[Relevant document: The oral evidence taken before the Public Administration Select Committee on 27 July (HC 397) on the Civil Service compensation scheme.]
I beg to move, That the Bill be now read a Second time.
In a statement to the House on 6 July, I made clear the Government’s intention to make the civil service compensation scheme affordable and I set out our intention to legislate to underpin the negotiations about achieving that. I start by stating my unqualified support for the British civil service; I firmly believe that our system of a permanent civil service is one of the jewels of our constitution.
The service’s values of political impartiality, recruitment and advancement on merit, and the public service ethos are as much to be cherished and nurtured today as they ever were. The service is admired throughout the world for the way in which it serves the elected Government of the day. A steady stream of visitors from other countries send their civil servants to find out how it is done here. It is a pleasure, on returning to government—after an 18-year sabbatical, in my case—to discover that those virtues and values remain intact.
In the latter part of the last Parliament, I was pleased to support the previous Government’s actions in introducing, rather belatedly, it has to be said, civil service legislation—only 154 years after it was promised in the Northcote-Trevelyan report, but better late than never. That was an important step in ensuring the continuance of an impartial civil service.
I am also delighted to find that the service continues to attract the best and the brightest, with the civil service fast stream recognised as one of the most prestigious graduate programmes in the country. So the Bill is emphatically not an attack on the civil service: it is a necessary measure to deliver fairness and affordability in the appallingly challenging fiscal circumstances in which the last Government left Britain.
It might be helpful to the House if I set out some of the history and background to how we have got to where we are today. The history of compensation in the civil service is a long one, with the first legislation covering it having been passed more than 150 years ago. The ability of the state to pay compensation to civil servants on the loss of office was created under the Superannuation Act 1859. That Act did not create a right to compensation, but it created a framework under which such payments could be made. The Superannuation Act 1965 consolidated the previous Acts and included provision for the early payment of pensions to those aged 50 or over who were asked to take early retirement in the interests of efficiency. The same Act repeated the provision of an earlier Act that spelled out that civil servants had no legal entitlement or legal right to the benefits referred to in the 1965 Act, which was itself supplemented by an administrative code that set out the payments that a civil servant could expect, making it crystal clear that there was no entitlement to such benefits.
In the late 1960s and early 1970s, the Fulton committee reviewed the position of civil servants. Alongside that committee, the joint superannuation committee of the national Whitley Council was set up to review the provisions of the 1965 Act. It reported in 1972, noting that improvements were needed to the superannuation scheme
“to restore to the Civil Service the position it had traditionally held as one of the leaders in pension practice.”
That view was reflected in the Superannuation Act 1972, which granted civil servants rights to their pensions. In 1987, the compensation scheme was amended to its current form.
The previous Administration concluded that the current scheme was both unsustainable and indefensible. In the summer of 2008, with support from all parts of the House, Ministers embarked on lengthy negotiations to reform the compensation scheme. The right hon. Member for Dulwich and West Norwood (Tessa Jowell) was one of those Ministers. I think it is fair to say that those negotiations were very long drawn out and protracted. I pay tribute to the efforts of successive Ministers in trying to achieve an agreed outcome; they really did go the extra mile to try to achieve consensus. Arguably, they went too far, because the new scheme that was finally agreed in February this year was still out of kilter with most of the rest of the public sector and would have been unrecognisable, frankly, to anyone in the private sector.
The compromises that created what I still regard as a hard-to-defend scheme were made with the expectation that all six civil service trade unions present at the negotiations would agree it. That appeared to have been achieved, but sadly when the agreement was referred back to the leadership of the Public and Commercial Services Union—the biggest and most numerous union, representing very largely lower-paid civil servants—the rug was pulled from under the feet of the lead PCS negotiator and the agreement was rescinded. So after 18 months of tortuous negotiations, with perhaps an excess of flexibility on the part of the then Government, consensual reform of the scheme seemed as far away as ever. Ministers then took the view, correctly, that PCS’s last-minute volte-face could not be allowed to stand in the way of much-needed reform. Therefore, with the agreement of five out of the six unions, the right hon. Member for Dulwich and West Norwood laid the necessary order to give effect to the reformed scheme.
I have at all times made clear our view that the February scheme did not go far enough. Had it come into effect, however, when the coalition Government took office in May this year, a pressing case would have been made to let it remain in force. Sadly, that option simply did not exist. PCS unilaterally, and without the support of the other five trade unions, sought and obtained judicial review and obtained an order that quashed the February scheme. The option of allowing the scheme agreed and negotiated by the last Government was removed from the table by PCS’s unilateral action.
Whatever the rights and wrongs of seeking judicial review, I am sure the Minister will accept that PCS represents some of the poorest-paid workers in the civil service. His scheme, rather than being fair, will be a lot less generous to them. Why is he introducing a scheme that gives the poorest-paid junior jobcentre official only as much protection as a head of Department in the civil service, when on 6 July he promised protection for the poorest- paid?
I will come on to precisely that point, because the hon. Gentleman puts his finger on a real concern that I have. I will deal with it in detail later, if I may, because how to protect effectively the position of the lowest-paid in the civil service is a really important issue that will concern everyone in the House.
It is now more than 20 years since the last serious reform of the compensation scheme and more than two years since the current reform process began, with an unchanged set of arrangements still in place. Frankly, that position cannot be allowed to continue. The current 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 enhancements can total as much as six and two thirds times annual salary. That compares with a maximum of 30 weeks’ pay under the statutory redundancy scheme, with a weekly cap on the salary allowable of £380, giving a total of about £11,000.
The level of payments under the current scheme would be excessive even if we were not facing such a difficult financial situation. The last Government left the country with, in the immortal words of their last Chief Secretary to the Treasury, “no money left”. The Government are having to borrow a pound out of every four just to keep pensions paid and schools and hospitals functioning.
The extent to which rights are accrued is an issue to consider. We are talking not strictly about redundancy but about compensation for loss of office under a statutory scheme, and the relevant rights are those in force at the time when redundancy or loss of office happens. If the statutory redundancy scheme changes, the terms that govern the entitlement are those in place at the time when the redundancy happens. I understand my hon. Friend’s point, but I do not believe it applies in this case. I shall deal with that matter a little more in due course.
Our view is that to maintain the current scheme would be unfair as between taxpayers and civil servants and as between workers in the civil service and those in the private sector or the wider public sector. It is unfair also to less well-paid civil servants, which is related to exactly the point that the hon. Member for Birmingham, Selly Oak (Steve McCabe) made, with which I shall deal.
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 is therefore that when money has to be saved by reducing head count, the burden currently falls disproportionately on the lower-paid, more of whom lose their jobs than is necessary or desirable. My view is that lower-paid civil servants suffer disproportionately and are more likely to lose their jobs under the current scheme than would be the case under the arrangements that we are seeking to negotiate. In addition to the very simple cap incorporated in the Bill, we are seeking in parallel to negotiate different arrangements with significantly enhanced protection for lower-paid civil servants.
Let me say that I want to assume that the Minister’s long-term intentions are exactly as he says, but is it not a fact that under the Bill he will penalise, to an extraordinary degree, the poorest paid people in the civil service? That is the effect of the measure that he is asking us to vote for today.
No. The effect of the legislation will be identical on all civil servants. Under the Bill, the cap would apply uniformly to civil servants. I shall come in a moment to the negotiations that are going on in parallel, because that will deal exactly with the hon. Gentleman’s point.
My hon. Friend is exactly right and puts his finger on an important point. Because it is so disproportionately expensive under the current scheme to make redundant long-serving and high-paid civil servants, instead of one civil servant who earns 10 times the average—there are some—losing their job, 10 or more lower-paid civil servants might lose their jobs to save the same amount of money. We are seeking to address exactly that issue.
I, too, was pleased to hear the Minister say that the Government want a scheme that will be better for the lower-paid, but the Bill does not differentiate the lower and higher paid. Will the Government seek to amend it to allow better compensation for the lower-paid?
It is not my intention to propose amendments of that nature, because in our view such arrangements are difficult to engineer—this is tricky stuff—and are not amenable to incorporation in primary legislation. Such matters should be negotiated. It is precisely for that reason that we are engaged in a parallel process of negotiation with the Council of Civil Service Unions, which I shall talk a little about in a moment, because we are seeking to achieve two things.
It is interesting to hear the Minister talking about parallel negotiations with the unions. Will he help me by explaining what negotiations, discussions or consultations there were with any of the civil service trade unions before the publication of the Bill?
Negotiations were carried out by the previous Government over the 18 months before the order was laid, which, as I understand it, exhaustively explored all the options. I met the Council of Civil Service Unions before the election and immediately after. I have had several meetings with the council—at least two, I think—since, and I am proposing to meet the chairman later this week. There is a continual process of discussion and dialogue, which I regard as very important. I do not want the measure to be unilaterally imposed; I want a genuine consensual arrangement, whereby all six civil service unions agree to a new, sustainable and long-term scheme.
As my right hon. Friend knows, I am a former civil servant. I am very conscious of the large numbers of low-paid civil servants in this country. He and other hon. Members will know that on average, the UK civil servant receives no more than £24,000 a year, so there are issues of fairness. I give him my full support in taking forward in his negotiations with the various trade unions every possibility of increasing the statutory minimum available for low-paid civil servants. That will fulfil exactly one of the major tasks for the Bill: greater fairness in the system.
I can reassure my hon. Friend that that is exactly our aim. It is one of the great myths—I have sometimes heard this expounded even in this august House—that all civil servants are highly paid. That is simply not the case. As he says, the average pay of the civil servant is, I believe, around £23,000, and half of civil servants are paid £21,000 or less. In the pecking order, as it were, of the different sectors, average pay is highest in the wider public sector, private sector pay is next, and civil service pay is the lowest. So my concern for lower-paid civil servants is real and genuine, and it is based on a proper understanding of the concerns that exist.
Is it not the case that many of the low-paid workers have accepted those low wages because of the conditions of employment, which included a pension scheme and superannuation scheme that meant something? To take that away from them takes away the very essence of why they are there.
I hear what the hon. Gentleman says, and the fact is that in any employment the terms that apply are those that apply when an event happens. People get sick pay when they are sick; they get redundancy pay when they are made redundant. The statutory redundancy scheme, which has the force of law—as indeed this scheme does, as it is a statutory compensation scheme for loss of office—and the compensation to which people are entitled when they lose their office is that which is in force at the time. That is the view that the previous Government took, robustly, having considered—I presume—all the issues as carefully as we have done. So there is a strong view on both sides of the House that this scheme is unsustainable and unaffordable. Even in good circumstances it would be unaffordable, but in today’s tragically difficult financial position—with the budget deficit that we inherited so out of control and high—it would be indefensible to allow it to remain unreformed, as a matter of fairness.
I was pleased when, a few moments ago, the Minister suggested that he did not want to impose this change unilaterally. Of course, that ties in with Mr Justice Sales’s comments that that might not be possible without agreement anyway. How confident is the Minister that agreement will be reached, perhaps before this legislation completes its passage?
All I can say is that it would be rash to make predictions. I can express the hope and aspiration that agreement will be reached. I stand ready to meet the Council of Civil Service Unions at any time, and my officials are engaged in genuine and sustained negotiations and discussions with the unions, which are continuing on an almost daily basis. I have to say that I was discouraged this morning when Mark Serwotka, the general secretary of PCS—a man for whom I have considerable respect—said, when asked whether he would challenge the result in the courts again, that he would do so. That does not bode well for a consensual outcome, and the fact is that five of the six unions had agreed the previous scheme, but the rug was pulled by one union, to the disbenefit of everyone concerned.
I have made it clear that I do not see this Bill as the last word. It remains our desire to reform the scheme by negotiated agreement, so there have been significant and continuing discussions. There are two key goals in the negotiations. The first is to deliver additional protection for lower-paid civil servants, and that has to be done by negotiation—
The Minister has said several times that he aims to protect the lower-paid, but I do not follow his argument. Under the current arrangements, someone who is earning £20,000 a year with 20 years’ service in the civil service would receive £60,000 in compensation. Under the February 2010 deal, proposed by the Labour Government, that individual would have received £58,000 in compensation. Under the present proposals, that civil servant would receive £20,000 compensation. Conversely, someone who is higher paid—for example, £40,000 a year—would receive £120,000 compensation under the current arrangements, given that three years is the maximum payment. Under the February 2010 deal, that amount would have been £60,000 because that was the cap, and under the present proposals it would be £40,000. Can the Minister please explain how the lower-paid will be protected?
The answer to the hon. Gentleman is, as I have said several times already, that this Bill is not the last word and that the additional protection for lower-paid workers has to be done by agreement. I do not want to be in a position where we design as if in some laboratory a complicated scheme to try to give protection for the lower paid, because the right way to do it is by proper negotiations and discussions with the unions—and that is exactly what is going on at the moment. As I said, that is the principal aim of the—
I am grateful to the Minister for giving way. I respect the sincerity with which he puts his case, and I also accept that the rightful place for the detailed discussions will be the negotiations with the unions. However, I think what the hon. Member for East Kilbride, Strathaven and Lesmahagow (Mr McCann) is looking for—and I am, too—is a little more detail on, and justification for, those words that the Minister uttered about protecting lower-paid workers. The anxiety out there is real, and the Minister needs to address that a bit more, if he can.
I am reluctant to start conducting those negotiations in public. It would be regarded by the unions, which I think are engaged in good faith in these discussions—certainly, all the indications are that they are engaged in good faith in these private discussions in order to achieve an agreed outcome—as bad faith were we to start to explore them here. All I would say at this stage is that we completely and genuinely understand the need for additional protection for lower-paid workers, of whom there are many in the civil service, and we will seek to achieve that.
