26 Oct 2010 : Column 1119
House of Lords
Tuesday, 26 October 2010.
2.30 pm
Prayers-read by the Lord Bishop of Wakefield.
Introduction: The Lord Bishop of Birmingham
2.37 pm
David Andrew, Lord Bishop of Birmingham, was introduced and took the oath, supported by the Bishop of London and the Bishop of Wakefield, and signed an undertaking to abide by the Code of Conduct.
Public Expenditure: Value for Money
Question
2.42 pm
The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, value for money is a key consideration when allocating public expenditure. The spending review has prioritised growth and fairness, underpinned by radical reform of public services. Departments were asked to prioritise spend against tough value-for-money criteria set out in the spending framework and the economic value of all capital projects was considered. In addition, public ideas were sought on how to make savings and deliver more for less.
Lord Haskel: My Lords, I thank the Minister for that rather narrow accountant's view of value for money. What prompted this Question was when the Prime Minister said recently that there was more to life than money. He said it in the context of the extra value that we get from sport, the arts and having a roof over our heads.
Lord Haskel: The question is coming. The Prime Minister said it in the context of the extra value that we get from sport, the arts and social capital. My question is: will the Minister say how these non-monetary values are taken into account when assessing value for money?
Lord Sassoon: My Lords, questions about value for money are asked in the context of a wide range of other factors that are all set out in the Government's Green Book, which is a 100-page document that has been used for 20 years or so. It has become a model of its kind around the world, and sets out value for money in the context of the complete range of factors that have to be considered.
26 Oct 2010 : Column 1120
Lord Newby: My Lords, does the Minister agree that the effectiveness of public expenditure would be greatly enhanced by the abolition of the 4,000-plus central government targets over local government that was announced by the Chancellor last week? Will the Minister look at adopting a similar approach to other parts of the public sector, including the police and NHS, so that front-line staff can spend most of their time serving the public rather than completing unnecessary bureaucratic paperwork?
Lord Sassoon: I completely agree with my noble friend that the overlay of unnecessary, wasteful targetry that the last Government imposed absolutely detracted from the fundamental consideration of value for money. To emphasise the point, it was not just over 4,000 but 4,700 targets that were swept away from local authorities, enabling them to get on better and do what really matters for citizens.
Lord Jones of Birmingham: Could the Minister please explain where the value for money exists in public expenditure when we constantly untie our overseas aid? Japan, America, Germany and France do not. This is a time when we could have a win-win of increasing the overseas aid budget and helping nations that need our wealth while creating jobs at home and tax from profits at home, rather than doing what we are doing, which is to give taxpayers' money without any custodianship and keeping no control, therefore creating jobs in Japan, France and America.
Lord Sassoon: My Lords, the first thing to re-emphasise is that we have maintained overseas aid expenditure to meet our commitment of 0.7 per cent of GNI from 2013, but in that context we must make sure that the money is well spent. A new independent commission on aid impact will assess all ODA spending, and DfID in particular will protect all UK aid from corruption by assessing risks and using safeguards to prevent the misuse of funds.
Lord Barnett: My Lords, in the spending review, the Chancellor agreed to maintain the spending on the Barnett formula, thus rejecting the serious recommendations of a powerful Select Committee of your Lordships' House, chaired by my noble friend Lord Richard, a former Leader of the House, and including a former Chancellor in the noble Lord, Lord Lawson, and two former Secretaries of State for Scotland in the noble Lords, Lord Forsyth of Drumlean and Lord Lang. He rejected all that, and surely it could not have been on the grounds of value for money. Would the noble Lord care to tell us what the grounds were?
Lord Sassoon: I thank the noble Lord, Lord Barnett, for reminding us of the importance of continued consideration of the pros and cons of his formula. We are talking about value for money and he asks whether it was not on the basis of value for money that we rejected these recommendations, but I think that we had better stick to value for money for this afternoon.
26 Oct 2010 : Column 1121
Lord Forsyth of Drumlean: My Lords, on the subject of value for money, can the Minister tell us what his or the Treasury's estimate is of the difference in value for money obtained when an individual spends a pound according to their own judgment and when that pound is spent by Government when it has been taken from them in taxation?
Lord Sassoon: My Lords, the assessment cannot be done exactly in that way-but when it comes to procuring large public projects and it costs more to cancel the project than it does to complete it, that is not the sort of behaviour that most people would indulge in when spending their own money. I absolutely take my noble friend's point that there is far too much waste in procurement in government expenditure, inherited from the previous Government, and that is not the sort of thing that any of us would do when managing our own budgets.
Lord Touhig: The Government announced £1.1 billion-worth of savings in discretionary spending, including savings in consultancy contracts. Between May and 13 August, the Government signed 50 new contracts costing £10 billion with consultants. The National Audit Office has said that this is not value for money. Indeed, it said that the Government,
these contracts. What is the Government's response to the National Audit Office?
Lord Sassoon: My Lords, shortly after coming into office we cancelled £6 billion of in-year expenditure. That is the sort of rigorous approach that we will take, not only to inherited expenditure but to the management of all new contracts.
Lord Eatwell: My Lords, is the Minister's commitment to value for money and fairness not truly incredible when the Government are cheerfully imposing larger penalties on families with children than they are on the banks?
Lord Sassoon: My Lords, we have introduced a fairness premium worth over £7.2 billion to support the poorest children in this spending review, and I think that that speaks for itself.
Public Expenditure: Members of Parliament
Question
2.50 pm
To ask Her Majesty's Government what would be the net cost implications for public expenditure of reducing the number of MPs to 600 and introducing 300 directly elected Members into the House of Lords.
The Minister of State, Ministry of Justice (Lord McNally): My Lords, it is difficult to attribute the exact savings from having 50 fewer MPs.
26 Oct 2010 : Column 1122
A noble Lord: What's your best estimate?
Lord McNally: Our best estimate is £12.2 million annually, subject to decisions made by the Independent Parliamentary Standards Authority. Estimates on Lords costs will be given when the House of Lords reform Bill is published.
Lord Grocott: I am at least grateful to the Minister for enabling me to win my bet, which was that he would not answer the Question. I suggest that he looks at it like this. Will he confirm that on 5 July, his leader, the Deputy Prime Minister, said that the savings from reducing the number of MPs by 50 would be £12 million a year? Introducing 300 directly elected Members of the House of Lords, who of course would have much bigger constituencies, must therefore be at least six times that, at £72 million. Maybe the Minister's departmental computer could confirm that that would mean a net cost of £60 million. At a time when the Government are looking for any possible cuts in public expenditure that they can find, and given that none of these reforms have any support among anyone out in the real world, why does the Minister not do the common-sense thing, save the money and scrap the lot?
Lord McNally: My Lords, I am rather hurt by the assertion that I did not answer the Question. The noble Lord has confirmed what my noble friend said in another place; that the cost for 50 MPs would be about £12 million. That is half the Question answered; that is five out of 10-a lot better than I used to do in some exams. On the second half of the Question, where the noble Lord is giving numbers for a reformed House of Lords and calculating on his own bases, we will have to wait for the Bill. He and I will then make calculations and be able to assess the cost. I am not in a position to answer both halves of the Question at this moment.
Lord Tyler: My Lords, does my noble friend recall that the previous Administration published a White Paper that had a section on costs for the House of Lords? The noble Lord, Lord Grocott, was a distinguished member of that Administration. Does my noble friend also recall that that Administration then had no economies to suggest for the House of Commons, and does he agree that the coalition is at least making a bid to find a reasonable equation?
Lord McNally: My Lords, I must say that the quality of the questions coming from the Liberal Democrat Benches today is extremely high. I am grateful for that question. I had forgotten that the previous Labour Government had done some costings; when I leave the Chamber, I will go and look at those costings and send them on to the noble Lord, Lord Grocott. That gives me an opportunity to say that the White Paper was partly the work of Mr Jack Straw, who, sadly, has moved from the Joint Committee because he has returned to the Back Benches. The quality of the Bill that is produced for this House in due course will owe much to the work done by Mr Straw, including his calculations on costs.
26 Oct 2010 : Column 1123
Lord Boston of Faversham: My Lords, does the Minister agree that the cost of reducing membership of the House of Commons by any number would be worth paying? Does he also agree that the cost of providing 300 directly elected Members of your Lordships' House would not be worth paying?
Lord McNally: These are judgments that Parliament will make in due course. The argument for reducing to 600 has been well discussed at the other end of the Corridor and has been moving with all due speed. We will shortly have the opportunity to debate these issues ourselves.
Lord Campbell of Alloway: My Lords, does this Question not pre-empt the decision of this House as to whether it will retain an appointed Chamber? Is it really possible to consider this, which is a matter of cost, when retention of the Chamber as constituted is a matter of quality of advice to the nation?
Lord McNally: My Lords, I agree with my noble friend. One of the problems with the persistence of the noble Lord, Lord Grocott, in putting these Questions on the Order Paper, is that much of this is idle speculation by him. We will soon have the Bill and then we can have a proper debate.
Lord Howarth of Newport: My Lords, would not such a reduction in the number of Members of the House of Commons have larger and dangerous implications for the control of public expenditure? With the payroll vote being a yet larger proportion of its Membership, would not the freedom of the House of Commons to scrutinise the Government's proposals for public expenditure, and its capacity to hold the Government to account for their performance over public expenditure, be enfeebled even beyond its present inadequacy?
Lord McNally: In responding seriously, I honestly do not think that this is a numbers game. I agree with the noble Lord that, whatever reforms are carried out at this end, the House of Commons should also sharpen up its act in holding the Executive to account.
Small Businesses: Invoice Payments
Question
2.57 pm
To ask Her Majesty's Government what steps they are taking to promote prompt payment of invoices to small businesses by public sector organisations and within the private sector.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, the Government are working in partnership with business and finance bodies to challenge the long-standing culture of late payment. Our strategy encompasses three key aims: equipping suppliers with the support and guidance they need to better manage their customer relationships, invoicing arrangements
26 Oct 2010 : Column 1124
Lord Harrison: My Lords, given that one in three small firms has to wait 40 days beyond the agreed payment periods to receive an average £38,000 in late payment from Government, public bodies and larger firms, will the noble Baroness study some of the solutions offered by the Federation of Small Businesses? These include having a social clause, which would oblige contractors to pay subcontractors as swiftly as they are themselves paid by Government. She knows very well that small firms worry about obliging larger firms to comply with the late payment Act because they think they will not get future contracts. Secondly, will the Minister enforce the Companies Act 1985 and ensure that Companies House has the wherewithal to name, shame and fine the regular violators of late payment law, which so frustrate our small businesses at a time of financial downturn?
Baroness Wilcox: I thank the noble Lord for the question and the recognition that I come from a small-business background. Therefore, I know what it is like to try to get your invoices through. I have to admit that some of the research that we have done shows us that an awful lot of small businesses are so keen to get a contract-I know because I have done it in my time-that they do not read the small print and produce their invoices in exactly the way that a particular company wants to receive them. There is then an easy mechanism for them to say that the invoice is not suitable for payment. The Federation of Small Businesses, which the noble Lord cited, is well known to the ministry for business and meets regularly with us to help us develop and enforce the prompt payment code. More than 1,000 companies have signed up to that, some as big as Tesco and some as small as Mr Andrews, the plumber in my village of St Mawes.
Lord Razzall: My Lords, does the Minister recognise that the previous Government produced an initiative in the public sector under which invoices were to be paid in 10 days, which was intended to be specifically beneficial to the SME sector? Does she accept that this was typical of so many Labour Party initiatives, in that it was more honoured in the breach than the observance?
Baroness Wilcox: I think that we have moved past the time of saying too many bad things about the previous Administration.
Baroness Wilcox: Well, I have. My job is to move us on, make sure that we get business for Britain and use mechanisms that really work. We have a system for the public sector whereby the big central government departments pay within five days' sight of an invoice. By so paying our big suppliers-at the minute, we are paying 90 per cent of them that way-we are encouraging them to pay the small companies supplying them within the 10 or 30 days that they have arranged, so we are trying our best.
