Legislative Scrutiny: (1) Superannuation Bill; (2) Parliamentary Voting System and Constituencies Bill

Legislative Scrutiny: (1) Superannuation Bill; (2) Parliamentary Voting System and Constituencies Bill - Human Rights Joint Committee Contents

Bills drawn to the attention of both Houses

1 Superannuation Bill

Date introduced to first House

Date introduced to second House

Current Bill Number

Previous Reports

15 July 2010

14 October 2010

HL Bill 27

None

Introduction

1.1 The Superannuation Bill is is a Government Bill which completed its passage in the House of Commons on 13 October 2010. It completed its Committee Stage in the Lords on 10 November[1] and its Report Stage is scheduled for Wednesday 1 December. Lord Wallace of Saltaire, Advocate General for Scotland, has certified that, in his view, the Bill is compatible with Convention rights.

The purpose of the Bill

1.2 The main purpose of the Bill is to cap compensation payments to civil servants under the Civil Service Compensation Scheme ("CSCS") at a maximum of 12 months' pay for compulsory redundancy and 15 months' pay for voluntary redundancy.[2] The CSCS is made under the Superannuation Act 1972. Under the current scheme the compensation payable to civil servants on redundancy is much more generous, providing for payments of up to 3 years' pay and enhanced early retirement packages which can be up to 6 years' pay.

1.3 The terms of the CSCS were amended in February 2010, but those amendments to the scheme were quashed by the High Court in judicial review proceedings brought by the Public and Commercial Services Union ("PCS").[3] The basis of the High Court's decision was that, under the terms of the Superannuation Act 1972, accrued rights to redundancy payments could not be set aside without the full agreement of all the unions concerned. The more generous terms of the former CSCS revived on the quashing of the amended scheme.

1.4 The Bill also removes the requirement in the Superannuation Act 1972[4] for union consent to detrimental changes to the CSCS.[5] Although the requirement on the Government to consult the unions remains, and is strengthened by the Bill,[6] the provision removing the trade union veto gives the Government the power to impose a new scheme if negotiations with the unions do not reach agreement.

1.5 The Bill also contains a sunset clause whereby the provision in the Bill imposing the caps on compensation will expire after 12 months, unless repealed before then by order.[7] The Government's intention is that a new scheme amending the CSCS will be made after the Bill receives Royal Assent to supersede the statutory limits which will be repealed by order.

Explanatory Notes/Human Rights Memorandum

1.6 The Explanatory Notes to the Bill deal with its compatibility with the ECHR briefly at paragraph 22.[8] The paragraph states that the Government considers that the limits on civil servants' compensation in the Bill are not an interference with their right to possessions protected by Article 1 Protocol 1 ECHR. It gives two reasons for that view, the cogency of which is considered below.

1.7 So far this Session we are pleased to report that Government departments have been very proactive in their provision of information to us about the human rights issues raised by Government Bills. We have received a very helpful human rights memorandum in relation to most Government Bills on or shortly after their introduction. This has greatly assisted us in our scrutiny of Government Bills and enabled us to focus on the significant human rights issues raised by a Bill in our correspondence with ministers. However, no human rights memorandum has been received from the Cabinet Office in relation to this Bill.

1.8 We wrote to the Minister for the Cabinet Office and Paymaster General, the Rt Hon Francis Maude MP, on 13 October asking him to provide a more detailed explanation of the Government's justification for interfering with civil servants' rights to "peaceful enjoyment of their possessions" under Article 1 Protocol 1 ECHR, on the assumption that the right applies.[9] The Minister replied by letter dated 25 October 2010.[10] We consider his answer in detail below.

1.9 On 5 November we also received evidence from PCS on the question of the Bill's compatibility with human rights, including Article 1 Protocol 1.[11] PCS also raise the question whether the Bill's removal of the requirement for union consent to detrimental changes to the CSCS is compatible with civil servants' right to freedom of association with others, including the right to form and to join trade unions for the protection of their interests, under Article 11 ECHR, of which the right to bargain collectively and to enter into collective agreements has been recognised by the Grand Chamber of the European Court of Human Rights to constitute an inherent element.[12] We did not raise this issue in our earlier correspondence with the Minister and we express no view on it in this Report, which is confined to considering whether the Bill's limits on civil servants' compensation are justifiable interferences with their right to peaceful enjoyment of possessions.