Does the Minister agree that the difficulty is that the Government need to act and cannot allow one of six trade unions simply to veto all changes, and that if the Government are therefore to put something through, they need negotiating room to offer something better in the negotiations? Obviously, this Bill will not be as good as a final deal that could be agreed with the trade unions.
That is completely right. My hon. Friend puts his finger precisely on the point. Our view is that one union cannot be allowed to prevent necessary reform of a scheme that is unsustainable and unaffordable—and, of course, that is precisely the view taken by the last Government. The order laid by the right hon. Member for Dulwich and West Norwood, which came into effect, I think, in April this year—before it was rapidly quashed by the judicial review sought by the Public and Commercial Services Union—was made on the basis that one union could not be allowed to hold up the necessary process of reform. However, I stress again that we seek genuinely to negotiate additional protection for the lower paid.
I have been listening to these exchanges closely, but will the Minister tell me whether I have understood him correctly? Is he saying that, whatever special measures may be made for the lower paid, which he is not prepared to discuss now for the reasons he outlined, he has no intention of trying to impose them through legislation, and that they will be negotiated come what may, but that this legislation might become necessary in order to provide the framework for such a settlement? Is that correct?
Indeed. I will say more about the relationship between the negotiations and the Bill in a little while. The aim would be to have a whole new negotiated scheme that would make this Bill redundant. Sadly, however, the experience of the last Government shows that it is impossible to place absolute reliance on the ability to achieve total consensus on that. Proper additional protection for the lower paid is a central part of our aim in the negotiations. I will say briefly as well that the other side of that coin should be a cap on payments for the highest paid. Again, it seems to us that basic fairness requires that.
Our second goal in the negotiations is to negotiate a higher cap for voluntary redundancy schemes. It is the essence of most redundancy schemes that there should be scope for voluntary redundancy terms to be more generous than those for compulsory redundancy. However, I would like to make it clear, if it needs to be made clear, that no one wants redundancies at all, but if they are unavoidable, which sadly I believe they will be—they were under the last Government, and in the current fiscal environment, they are even more likely—it will surely be much better to be able to offer more generous voluntary redundancy terms. That is simply impossible under the current scheme, because of its unaffordably generous terms.
We have made some progress in the talks, but they have not yet delivered an approach that is agreeable to all the unions involved and to the Government. If we can secure agreement with the civil service unions to introduce a comprehensive new scheme, we will implement that package rapidly. Until we reach that point, however, we would be failing in our duty to the tax-paying public—and to lower-paid workers outside the civil service who daily confront much less generous terms—if we were to allow the excesses of the current scheme to continue unchecked.
That is why we have introduced a Bill to limit the size of compensation payments. It has only two clauses, which cap the amounts payable under the current scheme. The first creates caps on the level of payment possible. Staff who depart on voluntary terms will receive payments calculated under the current terms, but limited to a maximum of 15 months’ pay. For those leaving on being formally dismissed—effectively, compulsory redundancy—the limit will be 12 months’ pay. Where the civil service compensation scheme terms provide for early retirement instead of or in addition to a severance payment, the total value of the package will be subjected to the same cap of 12 or 15 months’ pay. In these cases, if the actuarially assessed cost of the total package exceeds the appropriate cap, the Bill provides that those individuals will instead receive 12 months’ salary—or 15 months’ salary in the case of voluntary departures—and no change to their pension entitlement.
My hon. Friend says that those terms were “almost agreed”, but that was far from being the case. In fact, one of the trade unions refused to agree to them, sought judicial review and had the agreement quashed. Given that one of the unions had refused to contemplate agreeing to the relatively modest—if we are honest—changes to the current scheme, it would be unrealistic to assume that we could then go back and say, “Oh, PCS, please feel completely differently, and please execute a rapid volte face from your position of a few months ago.” I take the view that the previous Government took, which is that the situation is not sustainable, and that one union cannot be allowed to stand in the way of necessary reform. That is why we have introduced the Bill, and why we are engaged in a concurrent process of negotiation, through which we genuinely want to achieve a long-term, sustainable settlement.
Just to be clear, we are seeking to negotiate a new scheme, which would effectively make the terms in the Bill redundant. I make no bones about this: the Bill is a bit of a blunt instrument. It does not seek to create an entire, comprehensive new scheme. It simply imposes a cap on the amounts payable under the current scheme, so that it will be possible for the scheme to operate in a way that is fair to the taxpayer and to workers in other sectors outside the civil service. This is a complex process, and no one should be surprised that there is not instant agreement on a comprehensive new scheme. We are seeking to negotiate all the terms, but particularly those relating to additional protection for lower-paid workers and to a cap on what can be paid to the highest-paid workers.
Almost by definition, if a compulsory scheme offered less work and better terms, no one would take up voluntary redundancy. Voluntary redundancy is better because it can be negotiated and a scheme can be fashioned to meet the precise circumstances of the employing organisation and the work force. It can be designed to be as sensitive as it can be to the particular needs of the situation. Obviously, if a compulsory scheme were more generous than a voluntary one, no one would ever take voluntary redundancy. It is of the essence of any redundancy scheme that voluntary terms should be capable of being more generous. That is why we framed the provision in this way and why part of what we are seeking to achieve in the negotiated comprehensive new scheme is to enable employers in the civil service to configure voluntary redundancy schemes that are more generous than the compulsory scheme.
If this Bill progresses through the House, achieves Royal Assent and goes on to the statute book, it will come into effect, so the cap will apply as of the day of commencement. As I said, I hope that we achieve something frankly more grown up, more sustainable and more long term by having an agreed long-term comprehensive settlement. If both Houses of Parliament agree that the Bill should be passed, however, it will come into effect.
The Minister is generous in giving way. On numerous occasions, he has mentioned the issue of lower-paid civil servants. There is a great deal of anxiety out there about it and many of us have received representations in respect of it. How does he define “lower paid”? What is his definition of a lower-paid civil servant when it comes to these parallel negotiations?
Well, that is one of the issues that is being negotiated. It can be defined in all sorts of different ways. It can be defined in terms of a proportion of the median salary or it can be defined by an absolute number, which would subsequently need to be updated from time to time. That is precisely one of the issues that is the subject of negotiations, and I hope we can make progress on it.
I really have to make some progress and draw to a conclusion because Members of all parties wish to participate in the debate.
I emphasise that if the Bill comes into effect, it will affect only those staff issued with a notice of dismissal or in respect of whom a departure date was agreed after the legislation came into effect. Any civil servant already issued with a redundancy notice or who receives one before the Bill passes into law will not be affected by the restrictions it introduces. The first clause provides definitions to clarify who is covered by the compulsory cap and who is covered by the cap on voluntary departures. The second clause provides for the Bill’s effects to be time-limited. I stress again that we have no desire to see this legislation continue any longer than is absolutely necessary. The inclusion of a sunset provision prevents the legislation from continuing ever onwards. Instead, if we wish to renew it, the Government will be obliged to return to the House to seek approval by an affirmative resolution.
Alongside the provision for prolonging the effects of clause 1, there is also the option to bring forward the termination date. As I have already said, my intention is absolutely to resolve the issue by discussion and negotiation rather than by legislation, and I look forward to making the order that will repeal section 1 of the Act. It was disappointing, as I said earlier this morning, to hear Mark Serwotka, the general secretary of the PCS, pledge to return to the law courts to try to thwart further reform. That bodes ill for the chances of an agreed settlement, but we will strive—we will genuinely strive—to achieve that agreement. It is essential to deliver additional protection, which, I stress, is especially directed at members of Mr Serwotka’s own union. For the sake of his own members, as well as in the national interest and the interest of the taxpayer, I urge him to engage in the negotiations as wholeheartedly as the other five civil service trade unions.
I earnestly hope that a successful negotiation will render the Bill a dead letter before it even hits the statute book. That is my aim, and I will do all that I can to deliver it. In the meantime, however, the Bill is indispensable, and I commend it to the House.
I beg to move an amendment, to leave out from “That” to the end of the Question and add:
“this House, whilst affirming its belief that civil service compensation should be reformed, declines to give a Second Reading to the Superannuation Bill because it provides inadequate protection for some of the lowest paid and longest serving public sector workers; believes that the reform proposals of February 2010 were fair, reasonable and non-age discriminatory, offering protection for the lowest paid workers whilst making substantial savings; and is strongly of the opinion that the publication of such a Bill should have been preceded by a full process of pre-legislative scrutiny of a draft Bill and in full consultation with Civil Service employees.”
I hope that the Minister has studied the amendment closely, because Labour Members believe that it holds the answers he seeks.
At the end of the last parliamentary session, the day before the Bill was published, the Minister declared that when it came to reform of civil service compensation, he wanted to negotiate an arrangement that had fairness built into it. Obviously we welcome that ambition, but we argue that as the negotiations have progressed and the detail of the Bill has become clear, he has failed to live up to his commitment.
The Minister says that he wants a fair settlement, but he has proposed reforms that are harsh, and harshest of all for some of the longest-serving, often low-paid, civil servants. The Minister says that he wants a negotiated settlement, but he has thrown out the progress made by the last Government through just such negotiations, and instead seeks to impose a short-term solution which lacks the legitimacy that comes from open and honest dialogue with the trade unions representing the people who will be affected by the reforms.
I welcome the Minister’s generous remarks, which were sincerely meant, about our nation’s public servants. I join him in recognising the important role that they play in our national life. However, I also argue that they deserve better than the proposals in the Bill. Public servants are too often represented as dead-weight on the taxpayer, as if they were somehow the cause of the deficit.
That is also misguided, and we can have a further debate about it.
In fact, it is public servants who make our borders safe, help unemployed people back to work, run our courts and prisons, collect our taxes, and support our armed forces both at home and abroad, in Iraq and Afghanistan. With professionalism and integrity, they make the process of government work. The representations that I suspect we have all received in our constituency surgeries seek to make that point. It is being made by the people who provide those services, many of whom are members of the PCS but feel that their motives and their importance are being misrepresented.
Let me make it absolutely clear that we do not blame public servants at all for the disgraceful budget deficit that the coalition Government inherited. Like Tony Blair, we blame the last Prime Minister, who as Chancellor and then as Prime Minister presided over an incontinent approach to the public finances.
And let me make it absolutely clear that the Minister has grossly misrepresented the words of the former Prime Minister. Let me also remind him that the deficit arose because of a global financial crisis, and that it was our Government—led by the last Labour Prime Minister—who steered our economy at that stage, who, indeed, provided leadership for the world, and who drew our economy back from the brink of disaster. Let us have no more trivial point-scoring on that subject. I hope that during this debate we shall be able to move on from some of the crass misrepresentation of our country’s public servants and once more recognise the importance of their work, both public and private.
As the right hon. Lady knows, a number of Members on this side of the House, as former civil servants, have already said how important they believe the civil service to be. The amendment, however, focuses on fairness and affordability. Does the right hon. Lady agree that affordability is critical in the current economic climate, and will she tell the House what approach she intends to take? As for fairness, does she agree that the outline given by my right hon. Friend the Minister of his negotiations with the trade unions represents exactly the sort of fair approach that we should be seeking?
I intend to test the Minister’s commitment to fairness—with respect, I think that he asked more questions than he answered—and, if the hon. Member for Gloucester (Richard Graham) will contain his impatience, I shall respond to both his tests in relation to the fairness and the affordability of our alternative.
The Minister has made it clear that the civil service compensation scheme is in need of reform, and we agree. The cost of the scheme needs to be reduced. We fully recognise that, in the present climate, it provides over-generous and disproportionate benefits for some very highly paid people. I believe we are all agreed on the need for reform, which is why in February we set out changes to end what would be regarded by the wider public, and by any measure, as over-generous settlements.
The February 2010 scheme would have saved £500 million over the next three years. That was part of our Government’s plan to reduce the deficit. Yes, reform is needed, but it must be the right reform, delivered in the right way. It must be fair and workable, and in particular—here I echo the Minister’s words—it must provide protection for the lowest-paid. It must also be underpinned by open and honest dialogue with the civil service unions representing those who are likely to be affected.
The right hon. Lady keeps presenting the last Government as the Government who pursued a path of negotiation and what she has just described as open dialogue. In February this year, however, she too pursued the route of compulsion. Does she now regret the precedent that that set?
I am going to make a bit of progress.
In the current environment in which many civil servants are understandably concerned about their jobs, it is even more important for any reform package to be achieved in full consultation and, wherever possible, agreement with the work force. As a result of the Equality Act 2010, which formed such an important part of the last Government’s legislative programme, the Bill is subject to an equality impact assessment, which I took the time to study.
Against the commitments to full consultation and transparent negotiation, we might look at some of the evidence in the equality impact assessment. It asks:
“Does this policy affect the experiences of staff? How? What are their concerns?”
For staff, the following answer is given:
“Exit terms are set out in Civil Service Compensation Scheme, to be capped at levels set out in the Bill.”
That is a perfectly fair statement of fact. The impact assessment then asks whether the policy affects the experiences of staff networks and associations. The answer given is: “As above”—for staff—but also:
“(no consultation due to urgent need for affordable provisions).”
The answer for trade unions is the same:
“As above (but no consultation due to urgent need for affordable provisions).”
When the equality impact assessment looks at the impact on voluntary organisations, the conclusion is that that is “N/A”—not applicable. The impact on race is also deemed not applicable, as are the impacts on faith, disability rights, gender, sexual orientation and age. The impact assessment also asks:
“What were the main findings of the engagement exercise and what weight should they carry?”
That, too, is said to be not applicable.
“Does this policy have the potential to cause unlawful direct or indirect discrimination? Does this policy have the potential to exclude certain groups of people from obtaining services, or limit their participation in any aspect of public life?”
That is not applicable as well.
“How does the policy promote equality of opportunity?”
That is not applicable also. I could go on.