26 Oct 2010 : Column 1125
Lord Campbell-Savours: My Lords, what about the recommendation of Sir Philip Green? He said that the Government should delay paying business bills.
Baroness Wilcox: Did the noble Lord say "delay paying public bills"? I am very sorry. Gosh-there we are. I shall go back and check that.
Baroness Gardner of Parkes: My Lords, is the Minister aware that many payments to small businesses are made by private individuals and that the transfer of money by direct bank payment is still very bad in this country, which causes delays in businesses receiving the money? Over the years, we have been told repeatedly that banks will be encouraged to transmit the money more rapidly, given that it is taken out of your account immediately but does not reach the other party for three or four days. Will the Minister encourage the banks to speed up this payment process?
Baroness Wilcox: Ensuring that banks keep things flowing for business is a long-standing issue. It is very important to ensure that the banks do everything they can in that regard, and for us to ensure that we provide the freedom and flexibility to enable businesses in this country to maintain the business flow which is badly needed right now.
Lord Tomlinson: Bearing in mind the earlier Question answered by the noble Lord, Lord Sassoon, does the noble Baroness think that it represents value for money to have Sir Philip Green produce a report for Government of which Government do not seem to be aware?
Baroness Wilcox: I do not really think I ought to answer questions that were directed at my noble friend.
Lord Swinfen: My Lords, is there not a statutory right to charge interest on late payment of invoices, and after what period does this come into effect?
Baroness Wilcox: Is there a statutory right? I shall have to come back to that in order to be sure.
Lord Jones of Birmingham: I should be grateful if the Minister dealt with the second part of the question. Legislation was brought in to ensure that the major contractor gets paid quickly. However, although he is holding on to the money, that contractor does not pay a small business-that was the second part of the question-and small businesses across the land get caught with this every day. I should welcome an answer to that.
Baroness Wilcox: I agree. Previous legislation brought in the five-day payment. I must say that when I looked through these questions and saw that we were paying within five days, and then saw that some of the contractors further down the line were contracting to pay within 30 days, I asked myself, "Where is that money going for those 25 days?".
Lord Triesman: My Lords, I do not want to make the noble Baroness's life more difficult and I appreciate what she said about Sir Philip, but I wonder whether an entirely novel inspiration might have flowed from the question. Will the Government consider using Sir Philip Green's proposals the reverse way round and use the extraordinary leverage that Government plainly
26 Oct 2010 : Column 1126
Baroness Wilcox: I think the answer is that we should pay when payment is due.
Health: Spending Review 2010
Question
3.05 pm
To ask Her Majesty's Government whether, in the light of Spending Review 2010, they will meet the commitment to free prescriptions for people with long-term conditions, the right to one-to-one nursing for cancer patients and the target of a one-week wait for cancer diagnostics.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, following the spending review, some of the programmes announced but not implemented by the previous Government will not be taken forward. We will, however, explore options for creating a fairer system of prescription charges and exemptions, taking into account the financial context. We are committed to improving early diagnosis of cancer and to ensuring that cancer patients have the care and support they need. Our updated cancer strategy, published later this winter, will set out the future direction for cancer care.
Baroness Thornton: I thank the noble Earl for that Answer, which goes some part, but not definitively, towards answering my Question. According to the Conservative Government's own figures, waiting lists to detect cancer and other serious conditions have almost doubled since Andrew Lansley scrapped the 18-week target and other targets. We know that the quicker cancer can be detected, the better the likely outcomes. How does the Minister justify this growth in waiting lists, made worse by the CSR, and what do the Government intend to do to get back to a situation of reduced and reducing waiting lists that previously existed during the Labour Government? How long does the Minister think that that will take?
Earl Howe: My Lords, the noble Baroness is completely misinformed and wrong. The Government have not scrapped the cancer waiting time standards. Therefore, the figures that she referred to can have no bearing on the scrapping of the 18-week target, which is quite separate. People with suspected cancer will still benefit from the two-week waiting time target. That is clinically underpinned and we are keeping it. The statistics for those waiting for diagnosis on cancer are down very sharply over the longer term. There are, of course, fluctuations from quarter to quarter. The median waiting time at the moment is just under two weeks, and 95.5 per cent of people are seen within two weeks. That is an acceptable figure, although we of course maintain a close watch on the trends.
26 Oct 2010 : Column 1127
Lord Walton of Detchant: My Lords, part of the Question refers to the exemption of prescription charges for people suffering from long-term conditions. In my professional capacity as a neurologist, I looked after many such patients. Is the noble Earl aware that, as a result of recent research in molecular biology and genetics, many people with previously incurable conditions which are genetically determined are facing the prospect of drugs becoming available to treat their condition-so-called orphan or ultra-orphan drugs? Because these drugs need to be taken on a long-term basis, can we have an assurance that, as they come on stream, they will be made available to patients who will then be exempted from prescription charges when receiving this kind of treatment?
Earl Howe: The noble Lord raises two issues: access to new medicines for sufferers from cancers, particularly rarer cancers; and prescription charges. On the first, he will know that we have already created a cancer drugs fund to enable those people who cannot access cancer drugs to apply for funding for those drugs. That was part of the spending review announcement made last week. On the issue of prescription charges, we are looking for ways to make the system fairer than it is at the moment. We have not implemented the previous Government's plan to exempt all people with chronic conditions. Frankly, it was not affordable in the current context. However, we are looking at other means of creating fairness in the system.
Lord Naseby: Is my noble friend aware how important it was that he re-emphasised that there had been absolutely no change in the targets for dealing with cancer patients? Is it not surprising to him that the opposition spokesman was not aware of that fact? If we are to have a further report before the end of the year, will it include a review of NICE's attitude to all cancer drugs, and of their availability to NHS patients?
Earl Howe: My Lords, we believe that there is a long-term role for NICE, not least in the area of assessing the clinical effectiveness of drugs. In the longer term, we believe that the problem that my noble friend identifies can be addressed more satisfactorily by a system of value-based pricing for medicines, which will mean that the price of a medicine will reflect its value to the patient, as assessed. That is a longer-term exercise that we cannot bring in in a hurry, but we are extremely conscious of the problem that my noble friend alludes to. Having said that, I stress that NICE will remain at the centre of our plans to roll out quality in the NHS.
Lord Wills: My Lords, the Minister has just accepted that early diagnosis is key to the survival rates for cancer. Can he confirm that his Government is indeed scrapping the Labour Government's commitment to reduce to one week the wait time for test results for cancer? If he can confirm that, does he seriously believe that extending the prescribed time for diagnosis results is going to help the health outcomes of those living with cancer?
Earl Howe: My Lords, there is no question but that timely diagnosis of cancer is extremely important. I do not think that anyone would argue with that. However,
26 Oct 2010 : Column 1128
Intelligence and Security Committee
Membership Motion
3.12 pm
That this House approves the nomination of Lord Butler of Brockwell as a member of the Intelligence and Security Committee.
Arrangement of Business
Announcement
Lord De Mauley: My Lords, immediately after the Second Reading of the Superannuation Bill, my noble friend Lord Attlee will repeat a Statement on investment in highway and local transport schemes.
Superannuation Bill
Main Bill Page
Copy of the Bill
Explanatory Notes
Second Reading
3.13 pm
Moved By Lord Wallace of Saltaire
Lord Wallace of Saltaire: My Lords, the Bill is an important step in implementing the coalition programme for government, which set out a commitment to,
- "reform the Civil Service Compensation Scheme to bring it into line with practice in the private sector".
The Government's intention is to put in place a scheme, following consultation with the Civil Service unions, that is affordable and that not only is fair to civil servants but can be justified to taxpayers at a time of severe economic hardship. Noble Lords will be aware that this follows closely what the previous Government had intended to do, so I hope that there will be a certain measure of support from the Benches opposite. Indeed, in March 2009, the then Prime Minister, Gordon Brown, announced an intention to reform the existing arrangements in order to control costs and to improve departmental accountability. He said:
"The Government therefore intend fundamentally to reform the severance and early retirement terms for all civil servants in order to control costs. The current arrangements have been in place since 1987 and are inflexible and expensive. The new terms require departments to reduce costs and will improve accountability and value for money for the taxpayer, saving up to £500 million over the next three years".-[Official Report, Commons, 31/3/09; col. 60WS.]
26 Oct 2010 : Column 1129
It may help your Lordships if I set out some of the background to compensation schemes in the Civil Service which we are now hoping to reform. The first legislation to cover the possibility of payment of compensation to civil servants on the loss of office was created under the Superannuation Act 1859. This Act did not create a right to compensation but it did create a framework under which such payments could be made. The Superannuation Act 1965 consolidated the previous superannuation Acts. It included a provision for the early payment of pensions to those aged 50 or more who had been asked to take early retirement in the interests of efficiency. The 1965 Act repeated the provision of a much earlier Superannuation Act-the first one, of 1834-under which authority to pay pensions to civil servants was granted for the first time. It also spelt out that civil servants had no legal entitlement to the benefits. The 1965 Act was supplemented by an administrative code, which set out the payments that a civil servant could expect but also made it clear that there was no legal entitlement to such payments.
Alongside the Fulton committee review of the position of civil servants, the Joint Superannuation Committee of the National Whitley Council was set up in 1968 to review the provisions of the 1965 Act. It reported in February 1972 that improvements were needed for the superannuation scheme,
- "to restore to the Civil Service the position it had traditionally held as one of the leaders in pension practice".
This view was reflected in the Superannuation Act 1972, which granted civil servants rights to their pensions.
I think that it is worth noting here that, unlike a pension, which all civil servants hope to enjoy in their retirement, the provisions for compensation were intended for use only in exceptional and very specific circumstances and that the vast majority of civil servants neither wanted nor expected to benefit from them.
The compensation scheme was amended in 1987 to its current form, which has lasted for over 20 years. However, by 2008 it had become increasingly clear that this scheme would no longer be sustainable when compared with equivalent schemes in the private sector. Indeed, public sector schemes had then become more generous than those in the private sector. Reform became even more urgent when it became clear that cuts in public expenditure were bound to lead to an increase in public sector job losses. Accordingly, with all-party support, in the summer of 2008 Ministers of the previous Government embarked on lengthy negotiations to reform the compensation scheme. The previous Government's negotiations led to a new scheme, which was still generous compared with schemes in the private sector and most of the rest of the public sector. That new scheme was finally agreed after 18 months of discussions with five of the six main Civil Service unions in February 2010.
Ministers then took the view that, notwithstanding the failure to achieve agreement with one of the unions-the Public and Commercial Services Union, or PCS-the scheme should be reformed. Accordingly, the previous Government laid the necessary order to give effect to the reformed scheme as from April 2010. The PCS, without the support of the other five unions, sought a
26 Oct 2010 : Column 1130
That position cannot continue, which is why, in Clause 1 of the Bill, we are introducing provisions to remove the requirement in Section 2(3) of the Superannuation Act 1972 to obtain the consent of Civil Service trade unions to any changes that would lead to a reduction in benefits offered under the Civil Service Compensation Scheme. We cannot operate in a position where a single union can block any change, however reasonable that change may be. However, this does not mean that we will not consult fully with the unions, as we are continuing to do day by day at present. As was offered in another place by my right honourable friend the Minister for the Cabinet Office, I can give a commitment today to look at how we might amend Clause 1 of the Bill in Committee so as to write into the Bill a requirement for meaningful consultation with the unions.
The coalition Government's view, which was accepted on all sides in the Commons when this Bill was under consideration there and which was the view of the previous Labour Government, is that the current compensation scheme is unaffordable and unsustainable. It allows for payments of up to three times annual salary or, for older workers, enhancements to pension and lump sum payments costing more than five times salary. For some, those payments can total as much as six years and eight months' salary. This compares to a maximum for statutory redundancy of 30 weeks' pay with a weekly cap of £380.
Noble Lords will have seen a number of stories in the press headlining what enormous sums the highest paid might receive if taking redundancy and estimates of the very significant costs to the Exchequer of redundancies to higher-paid officials under the current scheme. The level of payments would be excessive even if we were not facing such a difficult financial situation. To maintain the current scheme would simply be unfair and unacceptable to the vast majority of ordinary taxpayers. It is also unfair to lower-paid civil servants. The effect of the current scheme is that it is prohibitively expensive to make redundant civil servants who are highly paid and long serving. The result, therefore, is that when money has to be saved through reducing headcount, the burden tends to fall disproportionately on the lower paid, more of whom will lose their jobs than is necessary or desirable.
