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

Examination of Witnesses (Question Numbers 27-39)


27 JULY 2010

  Q27 Chair: Good morning, Minister and Secretary of State. We are very grateful to you for giving us your time this morning. Would you like to introduce yourselves for the record?

  Mr Maude: I am Francis Maude. I am Minister for the Cabinet Office.

  Mr Letwin: I am Oliver Letwin, Minister for Government Policy.

  Q28  Chair: Does it mean you are both ministers of state?

  Mr Maude: We are both of that rank both attending the Cabinet.

  Chair: Thank you. Charlie Elphicke?

  Q29  Charlie Elphicke: Ministers, the letter to the unions says that the payment caps reflect the current economic circumstances not an institutionalised culture of hostility towards the Civil Service. By introducing that emergency legislation first are you not negotiating with a gunboat style of diplomacy?

  Mr Maude: Our view was that had the scheme that was introduced by the last Government, which was diluted as the negotiations went on, I understand, in order to secure the agreement of all of the unions, including PCS, remained in place then there would have been a very pressing case made for us to retain that and work with that. As Mr Brennan knows, there were significant savings which had been, as it were, banked by the last administration on the basis of that new scheme, but that option was taken off the table within days of us taking office and the view the Government took was that it was not responsible in financial terms to allow the current scheme to remain in place nor indeed was it defensible in human terms because the truth is that there are significant numbers of people within the Civil Service for whom through no fault of their own but simply because of the way life has moved on there is no job in reality but who are not made redundant because the terms are prohibitively expensive at the moment. In human terms it is not a good way to treat people to keep them in limbo with no actual job, so we took the view that we needed to proceed and proceed with expedition.

  Q30  Charlie Elphicke: What I do not understand is why you are not prepared to use the February 2010 deal as the basis of negotiation and are giving a worse position under the emergency legislation?

  Mr Maude: The reason for that is that the scheme (it was not an agreement, it was a scheme imposed by the last Government with the support of five out of the six unions) was still massively out of kilter with good practice elsewhere in the private sector and also out of kilter with much practice in the public sector. Given that that option had been removed and that it had been impossible previously to secure agreement to that, the view we took was that we should try to get a scheme in place that would be sustainable and affordable for the long term. It remains my intention to do everything we can to secure a negotiated settlement. We have said that there is scope and flexibility both in terms of the headroom for voluntary schemes of redundancy but also particularly we are concerned with giving additional protection to lower paid workers. That is quite a complicated business which is not susceptible to being put into a Bill and in any event needs to be negotiated. We need to be satisfied that it really does meet the concerns of fairness and is affordable.

  Q31  Charlie Elphicke: And what are your plans for bonuses for more senior mandarins?

  Mr Maude: In the previous year I think 75 per cent of civil servants got bonuses; last year it was 65 per cent; this year it will be 50 per cent; and next year 25 per cent. I would not expect it to fall below that. I think the bonus approach—non-consolidated performance pay as I believe it is technically known—is a valuable pay tool to have and I would want it to be retained, but it should not be routinely going round with the rations.

  Q32  Charlie Elphicke: Will you link the bonuses more to actual productivity, which has been falling in the public sector? Will you link those bonuses to productivity so we can see productivity rise?

  Mr Maude: Yes. One of the functions of the enhanced departmental boards that we are starting the process of establishing will be to set up (and this is in the board protocol that we have published) a remuneration committee which will be very much involved in setting the performance terms for those bonuses.

  Q33  Robert Halfon: How will the proportion of bonuses be divided up between the high paid and the low paid and will the lower paid benefit from bonuses?

  Mr Maude: The bonus scheme is just a Senior Civil Service scheme. Pay arrangements for the delegated grades below the Senior Civil Service are obviously a matter for individual departments and agencies.

  Chair: The Chairman is failing in his duty to keep to the subject of the Superannuation Bill. If we could stick to that I would be very grateful.

  Q34  Robert Halfon: With the Superannuation Bill in the background are you having positive negotiations with the unions?

  Mr Maude: I am not conducting them on a day-to-day basis. They are being conducted by officials. I have met with the Council of Civil Service Unions a number of times, both before the election, where we had a good and constructive meeting, pretty soon after the election, and then I guess earlier this month after we had announced that we were going to legislate.