That is not by any stretch of the imagination a proper assessment of the impact of the proposals on the work force, taking account of the obligations that sit on the coalition Government to recognise equality of opportunity.
I am interested in what the right hon. Lady is saying, but I think it is incumbent on her to explain to the House why she thinks the Bill might be discriminatory in some way, rather than just advert to a negative and say that that is not good enough. Does she honestly believe that the measures could be discriminatory in some way? If she could explain that to the House, it would be very helpful.
The hon. Gentleman asks a fair question, but it is his responsibility to test that. However, because compared with the existing situation these proposals in effect levy the greatest penalty on the longest-serving, and almost inevitably the oldest, civil servants, there is at least a prima facie case for considering whether they are age discriminatory. I draw no conclusions, but I say to the House that I consider that the equality impact assessment has not taken full account of the impact of the proposed measures across the work force. The Opposition consider the terms put forward to be both unfair and punitive.
The right hon. Lady often uses the word “unfair”. I assume that she employs her own staff in her parliamentary office and that they are subject to the statutory scheme, with a maximum of 30 weeks’ pay. How does she argue that that, which was set by Parliament, is fair compared with the scheme the Government proposed in February this year?
For the very simple reason that, in order to meet the terms of the judicial review, the proposals in the Bill are removing entitlements, expectations and accrued rights from staff who have a reasonable expectation of receiving them. That is why they are unfair.
No, I am going to make progress because many Members wish to speak in the debate.
We argue that no adequate protection is offered to the lowest-paid, with a junior official in a job centre receiving no more protection than a permanent secretary of a Government Department. In introducing the Bill, the Government have insufficiently consulted their employees. The scant information in the equality statement makes that very clear.
Does my right hon. Friend agree that the fear, which I have come across in my constituency, about these changes is exacerbated by what seems to be scant consultation? Having more consultation would be helpful in dealing with the worry and fear that I have picked up on in Wirral.
My hon. Friend makes an important point based on extensive discussions in her constituency with civil servants likely to be affected. She is absolutely right in identifying that fear, but that does not mean that change is not necessary, nor that members of the Council of Civil Service Unions are not reasonable people who are prepared to negotiate in the spirit that they recognise is necessary.
No, I am going to make some progress—and I think that the hon. Gentleman has already made an intervention.
The very fact that the Bill is designed to expire within 12 months makes its own case for its unworkability as a long-term solution. Instead the Bill is being deliberately used to force the trade unions into compliance. As such it should be seen as a very unusual use of parliamentary procedure to ask Parliament to pass legislation that—as the Minister has made clear—it is hoped will not be implemented.
The Deputy Prime Minister has stated—presumably on behalf of the Government—that fairness will be at the heart of everything the Government do. However, as with so much that the coalition does, the terms put forward under the Bill do not meet the first basic test: they are not fair because some of our longest-serving, and often lowest-paid, civil servants receive no protection under the proposals.
Did the Minister not give it away when he made the point in his opening remarks that it is more expensive to get rid of those at the top of the tree, and therefore there would be an encouragement to get rid of those at the bottom of the tree? Will not low-paid civil servants be really concerned by the attitude now being taken?
Let me make it absolutely clear that the point I was making is that, under the current scheme, lower-paid people are more likely to lose their jobs because it is so prohibitively expensive to make higher-paid, longer-serving senior officials redundant. As a result, more lower-paid civil servants get made redundant. The reform is therefore necessary for this reason alone: to protect the jobs of lower-paid workers.
Well, let us see how that commitment plays out in practice. I entirely agree with the right hon. Gentleman that the people who work in job centres and at our borders often doing relatively low-paid jobs are the people who make those services happen at all, and I think there would be a marked degree of cross-party agreement about ensuring fairness and protection for such employees. We on the Opposition Benches, however, feel considerable scepticism about whether the proposals will deliver that.
Let me illustrate that and pick up on the point made by my hon. Friend the Member for Midlothian (Mr Hamilton). A member of staff earning less than £20,000 made compulsorily redundant after more than 20 years’ service would see their redundancy package more than halved under the provisions of the Bill; and staff covered by the civil service compensation scheme would receive substantially less in redundancy terms than comparable public sector employees, despite being among the lowest-paid public servants. The proposed cap is half that often seen in local government, education and the NHS.
On the question of protection for the lowest-paid, let me repeat the words used by the Minister in the House in July—he was right about this:
“Contrary to general belief, large numbers of civil servants are not very well paid—half of them earn £21,000 a year or less—and we want there to be extra protection for them.”—[Official Report, 14 July 2010; Vol. 513, c. 931-32.]
So say all of us, but the fact is that the Bill gives no confidence to those lower-paid employees.
I am surprised that the hon. Gentleman feels it necessary to ask that question. If employers in the private sector use the basic statutory scheme, it is considerably less generous than even the proposals in the Bill. In a way, that is not the point, because the value that we attach to public servants, to the importance of the jobs that they do and to the commitment to invest in security to prevent turnover and to compensate for what are often lower levels of pay is one of the reasons that such provisions have traditionally tended to be more generous. It is worth reminding the hon. Gentleman—the Minister took us through the history—that the scheme was created by a Conservative Government and amended by a Conservative Government and that attempts at reform were made under a Labour Government. Now, under the coalition Government, we have what amounts to a hollowed out version of the original scheme.
No, I am going to make some progress so that Back-Bench Members can get in.
We expect the Government to take seriously the need for proper dialogue and negotiation in circumstances where the individual impact of the changes is so substantial. It is fair to reflect disappointment among the trade unions that the Bill makes no attempt to put in place a long-term solution to the big challenge of the reform of civil service compensation and, as such, no solution is possible given the Government’s failure to engage constructively with their employees and their representatives. That is implicit in the Bill’s final provisions, which are designed to ensure that it is sunsetted, or expires within 12 months, can be repealed at any time and can only be extended for a further six months through recourse to secondary legislation.
The Bill to which the House is being asked to give a Second Reading tonight does not even represent the Government’s settled position. The Minister tells us that his ambition is now a negotiated, sustainable and practical long-term solution, but that ambition merely serves to remind us that the Bill fails to provide such a sustainable solution or one that has been subject to proper dialogue with those affected.
There are questions that the coalition Government and the right hon. Gentleman must answer. The Opposition have made absolutely clear the anticipated level of savings—figures in which there can be confidence—that would have been produced by the February reform package, so I ask the right hon. Gentleman what savings the Government expect to make from the proposals in the Bill. Why do we not have a complete and workable scheme in front of the House as part of the Bill for which a Second Reading is sought? Why are we spending parliamentary time on legislation that simply seeks to provide the right hon. Gentleman with a negotiating tool to use with the civil service unions?
There is, of course, an alternative. It is fair and it is workable. As shown in our reasoned amendment, the February 2010 scheme should form the basis for the reform that we all agree is needed. As the right hon. Gentleman has made clear, it emerged from an eight-month consultation between the Government and civil service staff and would provide a fair resolution to the issue. Now, although five trade unions have agreed and continue to support the proposal, all six have expressed their support for the use of the principles underpinning the scheme as a basis for moving forward. That is an invitation and an offer to the right hon. Gentleman. Such an approach would meet the tests that we have set out for reform and save at least £500 million over the next three years.
Our challenge to the Minister is to put back on the table the February 2010 proposals, which are fair to the lowest-paid, will contribute £500 million to reducing the deficit and will reform the existing scheme. The right hon. Gentleman has already conceded in exchanges with my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) that, had all the unions agreed to this, there would have been—as he put it—a pressing case for acceptance. We therefore ask that he accepts the case now and supports the reasoned amendment. I call on the House to reject the Bill.
Like every Member of this House, I have received significant communications and representations from individuals and from the unions on this matter. Many of us will have significant numbers of public sector employees in our constituencies. I would say that Wales as a whole has a disproportionate dependence on public sector employees—quite obviously, including employees of the civil service—and the Vale of Glamorgan is no different.
It is quite sad for all those individuals and for the House that we are in this position today. The financial state of the nation has led us to this position. The unrealistic position taken by the unions has driven the Minister to introduce such a Bill, sadly without complete settlement with the unions. I was encouraged by some of the statements that he made about the negotiations and I shall come back to them a little later.
It is difficult to believe some of the payments that are made under the current system. In 2007-08, the Department of Health, in 76 individual cases, paid severance compensation of more than £7.8 million—an average of more than £102,000 per employee. I wonder how many of those who were made redundant or who took voluntary redundancy were then re-employed by the Department of Health as consultants, which would obviously have increased the costs to the public purse. In the Department for Environment, Food and Rural Affairs, there are two examples: in one, compensation in excess of £500,000 was paid and, in the other, compensation in excess of £1 million was paid. That position clearly cannot continue and is wholly unreasonable not only to those in the civil service who are paid at lower levels but to the taxpayer who must ultimately foot the bill.
When I discussed those levels of payments with some of the constituents who got in touch with me expressing concern about their own interests, they showed equal disdain towards the levels of compensation that are paid, and they would recognise the absolute need for reform. Such levels of severance paid at the higher level simply cannot continue. It is a burden on the taxpayer and, as has been highlighted, is prohibitive to the reform of the public sector when the taxpayer really needs every efficiency measure to be driven through. Not only is it prohibitive in terms of the level of payments and the high cost of making many of these individuals redundant, but it is prohibitive and damning for people at the lower levels who will have to be made redundant when those at the higher levels cannot be laid off because it would be unaffordable, even when many of their roles have become redundant as a result of the evolution of the Department or because of new technology. The Bill goes further than the previous proposals, but as the financial situation of the country is much worse than was previously stated, the bill must be affordable, and that imperative has obviously influenced my right hon. Friend the Minister in introducing the Bill in such a form.
I do have concerns about the effect on civil servants at lower levels of the pay bands, and we need to recognise their interests. I was encouraged by my right hon. Friend, who highlighted his concerns and the need for negotiations. I would look to the trade unions, particularly the PCS Union, to see that statement in a positive light and negotiate, in the interests of those at the lower levels, a settlement that is in the interests of the whole of the civil service and, obviously, of the taxpayer.
In research and when chatting to constituents, it was highlighted to me that at the Department for Work and Pensions, someone who is at the maximum of the lowest pay band—band B—earns between £15,000 and £18,000. To put that in perspective, a fraud officer—an individual who we expect and hope would save some money for the taxpayer over the coming years—is a band C. That demonstrates how much responsibility can reside at the lower levels of some civil service pay bands. Currently, if made compulsorily redundant, such an officer would receive three times their salary if they were older than 42 and had more than 20 years’ service. Before the court judgment, the intention was to provide such officers with the equivalent of two years’ service, and now it is to provide one year’s salary in compensation.
I am encouraged by my right hon. Friend’s statements to the effect that he is interested in negotiating at this level. I recognise the difficulties in sharing some of those concerns with the House, because it is obviously not the place to negotiate with Ministers, but I ask him, in the summing-up, to go as far as he can in sharing the objectives that he would like to achieve in the interests of people at the lower levels of the salary and responsibility grades.
I would advise the right hon. Member for Dulwich and West Norwood (Tessa Jowell), who was asked a question about the average for private sector redundancy pay, that it is in the region of £9,000, which we should recognise is less than is being offered, and in the affordability debate we need to recognise the generosity of that.
Interestingly, the 2009 civil service statistics show that 36% of civil servants earn less than £20,000 and 58% less than £25,000. Clearly, there is a need for some sort of protection at the lower levels. The Government have taken positive steps—when they formulated their policy on the pay freeze, they protected those at the bottom end of the scale, and I think that principle should carry through to this Bill and to the negotiations that my right hon. Friend is undertaking.
The hon. Member will recall that, when the Minister was asked to say at what level he thought people were low paid, he said he could not say. It would not be for him to say—it would be almost impertinent to suggest that outside the negotiations—but the hon. Member has rightly recalled that the coalition Government had no problem deciding that £21,000 was the threshold at which people should be protected from the pay freeze.
I have no doubt that that would be part of the negotiations, but I wholly accept the point that my right hon. Friend has made that one does not start negotiations at the point where one expects to finish, bearing in mind the actions that the PCS Union and some of the other unions involved have taken to date. However, the point about the £21,000 threshold that the hon. Gentleman highlighted demonstrates the compassion and support shown by the Government, and I have absolutely no doubt that that compassion and support can and will be shown towards civil servants in the negotiations that are led by my right hon. Friend.
Considering that there are ongoing negotiations, does not the hon. Gentleman agree that the Government are using the Bill effectively as a battering stick to coerce the unions during those negotiations?
I am grateful to the hon. Gentleman for the question, but I think the Government have been left in an extremely difficult situation—a sad situation, as I highlighted—from the outset. We have such a large deficit. A decision is needed on this question, particularly given the reforms and cuts that are likely to follow the comprehensive spending review, so I look positively at the action that my right hon. Friend is taking to resolve that position to bring certainty to those people whom I have rightly sought to champion.
I chair the PCS parliamentary group. It is a cross-party group that was formed a number of years ago, and several Members of Parliament on both sides of the Chamber tonight are members of it. I think it has been helpful for Members of Parliament to gain a knowledge, through the union, of what the union’s members undertake, how they effect their work and the role that they play.
PCS represents the largest number of civil servants, and certainly the largest number affected by the compensation scheme, and I want to add my name to the compliments that have been paid today, across the Chamber, with regard to civil servants and the role that they play. It is an admirable tradition, serving Governments of all political colours, with commitment and dedication that is second to none across the globe. It is slightly ironic that we praise them now, and yet, by the looks of it, in a month’s time we are going to lay off and make redundant the largest number of civil servants ever in our history, as a consequence of the comprehensive spending review. Anyway, we are all committed to the existence of a civil service that implements the policies of a directly elected Government.