The human rights issue

COMPATIBILITY WITH THE RIGHT TO PEACEFUL ENJOYMENT OF POSSESSIONS

1.10 In our view, the most significant human rights issue which the Bill raises is whether the Bill's limits on civil servants' compensation payments under the CSCS is compatible with their right to peaceful enjoyment of their possessions which is protected by Article 1 Protocol 1 to the ECHR.[13]

1.11 The issue has been specifically raised in Parliament as a human rights issue: in evidence before the Public Administration Select Committee:[14] at each stage of the Bill's passage through the Commons (on Second Reading by John McDonnell MP[15] and Bernard Jenkin MP,[16] during Public Bill Committee,[17] and at Report Stage[18]); at Second Reading in the Lords[19] and in Grand Committee.[20]

1.12 Two discrete issues arise:

(a) whether the right to peaceful enjoyment of possessions in Article 1 Protocol 1 ECHR applies and is interfered with by the limits on compensation in the Bill; and

(b), if it does, whether the Bill's interference with that right is justified.

(a) Is there an interference with peaceful enjoyment of possessions?

1.13 The Government's view is that capping the payments civil servants receive under the CSCS does not constitute an interference with the right to possessions under Article 1 Protocol 1 ECHR, for two reasons.[21] First, the Government do not consider payments under the CSCS to be "possessions" within the meaning of Article 1 Protocol 1. Second, even if such payments are "possessions" within the meaning of Article 1 Protocol 1, there is no deprivation or interference with existing possessions because the Bill's limits on payments only apply where notice of compulsory severance is given, or voluntary severance agreed, after the Bill comes into force. The Government's view, in short, is that the Bill does not engage serving civil servants' right to peaceful enjoyment of their possessions under Article 1 Protocol 1 at all, because no entitlement to such payments arises until they are made redundant, which will be after the Bill is passed.

1.14 PCS, on the other hand, argues that the limits in the Bill on the benefits payable under the CSCS constitute an interference with the peaceful enjoyment of possessions of civil servants, or even a deprivation of those possessions. It argues that the Bill will deprive individuals of benefits based on service already undertaken, and of which they had a legitimate expectation in the event of redundancy.

1.15 It is correct to say, as the Government do, that civil servants do not have a strictly legal right to payments under the civil service compensation scheme. They do, however, have a legitimate expectation that they will receive such payments and that expectation is recognised in public law. Indeed, this was an important part of the reasoning of the High Court which led to the amended scheme being quashed.[22] Because the expectation had long been recognised as one "which might be relied on with full certainty", compensation payments under the CSCS were treated by the court as "accrued rights" in the same way as pension entitlements.

1.16 Although the payments to which those accrued rights give rise are not payable until the occurrence of a future event (redundancy), the right to those payments has already accrued because the service in respect of which the rights arise has already been given. The analogy with accrued pension rights is therefore exact: accrued pension rights are also not payable until the occurrence of a future event (retirement), but that does not mean they are not "possessions" within Article 1 Protocol 1 or that no interference is possible until after that future event. The Government's argument that there is no interference with existing possessions because there is no entitlement to payment until the occurrence of a future event is therefore not, in our view, persuasive.

1.17 The European Court of Human Rights has also expressly recognised that a legitimate expectation of obtaining effective enjoyment of a property right can constitute "possessions" within the meaning of Article 1 Protocol 1.[23] As has been pointed out during debate on the Bill, individuals have acted in reliance on their expectation that they will receive the payments to which they thought they were entitled, for example by entering into mortgages in the belief that even if they lost their job they would have redundancy pay that would cover their mortgage repayments.[24] That expectation was entirely legitimate, as the High Court held in the judicial review of the revised CSCS brought by PCS.

1.18 The effect of the Bill on those possessions, however, is, in our view, an "interference", not a "deprivation" as suggested by PCS. This is because, although the reduction for some individuals will be as much as 60-70% from their current entitlement, the effect of the Bill is still only to impose limits on the amount of compensation payable, rather than to take away that compensation altogether.

1.19 In our considered view, having regard in particular to the fact that civil servants' rights to payments under the CSCS have already accrued in respect of service already given, the limits on those payments in clause 3 of the Bill clearly engage civil servants' right to peaceful enjoyment of possessions in Article 1 Protocol 1 and constitute an interference with that right.