That is why Clause 2 of the Bill introduces limits on the benefits that can be provided under the Civil Service Compensation Scheme. Clause 2(2) imposes a cap of 12 months' salary in cases of compulsory severance and 15 months' salary in cases of voluntary severance. My right honourable friend made it clear, during debates in another place, that these caps, as set out, are a blunt instrument. He is right, because the
26 Oct 2010 : Column 1131
The most generous terms currently available are for those aged 50 who have a significant number of years of service and who are compulsorily retired early. A large part of this cost is the enhancement to their pension. Under the Bill, rather than receiving an enhancement to their pension, such staff will now receive a cash lump sum equivalent to the appropriate cap. I emphasise that the Bill will affect only those staff who are issued with their notice or agree a departure date after the legislation comes into effect and while the caps are operating, so any civil servant who has already been issued with a redundancy notice, or receives one before the Bill passes into law, is not affected by the restrictions introduced by this Bill.
Clause 2 also provides definitions to clarify who is covered by the compulsory cap and who is covered by the cap on voluntary departures. Clause 3 provides for the effects of the Bill to be time limited. We have no desire to see this legislation continue any longer than is absolutely necessary. Inclusion of a sunset provision prevents the legislation from continuing ever onwards. Instead, if we wish to renew it, the Government would be obliged to return to it.
Alongside the provision for prolonging the effects of Clause 2, there is also an option to bring forward its termination date. Our firm intention is to resolve this issue by discussion rather than legislation and, provided that that is possible, we will then make the order that repeals what will be Section 2 of the Act.
We are close to getting a negotiated agreement. My right honourable friend the Minister for the Cabinet Office announced on 7 October that the Government had concluded negotiations with five of the Civil Service unions on a new Civil Service Compensation Scheme. The new scheme would offer significant extra protection for lower-paid staff and for those with long service who are close to retirement. As part of the Government's commitment to fairness, it would also limit the maximum payments to the highest earners.
Key measures of that proposed new scheme include, first, a standard tariff, where each year of service provides one month's salary in the event of redundancy. The tariff would be capped at 12 months for compulsory redundancy and 21 months for voluntary redundancy. The other key measures are, secondly, that all civil servants who are made redundant-voluntarily or compulsorily-would be entitled to a three-month notice period; thirdly, that there would be significant protection for lower-paid civil servants, so that any civil servant earning less than £23,000 who is made redundant would be deemed to earn that amount-that is to say, £23,000-when their redundancy payment was calculated; fourthly, that payments to the higher paid would be limited, so that staff earning more than six times the private sector median average earnings-currently just short of £150,000-would have their
26 Oct 2010 : Column 1132
This offer is a good one and we seriously hope that it will still be possible to secure the agreement of the sixth Civil Service union, the PCS. However, should this not be so, the Bill will mean that the Government and the country will not be subject to an indefinite veto over the reform of this scheme.
I can confirm to the House that a delegated powers memorandum on the Bill has been submitted to the Delegated Powers and Regulatory Reform Committee. Also, my right honourable friend the Minister for the Cabinet Office has written to the Joint Committee on Human Rights about the reasons why we believe that this Bill is in line with the United Kingdom's human rights obligations. I look forward to reading any comments that these committees may have to make on the Bill.
Finally, and to avoid any doubt, I want to underline that this is not in any way an attack on the principles that govern the British Civil Service. The Government believe in the continuation of the British system of a permanent and non-political Civil Service, with its values of integrity, honesty and impartiality and with open recruitment and advancement on merit. These values are as much to be cherished and nurtured today as ever.
I shall now listen with great interest to the points that noble Lords have to make both on the Bill and on the practical implementation of the scheme. The Government are convinced that reform of the Civil Service Compensation Scheme is in the national interest and the interests of the British economy and I earnestly hope that a successful negotiation will render the provisions in Clause 2 unnecessary. That is the coalition Government's aim and I will do all that I can to help to deliver it by guiding this Bill through your Lordships' House. I commend the Bill to the House.
3.29 pm
Lord McKenzie of Luton: My Lords, I start by thanking the Minister for his explanation of this short Bill and some of the history associated with the compensation scheme and for his courtesy in facilitating meetings yesterday, which I found very helpful.
Despite its brevity, the Bill has the potential to impact the lives and aspirations of many. We approach it in a constructive manner that recognises the sensitivity of the issues that it is intended to address through the reform of the Civil Service Compensation Scheme. The Government have said that they put great stock in wanting to reach a negotiated settlement, and there was indeed a consensus in the other place that that would be the right course of action. However, it is our duty, in seeking to improve the Bill, to ensure that it reaches the statute book in a way that is practical, fair and in the long-term interests of the country.
Let me be clear: we agree that the current arrangements are in need of reform. That is why in February this year, when still in government, we brought forward proposals that would have saved £500 million over
26 Oct 2010 : Column 1133
We accept that the position would have had to have been addressed by any incoming Government, but before commenting on how this Government have responded we might just reflect on the context in which these matters must be considered. We know that the Treasury predicts half a million public sector job losses over the CSR period. Of course, not all of those will be Civil Service jobs, but perhaps the Minister will update us on his latest estimates of how many will be. With PricewaterhouseCoopers predicting half a million private sector job losses caused by the spending cuts, the British Chamber of Commerce expecting unemployment to rise for the next two years and the CIPD forecasting that unemployment will not fall below 2010 levels for the whole of this Parliament, there will be a difficult alternative employment market for many civil servants who lose their jobs.
Being fair to those who lose their jobs is paramount. We must be fair not only in terms of compensation and pensions but in the support that individuals receive when they leave the service. Evidence given to the Committee in another place gave testament to how, through a range of sophisticated techniques-including redeployment, reskilling and, of course, good quality voluntary redundancy schemes-the service has successfully managed a headcount reduction of more than 80,000 over recent years. Fairness means ensuring a credible bridging policy for those individuals affected by the Government's cuts. The Minister's press release prematurely announcing the conclusion of negotiations with the trade unions also refers to significant changes that are planned to shorten the process for making staff redundant. Can the Minister confirm that, the CSR and the press release notwithstanding, the same levels and quality of support will be available for those who will depart the service over the next four years?
There is a perception that civil servants cope with such things because they are all on large salaries and feather-bedded pensions. This perception is false and is often fuelled by untypical examples that arise in the public sector at large being extrapolated to suggest that those examples are the norm. The reality is that pay in the Civil Service is substantially below that of the private sector or other parts of the public sector. The median salary is around £22,000 per year, with 40 per cent of civil servants paid less than £20,000 per year. For these people, enhanced protection for redundancy formed part of a package, which helped to ensure reasonable levels of job security and made it more palatable to accept lower levels of pay. At Second Reading in another place, the Minister himself referred to the great myth that all civil servants are highly paid.
26 Oct 2010 : Column 1134
We should also be mindful of the hugely important part that the Civil Service plays in our national life. Its professionalism and integrity make the process of government work. Through its commitment and work, government continues to function normally even during the heady periods of the electoral cycle and changes of political Administration. The Minister now has first-hand experience of that.
I turn to the specifics. As we have heard, the Bill has three clauses, and in their current form we have difficulties with each of them. Clause 1 was a rather rushed addition that the Government introduced late in the proceedings of the other place and that no one, including the Government, appears to be wholly satisfied with. The clause proposes to remove the statutory requirement on the Government to have the agreement of the Civil Service unions before decreasing any compensation benefits. The clause will amend Section 2 of the Superannuation Act 1972.
The trade unions are understandably concerned that, if the Bill is passed as drafted, their ability to engage meaningfully in negotiations will be undermined. In its current form, we cannot support that provision. We accept that, where a serious and concerted effort to reach agreement has failed, the Government should ultimately be able to compel a settlement. However, such a right should be exercised only on the basis of clear, systematic, open and proper negotiations with the workforce and its recognised trade unions, and the process should be reported to Parliament, which should be the arbiter of whether the process is fair and transparent.
We understand and have heard that the Government have committed to redrafting Clause 1 in consultation with the trade unions. The wording of any such amendment will be critical, so we will look at it in detail when it is introduced. We will be particularly interested in whether it incorporates natural justice elements and enables due process for consultation. We look forward to seeing the Government's amendment in due course and to having sufficient time to consider its implications.
Clause 2 has been controversial from its introduction. It proposes to introduce a crude capping mechanism by placing a maximum amount of compensation payable to civil servants-12 months for compulsory redundancies and 15 months for voluntary redundancies. If implemented, that would produce dramatically worse outcomes for many civil servants in comparison with the existing scheme and the February 2010 scheme. Compared with existing arrangements, some civil servants could lose two-thirds of their current entitlement. That is particularly unfair to longer-serving individuals, given that current arrangements are based on years of service.
Those caps are punitive, unfair and unworkable. They were put forward without any consultation, have led to mistrust and have created real concerns among staff. It is clear from the evidence provided by the trade unions that the inclusion of the caps in the Bill was not helpful in creating a climate for negotiations and was demoralising for staff who see themselves assailed by redundancies, proposed extra costs of pensions and freezes on pay.
26 Oct 2010 : Column 1135
The Cabinet Office Minister referred to the caps-this has been repeated today-as a bit of a blunt instrument, which he recognised cannot represent a comprehensive, sustainable scheme. He stressed the importance of a negotiated settlement with greater protection for the low paid and caps on payments for the highest paid. If the Government do not see the caps in Clause 2 as a sustainable basis for maintaining the compensation arrangements, why introduce such caps, especially given that Clause 1 now gives the Minister the power ultimately to impose modifications to the scheme without agreement? The purpose of the caps is now redundant. If the Minister does not ultimately need agreement for changes to the scheme, as proposed in Clause 1, one has to ask why the caps should be retained.
As we have heard, things have moved on and an agreement has been reached with four or perhaps five of the Civil Service trade unions-including Prospect, FDA, Unite and GMB-which the Minister is minded to implement under the provisions of Clause 1, immediately following the entry into force of the Bill. As we have also heard, Clause 3 permits the Minister for the Civil Service to repeal Section 2 by order. If we are not able to convince noble Lords to seek the removal of the Clause 2 caps during the passage of the Bill, we might be comforted that it is planned to repeal the provision as soon as the Bill is passed. I think that the Minister earlier confirmed that that is the intention and that that will definitely happen.
Clause 3 also contains a sunset provision, so that while Clause 2 will otherwise expire at the end of 12 months unless earlier repealed by an order, it can also be either extended for a period of six months or, bizarrely, revived for six months following its expiry or repeal. Having been laid to rest, it can be brought back from the dead-it was rather aptly coined the "zombie clause" in the other place-so the effect is that the clause will be a continuing threat to those who might challenge the arrangements that the Minister will implement.
Like zombies, zombie clauses are not common-one of the few examples relates to emergency terrorist legislation-so can the Government explain why such a measure is now necessary and appropriate? If the Minister is not confident that the amended scheme that he has negotiated is secure, whether in its dealing with accrued rights or proper consultation, he should seek to amend it. To hold in reserve draconian caps as a continuing threat to the workforce, on the pretext that someone might challenge the amended scheme, is, frankly, unacceptable. The Clause 2 caps must not be a default position for the scheme. With the assurance of the Minister that Clause 2 is to be repealed the day after the Bill becomes law, we will seek to have the provisions that allow for the revival of the clause to be removed from the Bill.
We welcome the Government's commitment to draft amendments to reinforce the obligation to consult and to make the process more transparent. We hope that those amendments will allay our concerns, and we look forward to the opportunity to consider them during the passage of the Bill. Like removal of the right to revive Clause 2, progress on an amendment to address Clause 1 would help to redress some of the
26 Oct 2010 : Column 1136
We have heard today an update from the Minister on negotiations with the trade unions and the extent to which agreement has been reached. Our preference would have been to see the February 2010 proposals as the starting point for an updated scheme, but this is not where we are now. The agreement being advanced is in some respects a less generous package, but we acknowledge that it contains improved protections for the low paid, which we support. The Minister, it is to be hoped, will be able to confirm that it addresses, in so far as it is considered relevant, the issues of accrued rights and the Human Rights Act.