There are certain measures that Governments introduce that can be described as land mine Bills. Judging by the type of the legislation or their subject matter, they might appear relatively innocuous at first, but they are political land mines that can permanently damage and taint an Administration. I think the art of good governance is to identify—perhaps from bitter experience—the potential disasters, those land mines, and avoid them. This Bill is a political land mine. It is potentially extremely potent and it is an explosive issue. I think it is potentially disastrous for this Government and I think, coming at it as an ex-bureaucrat myself, that it will undermine their ability to implement their overall programme. Why? Well, many Members have commented that they have discussed with constituents and civil servants and they have received representations, so many Members will share the feeling that I have. I think morale is being affected by this legislation and the way in which it is being handled. I think morale at the moment in the civil service is at an all-time low as a result.
The Government have been democratically elected and have the right to implement their policy programme, but every manager, whether in the public or the private sector, needs not only resources and clear objectives but a committed, dedicated and motivated staff. The imposition of the Bill is undermining that morale, that commitment, that dedication, that we so need among the work force.
There is a depth of feeling about the unfair way in which people are being treated in the civil service. I have met many PCS members, including many who are my constituents, and there is resentment of the Government’s political action on this issue. The most common response that I—and, I am sure, other Members—have met is the simple statement, “We didn’t cause this economic crisis, but we’re having to pay for it with our jobs and with cuts in our conditions of service, and this is the latest round of those cuts.” There is a real, palpable sense of grievance, particularly as the bankers who did cause the crisis are not just back in position, but have, in some cases, been appointed to higher positions. Some have even been appointed to ministerial positions in recent weeks. Bankers are coming back for their obscene bonuses and obscene pay. There does not seem to be any equity or equivalence of suffering. There is a feeling among civil servants that we are not all in this together.
The hon. Gentleman will know that the budget deficit that this Government inherited from the previous Government is £155 billion, but even the structural deficit, which was there before the economic crisis commenced, was £128 billion. The country was already living way beyond its means. That is why his Government tried to make changes to the scheme, and it is a reason why we need to do so. It is no good trying to blame the problem on a particular profession. If he is going to pick a profession to blame it on, he should pick the political class represented in the previous Government.
The hon. Gentleman came to the House at the last election, so he may not know that I was probably not the most vociferous supporter of the economic policies of the previous Government. I was a critic, and if he looks at the alternative Budgets that I provided annually—which this House rejected, but never mind—he will see that there would have been no deficit if I had implemented them. There would have been a redistribution of wealth and an increase in taxation, which would have enabled us to afford the public expenditure that our society requires.
I am not a Keynesian; I am a Marxist—[Laughter.] Well, it is interesting how true some of the predictions in “Das Kapital” are coming. Even if one takes a Keynesian position, the last thing one would do at this point in time is reduce aggregate demand and cut jobs, wages and conditions of service. It flies in the face of reality to lay off large numbers of civil servants, and then cut the income and compensation arrangements that they receive. Anyway, Mr Deputy Speaker would rule us out of order if we went into another economic diatribe.
I recognise that a range of negotiations need to take place. In the last set of negotiations with the previous Government, there were various issues to do with changes tackling age discrimination in particular. My view—we have to come on to the reality of the negotiations that will have to take place—is that we can create a climate of opinion in this House and elsewhere that will enable those negotiations to come to fruition, and that we should protect the lowest paid, in particular, as best we can. That has been the commonly voiced demand in the Chamber today.
Yes, and that is why I have consistently put forward alternative economic policies and strategies.
Let me press on, if I may. This is a serious debate, and I am trying to get across the feelings expressed to me through the PCS parliamentary group. As I say, I have met PCS members, I have attended meetings of the executive, I have been on picket lines, and I have been at various meetings around the country. There is anger about the proposals in the Bill—I shall come on to that—but also about the way in which the issue has been handled by Ministers.
In interview after interview, and even in the Chamber today, Ministers and Government Members have focused, in their descriptions of the compensation scheme, on payments to the highest-paid civil servants; it has almost been a portrayal of “Yes Minister”-type permanent secretaries, retiring to their Whitehall clubs on large-scale pay-offs. There are some individual examples of that, and they have been quoted today, but PCS is one of the leading unions that has pointed out that issues around high pay within the civil service have undermined the equitable distribution of rewards in the public sector.
Time and again, including today, we have had repeated the example of some civil servants receiving up to six years’ wages as a redundancy settlement. Let us get this point on the record as best we can: if I may refer Members to the Library note, of 500,000 civil servants, only 4,400 are in the senior civil service. The maximum compensation for most is capped at three years’ pay under the compulsory scheme, and two years’ pay under the flexible, voluntary scheme. For a small number of people who joined the service before 1987 with reserved rights regarding severance payments, payments are higher.
Ministers were asked by the Public Accounts Committee and, I believe, in parliamentary questions on the Chamber Floor, for information on the number of individuals currently getting a package worth six years’ salary. We were told that the information was unavailable because it could be provided only—there is a sense of irony here—at disproportionate cost. The six-year allegation is consistently used, even today. I would welcome some facts on how many people we are talking about and what the costs are.
Perhaps I could be of assistance to the hon. Gentleman. One of my constituents, a civil servant, calculated that to qualify for that six-year maximum, one would have had to have joined the civil service just after one’s 17th birthday and have been made redundant just before one’s 50th. I suspect that we are talking about a very small number.
Would it not have been useful, though, if we actually had the number so that we could have a properly informed debate, rather than allegation, counter-allegation and, almost, smear?
Ministers were also asked how much public expenditure the imposed scheme would save—my right hon. Friend the Member for Dulwich and West Norwood (Tessa Jowell) on the Front Bench raised the issue again today—but that information has not been forthcoming. The Secretary of State has said that the amount is impossible to calculate. I have been there; I have advised decision makers—and in the private sector it is exactly the same—and when one is entering a redundancy situation, one does a rough, or even a back-of-an-envelope, calculation of the numbers one is looking to lose, the amounts, the average rates of pay, the distribution of the rates of pay across the service, and therefore roughly what the cost would be. That is not too much to ask before we make a momentous decision on this legislation. In fact, the Public Accounts Committee raised the issue again in July, and the Minister refused to respond.
I deal now with the myth of the highly paid civil service. Some people have already mentioned the subject today, but it is important that we get the point on the record. Even though this has been denied today, it has been part of the Government’s strategy to promulgate the myth of a highly paid civil service.
I believe that people who are made redundant should be properly compensated and, yes, I believe that the system put forward by the last Government was certainly affordable. I actually believe that the mechanism previous to that is still affordable. However, I accept that there was a need for reform. That is what the unions were negotiating on. It was not the PCS’s fault that the last scheme fell apart; the Government ruled that the process by which it was introduced was unlawful—it is as simple as that.
Let me return to the myth of a highly paid civil service that is promulgated, if not today, certainly elsewhere, including by the media. Yes, there are some highly paid civil servants, and we have dealt with that today. The unions themselves are at the forefront of highlighting the need to tackle high pay and bonuses. However, as had been said, the average civil service pay on which redundancy payments are based is £22,850 a year, compared with £24,970 in the private sector. There are 35,000 civil servants who earn less than £15,000 a year. Some 210,000 people—40% of the civil service—are paid £20,000; 350,000, less than £25,000. The bulk of our civil servants are on low or relatively modest pay.
The other tactic that is used—and it has been paraded again today by Ministers and Members in the debate—is a justification of the attack on the compensation scheme by divide and rule, playing public sector workers off against private sector workers. The Government have argued that many people in the private sector receive only statutory minimum redundancy payments or low-level additional scheme payments, but the reality is that most private sector workers are covered by some form of additional scheme, and are usually protected by its being written into their contract of employment. The fact that the level of many of those compensation payments is disgracefully low in some parts of the private sector is no justification whatsoever for undermining standards in the public sector. It is an argument for raising levels and standards in the private sector, even in these economic times.
The argument that when civil servants take on their job they weigh up the merits of going into the public or private sector has been made today. Wages in the public sector are lower, but the benefits are better, and usually more secure—that is the calculation that is made. If we compare civil service grades with jobs in the private sector, we can see that admin officers in the civil service earn 21% less than people in comparable jobs in the private sector.
I will not quote the figures again, but I refer the hon. Gentleman to the income data survey. I am happy to provide him with a PCS briefing that sets out the figures. [Interruption.] Well, the briefing is based on information independently issued by the income data survey.
In the executive grades, supervisors in the public sector—people with vocational qualifications—earn 18% less than supervisors in the private sector. The decision to go into the public sector, as I have said, is based on a judgment in the round about security, benefits, pensions and, yes, redundancy payments, which are described as accrued benefits that people earn over time. They are part of their wages. What is happening today is a Government unilaterally tearing up the contract that was entered into when many of these civil servants entered employment. I think that that will be open to challenge on the grounds of human rights compliance. Inevitably, members not just of the PCS but of other unions will wish to exercise their rights in law. What is happening is the worst of all worlds for civil servants.
Perhaps the hon. Gentleman was not listening. The period of six years has been used time and again to justify the measure. A tiny number of cases are involved, but we would like the exact number. If he can help us to extract that information from his own Ministers, that would be useful.
The vast bulk of civil servants who have been made redundant have been laid off on conditions of no more than three years’ pay, and the majority of them on considerably less. Under the terms of this measure, that will be reduced by two thirds. It is not about the tiny minority who receive six years’ pay, but about the vast majority who will lose up to two thirds of their payment.
I will press on, and give way to the hon. Gentleman shortly.
The position now is the worst of all worlds for civil servants, who are facing a double whammy. They enter a service in which they are paid less than the private sector, but at least they receive some benefits as a result of the security of pension and redundancy payments and so on, but their redundancy payments are to be cut while at the same time their pay is frozen or cut.
There is no protection in the Bill for the low-paid—we all agree about that. Members have appealed for details, but the ministerial response is that this is not the place to begin negotiations. The Bill begins negotiations, and it is a negotiating ploy. The Minister could at least set out the parameters or the options available to protect the low-paid. The argument goes that that will be negotiated with the unions in separate negotiations, but do Members of Parliament not have an additional responsibility to represent the interests of their constituents? When hon. Members vote on the Bill, they need security of information to protect their constituents’ interests. They need to know in more detail how their low-paid constituents will be protected as a result of the legislation. However no fragment of information has been given, nor have parameters been set by the ministerial words we have heard today.
When we deal with legislation of this sort, we need to consider the impact on people’s lives. The worst feature of the Bill is the Government’s almost brutal disregard of the human consequences. Tens of thousands of civil servants are likely to lose their job in the coming years. In the economic crisis, even if there is no double-dip recession, and we just rattle along the bottom for the next three years, most of those people will struggle to get back into work at all or find work offering similar wages. If we look at previous recessions, particularly for older workers, we can see that some of them never work again. We must recognise the devastating impact that that will have on individuals and families.
Most people in this country lack savings. Various reports by citizens advice bureaux show that even people in work lack savings beyond a month’s salary or wages. Most people have enough for only two months’ mortgage payments, so are close to default. Reducing redundancy payments in this way undermines people’s ability to survive the devastating impact of losing their job. It also undermines their ability to get back into work in many instances, because it is a costly exercise to travel around the country looking for work. The measure will introduce poverty and stress, and put pressure on people who have lost their job. The irony is that whatever savings are found will be significantly reduced by the benefits that we pay out. Many of the people we employ to administer unemployment benefits will receive those benefits themselves as a result of cuts in public expenditure.
Many of the PCS members I meet are desperate as a result of the anxieties engendered by the Bill, and they are becoming angry. When people perceive that an injustice has been done to them, they react. Boiling point has been reached as a result of the autocratic methods used by the Government to impose their way. They have introduced legislation before serious negotiations have taken place. It is like putting a cosh on the table before beginning a dialogue. The use of the money Bill device to prevent full parliamentary scrutiny is despicable. I have looked at “Erskine May”, and I urge other Members to do so. I cannot see how this can be defined as a money Bill. I hope the Speaker will rule against it after Third Reading. If it is passed as a money Bill, it will be implemented within a limited time scale, with no potential for amendment in the other Chamber.
The introduction of a sunset clause sends out a message that if the economic situation worsens, the Government will come back for more, and there will be further cuts in the scheme after that year. The Bill immediately soured the industrial relations climate under the new Government, and that does not apply just to the civil service. Across the public sector teachers, local government workers, health workers and those working in the emergency services are all on better terms than the terms introduced by the scheme in the Bill, so they see the legislation as the starting gun for an attack on their conditions and their redundancy payments.
Some have put a more sinister construction on the Government’s intentions. It is clear that the Government’s strategy is that the economic recession will be solved on the basis of cuts in the jobs, services, wages and conditions of employment of working people. For those of us who have been around a while, it smacks of the same old policies of the 1980s. In that period a Conservative Government decided that the unions had to be broken if the Government were to be able to force through harsher cuts. They took on the miners’ union, for which I worked at the time. It was an attempt to break a union as an example to others. The present Government appear to have identified the group of public sector unions as the modern day target. I am sure we will soon be hearing statements about enemies within and so on.
If that is the Government’s strategy, they are sorely mistaken. My sense is that the public servants who will be affected by such legislation will not take it lying down. Members have been lobbied already. They are aware of the growing anger, and there will be resistance. That will have public support, particularly as our communities begin to experience the impact of the cuts to their services and increasingly appreciate the scale of the damage that will be incurred by our society.
I appeal to the Government to pull back from this mistaken approach of imposition, which will lead to confrontation. I urge them to get back to the negotiating table and to agree a serious and sensible way forward. They should take the cosh of this legislative proposal off the table to allow proper negotiations. Ministers could sensibly withdraw the Bill tonight. Failing that, I urge Members to reject it because there is nothing in the Bill or in the words uttered by Ministers today that gives us the guarantee of the protection of our constituents that we require. The Bill will damage the civil service that we have all commended in today’s debate as an exemplar to the world.
