Written evidence submitted by the PCS Union (ENT 66)

Enterprise Bill 2015-16 Public Bill Committee

1. The Public and Commercial Services union (PCS) is the UK’s largest civil service union representing around 200,000 members across government departments, agencies and non departmental public bodies, as well as in privatised areas of government work.

2. PCS rejects the proposal in Section 8 of the Enterprise Bill 2015-16 to introduce a cap of £95,000 on the value of public sector exit payments, as this is both unfair and unjustified. We set out our reasoning and evidence for this position below.

3. In the first instance, the consultation on capping public sector exit payments did not comply with the Cabinet Office Consultation Principles. The period of consultation spanned only four weeks and furthermore coincided with the peak holiday period of those affected by the proposals. The Principles recommend that sufficient time is allocated to allow stakeholders to provide a considered approach and goes on to advise that mitigating steps are taken if the consultation period should fall within a holiday period. It further states that a consultation may span up to twelve weeks, illustrating that the four week timeframe was selected to enable minimum rather than meaningful consultation.

4. After the consultation closed, the government response was published less than 3 weeks later, demonstrating again insufficient time to consider the issue and the 4,000 plus individual responses submitted. That the government’s response allocates less than 5 pages to answer the points raised in these 4,000 submissions and the fact that there has been no significant modification of the initial policy position, further evidence the purely symbolic nature of the consultation. PCS believes that the cap should not be imposed through legislation when there has been insufficient consultation and negotiation with those affected and their representative bodies.

5. Furthermore, since the Enterprise Bill began its passage through the House of Lords, a fresh consultation has been launched on 5th February 2016 announcing the government’s intention to make additional drastic and wide ranging changes to public sector exit terms. Another consultation focusing more specifically on the Civil Service Consultation Scheme (CSCS) was launched on 8th February 2016. Following on from the consultations, further legislation could be brought forward to force through the government’s proposals, should attempts to negotiate acceptance of the changes fail. Considering that in the first place it is questionable whether public sector exit payments should form part of a bill concerned with ‘enterprise’, this brings into question whether Part 8 should be part of the Enterprise Bill at all. As well as being a waste of Parliamentary time, it is also unclear why the government has not contained the exit payment cap within this wider (and more thorough) consultation so that representative bodies can negotiate meaningfully on the whole package of reforms which are being proposed. To introduce the cap in this way is therefore underhand and runs counter to good industrial relations practice.

6. The proposal of the exit payment cap itself is the product of political dogma rather than rational argument. This is demonstrated by the lack of evidence or rationale for the proposed cap. There are no references to private sector comparators offered. Nor is there any evidence supplied to demonstrate why the current arrangements do not represent value for money when the current CSCS compensation payments introduced in 2010 were described by the then Minister for the Cabinet Office, Francis Maude, as "fair for the taxpayer" and "right for the long-term". Furthermore, the breakdown of costs provided is insufficient as it is based on estimates. There is also a lack of reasoning given for why the government would exclude financial and other organisations (other than the armed forces) from its proposed cap, even though these payments also come from the public purse.

7. The government seeks to justify the need for a cap on exit payments solely on the basis of the cost of payments to staff in the public sector between 2011 and 2014. This is the only evidence provided and fails to recognise that employment across the public sector has reduced in the same period by 790,000 which generated a massive reduction in public spending. In the civil service, employment has fallen by 107,350 during this period using the current CSCS arrangements. No evidence is provided to demonstrate that a cap would deliver value for money savings as changing the compensation payments naturally affects the number of staff willing to exit the public sector, which may engender higher costs elsewhere.

8. It can neither be argued that these changes are aimed at curbing excessive exit payments for the higher paid. The CSCS already has a maximum salary threshold set in 2010 of £149,820, which already serves to limit the size of exit payments for high earners.

9. PCS has assessed the proposals to reduce the cap on exit payments from the CSCS to £95,000. It is clear that, although this change is likely to impact on a small proportion of civil servants, it will impact mainly on those with long service and it is far from high earners alone who will suffer detriment. For example, if a civil servant seeking an early exit package is aged 50 or over, earning £24,611 or more, and has 34 or more years’ service, they are likely to see their exit payment capped under these proposals. Therefore, the government’s intended policy will cap the exit payments of the public sector’s dedicated and longest serving employees, some of whom earn below the UK average wage.