(b) Has any interference been shown to be justified?

1.20 The right to peaceful enjoyment of possessions in Article 1 Protocol 1 is not an absolute right. Measures interfering with the peaceful enjoyment of possessions are capable of being justified by a sufficiently compelling public interest, provided the interference is not arbitrary, is proportionate and does not affect the very substance of the right. Therefore, if the Bill's limits on payments to civil servants constitute an interference with possessions within the meaning of Article 1 Protocol 1, that interference calls for justification by the Government.

1.21 The Explanatory Notes do not deal with the question of whether any interference is justified as the Government's view is that the right to peaceful enjoyment of possessions is not engaged by the Bill,. We invited the Government to explain its justification for any such interference on the assumption that the right to peaceful enjoyment of possessions applies and is interfered with by the limits contained in the Bill. The Government's view on justification is set out in the letter from the Minister dated 25 October 2010.

1.22 Without prejudice to the Government's position that the Bill does not interfere with possessions falling within the scope of Article 1 Protocol 1, they argue that any interference would be fully justified by the pressing need to reduce the budget deficit.[25] They also points out that it is "well-established that the government is entitled to a wide margin of appreciation in matters of social and economic policy".

1.23 We accept that the burden of justification for an interference with peaceful enjoyment of possessions under Article 1 Protocol 1 is not onerous. In the context of economic and fiscal policy generally, the European Court of Human Rights allows a considerable degree of latitude to states in deciding what is in the public interest, and is reluctant to interfere with that judgment unless it is manifestly without reasonable foundation. In cases concerning changes to the state pension, for example, the European Court of Human Rights has generally been deferential to arguments of fiscal necessity, although it has carefully preserved a scrutiny role and made clear that even interferences which are justified by fiscal considerations must not be arbitrary or so excessive that they remove the very essence of the right.[26]

1.24 We question, however, the appropriateness of the Government's invocation of the judicial concept of the margin of appreciation when its justifications are being scrutinised in Parliament. We accept that courts will often afford a wide degree of latitude to the Government's judgments in matters of social and economic policy, but its relevance is to the threshold of justification required to satisfy a court: it does not remove the need for the Government to provide a reasoned justification for the interference, particularly to Parliament which, compared to the courts, has both the institutional capacity and the democratic legitimacy to test the Government's justifications in matters of social and economic policy.

1.25 In any event, even in court, although the burden of justification for interfering with peaceful enjoyment of possessions is not heavy, the Government must nevertheless provide some detailed justification for the interference, including an explanation as to why it is considered to be proportionate.

1.26 The Government's justification for any interference is that the current CSCS is "simply unaffordable". Its terms, the Government argue, are "significantly out of kilter with other parts of the public sector and also the private sector" and it is unfair to taxpayers to expect them to continue to fund the current CSCS benefits. The Bill is said to be an essential reform, in light of the budget deficit, and needed in the public interest. If the current levels of compensation were to be maintained, the Government would be forced to reduce spending in other areas either to pay for the compensation payments or to continue to employ staff in posts that would otherwise be unnecessary and this would not be the best use of limited public sector resources. The caps on compensation payments in the Bill do not, in the Government's view, produce outcomes that are either arbitrary or so substantial as to affect the very substance of the right. Although in some cases there will be a large reduction for some individuals (of 60%-70% in some cases), the impact on the majority of staff will not be as significant, and the individuals concerned will remain entitled to 12 months' salary, which is comparable to good practice in the private sector.

1.27 The Government, however, also state that the caps in the Bill are intended as "a sound basis for discussion" of reform of the compensation scheme in negotiations with the unions: a minimum below which the Government should not go, rather than a maximum which the Government would not want to exceed in any negotiated settlement. They are described as "crude caps", "a blunt instrument" and "a safeguard to ensure that if agreement could not be reached, we could at least limit the payouts in the short term."[27]