I warn the Government that issues such as those raised by the Bill, which appear minor at first glance, become the combustible material that eventually brings down a Government. I urge Members to reject the Bill tonight.
Order. A considerable number of Members are trying to catch my eye, as the House can see. If speeches go much beyond eight minutes, we will not get everybody in, so I ask Members to focus and show discipline in order to help other Members to be able to deliver their speeches also.
I shall be fairly brief, as I have only one fundamental concern. Despite the persuasive skills of the Minister, I sensed in what he said the iron fist within the velvet glove.
I have concerns about the scheme which focus on the fundamental issue of a unilateral alteration of contract and how that stands in this place. I accept that the scheme as it stands is, as many hon. Members have said, generous. It is certainly superior to any available to other public sector workers, such as teachers, NHS staff or local government workers. It is expensive and everybody accepts that it needs an overhaul. I am aware that successive Governments, worried about affordability, have sought agreement on changes and got very close to agreement, which must give some hope for the future.
What I have difficulty with—it is a genuine difficulty, and perhaps the Minister can help me—is a unilateral variation of contract in any context, and not because it is ruled out, as it was in the courts, by the Superannuation Act 1972, which Parliament is, of course, free to amend, and which we are in the process of amending here. Let me briefly explain why. The scheme as I see it is referenced in civil service contracts of employment. Those contracts are freely entered into by the state and by the employees who work for the state. The scheme therefore features, though not in specific detail, as a term and condition of that contract.
When an employment contract is ignored or discarded by any other employer, there is normally a redress in law. Some unscrupulous employers view that as an occupational hazard, preferring to pay people off with meagre compensation than to honour contracts. That is a calculation, but it is not something that a Government should engage in. Such people belong to what I would call the brutalist school of management, and working for such people is a unhappy experience. The hon. Member for Hayes and Harlington (John McDonnell) mentioned how things could go in the civil service.
The state should, in theory, be a model employer, and legislates in this place on employment law for other employers. What we have here, apparently, is the courts telling the civil service that they cannot vary a contract unilaterally as a result of action by the previous Government, and this Government legislating to ensure that they can. However it is dressed up, that represents the naked—albeit legal—use of power to alter a contract unilaterally. Such managerial brutalism, as I call it, is likely to have long-term detrimental consequences, in terms of morale and the willingness of employees to engage satisfactorily in their employment.
Leaving aside the fact that this sets a poor example, there is a danger that it may also be poor politics. Good politics is based on ethics, and who wants to defend breaking contracts at one’s convenience? To be sure, keeping to them in this case costs money—Members have spoken about affordability—and more money than people ever thought it would. We do not argue in this place that because private finance initiative contracts cost much more than imagined, we should pass legislation to drop some of their clauses, but that strikes me as an exact parallel of what the Bill appears to do.
Keeping contracts is fundamental to any scheme of law. Even when football teams that are saddled with managers who drag them down into lower divisions finally come to sack them, they honour contracts that they have made with them, sometimes at huge cost: they keep the terms and conditions of their contract. We do not hire people to work on our premises or our houses and, when our bank balance declines and our fortunes get worse, insist on paying them less than agreed, unless we have some sort of justification. Only in the direst national emergency can a democratic Government sacrifice the principle of honouring contracts, and they should do so only when there is no alternative course of action.
I genuinely appreciate the Government’s dilemma. I wish to see the scheme reformed to become more affordable, at less public cost. We must all accept that since 1972 the scheme has grown and grown, and there might be a difference between reneging on the scheme and varying some detail of it, but that is a legal question above my pay grade. I do not seek to answer whether that difference exists, or to create difficulties for anyone. I simply want to know whether the Bill before us is in effect a unilateral variation—a rewrite of a contract. If it is, how in this case can we provide a wholly rational and ethical defence for it?
May I declare an interest? In the Chamber tonight, I am representing thousands of civil servants who live and work in my constituency, home to Her Majesty’s Revenue and Customs, the Department for International Development and the Department for Work and Pensions. Many other constituents work in the Scottish Court Service, the Scottish Prison Service, the Forestry Commission and many other Departments, agencies and non-departmental public bodies throughout Scotland.
I have another interest to declare: I was a civil servant between 1982 and 1992; I became a full-time official with the Civil and Public Services Association, a predecessor of the Public and Commercial Services Union; and then I became a senior full-time official for the PCS. I know all the protagonists in this debate very well indeed, including the aforementioned Mr Serwotka.
The motto of the new coalition Government is, “We are all in this together,” and I should like to put that to the test by asking them to put their motto into actions rather than words, because, despite what was said amid the heady atmosphere of the Queen’s Speech debate, every Member recognises that we have to tackle the fiscal deficit. The difference—well, there may be more than one—between Opposition and Government Members is how we do so. The Opposition believe that there are other options, that the Government are going far too far, far too quickly and that the damage that occurs will create more problems for the economy.
The proposal before us is the first real acid test of the Government’s plans for deficit reduction, because we all know that the whole economy of the United Kingdom benefited from the economic bail-out. The private sector, the public sector and what people call the third sector all benefited, and in order to reduce the deficit every part of the economy must contribute. I shall argue strongly that that contribution must be proportionate and depend on how much people can afford. For example, the bankers, who perpetrated the biggest crime against our country’s economy, must pay the most in order to rebalance our books.
We know from the Budget that people will be asked to pay a 20% VAT rate, and that there will be what Opposition Members regard as a puny levy on the banks. We must also consider the proposal before us, and taking matters in the round I have reached the judgment that we are not all in this together, because we are asking those who can least afford it, those who are vulnerable and public sector workers to pay the largest price. That is the collective impact of the proposal. Despite what the Minister said, that is the message that the Government are sending out. I appreciate his point about the negotiations, but, having taken part in many negotiations over the years, I now recognise when I had the upper hand and when the employer did, so I recognise that in the current negotiations the employer—the Government—has very much the upper hand.
Ministers still have an opportunity to reach a common-sense resolution for the civil service compensation scheme, however. A lot of inaccurate information has been put out in the press, and there is a great deal of confusion about the difference between severance and early retirement. For example, on the BBC’s “Today” programme, I heard that some civil servants would receive six and two-thirds years’ payments after they had been made redundant. That clearly confused severance with retirement, because severance is simply based on length of service and salary, and the maximum payout under the current CSCS scheme is three years. In respect of retirement, the terms are for the over-50s, involving an enhancement, through added years, to their pensions.
The Labour Government’s comprehensive proposal to the civil service unions would have saved between £500 million and £650 million—not inconsiderable amounts of money, I hope Government Members will agree—and protected all the different bases in respect of early severance and early retirement.
The hon. Lady is absolutely correct, but earlier contributors made it clear that that refers to a very tiny proportion of the civil service staff; the vast majority are under the terms that I have given the House—[Interruption.] The hon. Member for West Suffolk (Matthew Hancock) shakes his head, but it is absolutely true that the vast majority will receive severance terms based on a maximum three years’ payout. [Interruption.] His colleagues nod in agreement, so he seems to be in the minority.
The surprise that I express is due to the argument that, because not many people will receive enormous payouts, there is somehow not a problem. I also want to add a couple of facts to the debate. In the past three years at the Department of Health, the average payout has been more than £100,000 each year. The argument that large payouts amount to a couple of small examples contravenes the facts.
I thank the hon. Gentleman very much for that intervention, but he is simply wrong. A minute number of individuals will attract substantial payments; the vast majority will receive a maximum three years’ payment under severance terms and, for early retirement, up to six and two thirds added years. The Minister nodded when I mentioned that the maximum is a six and two-thirds years’ enhancement.
The most important thing about the February 2010 proposals that the previous Labour Government put forward was that they would have protected the lowest-paid civil servants. The cap was two years’ salary, with a maximum payout of £60,000, but given that the average salary of a civil servant is £20,000—that figure has been bandied about a lot in the debate—Labour’s proposals would have protected those individuals. Under the Bill, they face a two-thirds cut, which is unreasonable and, with the greatest respect to Government Members, demonstrates that we are not all in this together. The Bill anticipates that, as a result of the comprehensive spending review, many thousands of civil servants will be made redundant in the months to come, and it effectively says, “While we give you the pain of making you redundant, we’ll also hammer you financially as you walk out the door.” That is unacceptable.
Does the hon. Gentleman agree that his comments are focused on the Bill, rather than on the parallel aim of the negotiations with the trade unions? The fundamental aim of those talks, which is to increase the minimum statutory amount for the less well paid civil servants, is critical and fair. Does he support it?
I understand the hon. Gentleman’s point, but may I make this point in return? If the February deal was unacceptable to one trade union in the negotiations, it strikes me as logical that that deal would have to be significantly improved in order to make it acceptable to the PCS. I do not get from the Minister any impression that there will be any significant move to improve that deal financially, which leads me to conclude that those negotiations might not be as fruitful as Government Members hope.
One of my final points is that the February deal should be put back on the table. That is the simple fact of the matter. That deal represents the best opportunity to reach an agreement, as the shadow Minister, my right hon. Friend the Member for Dulwich and West Norwood (Tessa Jowell), said.
The Minister said that the Government have proposed a 15-month deal for those who volunteer for redundancy, and from a negotiating point of view I can understand why that might seem attractive, but it will not be attractive to the many low-paid civil servants who work in my constituency. They will see it as a pearl-handed revolver to the temple, implying that they can take 12 months’ pay if redundancy is compulsory, but 15 months’ pay if they go quietly. That is not fair to civil servants.
I gave an example when I intervened on the Minister. Let us take a 42-year-old civil servant with 20 years’ service—I have chosen that age because it is, almost, close to mine. Under the current, pre-February deal, which is in place because, owing to legal action, the legislation has not changed, that individual would receive £60,000. Under the February proposals that the Labour Government put forward, that individual would have received £58,000. Under this Bill, they would receive £20,000 in compulsory terms or £25,000 if they went voluntarily.
I respect the hon. Gentleman’s argument, but on a point of clarity, I should say that he talked about a 42-year-old who had worked for 28 years. That suggests that he or she would have started work at 14. I would have a bit more understanding if the hon. Gentleman used a more realistic example.
The numbers are okay. Forgive me; I was not trying to suggest that we introduced new legislation in Scotland under which people started work earlier. My point is that the lowest-paid are still paying the biggest price. That is unfair, and I hope that Government Members will take that on board.
A number of people have said in this debate that the private sector does not get the same treatment. I was a full-time negotiator for the Public and Commercial Services Union and its predecessors for many years, and let me tell the House what happened in the public sector. When times were good and we went into negotiations asking, Oliver-style, for more, we got the answer back that we had to set an example. We could not share in the country’s wealth because of that. When times were bad, the argument from the opposite side of the table changed—it became, “We can’t afford it.” That is why the civil service has been a battleground for a number of years.
Sadly, I am old enough to remember the 1980-81 pay disputes. In the late 1980s, Margaret Thatcher, the then Prime Minister, put new arrangements in place. Those were ripped up in September 1992 when we had to pull out of the disastrous exchange rate mechanism. In 1993, the Conservative Government imposed a 1.5% pay limit on the whole public sector to take account of their economic problems. I mention all that to demonstrate the link between Conservative Governments and cuts to the civil service and the fact that the civil service is always the easy scapegoat.
There is always a dilemma between the public and private sectors. We were trying to emulate in some way the private sector’s efficiency—there is an eternal debate about how we can make the public sector more efficient. The conundrum is this: the private sector can make a profit, but the public sector is about service and delivery. The public sector must always be efficient, but low salaries are the price that public servants are prepared to pay in return for better terms and conditions of service. That is the simple fact of the matter.
My hon. Friend the Member for West Suffolk (Matthew Hancock) highlighted the fact that there is little difference between weekly salaries in the private and public sectors. How does the hon. Gentleman equate that with his argument that a differential has been growing?
The simple fact of the matter is that I can pluck any statistic out of the air that will disprove that. When I was a negotiator, I used the retail prices index, RPIX, the consumer prices index—whichever best backed up my claims on behalf of my members. That is the simple fact of the matter. I respect the fact that the figures come from the Library; I do not doubt them at all, but I could quote other figures that would support my argument, and mine are more accurate.
My understanding is that the Government’s figure was from 2009, with no other years being considered. I am sure that my hon. Friend will agree that 2009 was in the midst of the deepest recession since the 1930s. At that stage, the private sector had taken the real hit, which perhaps explains what a statistician would describe as an “outlier figure”. Most statisticians and statistics would suggest that there is a pay premium in the private sector; that has been established over 30 or 40 years. To cite figures from only 2009 is a little naughty.
I shall defer to my hon. Friend’s greater knowledge of these matters and get back to the point that I was trying to make.
Public sector workers take poorer salaries in return for more reasonable terms and conditions. When things go pear-shaped, they expect reasonable protection. Things have gone pear-shaped without a shadow of a doubt; the problem is that the safety net that public sector workers thought was there is going to be withdrawn. Ministers can do the right thing, and I hope that they take heed of my arguments and those made by some other Members.
To demonstrate his desire for fairness, the Minister for the Cabinet Office said in a sitting of the Public Administration Committee:
“Our view was that had the scheme that was introduced by the last Government, which was diluted as the negotiations went on, I understand, in order to secure the agreement of all of the unions, including PCS, remained in place then there would have been a very pressing case made for us to retain that and work with that.”
The right hon. Gentleman should take that position away; he should drop the Bill and move back to the February 2010 proposals as a basis on which, hopefully, negotiations can be concluded.
