2. Letter from Rt Hon Francis Maude MP,
Minister for the Cabinet Office and Paymaster General, to the
Committee Chair, 25 October 2010
Thank you for your letter dated 13 October 2010,
about the Superannuation Bill. In my discussion of the Bill, I
will refer to the Bill as introduced in the House of Lords on
14 October 2010. You have asked for a more detailed explanation
of the justification for interference with civil servants' rights
under Article 1 of Protocol 1 (A1P1), on the assumption that the
right to peaceful enjoyment of possessions applies—which,
as you say, is not the Government view.
The Government considers that the Bill does not interfere
with possessions falling within the scope of A1P1. However, without
prejudice to that position, we also believe that if the Bill did
constitute an interference with A1P1 rights, such an interference
would be fully justified. It is well-established that the Government
is entitled to a wide margin of appreciation in matters of social
and economic policy: cf decision of Court of Appeal in R (Global
Master Fund LP and others) v HM Treasury, [2009] EWCA Civ
788, para 75 (given macro-economic context, court should only
interfere if decision was "manifestly without reasonable
foundation").
There is a very pressing need for reform of the Civil
Service Compensation Scheme (CSCS), especially in light of the
Budget deficit. The current CSCS, as revived by the Sales J judgment
in R (PCSU) v Minister for the Civil Service, [2010] EWHC
1027, is simply unaffordable. The current CSCS terms include a
service and age-related payment of up to 3 years' pay for those
taking compulsory early severance or redundancy. The current terms
also provide for an enhanced retirement package for those aged
between 50 and 60, with at least 5 years' service. The enhanced
retirement package for an individual employee can cost employers
6 times that employee's annual pay.
The current CSCS terms are significantly out of kilter
with other parts of the public sector, and also the private sector.
It is unfair to taxpayers to expect them to continue to fund the
current CSCS benefits. I consider the Superannuation Bill is an
essential reform, and that it strikes a fair balance between public
and private interests.
Clause 1 of the Bill removes the requirement for
trade union consent for detrimental changes to the CSCS. This
is needed to reform the current position, whereby a single trade
union can veto reform to the CSCS. Clause 1 does not affect accrued
pension rights, and it leaves intact the need to consult trade
unions. The Cabinet Office is in discussion with trade unions
about producing a new scheme, which we believe will be fair to
civil servants and the tax payer, and also protect the lowest
paid civil servants. Our proposals currently feature a cap of
21 months' pay, the ability of staff near to their pension age
to access an unreduced pension and extensive protection for those
who are lower paid through the use of a deemed salary. This protection
will cover almost 50% of staff.
Clause 2 contains limits to the amounts which can
be paid to civil servants under the current CSCS. These amounts
are capped at 12 months' pay for compulsory severance, and 15
months' pay for voluntary severance. Clause 2 is necessary because
we cannot continue with the status quo, namely a trade union veto
on any reforms of the current CSCS terms. However, I have always
made it clear that I hope a new compensation scheme can be put
into place, after negotiation with trade unions, and that I can
then repeal clause 2 using the powers in clause 3. However, I
believe the caps in clause 2 are necessary unless and until a
new scheme is implemented, otherwise we would return to the unacceptable
position we are currently in. Further, I consider it is necessary
to retain the powers to revive clause 2, should for some reason
any new scheme be delayed, otherwise we would again return to
the current position.
I chose the caps of 12 and 15 months' pay as I believe
that the best terms should be available to those who volunteer
to depart rather than those who are compulsory dismissed. I have
been consistently clear that these figures are not the last word
on the issue. Instead I consider them to be comparable to good
practice in the private sector and a sound basis for discussion.
The figures chosen represent a minimum below which I am not persuaded
that the Government should go, rather than the highest limits
above which we would not wish to pass.
I think that we should be encouraging voluntary departures
so as to reduce the amount of time during which staff suffer the
stress of uncertainty about their future and to prevent a refusal
to co-operate until compulsory terms are offered.
I do not consider that the outcomes produced by these
caps will either be arbitrary or so substantial as to affect the
very substance of the right. The scheme will still operate as
now, only with the application of a lower cap than currently.
There will therefore be a consistent, and predictable, effect
on the amount staff would be paid as compensation.
Although in some cases, there will be a large reduction
for some individuals (in the region of 60% to 70% from current
entitlements), the impact on the majority of staff will not be
as significant. Even where there is a large reduction, the individuals
concerned will remain entitled to 12 months' salary, which is
comparable to good practice in the private sector. Therefore the
substance of the right is not affected. To the contrary, it is
unfair to the taxpayer to continue to fund excessive redundancy
packages.
I consider the Superannuation Bill is needed in the
public interest. The current financial climate is such that the
public sector must be reduced as part of the restoration of public
finances. This must include a reduction in staff numbers. If the
current levels of compensation were to be maintained then we would
be forced to reduce spending in other areas in order to either
pay for the compensation payments or to allow for the continued
employment of staff in posts that would otherwise be unnecessary.
This would not be in the national interest and I do not believe
that it would be the best use of limited public sector resources
to continue to pay staff whose services were no longer needed
or to make over generous severance payments to them.
25 October 2010
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