It is not the most comfortable position to have to proceed without agreement with all the trade unions. It is to be hoped that there is a chance yet for all six to be part of a negotiated way forward, but we are under no illusions about how difficult this would be. The Government could yet contribute to that end by removing from the legislation the Clause 2 caps and by ameliorating its approach to imposing a scheme. We hope that they will do so and that we will ultimately be able to support the Bill.
3.42 pm
Baroness Noakes: My Lords, it is a pleasure to follow the noble Lord, Lord McKenzie. It was good to hear the support of the Benches opposite for what the Government are trying to achieve in the Bill.
Last week my right honourable friend the Chancellor of the Exchequer set out the outcome of his spending review. The message could not have been more stark: 13 years of Labour government have left the economy of this country on its knees. Our Government are now taking some painful but necessary steps in order to restrain public expenditure. We will be able to begin the long road back to a healthy economy once the budget deficit is eliminated, and that requires the tough action set out by the Chancellor. Even then we will not get back to the economic health that existed when we left government in 1997, and no one should be in any doubt that the expenditure cuts are in any way optional.
The decisions that follow from the need to cut public expenditure may seem harsh to those in the public sector, but private sector businesses face these kinds of decisions all the time. Businesses constantly have to adapt their costs to meet market imperatives, whether caused by recessions or changing markets, and they often have to resort to redundancy programmes. What the public sector is now confronting is not an unusual phenomenon.
The Office for Budget Responsibility estimated in June that nearly half a million jobs would be lost in the public sector. According to the Office for National Statistics, public sector employment was just short of 6.1 million earlier this year. That means that the loss of jobs in the public sector will be around 8 per cent. Reductions of this scale may well feel huge in the public sector-and there will be areas where the
26 Oct 2010 : Column 1137
It should not be a big surprise to the public sector that there will be reductions in jobs. In the past 13 years, a disproportionate share of employment growth in the UK has been in the public sector. A report earlier this year from Manchester University's Centre for Research on Socio-Cultural Change estimated that in the 10 years after 1997, 57 per cent of the jobs which were created were either in the public sector or were funded by the state. The public sector picture has been one of a relentless rise in employment.
I mentioned that the current figure is around 6.1 million. When the previous Government came into power, the figure was 5.2 million directly classified to the public sector. Even if we exclude the nationalised banks from the current figures, the rise in public sector employment under the previous Government was 13 per cent. That rise in direct and indirect public sector employment was not sustainable on a long-term basis when it was created. Indeed, the Manchester University report to which I referred described it as an unsustainable and undisclosed business model for the UK. The courageous way in which our Government are dealing with the economy will ensure that the UK's business model will start to revert to one which has more staying power for the future.
When reducing jobs in the public sector, I am sure that the Government will look first to the scope for natural wastage to play a part. As I understand it, retirement and other natural wastage runs at a rate of around 8 per cent each year in the public sector, which is not far adrift from the total reductions required as a consequence of the spending review. But of course life is never that simple; natural wastage rarely does the full job, and some tougher action by way of redundancy will inevitably be required. That brings me to the Bill, the aims of which I completely support.
The plain fact is that the current redundancy scheme operating for the Civil Service is too generous by a country mile. It allows some individuals, as we have heard from the Minister, to take more than six years' pay when they leave. That means that if the Government wish to remove jobs by way of redundancy, the net cost savings achieved might be deferred until the seventh year after the redundancy. That is a personnel policy for the madhouse.
Those of us with a private sector background are simply astounded that a scheme which entails a six-plus year payback continues to exist. In the private sector, redundancy terms range from the extremely modest statutory scheme to voluntary schemes which involve higher payouts. Oral evidence given to the Public Bill Committee in another place showed that caps of two years' pay would be the maximum in the private sector, with most companies currently reducing that maximum to nearer one year. By any comparison, the current Civil Service scheme is out of line.
Some have argued that generous pension and redundancy terms are part of an overall bargain which goes alongside pay, which is lower in the public than in the private sector. However, that argument has been
26 Oct 2010 : Column 1138
The Government face the economic imperative of eliminating the deficit, and the Civil Service cannot be exempt from the cuts to public expenditure which have to be made. But it is obvious that with the current redundancy terms, the Government will not realise enough by way of early benefits from Civil Service redundancy and may therefore have to make deeper cuts elsewhere in order to meet the unaffordably high transitional costs of Civil Service redundancy if the current scheme is maintained.
To be fair to the previous Government, they tried to revise the current scheme and, as we have heard, to bring in a new scheme earlier this year. Some aspects of that we still thought were too generous, but the direction of travel was right. As the Minister has explained, that deal was struck down as a result of action by the PCS union. The Government have no choice but to bring this Bill before Parliament. I am glad that the noble Lord, Lord McKenzie, acknowledged that, had his party been in power, it would have felt it necessary to bring a Bill of some kind before Parliament.
I completely support Clause 1, which has the effect of removing the need for consent to a compensation scheme. This would bring the Civil Service scheme into line with arrangements in the private sector, where redundancy terms are commonly discussed with workforce representatives, including unions, but where it is rare that an employer is absolutely required to achieve agreement. This, too, was clear from evidence given to the Public Bill Committee in another place.
Furthermore, the evidence showed that it is not regarded as good practice in the private sector to hard-wire redundancy terms into employment contracts, which is the effect of the Superannuation Act 1972. Clause 1 represents an essential modernisation of employment terms in the Civil Service. I should stress that I completely support the need for consultation and for it to be substantive and not a mere formality. I therefore welcome the Minister's assurance that such a requirement will be placed clearly in the Bill by way of amendment in Committee.
Like the noble Lord, Lord McKenzie, I am less certain about Clauses 2 and 3. In fact, I do not understand why they are in the Bill. Clause 2 introduces caps and Clause 3 contains complicated sunrise and sunset provisions. Why are these clauses necessary given that Clause 1 removes the necessity for consent? It seems to me that these clauses amount to no more than negotiation by statute. If I am correct, that is not a good use of legislative time. The Government have said quite clearly that they are negotiating with the unions involved on the basis of a scheme which is far more generous than the limits set out in Clause 2. What is the purpose of Clauses 2 and 3 other than to act as a gun to point at the head of the unions? The noble Lord, Lord McKenzie, and I may be missing something here. If so, I hope that the Minister can explain it.
26 Oct 2010 : Column 1139
I can understand why individuals in the Civil Service see it as unfair that the current redundancy scheme is to be taken away just at the point when redundancies, both voluntary and compulsory, seem to be much more likely. But there is another aspect to fairness-for the taxpayers of this country. Why is it fair that someone in the private sector on average earnings of £25,000 a year should pay tax to fund Civil Service redundancy terms which are beyond that taxpayer's wildest dreams? Why is it fair that our chances of restoring the health of our economy by reducing the deficit are seriously hampered by outdated and overgenerous redundancy terms?
3.53 pm
Baroness Drake: My Lords, continuing the constructive approach adopted by my noble friend Lord McKenzie, it is understood that the Civil Service Compensation Scheme needs to be reformed to strike a fair balance between the taxpayer and the legitimate expectations of civil servants and that the Government must have authority to act on behalf of the taxpayer. But the reform needs to meet four criteria: be fair in its level of compensation consistent with the actions of a good employer; show sensitivity and understanding in the manner of its introduction; be the product of meaningful consultation and negotiation; and provide protection for the lowest paid. All these criteria are consistent with good HR practice of a good employer or large company in the private sector.
However, the Bill as drafted fails to meet those standards. In determining the process for changing the Civil Service Compensation Scheme, a process which should have integrity over the long term, it is not necessary for the Government to give themselves unbridled powers. Compelling a change should be a course of last resort not an action of first resort, which the current draft of the Bill allows and facilitates. The Bill should give clear recognition of the need to change to be preceded by meaningful consultation and negotiation. As drafted, it fails to do that. The Bill should provide for safeguards to be put in place to ensure a fair and transparent process for change to take place. As drafted, it fails to do that. Such safeguards need to strike the right balance between the powers of the Government, the involvement of Parliament and the engagement of trade unions. I fear that the Bill as currently drafted does not achieve an equitable balance. When considering Clause 1 of the Bill, I urge the Government to make it clear that proper consultation and negotiation must take place before changes are put into effect. If the Government do not explicitly support effective consultation processes in the treatment of their own civil servants, it sets a poor benchmark for other employers to follow.
Clause 2 seeks to impose caps on the level of compensation which, in my view, are punitive and unfair and far below what constitutes fair and reasonable. That is particularly so when considered against the extent of the movement from the current scheme provisions. There is no necessity for such compensation caps to be in the Bill. As the Government themselves have conceded, these caps are not intended as a long-term replacement scheme. As such, they can be interpreted only as intending to provide the Government with a
26 Oct 2010 : Column 1140
It is all too frequent in difficult economic circumstances to observe popular calls for scapegoats and in that vein to demonise civil servants as overprivileged and overindulged. That is unfair and unfounded. The vast majority of civil servants are hard-working, conscientious employees, who come to work to do a good job and are motivated to deliver in the interests of the citizens of this country. The efficient discharge of their functions is an essential component of our democratic structures and delivery mechanisms. Civil servants are not just a set of numbers, but ordinary people who have children to raise, rent to pay, bills to meet, and in common with many private sector workers, feel increasingly insecure about job losses and employment.
Half a million civil servants are covered by this scheme. How change to the compensation scheme is managed will influence their morale and motivation. I welcome the articulation of the Government's commitment to meaningful consultation by the noble Lord, Lord Wallace, but urge the Government, in securing the process for and the change to the compensation scheme, clearly to recognise in the Bill itself the importance of due process, consultation and negotiation before change is effected both in the short term and over the long term, and to remove the caps, which are both unfair and unnecessary.
3.58 pm
Lord Maclennan of Rogart: My Lords, it could never be easy to introduce a statutory scheme reducing the compensation entitlements of those leaving the Civil Service prematurely. That was manifested by the experiences of the outgoing Labour Government when their proposals for reform of the scheme under the 1972 Act were taken to the High Court and quashed. That is the immediate background against which we have to judge this Bill and recognise the difficulties that face any Government.
It is also important to reflect that the dramatic headlines about the loss of people employed in the Civil Service have concentrated the minds of those who might not otherwise be so concerned about the terms of the Bill. The previous legislation has lasted for a long time, since 1972. It was not challenged before because there was a gradual expansion rather than contraction of the numbers working in the public sector. That expansion was substantially accelerated in the lifetime of the previous Government; the contraction now envisaged will not reduce the Civil Service to the level at which it stood in 1997 when the last Labour Government took office. It is my understanding that we shall end up with 400,000 more jobs in the public sector than in 1997, notwithstanding the cuts envisaged.
26 Oct 2010 : Column 1141
It is unquestionably highly desirable in making the changes to the terms available to civil servants on premature termination of their employment that the scheme is broadly acceptable to all categories in the service and, in particular, that its provisions ensure proper protection for the lower paid. I believe that the coalition Government have recognised that that is an important condition and have moved to ameliorate the terms on offer in earlier proposals. I have listened with interest to the speeches of the noble Baroness, Lady Drake, and my noble friend Lady Noakes about the precise terms of this legislation and particularly their concerns with Clauses 2 and 3, which would be widely shared. It is not reasonable not to accept and acknowledge the substantial movement towards acceptance of a better deal than was originally proposed in the months since the Bill was published.
When changes were mooted to the current scheme by the Labour Government, five of the six unions involved in the negotiations were prepared to recommend to their members acceptance of what was proposed. That appears to be the position in respect of the proposals of the present Government. It is to be hoped that the sixth union, the PCS, will acknowledge that substantial improvements have been made in what was originally proposed. It has not as yet given any indication that I have discovered of what particular complaints it has, or what proposals it would make to amend the proposed scheme, which has been acceptable to their colleagues. It would be helpful to the Government and the legislature to have a clearer idea of what its goals are.