What worries me is that in that same sitting, the Minister also said:
“the truth is that there are significant numbers of people within the Civil Service for whom through no fault of their own but simply because of the way life has moved on there is no job in reality but who are not made redundant because the terms are prohibitively expensive at the moment.”
With the greatest respect, that is arrant nonsense. I have visited Government Departments, agencies and non-departmental public bodies the length and breadth of the country, and I have never seen highly paid workers sitting around doing nothing. I do not believe that what the Minister said is accurate and I hope that he will withdraw the comment. He should know that 40% of civil servants earn £20,000 or less and four fifths earn less than £30,000. It is for the right hon. Gentleman to tell us in which Departments these people are sitting around doing nothing and earning money.
The trade union position is another stumbling block that we cannot hide from in this debate; it is important that that should be covered as well. The fact is that five of the six trade unions backed the February 2010 deal and that the Public and Commercial Services Union rejected it. To the Public Administration Committee, the PCS said that half of its 300,000 members—the higher-earning members—would lose out because of that deal. I fully understand the concerns, but then I look at the other trade unions involved in the negotiations—the FDA and Prospect, for example. The FDA represents the most senior civil servants in the United Kingdom and Prospect’s predecessor unions have represented professionals, managers and scientists, who are more highly paid. Both those trade unions accepted that they had to make some compromises in the negotiations under the last Labour Government. They probably reached the conclusion, before the words were said by Government Members, that “we are all in this together” and that the public sector also had to make a contribution to the rebalancing of the economy.
The PCS rejected the deal, took legal action and stopped it. However, they stopped it not only for their own members but for all the trade unions that are part of the Council of Civil Service Unions. Now, this Bill tells us that all bets are off. The Minister for the Cabinet Office states that had that deal been accepted, this Government would probably have honoured it. He then offers a significantly poorer deal, which is linked to future negotiations. The Minister may feel that there is an opportunity to save more money or to humiliate the PCS for what he might perceive to be its exceptionally foolish action.
For the sake of accuracy on the record, I should point out that the vast majority of members affected are PCS members; the numbers from the other unions are relatively smaller. Actually, when balloted, 63% of PCS members affected voted against the proposal for the scheme and in favour of industrial action.
My hon. Friend is correct that 70% of those covered by the negotiations were PCS members, but we should bear in mind that 150,000, or 50%, of them would have been protected by the Labour Government’s proposals. It is also dangerous to go down the line of citing figures from ballots because we then tend to look at how many people voted in them.
With the greatest respect, I do not think that people should worry about numbers—we need to go to the meat of the debate, which is about protecting low-paid civil servants who would be disproportionately affected by the proposals.
The Minister may feel that the PCS has been foolish. He may feel that he wishes to take advantage of the PCS’s vulnerability at this time and punish it. I genuinely urge him not to do so, because we anticipate a hard time for civil servants, many of whom may be made redundant as a result of the comprehensive spending review, and it would be vindictive in the extreme to hit them with the double whammy of redundancy and then a poor redundancy payment to boot, and to strip them of the hard-won conditions of service that they had.
You will be delighted to hear, Mr Deputy Speaker, that I am now going to sum up. The February 2010 deal was a fair deal, in my view. It saved money, it protected the lowest-paid, and it covered the protection of civil servants’ redundancy payments and early retirement provision. We should not be attempting to punish members of the five trade unions who backed the February 2010 deal, nor should we punish PCS members, even if Ministers believe that the PCS strategy was somehow misplaced. To use the motto of Government Members, if we are all in this together, we should be fair to civil servants. We should put the February 2010 deal back on the table, legislate for those changes, and get the deal done. Then, we can ensure that all public servants who work in the civil service are protected properly.
Order. The hon. Member for East Kilbride, Strathaven and Lesmahagow said several times that we are all in this together. We are all in this debate together, and if everybody takes about 20 minutes, we will get fewer than 10 Members in, so please be focused. We have not introduced a time limit on this debate, but if it carries on like this, I will have no hesitation in doing so.
I am grateful for that comment, Mr Deputy Speaker, and I will truncate my remarks as best I can. Perhaps it is just an irony that the PCS is the single union that held up the agreement and a representative of the PCS held up the debate for 21 minutes after being implored to speak for only eight minutes. I reflect on that.
The Public Administration Committee, which I chair, recently took evidence from my right hon. Friend the Minister for the Cabinet Office and the principal civil service unions about the provisions of the Bill and the prospects for a negotiated settlement of the dispute about ongoing compensation for civil servants who are forced to leave their jobs or voluntarily accept redundancy. The hope then was that the parties would reach a negotiated settlement, but regrettably that settlement has not been reached.
It is appropriate at this stage to remind ourselves of why we are having this debate. We are here because there was no agreement. The agreement reached with the five other unions by the previous Government was challenged in the courts, and we finished up with the courts ruling that the compensation payable represents legally enforceable rights. That was never the intention of the original legislation, and that is why we have this Bill. We are not undoing previous legislation; we are undoing the work of the courts on previous legislation. In my view, it is about the culture of judicial review and judicial activism that we now live in. It is unfortunate but it is where we are.
Let us have no illusions about why this is necessary from an economic viewpoint. We are facing the worst public expenditure crisis since the 1930s. It is inconceivable that compensation arrangements that were reached as part of voluntary arrangements between Government Departments and civil servants, and have become legally enforceable by accident, should be respected as though they were contracts entered into and signed in blood. I do not accept what the hon. Member for Southport (Dr Pugh) said about these arrangements. They were intended to be flexible and negotiable, and the Bill is attempting to restore that position, albeit now putting in place a statutory baseline that is harsh—let us have no illusions about that. It is sobering to reflect how harsh these arrangements are in comparison with the existing arrangements.
Will the hon. Gentleman give way?
The hon. Gentleman misunderstood me. The Government have made it clear that they want a negotiated settlement, and that they are not prepared to talk about the terms of that settlement in this debate. Obviously, however, what we enact here provides a legally enforceable baseline that ultimately is not negotiable—the hon. Gentleman is quite right. The point is that the Government have made it absolutely clear that they want a negotiated settlement. With five of the six unions having negotiated in good faith, I hope that the PCS will also do so, whether or not the Bill passes on to the statute book and comes into force.
The need to reform the civil service compensation scheme is well understood. In fact, all the evidence that we received from the trade union representatives conceded that we need to deal with it as a matter of urgency in the current economic climate. This short Bill is simply a reflection of the accumulated mess that successive Governments and successive decisions in the courts have got us into. If there is one thing I regret, it is that there is not more understanding from the official Opposition of the mess that they were in on this same subject and that we cannot present more of a united front, but that is the prerogative of opposition and our democratic process, and I respect that.
I have two particular concerns about the Bill, and I would be grateful if the Minister could address them when he winds up. The first is technical and raises an important issue of principle. Clause 2 provides for early termination or an extension of the 12-month applicability of the legislation. Of course, sunset clauses are not unknown, and in many respects they are welcome provisions because they provide an opportunity to declutter the statute book. However, this Bill is unusual in providing what one might call a “sunrise” clause whereby, if desired, the legislation can be revived by an order under the affirmative resolution procedure in this House. The only similar provision was made in relation to section 13 of the Prevention of Terrorism Act 2005. I worry that the matters in this Bill are hardly in the same category, and that the ability of this House properly to control the law is being excessively compromised for nothing more than the managerial convenience of the Government. Can the Minister explain what the special circumstances are that justify such a provision in this case?
Secondly, I should like to focus on the possibility of a further legal challenge to the provisions of the Bill given the High Court’s decision to quash the earlier agreement. In his judgment, Mr Justice Sales took the view that compensation payments under the scheme should be taken to be accrued rights in the same way as pension entitlements. In his answers to me about the Bill’s compatibility with the European convention on human rights, the Minister for the Cabinet Office was, if I may say so, not entirely persuasive that he had addressed the legal point made by the unions and potentially to be made in a future action. The PCS argues that the Bill is unlawful because it offends against the principles of the ECHR, namely that the legitimate expectations about compensation rates that the current state scheme gives rise to, are legally possessions of which individuals cannot be deprived.
In the explanatory notes, the Government declare the Bill’s compatibility with the Human Rights Act 1998 because payments under the civil service compensation scheme cannot be considered to be a possession. In any case, they say, even if they were to be considered possessions, since the cap on compensation rates does not apply until a redundancy notice is issued or a voluntary departure is agreed—that is, after the Bill has come into force—it does not therefore amount to the deprivation of an existing possession. That is all very elegantly argued, and no doubt the Government have had the benefit of legal advice, but if the Bill is enacted and subsequently challenged in the courts, the consequences could be extremely significant. Even if the challenge were not successful, if it went to the European Court of Human Rights for a determination, the delay and dislocation would be considerable. How sure is the Minister that the rights generated by the legitimate expectation of civil servants about their terms and conditions with regard to redundancy payments will not be regarded as possessions?
I understand that there is case law in the ECHR suggesting that mere claims to possessions are capable of being interpreted as property rights when there is sufficient basis in national law, for example when there is settled case law in the domestic courts confirming that. Precisely that confirmation was provided in the case that was adjudicated in May. Is the Minister confident that, even if the accrued rights are considered possessions, the Government are justified in interfering with those rights in the wider public interest, and therefore lawfully able to do so? In short, is he satisfied that the unions will not have a claim against him for not exercising his discretion in a fair and proper manner in failing to recognise existing entitlements?
That is an important matter, not some arcane point. A legal challenge could run for a very long time in Strasbourg, perhaps for years, and if the Government lost having gone ahead with job reductions on the terms set out in the Bill, it would potentially saddle the public purse with a huge liability at some future date, to say nothing of the subsequent complications in trying to repay individuals long after the event. I point out that Governments of both parties have a long history of wishful thinking when it comes to such cases. I speculate that it appears that the easier course in the short term is often to risk defeat in the courts sometime in the distant future rather than to confront the legal realities and their implications immediately. That is not conducive to better governance and decision making, and if it continues to happen under this new Administration there will perhaps be a case for the Public Administration Committee to launch an inquiry into why the Government’s legal advice has so often proved deficient in such cases. I place the Government on notice about that.
Subject to those qualifications, I support the Bill and will vote for it. What Ministers do will be taken as a reflection of the regard in which the civil service is held, and that will have an effect on the morale of the public service at a time of great uncertainty and change, and therefore on this Government’s relationship with civil servants. Nobody listening to this debate can be under any illusion about the seriousness of the measures that we are discussing and the impact that they will have on people’s lives. I commend many of those who have spoken from both sides of the House for alerting us to those concerns.
May I declare an interest? For 15 years I was chairman of the Ministry of Defence joint industrial Whitley council, which at its height covered 120,000 industrial civil servants. It was the only body in British industrial relations that survived the 18 years of a Conservative Government with a Minister in the chair, such was the emphasis on good industrial relations in a very sensitive Department. I know from my own experience that the armed forces value greatly the outstanding service given by defence civilians in the Army, Air Force and Navy. A colonel in charge of one of the biggest army bases in Europe once said to me, “Jack, we pay them poorly, but at least they can look forward to a decent pension and, if they lose their job, a good redundancy payment.” That historic assumption is now being torn up.
Who are the civil servants about whom we are talking? Reference has been made to those who work in customs, in the UK Border Agency, in the issuing of driving licences and in air traffic control, and I will give two additional examples. First, only two weeks ago I was in the Jobcentre Plus office in Erdington High street, which covers the area with the highest unemployment in Birmingham but is the highest performer. There were excellent young men and women there working with a passion to help the most underprivileged in a deprived community back into work. The other example is people I know very well from my own experience, the defence civilians at RAF St Athan who, right now, are working hard to support our troops in Afghanistan. They are typical of those who have historically worked in the Ministry of Defence—loyal, long-serving employees, many of them ex-service personnel.
There are 35,000 civil servants in the west midlands, and I want to dispel the myth that they are well paid and have gold-plated pensions and secure jobs. They are mostly low-paid people whose wages have fallen behind inflation. Their average pension is £4,200 a year, and 100,000 civil servants have lost their jobs. Can we have a debate based upon the facts, not the myths?
On the myth that civil servants are well paid, 40% earn less than £20,000 a year and 63% earn less than £25,000 a year. In the Department for Work and Pensions, the lowest-paid get but £13,000 a year. Yes, there was the IT director on £249,000 a year, and that was absolutely wrong, but can we stop using the exception to have a go at civil servants as a whole? On the myth that civil servants enjoy gold-plated pensions, I have already said that if we exclude the highest-paid, the average pension is £4,200 a year, and 100,000 retired civil servants have a pension of less than £2,000 a year. On the myth that they are in secure employment, 20,000 jobs have gone in HMRC, 30,000 in the DWP and 25,000 in the Ministry of Defence, and many more now face losing their jobs, particularly as we look towards the comprehensive spending review.
Reform the current arrangements? Yes. Negotiation to that end? Without hesitation. But it is fundamentally wrong, and a very dangerous precedent, for Government to impose unilaterally on any group of employees changes that are detrimental to their terms and conditions of employment. It is wrong to compare what is now on offer with what was on offer from the Labour Government. Somebody on the median salary of £22,500 a year who has been employed for 20 years and is made compulsorily redundant will suffer a cut of £37,500 in what they would otherwise have expected. That is a broken promise to people who had accrued rights on which they depended, which the Bill is taking away from them at a stroke.
It is wrong that there is no protection in the Bill for the lowest-paid. I heard the Minister’s Delphic statements earlier about his hope and expectation, but there is nothing to support them in the Bill. It is wrong and bizarre that somebody who is made compulsorily redundant will now receive less compensation. I know, from my years negotiating in the industrial civil service, about what used to be called public interest terms, which were associated precisely with compulsory redundancy. The Minister said earlier that he knew of no other such examples, but it is common in the private sector that there are enhanced terms for redundancy but yet further enhanced terms for compulsory redundancy.