10. The main reason for this is that the cap as proposed applies to the option to access an un-reduced pension currently offered under CSCS VER terms where the civil servant foregoes the compensation payment and the employing department tops up to cover any shortfall of the actuarial reduction.

11. This proposal is particularly detrimental to staff who would opt to take voluntary early retirement who have long service but who cannot be considered high earners by any measure. The current early retirement option is good value for taxpayers’ money. The proposed cap will remove the option for some people to take early pension with others facing actuarially reduced pensions. This proposal represents a further attack on civil service pension entitlement on top of a series of detrimental changes imposed over the past few years – further degrading the value of a civil service pension.

12. We believe that the current compensation arrangements are fair for a number of reasons:

a. The terms of the CSCS are proportionate for those who are losing their jobs, as they are proportionate to length of service, salary and age. The same rationale is applied to explain higher payments available under the statutory redundancy scheme and is justified by the fact that it has been statistically demonstrated that it is harder to find work when you are older.

b. Redundancy terms form part of the recruitment package and should be honoured in full.

c. As we say above, Francis Maude described the current provisions as ‘fair for taxpayers’ when the changes to the CSCS were introduced in 2010. No explanation is offered as to what if anything has changed that would warrant reducing the cap.

d. The salary cap currently applied in the Civil Service scheme already ensures the system is protected against extremes.

e. The current arrangements already provide good value for money. The previous changes have already delivered major savings to the public purse and the number of people receiving in excess of £100,000 has halved over the past year.

13. All available evidence suggests these proposals will hinder rather than help provide value for money. The current approach taken in the civil service already restricts exit payments for longer service and higher paid individuals. Any further restriction will impact on the ability of the civil service to react flexibly to change and maintain service delivery.

a. The decision to exclude commercially run areas from the cap suggests it is merely an arbitrary figure and as such will run counter to business needs, as it reduces the flexibility open to employers.

b. There is no assessment in the consultation of the impact of the proposals on public sector employers, and the difficulties that will result from the imposition of these proposals in delivery of other government objectives such as managing the workforce and retaining the motivation of civil servants. Indeed, because in the civil service Ministerial approval is already required for exits over £95,000, there have been cases where staff have been prevented from exiting employment because their exit payment calculation breached £95,000 by only a few pounds. Surely if there is a strong business case for someone taking voluntary redundancy on £94,999, the same business case would apply to someone taking voluntary redundancy at £95,001. The cap could therefore create situations where offices are left open for one person where neither the employee nor the employer wish to continue the employment.

c. The cap could even prevent those employees who wish to leave employment on exit terms less than the £95,000 cap from doing so.

We have had reports from members in some areas where they were not able to leave employment because one of their exit options, access to early unreduced pension, was higher than £95,000, even though they were happy to accept the alternative lump sum option which did not breach £95,000. This demonstrates how the cap could prevent some people from leaving employment on what would otherwise be mutually agreeable terms. These people could effectively be left in limbo should the cap be implemented meanwhile massive civil service job cuts see people without a substantive job or any opportunity of redeployment.

d. The consultation proposals also suggest restricting exit payments in circumstances other than redundancy. Included in the list are contractual payments and benefits. PCS believes all of these should be exempt as they are entitlements/ benefits which give flexibility to employers to manage workforce issues effectively.

e. These changes may simply mean moving costs from one section of the public purse to another. While, for example, less may be spent on redundancy payments, it could mean that more is spent on welfare benefits topping up the incomes of those who leave the civil service without enough money to support themselves.

14. PCS is also concerned that these proposals will lead to further discrimination at work. By their nature the caps will disproportionately impact on older people with long service. The government must undertake an equality impact assessment under the public sector equality duty in the Equalities Act 2010, section 149, before any changes are implemented.

15. In tabling this proposal the government is reneging on the settled position reached in 2010 with regards to the CSCS by unilaterally cutting the redundancy benefits of public sector workers. This is yet further evidence of breach of faith by the government against its own staff, and undermines any confidence that civil servants and public servants may still have of the value the government places on hard working loyal and experienced public servants.

16. We urge for these arbitrary changes to be dropped from legislation (as proposed in amendment 117) to allow employers and public sector unions to continue to use their longstanding collective bargaining frameworks to consult and negotiate on terms and conditions that affect workers in their sectors.

February 2016


Prepared 23rd February 2016