As for the provisions of Clause 1, it seems entirely right that no single body of employees in a union should be able to hold the country to ransom. It is entirely right that there should be requirements to ensure proper, meaningful consultation about proposed changes. I very much hope that that will appear in the Bill, and I was glad to hear my noble friend Lord Wallace give that assurance. On the other hand, pay in the private sector-and indeed in the rest of the public sector, including in the National Health Service-appears to have risen more rapidly in the past 10 years than in the Civil Service. That trend may not continue. In considering comparability between sectors, we should recognise the differential pay levels of the different sectors and the difficulties that will be faced by civil servants, made redundant, who have accepted lower levels of reward than their opposite numbers in the private sector.
It may be unusual to be considering a Bill whose terms could be amended by such sunset provisions as have been provided, but this underlines both the urgency of the situation and, I believe, the willingness of the coalition Government to negotiate. I very much hope that it will be possible to introduce the arrangements that encourage flexible voluntary redundancy arrangements in the months that lie ahead.
Redeployment within the service may not always be possible, but in the present circumstances systematic consideration should be given to it, including postponement of final service of notice, to allow public servants the best opportunity of re-employment. In April 2008, the then Government introduced protocols
26 Oct 2010 : Column 1142
It is immensely important that these changes come about with the least hardship. People who are employed in parts of the country far from the capital city will not find it easy to be redeployed within the public sector, and many of them will find it exceedingly difficult, in areas of existing high unemployment, to find alternative employment in those areas. They may have to move, and for some that would constitute enormous difficulties. I hope that the maximum flexibility will be exercised in terminating employment and issuing redundancy notices.
I recognise that there has been valuable movement in the direction of easing that situation by increasing pay in lieu of notice to three months; and other changes in the proposed new scheme, such as the readier access to pension arrangements at pensionable age, are welcome and could help considerably in those respects. We await with interest the tabling of the amendments that the Government propose to see whether they themselves will contribute to the easing of the difficulties that are faced, particularly by the PCS. I profoundly hope that that will be done.
4.09 pm
Lord Turnbull: My Lords, to the outside world it may look as though the changes proposed to the Civil Service Compensation Scheme are part and parcel of the coalition's spending cuts. In fact, this issue has been under discussion for at least seven or eight years-long before spending cuts were mooted. Early in Labour's second term, when I was Cabinet Secretary, the compensation scheme was identified as an issue to be addressed. This was driven by three considerations.
First, at around this time thinking on the issue of ageing was changing. The Strategy Unit had produced a seminal report drawing attention to the changing demographics. In particular, it criticised the early retirement culture in a world in which longevity was increasing rapidly. Incentivising people barely past the age of 50 to retire rather than seek other employment may have been convenient for employers, but for the economy as a whole it made no sense. It was this change in thinking that led eventually to the increase in pension age that is now proposed and the lifting of the compulsory retirement age in the Civil Service. The Civil Service Compensation Scheme is therefore a piece of unfinished business in this wider agenda.
Secondly, the arrangements for Civil Service compensation which date from 1972 were, for some categories of leavers, out of line with the rest of the public sector, massively out of line with the private sector, and bore no relation at all to the statutory scheme. There was therefore a growing sense of unfairness because taxpayers were funding a scheme for civil servants that was vastly more generous than anything they had access to.
26 Oct 2010 : Column 1143
Thirdly, too much of the compensation took the form of enhancement and earlier payment of pensions. Since these pensions came notionally from a non-existent fund, the costs were lost in the mists of the public accounts. Had the money come from a funded scheme, the drain on the fund would, I believe, have been identified much earlier and addressed.
The Government-both the previous one and this one-are right to tackle this issue. I support the Bill, albeit as a regrettable necessity made necessary by the failure to achieve a negotiated settlement. I also endorse the tactics used-that is, negotiate if possible, legislate if necessary. I hope, however, that the eventual outcome will be a negotiated settlement whose terms are close to those agreed recently with most of the Civil Service unions. That scheme is simple. It is also fair in a number of ways. It is fair between different parts of the public sector, fair between taxpayers and civil servants, and fair between the different grades of the Civil Service through the provision of the underpinning and the cap on reckonable salary levels. It reduces the extent to which pension provision is used to subsidise early retirement. It provides a premium and encouragement for voluntary rather than compulsory redundancies-rather than the other way around. It also removes the incentive to lay off lower-paid rather than higher-paid people.
There is a hard lesson here for the PCS and its approach of total resistance. If it had agreed to the terms put forward last February by the Labour Government, the coalition would have been put on the spot. Would it have allowed a negotiated agreement to stand, or would it have overturned it? Francis Maude hinted in another place that the coalition may well have let that agreement stand, since the gain then to be made would have been smaller and the resentment caused by overturning it would have been even greater. I urge the PCS to rethink its position. What is on offer in the October package is already worse than what was suggested in the February package. The PCS can go for broke and challenge the legislation. However, if it fails-and the legal advice in the various briefing notes that we have received indicates that it may well-it could end up with worse terms even than are available now, let alone last February, not just for the PCS but for the other unions in the Civil Service council. Since the underpinning means that the majority of PCS members are getting an uplift, that would be inexcusable.
Finally, there is a lesson here for the debate about public sector pensions which will follow the final report of the noble and learned Lord, Lord Hutton. The PCS could make the same mistake by trying to hang on to every aspect of the status quo and refusing to negotiate constructively, but ending up with a worse deal.
4.15 pm
Baroness Turner of Camden: My Lords, I am unhappy about this Bill. I know, of course, that we do not oppose Second Reading in this House and I am not seeking to do that. However, I hope that the Bill will be substantially amended before it leaves us.
As the Explanatory Notes make clear, the object of the Bill is to cut payments to employees who are made redundant. It is being introduced in the wake of the
26 Oct 2010 : Column 1144
I have been in touch with the Public and Commercial Services Union-one of the largest unions, with 300,000 members working across government departments. According to it, the Bill means that, in the event of redundancy, members working across the country will receive a vastly reduced compensation payment; some could even lose 50 per cent of the payments that they have accrued while working for the Government. According to the Explanatory Notes and to the statement made by the Minister this afternoon, an earlier attempt to amend the terms of the scheme was nullified when the union successfully brought judicial review proceedings.
I understand that there have been negotiations between the Minister and representatives of the PCS and the Prison Officers Association, the other large union involved, which has also objected to the main provisions of the Bill. An offer was made that was unacceptable, as the terms would have been detrimental to the majority of members earning more than £20,000 a year with accrued rights to two years' service or more, although it is understood that more favourable provision was available for the very low paid. The legal advice that the union has received indicates that civil servants should continue to be entitled to accrued rights under the compensation scheme. The union states that it is anxious to secure a negotiated settlement. If no agreement is secured, the union would have to consider taking legal action, which could take many months to resolve. If the union were successful, as it could well be, the Government would be bound to adhere to the original entitlements.
As things stand, however, it looks as though the Government are intent on making many civil servants redundant without incurring the costs originally laid down as a result of collective bargaining. As a former union official, I find that unacceptable. What sort of message does that send out to many public service employees-many of them women-already worried about the future in the light of the spending review? "They want to get rid of us as cheaply as possible and they are going to tear up our agreements", is what they will be saying-and that is the impression that will be created. The only way forward is a negotiated settlement with all the unions. As I said, we do not oppose Second Reading in this House, but we must seek to take this further in Committee.
4.17 pm
Lord Newby: My Lords, the noble Baroness, Lady Drake, said in her excellent speech that staff in the public sector feel demonised. I have had a number of conversations with senior staff in the NHS and my experience is that they indeed feel demonised. As a
26 Oct 2010 : Column 1145
However, one reason why this view is taken-in my view falsely-is that many people working in the public sector have not the faintest clue of what is happening in the rest of the world. Incidentally, it is true that many people in the private sector do not have the faintest clue of what is happening in the public sector. However, many in the public sector would be surprised to know how out of line their current redundancy terms are with those that obtain in the private sector. The typical provision, at least for compulsory redundancy, is that people receive one week's payment for each year that they have been employed. Indeed, I am told that this is the standard that DBERR, as it was, recommended to private sector employees. That is very different from what is happening in the public sector.
Even for voluntary redundancies, as the noble Baroness, Lady Noakes, pointed out, the most generous terms in the private sector are now no better than those currently on offer from the Government-indeed, those terms are being reduced all the time. In fact, if you are made compulsorily redundant in the private sector, it is virtually impossible to get a year's pay. You would have had to have started at 16 and still be working at 68 to qualify. The one year that has been proposed in the public sector is a level of compensation unobtainable by anyone in any circumstances in the private sector.
Many people in the public sector do not realise how differentials in pay have changed over the past 10 years. A number of noble Lords have mentioned this already, but recent IFS research shows a public sector pay premium of 2 per cent for men and 7 per cent for women, based on hourly rates. That ignores the other benefits that the public sector has in enhanced pensions and redundancy rights.
As the noble Baroness, Lady Noakes, said, over the past two to three years, in addition to making a lot of people redundant in many firms, the private sector has been adopting a range of flexible labour practices in order to keep the maximum number of employees in work, including reduced hours, frozen or reduced pay and the abolition of bonuses. That has worked to a considerable extent and unemployment in the private sector has not increased to anything like the extent that was originally envisaged.
One of the challenges for those in the public sector, including the unions, is the extent to which they can follow this practice, because surely, more than anything else at this point, they should be seeking to reduce the number of people who are made redundant and who have to leave public service. That should be the logical aim of a public sector or Civil Service leader, because the Government have imposed, in effect, a cash limit
26 Oct 2010 : Column 1146
In local government, steps that to a certain extent replicate private sector behaviour have been taken by a number of councils. In Salford, for example, staff are being asked to work an extra hour a week for no pay-a pretty common thing in recent times in the private sector. In Stockton, refuse workers have been put on a four-day week. That kind of practice, although not desirable in an ideal world, is what we, and the Civil Service and public sector trade unions, should be looking at, instead of fighting tooth and nail, as is happening in some cases, to preserve overgenerous redundancy terms that, if they were continued in their current form, would mean only that in the medium term more people would be made redundant or the size of the Civil Service would shrink even more.
The story so far reads rather like a throwback to the industrial relations that I remember from when I worked in the Civil Service-and indeed went on strike as a civil servant. The Government produced proposals-in this case on redundancy payments-that were still, by private sector standards, extremely generous. The PCS went to court and won. The negotiations dragged on beyond the election, so we now have a situation, not surprisingly, in which a new Government, in worse economic circumstances, find themselves offering less propitious terms than were available earlier in the year. It is a classic case of a union biting off its nose to spite its face. As the noble Lord, Lord Turnbull, said, if the deal offered earlier this year had been in place, it is highly unlikely that the coalition would have sought to overturn it.
Now the question is: what alternative do the Government have to the current proposals? A settlement is urgently needed. Without it, more civil servants will undoubtedly lose their jobs. I am a great believer in negotiations and would have hoped that it was possible to get them in this case, but I, too, have read the PCS briefing, which says:
"In considering the offer, the test PCS used has been a practical one-how many of our members, particularly the lower-paid-are protected by the proposals. The last scheme, with an underpin of £60,000 and a cap of two years, was rejected as our estimate was that it only protected 50% of our members".
The implication of that statement is that any scheme that has any detrimental effect on a significant number of PCS members will be rejected by the PCS. However, I am afraid that if it does not have a detrimental effect, there is no point in changing the scheme. The attitude exemplified in that brief means that the Government have no option but to proceed broadly as they are doing.
I hope, of course, that the maximum amount of consultation and negotiation will take place; indeed, I think that the Government are committed to that. I also have difficulties with the sunset clause simply because, despite the best efforts of my noble friend Lord Wallace, I cannot understand it. To cover an extraordinary series of circumstances in which zombies might be resurrected seems less than satisfactory. However, that is a second-order point. We are now at a point where we have to get a conclusion to a most unsatisfactory situation. I hope that the Bill, as amended, will allow us to do that.