1.28 PCS in its evidence argues that the limits in the Bill on the benefits payable under the CSCS constitute an interference with the peaceful enjoyment of possessions of civil servants, or even a deprivation of those possessions, which is not justified. They point out that the financial loss in some individual cases will be very considerable; that a one year cap has a materially greater impact on those at the lower end of the pay spectrum; that the Bill is substantially more restrictive of civil servants' rights than the revised scheme which the previous government sought to impose in February 2010, which the Government has said it would have retained had it not been struck down by the High Court; and that the Government's justification for the limits is "couched in terms of unquantified and vague generalities" rather than specific calculations as to what level of savings is required or expected to be achieved, or what sort of scheme is affordable. PCS also argues that there is no evidence of any actual comparison having been made with other public and private sector arrangements, and no account has been taken of the fact that the terms of the CSCS have been part of the package that, over the years, has been used as an incentive to recruit and retain individuals in civil service employment.

1.29 We are not satisfied that the Government has provided an adequate justification for the Bill's particular limits on civil servants' accrued rights to compensation under the terms of the current CSCS. We are conscious that the burden of justification on the Government is not as onerous as the requirement to demonstrate the "strict necessity" of, for example, an interference with freedom of speech. We bear in mind, however, that, even under Article 1 Protocol 1, interferences with accrued rights must not be arbitrary and must be proportionate in the sense that they must not impose too great a burden on individuals in the pursuit of the public interest.

1.30 In reaching our conclusion we have been particularly influenced by the fact that the limits on compensation contained in the Bill are considerably less generous than those which the Government has indicated it is prepared to agree in its ongoing negotiations with the unions. In our view, the Government's own description of the limits on compensation in the Bill as "a blunt instrument" which essentially represent the Government's minimum negotiating position in those negotiations, is not compatible with its argument that the particular limits in the Bill are a necessary and proportionate interference with civil servants' accrued rights. We therefore conclude that the particular limits on compensation payments imposed by clause 3 of the Bill have not been shown to be justified interferences with civil servants' right to peaceful enjoyment of their accrued rights to compensation payments in respect of service already given.

1.31 Finally, we note the Government's argument that it remains necessary to retain the caps in clause 3 of the Bill even after the Bill has been amended to remove the requirement that the unions' consent is obtained to all detrimental changes to the scheme. Asked why it is still necessary to legislate for statutory caps on compensation once the trade union veto has been removed, the Government's main reason is that, in the event of a human rights challenge to the new limits on compensation, providing for the caps in primary legislation will provide greater legal certainty than if they were contained in an amended CSCS which is given effect by statutory instrument.[28] The Government's argument is that, if a human rights challenge to the limits is brought, there will be less legal uncertainty capable of delaying the process of making people redundant. This, they say, is because, whereas an amended CSCS itself can be quashed by the courts if found to be incompatible, thus reviving the old CSCS, statutory limits can only be declared to be incompatible by courts, leaving the limits in force pending the outcome of the litigation.[29]

1.32 We question whether limiting civil servants' compensation payments by statute leads to any less legal uncertainty than doing so by amending the CSCS. The possibility of a final declaration of incompatibility, or a decision of the European Court of Human Rights, that the statutory limits are incompatible with Article 1 Protocol 1, introduces much the same degree of legal uncertainty, because if such a challenge were ultimately to succeed it is likely that the Government would have to remedy the incompatibility by compensating all those affected to the extent of their lost entitlement. In our view, the Government should seek to minimise legal uncertainty, not by questionable distinctions between the relative uncertainty caused by incompatible primary and subordinate legislation, but by providing for limits on compensation for which it can provide a stronger justification than it has provided in relation to the limits in the Bill.

1 HL Deb 10 November 2010 cGC29-60. Back

2 Clause 3. Back

3 R (on the application of the Public and Commercial Services Union) v Minister for the Civil Service [2010] EWHC 1027. Back

4 Section 2(3) Superannuation Act 1972. Back

5 Clause 1.The provision was added to the Bill by Government amendment at Report Stage in the Commons. Back

6 Clause 2, which was added to the Bill by Government amendment in Grand Committee in the Lords, requires the minister to publish and lay before Parliament a report of the consultation. Back

7 Clause 4. Back

8 HL Bill 22-EN. Back

9 Ev p 21. Back

10 Ev p 22. Back

11 Available at www.parliament.uk/business/committees/committees-a-z/joint-select/human-rights-committee . Back

12 Demir and Baykara v Turkey Application no. 34503/97 (12 November 2008). Back