  Q35  Robert Halfon: If there was some movement would you be more prepared to go back to the February 2010 deal or not?

  Mr Maude: I would need huge persuasion that we should move off the 12-month cap on compulsory redundancy. It is a pretty universal feature of redundancy schemes that you should always aim for that. We do not want there to be any compulsory redundancies at all. I make that absolutely clear at the outset. It was said that there had only been a handful of compulsory redundancies recently, and that is true, but there were several thousand redundancies which were made voluntarily but on compulsory redundancy terms, so I do not want there to be compulsory redundancies. In a rational world you would have headroom so that you can devise voluntary redundancy schemes which are more generous than the compulsory redundancy terms, but devise them in a way that suits the needs of the organisation and the group of people to whom they are going to apply. What I would want to see is us being able to negotiate a higher cap on voluntary redundancy terms as well as the all important additional protection for lower paid workers.

  Q36  Greg Mulholland: Good morning, Ministers. Obviously this is about the economic situation the country is in and the need to make considerable savings. Could you give us an idea of how much the proposals as they stand will save? The benchmark we have is that when the former Prime Minister, Gordon Brown, announced the reforms back in March 2009 he said that the reforms as proposed then would save £500 million over three years. Can you give the Committee a sense of how much you are telling us that this will save as it stands now?

  Mr Maude: No, not really; it is really hard to do that. The assumptions which lay behind that number were the new terms, which was the February scheme struck down by the court, which were more generous than we think is defensible in the current environment, and based on the same sort of number of redundancies as had been the case in previous years, but we know that there were significant numbers of redundancies which were not actually made because the terms were prohibitive. I cannot possibly know at this stage and departments will be working out their plans for how they deliver the spending reductions which are needed to meet our deficit reduction commitments. Just to say how much you are going to save does not quite work because the truth is that with a prohibitively expensive redundancy scheme people do not get made redundant or in many cases the wrong people get made redundant. You end up protecting more highly paid people who may have been there for a very long time and the result can be more people losing their jobs with a very expensive redundancy scheme. I think a scheme much more realistic and comparable with the private sector scheme is essential for those Civil Service leaders charged with running their departments to make good, sustainable decisions.

  Q37  Greg Mulholland: Could I suggest, Chair, that perhaps we get further clarification on that at a future date as we get further towards knowing exactly what the negotiations will lead to and what sort of savings there will be?

  Mr Maude: I should just make the point, you say this is made necessary by the financial situation and the budget deficit. That makes it urgent but actually the scheme is completely indefensible as it stands at the moment and needed reform in any event.

  Q38  Chair: Can I ask about the Bill and in particular the notes on compatibility with the European Convention on Human Rights, which is rather a longer paragraph than we usually have in such notes because in the case it was clear that the rights accrued through administrative practice were nevertheless legally enforceable rights. The Bill does not seek to address that directly. It places a cap on redundancy payments as an alternative to addressing that directly, but it could be argued that by limiting the right to compensation expected under the Civil Service Compensation Scheme you are in fact seeking to deprive people of their possessions as defined by Article 1 of Protocol 1 of the European Convention on Human Rights. Have you got a comment on that?

  Mr Maude: I am a very long retired lawyer. It is 25 years since I donned a wig and entered a courtroom (in that guise anyway) and I am advised that what we are doing does not in any way breach the European Convention on Human Rights.

  Q39  Chair: It is interesting that your notes on the Bill say: "Second, those limits only apply where notice of compulsory severance is given, or voluntary severance agreed, after clause 1 comes into force. So there is no deprivation of or interference with existing possessions (if any)." It does suggest there is some doubt as to whether these accrued rights are in fact possessions or could be, and is it not quite likely, as we have heard from the union representatives, that they are going to take this to the High Court once again possibly using the European Convention as the grounds for an appeal?

  Mr Maude: So far as that drafting and the note is concerned, I suspect that is admirable lawyerly caution drafted in that way, and I cannot remember the Latin but the English phrase is "out of an abundance of caution" very prudently.

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