26 Oct 2010 : Column 1147
4.27 pm
Lord Morris of Handsworth: My Lords, I have listened carefully to this debate and have also read some of the documents associated with the Bill. My first impression is that the Bill arises from a good old-fashioned dispute between an employer-the Government-and one of their trade unions. There is nothing strange about that. The employer wants to reduce its costs and the trade union wants to protect its members. However, it is on the process of dealing with the dispute that I want to comment. I say that because I see process rather than politics as the real issue here.
In a normal world, an employer would seek to negotiate a settlement and, if necessary, to have the issues properly dealt with through the medium of arbitration, conciliation or whatever mechanism is open for dispute resolution. That, of course, is the action that the Government always advise to others in disputes. "Go back to work, seek negotiations, go to ACAS". There is nothing wrong with that advice. However, what we see today is a Government employing what I call the political sledgehammer of legislation to crack what is in reality a minute nut compared with all the other issues that they are currently engaged with. I worry about this because it sets a very dangerous precedent. It seems to me that the Government are saying, "You must abide by one set of principles while we abide by a different set". Are we drifting into a situation where on every occasion that a trade union says no to an employer, a Bill will be introduced in another place and then come to your Lordships' House?
The noble Lord, Lord Wallace, and the noble Baroness, Lady Noakes, blame the PCS for retarding the deal. I do not cast any blame. I say only that it was not the PCS that brought the issue to a shuddering halt but the High Court of our land. However, that is not new. The trade unions cannot win. If they take industrial action, they are wrong; if they go to the High Court and get a judgment to stop unreasonable behaviour, as the law interprets it and provides for, they are wrong. I recognise the need to amend the existing regulations but I say that this should happen through negotiation. We should negotiate first, find an agreement and then enshrine it in legislation, because that is the way that the Civil Service works. You do not legislate and then negotiate; you negotiate and then legislate.
The people who will be adversely affected by the Government's proposals for a reduction are not benefit scroungers or people who stay in bed as a lifestyle choice, as it has been termed, waiting for the sun to set; they are hard-working civil servants-public servants. Many of them have made the choice of long-term security over a quick pay packet, and they serve all of us. Of course, in the current situation we recognise that job security is at the top of everyone's agenda. Indeed, there is no secret about the number of public servants who stand to lose their jobs-at the last count, it was more than 500,000. That is the impending problem facing many civil servants.
I see this short Bill as having the propensity to do immense harm. It strikes at the very heart of what we are so proud of in this country-free, democratic trade unions-because it undermines the right of a
26 Oct 2010 : Column 1148
Like everyone in your Lordships' House, I wish to see a speedy resolution to this issue, as it breeds uncertainty, not merely for the legislators, but more importantly for the individuals involved and for those who depend on the public servants who provide public services. I wish to seek assurance from the Government. I should like to know whether the Government now intend to resort to legislation as a first step every time a trade union disagrees. Will the Government take their own advice and use the instruments which are available, such as ACAS, to resolve industrial disputes? Do the Government recognise the ruling of the High Court, as set out in the briefing to which the noble Lord, Lord Newby, referred?
Trade unions want not only free collective bargaining, which is one of the tenets of our democratic society, but they also want fair collective bargaining. The people affected and the people at the negotiating table see the proposals as neither fair nor indeed free. A commitment has been made from this side of your Lordships' House to work with the Government to ensure the speedy passage of a Bill giving proper consideration to the need for some adjustments but equally recognising that the trade unions, by their contribution, can also bring about a speedy resolution for the benefit of all concerned.
4.37 pm
Lord Brett: My Lords, I will echo a number of contributions by noble Lords but I start by declaring an interest. For 10 years, I was the general secretary of the Institution of Professional Civil Servants, whose new name is Prospect. It was then the second largest union with trade union membership in the Civil Service and it remains that today. At that time, in the days of national pay bargaining and then departmental bargaining, I had some 25 years of experience of negotiations in the Civil Service and before that 12 years in the private sector-not least under the watchful eye of my noble friend Lady Turner, who was my boss for a number of years.
In all that time, particularly in the Civil Service negotiations, I learned that getting a solution involved two very clear requirements: trust and motivation. There needed to be trust that both sides were seeking agreement and motivation to find the means to reach that agreement. I negotiated with many senior civil servants, some of whom are Members of your Lordships' House, and a number of Ministers in the Cabinet Office, some of whom are also now Members of your Lordships' House, and never at any time did I find any lack of trust or motivation in seeking agreement. In
26 Oct 2010 : Column 1149
In this House, we also have many captains of industry, captains of finance and moguls of the retail sector who all have experience of motivating staff in large companies to achieve change, but I doubt that any of them would recommend, by accident or by design, the present situation facing the Civil Service. There is denigration. That denigration does not necessarily involve demonising by individual Ministers-Ministers are supportive of the Civil Service-but somebody has been briefing the press that there is a wasteland of inefficiency occupied by civil servants. If civil servants resent that, it is because the previous Administration placed on them year-on-year efficiency cuts of not less than 3 per cent, so there has been a long-term pressure on productivity. Yes, we hear of wage freezes in the private sector, but wage freezes are being imposed in the public sector also. Now we face massive job cuts.
I felt that in our discussions this afternoon, we on occasion got confused between the public service and the Civil Service. The Civil Service has not benefited financially as much as some other parts of the public service, but it looks like it will be hit just as badly as, if not worse than, some other parts of the public service in facing massive job cuts. To be added on top of that cake is the reducing of redundancy compensation.
Is that a way to motivate staff to reorganise and render substantial increases in productivity? I think that the answer is obviously no. If I was asked, "Do you see it enhancing trust?", I would have to say, "No, rather the reverse". Yet that is where we are in respect of this Bill. The issue is not what we would like to have but where we are, and this Bill is about coercing the Civil Service trade unions to the negotiating table and at the negotiating table. I share with the noble Baroness, Lady Noakes, a fear of negotiation by statute. At the end of the day, negotiations may lead to an impasse which, in governing a country, may lead a Government to determine that there needs to be a legal remedy. It is not normal to have that in front of the negotiations. When we have a clause, in Clause 2, that the Government say that they hope not to use and that they will repeal the day after there is an agreement, it begs the question whether that is helpful to the trust and motivation to bring about an agreement at all.
The other question is: what is the likely reaction of civil servants and their trade unions to seeking to coerce and bully them? The normal British reaction to bullying-going back hundreds of years in all four parts of this country of ours-has been to resist. Therefore, it will be counterproductive to reaching a negotiated settlement if Clause 2 remains in the Bill. Discussions are taking place-in good faith, I hope, on both sides-to find an amendment to the clause that will introduce the caps. We should be seeking to create the right atmosphere to bring that about. As my noble friend Lord McKenzie of Luton said, we want the Government and Civil Service trade unions to find
26 Oct 2010 : Column 1150
We are told that, in that event, we will have the immediate dropping of Clause 2, but we will still have Clause 3-the zombie clause, although I would prefer to call it the twilight zone clause-which suggests that, even if there is a solution at that stage, there may be a retention or resuscitation of the clause in one or two years' time. How does that help the climate of negotiation? How does that increase the degree of trust of the trade unions either at active level-the trade union negotiators-or at the level of the trade union members, who direct those negotiations?
What can we do to help? We must help to create the ambience for those negotiations to succeed. We therefore need to see how we can improve the Bill. I agree with my noble friend Lord Morris, and others, who said that the negotiating process is the way forward. Therefore, we believe that it would assist progress if we amended the Bill in the manner suggested by several noble Lords on both Government and Opposition Benches by removing the cap and the zombie clause in the hope that negotiations will bring a solution in early course. That would allow us to see the Bill in a much more benign form at Report. Those discussions can take place between now and then. I believe that we can help that in Committee by more thorough discussion of each of the clauses.
4.45 pm
Lord Wallace of Saltaire: My Lords, I thank noble Lords for a serious and good-tempered debate. I should declare an interest as my wife was a civil servant for some time and my daughter is a civil servant. Many of us have great respect for the Civil Service as a whole, and I know that many noble Lords have similar close links to the Civil Service. I do not think that any of us intend to denigrate the Civil Service. The noble Lord, Lord Brett, referred to briefing. I regret to say that I do not think that anyone needs to brief the Daily Mail against the Civil Service. It has its established narrative and does not need prompting. One does not need to brief the Daily Mail against the Liberal Democrats either. It carries on with its narrative in the same way. It is unfortunately part of the way we are.
I reiterate that the aim of this Government-an aim which we share with the previous Administration-is to make the Civil Service Compensation Scheme affordable, sustainable and fair to civil servants and other taxpayers while, very importantly, providing protection for the lowest paid. It is our strong intention to do this through a negotiated settlement with the Civil Service unions. However, as the noble Lord, Lord Turnbull, remarked, the Bill is a regrettable necessity.
The noble Lord, Lord Newby, raised the question of whether we would like to be where we are. Of course we would much prefer to be in a different place. This is not-as the noble Lord, Lord Morris of Handsworth, described it-a political sledgehammer to crack a nut. It is not a question of legislation coming first and negotiations coming second. The current Government have been in active negotiation
26 Oct 2010 : Column 1151
The noble Lord, Lord McKenzie, and the noble Baroness, Lady Drake, asked what the Government intend to do about Clause 1. We all understand that this is the most important clause in the Bill and that getting the language right is important for the Government and the unions. We therefore hope that consensus will be achieved by Committee stage on the exact language of this clause. We all also understand that consultation has a legal meaning. We need to get that absolutely right and, if possible, agree it with our trade union partners.
The noble Baroness, Lady Noakes, and others asked whether Clauses 2 and 3 are an appropriate use of legislative time and an important part of the Bill. We think that they are a necessary part of the reserve powers. These negotiations have been dragging on and the Government, like our predecessors, felt that it was useful to spell out a minimum level of support which would be there if we failed to achieve negotiated agreement. However, we much prefer to reach a negotiated agreement if we can. We are confident that-with the majority of the unions, but not yet with those representing a majority of the workforce-we are within sight of an acceptable agreement by consensus.
The caps set out in the Bill of 12 months' pay for compulsory redundancy and 15 months' pay for those who leave voluntarily under the scheme, represent the minimum below which the Government are clear that they should not go. The caps are a fallback if-following our discussions and what we believe to be the conclusion of a new workable compensation scheme, with terms improved beyond the caps-we find that, for whatever reason, we cannot implement the scheme. In other words, they are there to avoid having no choice but to revert to the old scheme, which looks increasingly like an historic anomaly and is not affordable.
Baroness Noakes:I am struggling with why, once we have Clause 1, which removes the requirement for consent, there is any requirement for anything else to be a fallback in Clause 2 with the underpinning of Clause 3. If Clause 1 takes away the need for consent and puts in place proper consultation, what is the necessity for any other part of this Bill?
Lord Wallace of Saltaire: I shall come in a moment to Clause 3, which is of course different. I am advised that Clause 2 is useful and necessary for spelling out the minimum that, under any conditions and without
26 Oct 2010 : Column 1152
Lord McKenzie of Luton: Can we be clear on that? Is the Minister saying that if there is a repeal of Clause 2 once the settlement is under way, he will be amenable to the removal of the revival provision in Clause 3, which could bring back the sunset clause?
Lord Wallace of Saltaire: The question of the zombie clause, the revival clause, or however one wants to put it, needs to be discussed further in Committee, when the Government may wish to return to that question in some detail with new proposals. All of us who have looked in detail at the legislation understand that sunrise clauses and revival clauses are a delicate issue for Parliament as a whole.
On turnover and natural wastage, I confirm that the Civil Service is suffering something of the order of 7.5 per cent a year. We nevertheless anticipate that the reduction in some areas will be a good deal more than that and that it will be necessary to ensure that the provisions set out in the Civil Service protocol for redeployment and assistance when people become redundant will be thoroughly available for all those who go through this scheme. Our preference is, where possible, for voluntary redundancy and redeployment, and we will be working extremely hard with the unions and with different departments to ensure that that is the case.