It is also wrong that, without negotiation or pre-legislative scrutiny, the vehicle of a money Bill is being used in this way, and it is a dangerous precedent. If yesterday we saw a constitutional outrage—a gerrymander—today we see a contractual outrage, the unilateral dashing of the hopes and expectations of hundreds of thousands of civil servants.
I return in conclusion to RAF St Athan, because the workers there working day and night in support of our armed forces in Afghanistan are themselves facing redundancy. I know many of the individuals concerned, and they are trying to plan their future. Now, at a stroke, what they had hoped for will be taken from them in this Bill. They are not responsible for the misdeeds of bankers, and they resent the peddling of myths about civil servants, as they will resent, in the words that the Minister used today, the use of a “blunt instrument” against good men and women who have served this country well and deserve dignity and respect, but who are being treated with contempt.
I wish to add to the comments of Members on both sides of the House my recognition of the work that our civil servants do throughout the country. I have spent my working life so far in the private sector. Until I read about this legislation and the background negotiations that brought us to this point, I had not realised that there were still jobs in this land in which people could expect at redundancy to receive a payment of several years’ pay. As we heard, in rare cases people can receive up to six years’ pay. Most of my constituents would be astonished to learn that some who are faced with redundancy—it is inevitably shocking and stressful—are cushioned by a payment of several years’ salary.
I thought I might share with the House some observations from the labour market in the private sector. Redundancy is always a very difficult decision for an employer to take. In my experience, most employers will try very hard to help employees to move within the organisation or reduce their hours. There are many examples in the current downturn of people accepting less work and remaining employed. We acknowledge that redundancy is very expensive, not only financially but in human terms, and that all good employers will go out of their way to try to avoid it. However, we can also see that in a flexible, modern and changing economy, redundancies will occur. Therefore, the provisions are significantly more generous than one would see in private sector employment today.
I can think of many privatised companies, as I am sure many colleagues can—I am thinking of British Energy and others—that have generous, multi-year severance packages, so it is wrong to say that we find them nowhere in the private sector.
I thank the hon. Gentleman for his intervention. I have obviously been in completely the wrong line of work, given that I was unaware of such significant redundancy packages.
We all recognise that people are reluctant to make employees redundant, and that they would make every effort to move people to new jobs. However, the Minister made an important point when he said that when redundancies need to happen, people want to avoid the situation in which the most recently hired and lowest paid are let go because decision making is distorted by the packages that must be offered to more highly paid people who have been with a company for a long time.
We can also acknowledge that when redundancies are made in the civil service—I gather that in the three years from 2005, there were 16,500 redundancies, which cost the public purse about £1 billion at an average of about £60,000 per redundancy—the money must be found from the taxpayer. I differ from my colleagues who said that the decision to introduce the Bill was made because of the deficit. I submit that even if we did not have a deficit, the sums of money being paid out in redundancy would seem no less huge.
We have talked a lot about fairness in today’s debate. Is it fair that some of the taxes paid by an individual who finds work after being made redundant in the private sector—the average redundancy payment in the private sector is approximately £9,000—go to pay significant redundancy payments in the civil service? We all agree that something must be done, and as the right hon. Member for Dulwich and West Norwood (Tessa Jowell) said, the CSCS is simply not appropriate for a modern civil service.
It would be right to do something about the situation in good times, just as it is right to do something in tough times, but it would clearly be better, as everyone agrees, if the unions and the Government successfully negotiated a change. It would be more attractive if the redundancies that are being discussed were voluntary. It is often the case that managing a redundancy process that has a significantly more generous voluntary element makes the process much less painful for the work force. In addition, it would be better if we negotiated a change so that the public sector is more vigorous and stronger when new jobs are created. It is one of the counter-intuitive laws of economics that companies that have very generous severance terms tend to hire fewer people than companies that are more flexible. It is also counter-intuitive that the mobility of staff within organisations that have more flexible employment terms is improved. That can often help with morale and job satisfaction.
We have spoken today about protecting the lowest-paid, but perhaps we should talk less about protecting them and recognise that the more junior staff are often able to move up. In other words, instead of talking about protecting junior staff, let us talk about promoting and creating more opportunity for mobility for them within the organisation.
It is also been observed that similar counter-intuitive laws of economics apply to countries. Countries that have more flexible employment laws have much stronger periods of job creation when they move into economic recovery.
I agree with colleagues on both sides of the House that it is a shame that we have to discuss the Bill and that it would be much better if we came to a successfully negotiated conclusion. Let us hope that while the Bill goes through Parliament, the negotiations bring about a more reasonable scheme that is both affordable for the public purse and fair to the very many valuable public servants who are covered by the current scheme.
Like other hon. Members who have spoken in the debate, I have been contacted by a number of my constituents who work as civil servants. The people who contacted me are not serial complainers and campaigners who write to me or to other politicians about everything, but people who do valuable work in a number of different departments within the civil service and other bodies locally, and who are genuinely concerned about their futures. They do important work in places such as the Identity and Passport Service, the Housing Investment Division of the Scottish Government, the Criminal Injuries Compensation Authority, the Child Support Agency and Registers of Scotland. Although those jobs are not based in my constituency, they are based in the travel-to-work area. They are important for an area such as mine, which has seen a downturn in the manufacturing sector and is still reeling from the announcement that Diageo is pulling out of the Johnnie Walker plant.
I have come to the Chamber today to put on record my constituents’ concerns and, like others, to take the opportunity to praise dedicated public sector workers, including civil servants, who have given their lives and careers to work on our behalf. However, it is no good speaking such warm words in the Chamber if we do not take action to back them up. We heard the Minister in his opening statement take a softly, softly approach, saying, “We can sort this. It’ll be all right on the night,” but that does not match up with the measures in the Bill.
We heard today that the people whom the Public and Commercial Services Union represents—the majority of people who work in the civil service—did not agree that the previous Government’s approach was the right one at that stage. Whether or not the hon. Gentleman agrees with the union, it had the right to go to court and did so, and secured a ruling in its favour. We must recognise and accept that. I was surprised to hear other hon. Members suggest that the ruling by the court was something that we should simply dismiss, and I would hope that that is not in fact what they are saying.
Given the need for brevity, I will focus on one particular point and that is the device that is being used to push this Bill through. I am very concerned that the Bill has been laid as a money Bill. I am a new Member and I stand to be corrected if I am wrong or if I have misunderstood what a money Bill has traditionally been used to do, but my understanding is that the Parliament Act 1911 defines a money Bill and charges the Speaker with certifying whether a Bill is a money Bill. Previously, money Bills have been used to protect revenue and to raise tax, but never before has a money Bill been used in a situation like this. I agree with my hon. Friend the Member for Hayes and Harlington (John McDonnell) who suggested that the use of a money Bill in these circumstances could be seen as an abuse of parliamentary procedure, and certainly many of the people who have spoken to me about this feel that is indeed the case. It is an abuse of that procedure to try to speed a Bill through Parliament without the proper scrutiny and, as the Minister has already accepted, to use a blunt instrument to try to force something on to the negotiating table.
If we look at the detail of the Bill, although it is very short we see that the degree to which it is unworkable in the long term is implicit in its provisions. The sunset clause, which means that the Bill will expire after 12 months, can be repealed at any time and can only be extended for a further period of six months by secondary legislation, and that is a real cause for concern. On the one hand, the Minister said that we have to negotiate but we cannot negotiate in public. However, at the same time, he is very publicly using this blunt instrument to try to force the unions into a particular position without providing any of the detail that Members on both sides of the House have sought today—
My hon. Friend is, as usual, shy about telling people that she is a former Minister in the Scottish Parliament and probably knows more about this than most Back Benchers. She also points out that the Bill has a sunset clause, but it is more like a sunrise clause. It is a blunt instrument fashioned to be picked up again and again when the Government do not have the capacity to negotiate and to be used to attack people in the public sector whenever they wish to do so. All that will be required is a statutory instrument off the Floor of the House, without anyone seeing what they are up to.
I am grateful for my hon. Friend’s complimentary remarks. In fact, I am a former Justice Minister. Far be it from me as a former Minister to suggest that people should be suspicious about very short pieces of primary legislation that give greater powers to secondary legislation that can then be picked up and laid without proper parliamentary scrutiny. Having had to work on legislation in another Parliament, I recognise that the concerns expressed by hon. Members are well made in this case.
The Bill puts the Speaker in a difficult and unfair position, because he has to decide whether it should be certified as a money Bill when in fact it is about industrial relations and people should be redoubling their efforts to put the previous deal back on the table and to ensure that all the trade unions are involved in the negotiation. Parliamentary procedures should not be abused in this way.
Given that brevity is required, I shall not seek to rehearse points that other hon. Members have made. However, when we are talking about the low-paid and given all the warm words that we heard earlier about the desire to protect the lowest grades in the civil service, I do not think it is good enough that Ministers cannot identify what “low paid” means in those terms and how many people will be affected. It is incumbent on the Minister who winds up the debate to give us more information on that point.
The Minister will know that I wrote to the Minister for the Cabinet Office on 21 July to set out the reasons why I cannot support this Bill. I have to say that I have not changed my mind in the intervening weeks or during the course of this debate. However, notwithstanding the fact that I will not be supporting the Bill, I appreciated the way in which the Minister presented it and the moderation of his tone in some remarks. Given that we are short of time, I shall cut straight to the chase and set out the reasons why I cannot support the Bill. The debate about private and public is the wrong debate. It is not even comparing apples and pears: it is more like trying to compare bananas with Brazil nuts. There is no comparison. I have been in the private sector all my life. I have never had a pension or redundancy terms, and I have always managed to earn a considerable amount of money. I knew what I was getting into. When I signed on for this place, I knew that I would experience a severe reduction in my pay, but that I would get a pension and redundancy terms, although of course the latter are not now so good—[Laughter.] Hey, we will keep working on that.
The point is that people take into account what they will receive in certain situations when they take a job. There may not be a legal contract, but I believe that there is a moral contract between the state and its employees. To put it in human terms, I have people in my constituency who work in the Forestry Commission, for the Department for Work and Pensions—although sadly that office was closed by the last Government despite being one of the most productive and absence-free in the country—and for HM Revenue and Customs in an office scheduled for closure in 2013. The one thing that all those people have been able to count on is that when the Gershon axe fell, they had a cushion between them and penury. In particular, I think of one employee who said to me, “Well, I took out my mortgage based on the fact that if I lost my job I could pay off the mortgage. If this Bill goes through the way it is written, I will have to sell my house.” That is the human reality of this.
Many of the people who have gone into the public sector have considerable qualities, had a vocational desire to be in the public service and have forgone the ability to earn more money in the private sector. Part of their consideration for doing that was the terms and conditions available.
Companies are different because they have a top line, and that can be driven to make more profit and expand further. The last thing that any of us wants to see is an ever-expanding public service. We would like to control it and keep it as cost efficient as possible while delivering the service. It is therefore a wholly different model to driving a top line and delivering a profit. It is right that the famous six times salary provisions—I suspect that those are few in number—and those at the higher-paid end should be reformed, but I am concerned that in fact the low paid in my constituency will bear the brunt, as will those who are coming to the end of their career and have no chance or ability to find another job. I want a scheme that will genuinely offer some help and succour to those at the bottom end of the scale.
I have a final suggestion for the Minister. He probably will not reply to it, but he can take it away for the negotiations to come. If the Government want a cap of £50,000, fine, but they should keep the current terms. That is a progressive way to do it, because the people at the bottom would be very generously looked after and the people at the top would pay most. Let us try that for a change.
I think that there is agreement on both sides of the House that the scheme needs to be reformed on grounds of economy and fairness, but the questions are what constitutes fairness and how one gets there. My view is that the Bill is arbitrary and unfair, and therefore likely to increase further the suspicions with which low-paid civil servants view this Government. It is arbitrary because it is a coercive measure seeking to impose new terms and conditions on public servants, even as the Government claim to desire a negotiated settlement, and it is unfair because, as we have heard, it does nothing to address the reasonable expectations of the employees concerned, especially, I reiterate, the half of all civil servants who earn less than £21,000 a year.
The people we are talking about are decent people, many of whom do vital and complex work for modest rewards. In my constituency, Her Majesty’s Revenue and Customs is an especially large employer. Most people from Cumbernauld—myself included—have a friend who works, or has worked, in HMRC. Members of the House who are blessed enough to receive official correspondence from HMRC are likely to have done so from Cumbernauld, and the men and women who work there do so to ensure that taxes are paid, tax credits properly administered and the Government’s revenue maximised. Few can doubt the importance of this work, especially in times such as these.
The Minister insists that the Government are working on a package to protect the men and women who do such vital work, but I hope that they will understand that those men and women are not prepared to take that on trust. The Government’s good intentions do not to a policy amount. This is especially the case when a fairer package already exists—the one devised by the previous Labour Government and now accepted as a basis for negotiation by all six trade unions. Alas, the new Government are uninterested and intend to force through changes to the law that override their obligation to consult and reach agreement with civil service unions under the terms of the Superannuation Act 1972. In the long term, therefore, this Bill has implications for the legal right of all civil service unions to consultation and negotiated agreements. In the short term, it means the removal of protection for the low paid.
The Government’s failure to build on Labour’s work in this area will, I believe, have dangerous consequences. All parties are agreed that the times call for more efficient government, but, as has been mentioned, particularly from the Liberal Democrat Benches, efficiency is not just about laying off staff more cheaply; good training, organisation and management are essential if those workers are to do the important job of closing the tax gap—a tax gap that appears to cost us all up to £40 billion a year. My view is that addressing tax evasion and avoidance is the only true, fair way to deal with the deficit. If individuals and businesses paid what they owed, closing the tax gap would become simpler. Successive Governments, including Labour Governments, have failed to do so because they have not resourced enforcement appropriately. It will be so much more difficult to do so in the context of a demoralised, dispirited work force fearful about their jobs and the terms under which they could be made surplus to requirements—a point powerfully made by the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) and his colleague the hon. Member for Southport (Dr Pugh).
