Q19  Greg Mulholland: Mr Lanning, do you still think that pursuing the legal route is the best way to protect your members' interests at this stage rather than sitting down with the other unions and ministers to see if you can reach a negotiated settlement?

  Mr Lanning: We have never thought the legal route is the best route. It has only been a last resort for us to do when we have not been able to reach agreement. We have said, and still say, we would like to have a proper, open, without pre-conditions on either side negotiation to try and reach agreement because they are the things that last. If it is imposed one way or another, be it by the courts or otherwise, then it is not going to stick. It will only be a collective agreement that does stick.

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