The noble Baroness, Lady Noakes, also remarked that there has been an explosion in public sector pay and that the private sector finds it difficult to accept the levels of compensation provided in the Civil Service. I noted in the PCS briefing, which was helpfully sent round to all of us, that the 1972 Act was intended to bring pubic sector packages up to the level of the private sector. The evidence to the Public Bill Committee from the Hay Group was that public sector packages are now in many areas better than those in the private sector. We are doing our best to keep them roughly in parallel. In the higher levels of the Civil Service, of course, the comparative level of award falls away, but this is partly because the narrower distribution of pay levels within the Civil Service does not compare to top executive pay.
On compensation, any statutory arrangements in relation to employment provide a minimum underpin for all workers. However, the Government are attempting, through negotiation, to provide an example to other employers of good practice in staff issues. Again I emphasise that negotiations are continuing and that a much more generous package than the minimum is on offer.
The noble Lord, Lord McKenzie of Luton, asked about human rights issues and accrued rights. The Government's human rights analysis has been set out in the Explanatory Notes to the Bill. In sum, we do not consider that Civil Service benefits are possessions
26 Oct 2010 : Column 1153
As I understand it, the judgment of Justice Sales was not about accrued rights but about the form of agreement under the existing legislation. This legislation therefore removes the basis for the judgment of Justice Sales. In any event, I emphasise that the limits in Clause 2 do not apply to departures agreed before the Bill comes into force. We are not trying to take away from staff a right that has been upheld by the court, because the court did not rule that staff had a right to the current terms. The question is about the nature of the negotiations and the right of the unions to veto any agreement made. Again I stress that we have been, and continue to be, close to an agreement and I hope that we will succeed in reaching one.
Our intention is to provide amendments that both reinforce the requirement for the Government to consult and ensure that the extent and outcome of the consultation is made more transparent. This will be further informed by points raised today before we present the necessary amendments to your Lordships' House in Committee.
I confirm that the level and quality of support offered to surplus civil servants who are made redundant will continue at the current level and that a copy of the April 2008 protocol for handling surplus staff situations is now in the Library of the House. That protocol will be updated to reflect the additional measures that the Government intend to introduce.
I hope that I have covered the points made by noble Lords in a serious and sober debate about what we all recognise is a difficult issue. I look forward to further discussions in Committee.
Bill read a second time and committed to a Grand Committee.
Transport: Investment
Statement
4.59 pm
Earl Attlee: My Lords, with the leave of the House, I would like to repeat the Statement made by my right honourable friend the Secretary of State in another place.
"With permission, Mr Speaker, I would like to make a Statement on the Government's investment plans for our transport networks. During the course of my remarks, honourable Members may find it helpful to refer to the documents that I have placed in the Library of the House and the Vote Office this afternoon.
As my right honourable friend the Chancellor explained last week, the decisions that we have taken to cut waste, end lower-priority programmes and reform the welfare system allow us to invest in Britain's long-term economic growth and to prioritise transport infrastructure to support economic growth. We have already announced a green light for Crossrail and Tube upgrades, as well as plans for investment in low-carbon vehicles and
26 Oct 2010 : Column 1154
Today I can confirm a programme of investment in our crucial strategic road network, managed by the Highways Agency, and in our local transport networks. We will continue to invest in capital maintenance, spending over £5.9 billion over the next four years on unglamorous but important works to maintain the integrity of the network, both strategic and local. We have also allocated over £180 million over the four-year period for high-value minor enhancements to the strategic road network.
We are taking action to reduce the cost of proposed Highways Agency schemes by respecifying, renegotiating with suppliers and improving governance and control. Thanks to these decisions, I can confirm that funds will be available for sustainable upgrades to the strategic network to tackle congestion hot spots, delivering networkwide benefits that provide very high returns on investment.
I can confirm today that the eight Highways Agency major schemes currently under way will be funded to completion and opened to the public in the next two years and I can announce funding for 14 new projects to commence on site by April 2015, including the schemes announced by my right honourable friend the Chancellor last week. These are: the A11 Fiveways dualling; the M4 and M5 junction north of Bristol; the M6 between junctions 5 and 8 in Birmingham; the M62 between junctions 25 and 30 near Leeds; three schemes on the M1 between Derbyshire and Wakefield, from junctions 28 to 31, 32 to 35a and 39 to 42; four schemes near Manchester, from junctions 8 to 12 and from 12 to 15 on the M60, junctions 18 to 20 on the M62, and from Knutsford to Bowden on the A556; improvement of the A23 between Handcross and Warninglid; and the completion of the upgrading of the M25, with a managed motorway scheme for peak-time hard-shoulder running between junctions 23 and 27 and junctions 5 and 7. These essential investments will cut congestion, improve journey times and, most importantly, support economic growth. Every pound that we spend on these schemes will generate, on average, £6 of benefits.
I can also confirm that work will continue on developing a further set of Highways Agency schemes, ready to start in the next spending review period if funds become available. A detailed list is included in the documents to which I referred earlier. There is one last group of four current Highways Agency schemes that will be reviewed to see if they still represent value for money and can be progressed for the next spending review period.
As important as strategic roads are to the national economy, many of the highest value-for-money proposals are those that address the needs of the local road and public transport infrastructure that supports the economies of our cities, towns and rural areas. That is why last week we announced our commitment to completing major local projects worth over £600 million, including measures to improve access to Weymouth in time for
26 Oct 2010 : Column 1155
My right honourable friend the Chancellor also announced last week that we will invest more than £900 million over the next four years on new local authority major schemes. They will include: a new bridge over the Mersey at Runcorn, partly funded by tolls; improving access to Leeds station; and extending the Midland Metro tram line from Snow Hill to New Street through Birmingham city centre.
I can confirm today that a further seven major local authority projects have also been given the green light, subject to planning and other approvals. They are: a new bus interchange and associated transport improvements in Mansfield; a new bypass that will take traffic away from communities in Sefton; an integrated package of sustainable transport improvements in Ipswich; major improvements to the M5 at junction 29, east of Exeter, providing access to new housing and employment areas; a bypass to the north of Lancaster, improving connections between the port of Heysham and the M6; improvements on the A57 east of junction 31 on the M1 near Todwick; and a new northern distributor road in Taunton to provide additional cross-town capacity and access to areas of brownfield land. These schemes, worth about £300 million in total, have been selected from a pool of projects with proven business cases. They are listed as 'supported' schemes and are shaded in green in the list that I referred to earlier.
But our duty is to ensure that every pound spent is essential. Even with these priority schemes, I expect local authority promoters to work with my department to ensure that every opportunity for cost saving has been taken and every source of alternative contributions fully explored before funding is confirmed in January next year.
While the House will welcome these decisions, Members on all sides will want to know how we are proposing to handle the remaining schemes. The £600 million-plus remaining for additional new projects after the announcements already made demonstrates the importance that we attach to local authority major schemes, but it will not be enough to fund all the schemes proposed by local authorities. I have therefore placed in the Library a list of all currently submitted schemes, including three schemes which previously had conditional approval and which we will now seek to progress to full approval, showing how we propose to categorise them.
For 22 schemes where my department has completed a value-for-money assessment in the past four years, we will invite best and final funding bids from this 'development pool'-the schemes shaded in amber in the list. Promoters will be challenged by my department to consider the scope of a scheme, its cost, lower-cost
26 Oct 2010 : Column 1156
Further analysis will be carried out on another 34 schemes for which the department does not currently have an up-to-date assessment to determine whether they can go forward to join the development pool and bid for a share of the £600 million-plus funds available. These schemes are shaded blue on the list; a decision will be made by January 2011. This competitive process will ensure that the greatest possible number of schemes, offering the best value for money, is able to proceed, facilitating economic growth and providing jobs across the country.
Under regional funding allocations, regional and local bodies were encouraged to identify a large number of schemes for longer-term prioritisation, many of which were in very early stages of development with no business cases submitted to the Department for Transport. In the longer term, I want decisions on local transport priorities such as these to be taken out of Whitehall and placed in the hands of local people. My department will work with the emerging local enterprise partnerships and local authorities to identify the best approach to local decision-making on future transport priorities.
I have set out today the decisions that we have made and what they mean for our strategic and local transport networks. The measures that I have described will help to deliver long-term, sustainable and affordable economic growth in this country. The difficult choices that this Government have made have allowed us to invest in the future and I commend this Statement to the House".
My Lords, that concludes the Statement.
5.10 pm
Lord Davies of Oldham: My Lords, I thank the noble Earl for repeating the Statement that was made in the other place earlier today and congratulate him on making the best fist of a pretty poor job. We all looked on the Secretary of State for Transport in his shadow role as some kind of Grecian figure with a huge club to wield on the public sector. Now that he has been translated to Secretary of State for Transport, we see that he is seeking to cover himself with some small fig-leaf of decency by investment in transport. But it will not do. He has not changed his visage or his perspective. This is not a Statement about significant investment in transport. It is a cover for limited investment in transport-a reduction of proposals under the previous Administration and no guarantee except in the most minimalist form of what will be delivered over the next four to five years.
If one looks at the major road schemes, apart from those that were put in place under the previous Administration, none of the new ones will begin until some time before 2015, if conditions allow. Certainly, they will not begin before 2015. There is no suggestion at all that they will be an investment of completion to the advancement of the nation, so delay is built into it. There is already an excuse for the delay because the whole document is presaged on the assumption that, if we can make the efficiency savings, if we can cut the
26 Oct 2010 : Column 1157
The Government will not get all they expect in terms of efficiency gains. They will not achieve all they expect in reducing waste. They will be disappointed in some areas and they will find difficulty in certain areas in getting their proposals through. After all, one element of the coalition might summon up some reserves of energy and resource at some stage to put a delaying tactic on certain aspects of these cuts. Therefore, we should look on these nugatory promises of investment for what they are: promises that are in the main contingent except where the scheme is already in place.
What we do know is where the cuts will fall. The Statement is about highway and local transport schemes but the noble Earl was very early on to the issue of rail and took pride in the fact that the Government are sustaining Crossrail. How could the Government do anything else with such a significant project? Crossrail, a rail issue, was introduced into this Statement about roads because it is an indication that the Government supposedly have their heart in the right place. Is their heart in the right place? The Government are prepared to contemplate increases in rail fares over the five-year period up to 2015-rises in certain rail fares of 25 per cent. Does anyone think that this will have anything but a detrimental effect on railway demand? Does anyone think that commuters and others will look at the choice between rail fares that are escalating and road costs and, having found the equation more to the advantage of road, move from rail to road to the detriment of our environment, to the detriment of our economy and to the detriment of the very objectives that the Government purport to secure through their overall railway policy?
What the Government are about is pricing certain people off rail. The Secretary of State for Transport indicated in a recent newspaper article that he expected some fares to go up by some 10 per cent, which merely indicates his economic innumeracy. It is quite clear that what is being contemplated is an increase vastly above that. For season ticket holders, we will see increases in fares of such significance as either to hold rail passengers to ransom or cause them to go on to our already crowded road system.
What is the case for rail is also the case for buses. There is a straightforward, unembellished clear cut in the subsidy to bus operators. What does that mean? It means higher fares or reduced services, or more likely both. We will see our rural areas become more and more dependent on the car because of this onslaught on the buses, and we will see the pressure reflected in the needs of those who have no access to a car but face increased bus fares.
What is also absent from this Statement is any comment about the cuts of more than 25 per cent in the resources of local authorities. What does that mean for crucial aspects of local authority operations? Certainly with regard to road maintenance it means a very great deal indeed, but it also means something to another dimension, on which the noble Earl was singularly
26 Oct 2010 : Column 1158
5.17 pm
Earl Attlee: My Lords, I am grateful to the noble Lord for his reply to the Statement. It was a virtuoso performance, as I have come to expect from the noble Lord. He has very skilfully-and I am grateful to him-avoided the trap of asking detailed questions about the Statement, because it is accompanied by plenty of literature for noble Lords to read tonight.
The noble Lord suggested that my right honourable friend had done a pretty poor job. I think that he has done a really rather good job and that he has the ideal skill set for his current position. The Government's top priority is deficit reduction. I wonder how much the party opposite would have had to cut the transport budget if it had won the general election.
The noble Lord talked about the difficulty of cutting waste and getting further efficiencies from organisations such as the Highways Agency. He is right; his party has plenty of experience. Why did we mention rail? My right honourable friend's heart is in the right place. We believe in the future of rail and we are committed to Crossrail, High Speed 2 and other projects. I certainly look forward to debating how we are going to improve our country's rail system.
The noble Lord talked about adjustments to local authorities' road safety budgets. It is of course up to local authorities to determine their priorities and how they continue to drive down casualties. We will be monitoring the situation very carefully. During my time in your Lordships' House, I have always paid the greatest attention to road safety, and that will not change.
The noble Lord mentioned the BSOG. I look forward to the Question for Short Debate that we will be taking shortly.
5.20 pm
Lord Bradshaw: My Lords, I am not going to indulge in a lot of criticism, but I will ask a few technical questions, which I hope the Minister will address.
26 Oct 2010 : Column 1159
First, much of the paper is made up of words like "appraisal" and "value for money", yet the system that the Government have adopted-the new approach to transport appraisal-is hopeless. I say this as an economist. The new approach puts value on a lot of valueless things, such as small time savings of a minute, half a minute or less, and it needs bringing up to date. Also, other road users such as bus users or cyclists need to be treated as valuable people. The new approach tends to assume that only car drivers are valuable people and therefore ascribes a lower value of time to those other users.
Secondly, will the Minister tell us something about hard-shoulder running, which is mentioned in the Statement? We do not yet know whether hard-shoulder running has proved to be thoroughly satisfactory from the point of view of both road safety and access by the emergency services to accidents.
Thirdly, I want to mention the PFI scheme, which is referred to in the Statement. Did the Minister see in the Sunday papers that the M6 toll road, which was built by PFI, is in considerable trouble because people will not pay to use a toll road when there is a free road beside it? The only solution, to my mind, is to introduce a system of road charging on our trunk motorways. Otherwise, there will not be many PFI investors.
Fourthly, road maintenance is in a disgraceful condition, and the Government should direct more attention to keeping the road network that we have in good and serviceable order rather than necessarily trying to expand it, because the road network does not work.
Fifthly, there are now lots of utility companies in this country, and all of them have near freedom to dig up the roads when they want and cause massive delays and damage to the road surface. There is supposed to be a system of traffic management, under which the utilities are supposed to apply to the local authority for permission to dig holes. Whenever they want to dig such holes, however, they put up a big sign saying "Emergency", "Danger" or whatever. That does not mean that they do the job any more quickly, but it allows them to override the provisions in the Transport Act 2005 to regulate the use of the highway.
Earl Attlee: My Lords, it fills me with dread when the noble Lord says that he will ask me a few technical questions.
The noble Lord referred to some of the terms of our assessment and things like that. We need to ensure that the schemes with the best value for money, the best benefit to society and the best economic growth are the ones that go forward. The noble Lord has expressed concern many times, in both this Parliament and the previous one, about NATA. We are reviewing that process.
The noble Lord talked about hard-shoulder running. He will be aware of, I think, the M42 where the Highways Agency has trialled hard-shoulder running, which has been shown to work. I understand that the statistics have shown a safety improvement. Because it has been shown to work, there will be more hard-shoulder running schemes.
26 Oct 2010 : Column 1160
The noble Lord mentioned the M6 toll road, which is perhaps not getting all the toll income that it should. I remind the noble Lord that the M6 toll road is not PFI-funded but is a private road.
The noble Lord mentioned the condition of local roads, which is a matter of great concern. I think that the ICE's State of the Nation: Infrastructure 2010 report states that the Highways Agency's strategic roads are in quite good shape but local roads have serious problems.
Finally, the noble Lord also talked about the utilities. All noble Lords will be aware of the problem of utilities digging up the roads, sometimes in ways that are completely inconvenient. We are aware of that, but I will draw the noble Lord's question to the attention of my ministerial colleagues.
Lord Berkeley: My Lords, since the election the Government have made great play of being a green and low-carbon Government, particularly committed to low-carbon transport. When one reads the Statement, it is extraordinary that it emphasises so many rail projects-most of which are irrelevant because they come under the major scheme-and very few road schemes, especially in the detailed list of 600 schemes, whatever those are. I am surprised. Perhaps the Minister could explain why the Statement mentions no local rail schemes or local tram schemes-except, I think, for one.
There is mention of a few bus schemes. Presumably, those will follow on from the enormous success of the Cambridge guided busway, which I think is two years late and has doubled in cost. Why anybody wants to replicate that around the country, heaven only knows.
There is nothing at all about cycling-no cycle schemes. I understand that the Government have cancelled the cycle training programme organised by Cycling England. Where is the implementation of the Government's green agenda in this Statement? It seems to be business as usual, going back to the previous Conservative Government.
Earl Attlee: My Lords, I am delighted to respond to the noble Lord's points about low-carbon and sustainable transport. Rail schemes will be covered later, as we are not talking about CP5 issues.
The noble Lord referred to problems with the Cambridge scheme. I have just signed off a reply to a Written Question on that, so he will get an Answer shortly. I accept that there are a few problems there.
The noble Lord talked about cycling and the situation with Cycling England. He needs to remember that, as I said the other day, the bikeability scheme will continue.
Lord Walpole: My Lords, I thank the Minister for the A11 Fiveways to Thetford improvement scheme, which will mean that Norwich-I do not know if any of you know where Norwich is-will be joined to the motorway network by dual carriageway to the south for the first time ever.
It is quite extraordinary that the A47 Blofield to North Burlingham scheme is being abandoned, according to page 1. In case the Minister does not know this, a new port has just been built at Yarmouth, so all the roll-on roll-offs will come along on the single carriageway, which will not be nice for them.
26 Oct 2010 : Column 1161
I cannot find anything in this document to do with improving the A47 or the A17, which connect Norfolk to the north, the west and the Midlands. In the yellow pages at the back, we find reference to the Norwich northern distributor road and the phrase "if it is worth it". I can tell noble Lords, as ex-chairman of Norfolk County Council's highways committee, that it is not worth it. It is not worth it because it was not built 25 years ago. It will be twice as long, twice as useless and will annoy twice as many people. Dear, oh dear-but at least the Government will get Norwich on the motorway.
Earl Attlee: My Lords, I am glad that the noble Lord is pleased about the A11 Fiveways project as it connects Norwich by dual carriageway. In researching the Statement, I found place names that I had never heard of. It is a little too challenging for me to comment on specific schemes, but parliamentary tools are available to the noble Lord, should he wish to use them.
Lord Higgins: My Lords, what is the definition of a congestion hotspot, as it is difficult to envisage a hotter congestion hotspot than that which exists along the south coast, particularly in the Worthing area? The scheme for a Worthing bypass got past the public inquiry stage something like a decade and a half ago, yet there has still been absolutely no action, particularly by the previous Government. In terms of economic efficiency, for a long while it has been quicker and much easier to drive from the south coast up to the M25, round the M25 and then down the M20 or M3 if one wants to get commercial traffic through the Channel Tunnel or to the Dover ports. Will my noble friend look into this whole issue as, in economic terms, it fully deserves to be included in the programme? No doubt the schemes that have been announced are very welcome, but I should have thought that this scheme ought to be given higher priority than those on the list.
Earl Attlee: My Lords, the noble Lord presents me with a difficult problem in responding to a specific scheme about which I know little. However, I will write to him.
Baroness Farrington of Ribbleton: My Lords, the noble Earl has referred on this and other occasions to local authorities' ability to respond to these issues, when the Government are failing adequately to fund local government to enable it to do so. He told the House that speed cameras could be funded by local authorities and that this would save money. In actual fact, it has cost the Exchequer money because the income from speed camera fines was more than the cost of the cameras. The Government have pretended that they are protecting pupils in our schools but admitted at the weekend that there is a cut in real terms in the funding per pupil. I have no doubt that the Government will say that local authorities can make up all those shortfalls, including the shortfall in road maintenance for local roads. The Government are hiding behind the shift of responsibility from themselves to local government in order to avoid the flak for policies that will gain public opprobrium.
26 Oct 2010 : Column 1162
Earl Attlee: My Lords, as I said, our number one priority is to deal with the deficit. I understand the point that the noble Baroness makes-it is a good point-but local authorities will have to deal with this matter as best they can. They will have to make tough choices, just as my right honourable friend the Secretary of State has had to make tough choices because of the situation that we have inherited.
Lord Stoddart of Swindon: My Lords, I wish to refer to the schemes in the development pool, particularly to the Leeds new generation transport trolleybus experiment, which I am pleased to see is within that pool. I declare an interest as the president and trustee of the British Trolleybus Society.
I point out to the noble Earl that trolleybuses are successfully operating in many countries throughout the world and are a very good, cheap, low-carbon, non-polluting, silent and safe vehicle to operate in the urban environment. Therefore, I hope that this scheme will be left in and that we can have an experiment in Leeds, which I sincerely hope will lead to a further extension of the trolleybus system-a system which unfortunately was destroyed throughout the country, probably by the actions of the oil lobby.
Earl Attlee: My Lords, I thank the noble Lord for his contribution. By definition, a trolleybus is electrically driven and therefore has zero emissions at the point of use, which makes it a very attractive project. I look forward to researching this project, just out of interest on my part.
Lord Brooke of Alverthorpe: My Lords, would the Minister agree that it is difficult to accept that dealing with the deficit is the number one priority when an announcement is made locally that the £50 million made annually by the congestion charge in west London is likely to be abandoned in December, with all the attendant loss for the capital that will go with it? That sits neither very squarely with dealing with the deficit nor indeed with fairness, when one sees the nature of the people who will be the beneficiaries from the abandonment of the west London congestion area.
I should like to ask something more positive. Nowhere in the document is there anything that gives us great hope of seeing a strategic approach to many of the problems that we face. In particular, I pick up the point made by the noble Lord, Lord Bradshaw, about the massive cut coming in the maintenance of roads. Some £200 million is to be taken out every year over the next four years, after a particularly difficult winter. If we have another hard winter, at the rate we are going we will be like a third-rate country. Will the Minister please explain the criterion used to determine how the £200 million should be saved in each of the next four years? Is that to be done by local authorities or has some criterion been set for establishing that?
Secondly, which schemes have been totally abandoned? It is very difficult when reading the documentation to identify whether any have gone. My reading of it is that some have gone all the way. Will he please place a list in the Library?
26 Oct 2010 : Column 1163
Thirdly, are the Government giving any thought to alternative means of raising funds to reinvest in the road transport system? For example, a number of parts of the country were exploring the possibility of introducing congestion charging-not solely to raise funds but to reduce congestion-and such schemes would have been helpful in providing funding for reinvestment in other parts of road transport. Has that been totally abandoned by this Government? Does the noble Earl have any views on how they might explore alternative ways in which money may be raised?
Earl Attlee: My Lords, the congestion charge is not my responsibility but the responsibility of the Mayor of London.
On the difficulty of local maintenance, I shall write to the noble Lord. On the Highways Agency, it can do a number of things to better manage the strategic road network. It can build on the investment of the previous Government in better systems, to make sure that maintenance takes place at the right point-not too early and not too late.
As for the noble Lord's question about local authority congestion charging, I should say that we have no intention of introducing a national scheme.
The road schemes to be cancelled because there is no foreseeable future for them are: the A1 Leeming to Barton scheme; the A19 Seaton Burn interchange; the A19 Moor Farm scheme; the A21 Kippings Cross scheme; the A21 Flimwell to Robertsbridge scheme; the A21 Baldslow scheme and the A47 Blofield to North Burlingham scheme.
Lord Beecham: My Lords, before the general election, visiting Conservative spokesmen who came to the north-east spoke warmly about the prospect of dualling the A1 north of Newcastle. Will he confirm that not only is there now no prospect of that happening for the foreseeable future but even smaller improvements to that road are not likely to take place as far ahead as one can see? Will he also bear in mind, when he talks about local authorities undertaking capital works, that the capital programme of local authorities is to be cut by 45 per cent?
Earl Attlee: My Lords, there is a slight glimmer of hope for the A1 north of Newcastle. We are considering whether it should be part of the strategic road network. However, this does not mean that it will be dualled any time soon.
| Next Section | Back to Table of Contents | Lords Hansard Home Page |