The Government claim that they are about getting more for less, but they have to recognise that this ambition is a complex and demanding one, and that it cannot be imposed arbitrarily from the centre. A Government genuinely interested in efficiency would look to promote bottom-up programmes and work force empowerment, and should not force through primary legislation that dramatically undermines job security. The legislation, I repeat, makes an arbitrary change without consultation or warning. This is slap-dash policy making—the Minister will not even offer an estimate of the potential savings. No wonder that civil servants in my constituency and elsewhere are sceptical and worried. This is not fair, it is not progressive, and it gives the lie to the claim that we are all in this together.
Ministers’ response to criticisms of their changes to the CSCS parallel the Government’s defence of the fairness of their policies more generally—“Do not judge us by what we have said and done. Judge us by what we might do in the future.” My constituents are not prepared to take the Government’s word for it. The gap between rhetoric and reality has already been observed in a number of areas in Government policy. This Bill will produce agonising uncertainty among modestly paid civil servants, will undermine their productivity in the service of the public, is damaging to industrial relations and exposes a divisive and confrontational attitude on the part of the Government. Most damagingly of all, however, it ignores progress made by the pervious Government.
I will finish on this point. My constituents are generally sceptical of the bona fides of the Government, so I ask the Minister and the Government to do something concrete to assuage their fears about their intentions in this area of policy.
Given that, in this Chamber, we often talk about cuts, you will be pleased to hear, Madam Deputy Speaker, that I have cut my speech substantially, in the interests of time.
It is interesting that so far in this debate there has been a general acceptance, on both sides of the Chamber, that change is needed in the civil service compensation scheme. That acceptance is welcome. I appreciate that both sides of the House cannot agree on how those changes should be made, but this Chamber and this nation are faced with some difficult and hard truths—we cannot afford the situation that the country finds itself in or the deficit that the Government have inherited. While I, like, I am sure, virtually every Government Member, want to see compromise and agreement between the Government and civil servants and civil service unions, we cannot wait for, or be held ransom by, one union that has decided that it does not wish to seek a compromise.
The simple truth is that there is a massive disparity between the private sector and the civil service when it comes to redundancy. Figures from the Chartered Institute of Personnel and Development estimate that, in autumn 2008, the average cost of a redundancy in the private sector was £8,981. Yet, according to comparative figures for 2005-08, 10,000 compulsory early severance packages were served on civil servants, costing an average of £42,000 each. All Members would accept that that is a substantive difference. Governments, like businesses, need flexibility in what they do and how they work, but the current scheme does not offer that flexibility. We can argue about three years, six years or two thirds, and we can talk about trying to achieve efficiency savings, but the simple reality is that we are facing a payback of between three and six years in order to realise the benefit of those efficiency savings. Unfortunately, that it is not going to be enough in the difficult times that we have inherited from the previous Labour Government.
I very much welcome the words spoken by my right hon. Friend the Minister at the Dispatch Box, along with his obviously heartfelt wish to seek compromise and reach agreement with the unions, for the benefit of everyone in this nation and of the civil servants who work so diligently for this Government. That should be welcomed on both sides of the House. I also hope that, with the passage of the Bill, the civil service unions will realise how important it is to reach that compromise swiftly, for the benefit of all.
Like other hon. Members, I have received representations from constituents, many of whom are civil servants. Very few would disagree that the civil service compensation scheme should be reformed; in fact, there are good, compelling arguments for public sector reform. However, we need to ensure that the compensation scheme affords protection for some of the lowest-paid and longest-serving public sector workers. Lower-paid staff should not be the victims of departmental cuts or of what is proposed in this Bill.
I represent a constituency in Northern Ireland whose economy is heavily dependent on the public sector. I am conscious that public sector reform is needed, that the economy needs to be rebalanced and that the private sector needs to grow and be stimulated, but there is still an urgent need to sustain jobs in the public sector and to make provision for new entrants into the civil service. Reform must always be tempered by the principles of social justice and fairness and by what is in the best interest of the public. We must not undermine the basis of the existing economy.
I speak as a former Minister in Northern Ireland who had responsibility for the benefits system for some three years. During that time, I had responsibility for some of the lowest-paid civil and public servants in Northern Ireland. Many of them were women, many worked part time and many were vulnerable. Why should such people be held responsible for the present situation? Why should they be the victims of this legislation? Why should they be susceptible to the loss of their jobs? We must also recognise that, although we are in the midst of an economic downturn and facing severe budgetary cuts, there is still a need to protect front-line services, and the vulnerable and disadvantaged. Many civil servants, particularly those in the lower grades, feel that their jobs are under threat. That is their perception, and I have heard nothing today from the Government Benches to assuage those fears.
Notwithstanding all these factors, it is important that Parliament defends the roles and rights of civil and public servants, particularly those in the lower-paid grades. The proposals in the Bill will slash redundancy compensation, especially for older and longer-serving staff. It is important that proper agreements should be reached with the civil service staff and that those agreements recognise the accrued statutory rights held by many of them. The agreements should also be fair to new entrants to the service. The Bill must not be used as a blunt bargaining tool to influence the negotiating process. Efforts must be made to protect staff and the delivery of front-line services, as well as to develop our economy at this difficult time.
I suppose, after this long Second Reading debate, that the best maxim would be that we should follow the road of proper negotiation, rather than that of unilateral imposition. I have learned over the past few weeks that some people believe that the coalition Government are less interested in listening to the views of those who represent the stakeholders. Perhaps that can be seen in their reactions and efforts in relation to the Bill. My hon. Friend the Member for Foyle (Mark Durkan) asked what agreements had been reached with the trade unions in preparing this Bill. Obviously, there has been little agreement.
The Government seem anxious to depart from negotiation, even though it has always been the standard bearer for industrial relations, and to move to imposition. In fact, the Minister for the Cabinet Office could not even provide the right hon. Member for Belfast North (Mr Dodds) with a definition of a lower-paid civil servant. My colleagues in the Social Democratic and Labour party and I are firmly of the opinion that the Bill should be withdrawn, as it is not in the best interests of junior and lower-paid civil servants.
It is a great pleasure to speak in this debate under your speakership, Madam Deputy Speaker. I shall concentrate on the issue of fairness, which has come up again and again today. It is central to the Bill, and an extremely important factor. We are debating a sobering situation, and the Bill is a response in part to the enormous fiscal deficit that we need to tackle. It is clear that the negotiations and the Bill will have an impact on many thousands of civil servants who have worked extremely hard for the good of their country. Like many other Members, I pay tribute to the excellent work of the British civil service, and I echo the view of the Minister that it is the jewel in the crown of our constitution.
That is why it is so important that we consider the consequence for fairness as the negotiations go forward and the Bill goes through. That view has been reflected in speeches from both sides of the House today. I shall address the issue of fairness in three different ways. First, we must consider the fairness of these measures, given what else is going to have to happen if we are to tackle the deficit. Secondly, we must consider fairness across society and the economy. Thirdly, we must take into account fairness within the civil service in terms of working practices, and the consequences of the current system for some of those working practices.
The enormous fiscal deficit has overshadowed many of the debates in the Chamber since the election. We on the Government Benches argue that dealing with the deficit is a fair and progressive thing to do. In the short term, failure to do so would lead to higher mortgage rates and interest rates as well as create the risk of a catastrophic economic failure, which we do not want to do. It would also be unfair to burden our children and grandchildren with levels of debt that we had failed to deal with. It is therefore fair and progressive to deal with the deficit. It is important, when considering all the different aspects of that process, to think about the Bill in that context.
How can it be fair to defend a system, as Labour Members have done, in which payments of more than £500,000 have been made to certain individuals at a time when we are having to take other measures—as Labour Members would have had to do, were they still in office—to deal with the deficit? How can it be fair that the average redundancy package in some Departments has been more than £100,000 for the past three years? In an earlier intervention, I gave the example of the Department of Health, in which the average redundancy package last year was £122,000.
When this country is tackling its deficit, it is difficult to say that it is fair to make such enormous redundancy pay-offs. The argument has been put by Labour Members that there are only a few of them so it does not really matter. However, we as a country are going through a difficult process, and having extremely unfair examples of public spending like that only makes it even more difficult. We cannot argue that simply because there is not an enormous quantity of such payouts, they do not matter. They do matter and reforming the system is crucial, as the Opposition Front Benchers seem to recognise, but Labour Back Benchers too often do not.
I am amazed that the hon. Gentleman is still quoting the figure of £100,000 when one of his hon. Friends who spoke earlier provided him with the true average of £60,000. He ignores reality again and again. Some people get huge payouts, and some Labour Members have argued against them for the last 10 years but we could not convince our own Government to deal with these people. If the hon. Gentleman’s logic had been applied after the second world war, the huge deficit this country would have had to carry would have meant no rebuilding and our people living in poverty for the next 50 years. The hon. Gentleman may be lucid, but he is certainly wrong.
The hon. Gentleman answers his own question when he says that the previous Government did nothing about the problem over the last 10 years. As for this new argument I am hearing expressed by Labour Members, that we had a large deficit in 1945—yes, we did, but we also had large cuts in 1945 and not least to the military because we had just won a war. There are no such easy reductions now because of the mess left by the Labour party—[Interruption.] I will take no lessons from what the hon. Gentleman shouts out from a sedentary position. At one point in the last three years, £8 billion was spent on redundancy payouts. I do not know whether the hon. Gentleman is willing to defend very high payouts, but we seem to be getting a reaction on the Labour side against any change to anything. It is a great pity that Labour Members do not engage in the process of trying to deal with the deficit as we Conservative Members do.
I would like to focus on the average rather than the outliers, as that seems to elicit cries of outrage from the Opposition. It is an incontrovertible fact that if we look at the average redundancy payout and average compensation, we find that the average cost in the private sector in autumn 2008 was £8,981, while it was £17,926 in the public sector—almost twice as much. That demonstrates that we have reached a position where, on average, people are being paid twice as much to retire from the civil service as they are to retire from the private sector. There is nothing fair about that.
It is always dangerous to give way to my hon. Friend, because she usually puts the point far more lucidly than one could oneself.
I was going to come on precisely to that point—my second point about fairness. Not only is it fair to deal with the deficit and, I think, unfair to give enormous payouts when we have to achieve other very difficult things, but fairness across the economy and across society is also important. The maximum payout in the mandatory private sector compensation scheme, for which this House legislated, is £11,400, yet the proposal is nowhere near that figure within the public sector.
It was interesting to note that when the shadow Minister, the right hon. Member for Dulwich and West Norwood (Tessa Jowell), responded to an intervention about whether it was fair to have a similar sort of payoff scheme in the private sector as in the public sector, she effectively said that she was not in favour of equality. I thought that Labour Members were in favour of equality, but obviously not when it does not suit.
I am not quite sure what point the hon. Gentleman is trying to make. If the question is whether I agree the case for parity between the public and the private sector on these matters, the answer is that parity cannot be willed. We are not going to peg the public sector to the private sector other than in an indicative way. There are different incentive structures in the remuneration packages of people who work in the two sectors and they are in different ways reflected in aspects such as the compensation for redundancy that we are discussing this evening.
I thank the right hon. Lady for her intervention. In some cases, it seems, one can talk about parity, and in other cases about equality. If one is favour of it, one might use one word, but if one is against it, use the other. The important point here is that we need to look at overall compensation packages and overall pay, including pensions and other terms and conditions of work.
That brings me back to the issue of fairness across the sectors. If we are to have a modern civil service and a modern flexible economy that work in the future, we also need to allow transfer between the two sectors. Bringing into line the working practices in the two is no bad thing; nor is bringing into line the redundancy payoffs as the Bill does—and, indeed, as the right hon. Lady’s former proposals did. The hon. Member for East Kilbride, Strathaven and Lesmahagow (Mr McCann) raised an interesting point when he argued that we should put the members of the unions ahead of the rest of our constituents. I think that the most important thing for a new MP to do is to represent all of their constituents, not just those who are members of a union.
My final point is about fairness in employment practices. I asked the House of Commons Library about the concept of priority posting pools, which are groups of civil servants who are given nothing to do, but cannot be let go because of the cost of the redundancy package. The Library determined that there were a total of 1,946 such civil servants. When people working for their country have completed their jobs and their projects, it cannot be fair to tell them, “We would like to pay you to do nothing. We cannot find anything useful for you to do. We do not think you would be any good at doing anything else, but we cannot afford to get rid of you, so we are going to carry on paying you.” As of January 2010, there were 1,946 such people in the civil service. I believe it is unfair to them not to have a flexible employment system so that we can have a grown-up and modern civil service working for the future.
Such is my argument. We are here to look at the fairness of this Bill as well as other aspects of it. If we want to spend public money fairly, rebalance our economy fairly and try to improve the fairness of working practices in civil service employment, we should support the Bill. The alternative is defending £500,000 payouts, an unbalanced economy and out-of-date working practices. I do not want to defend those things, so I will support the Bill this evening.
Notwithstanding the warm, or perhaps lukewarm, words from the Minister about our civil servants, I see the Bill as part of a concerted attack on the public sector and those who work in it. The war on the public sector is being waged by some parts of the media without contradiction from the Government, and, indeed, by large parts of the Government.
Creating a straw man or woman simply to knock it down is lazy politics, but that has been done this evening by speaker after speaker. It is a case of picking up an extreme example partly in order to divert public opinion from the reality. The aim is to win over public opinion—to make the public think, “Oh, that is dreadful! How can people receive payouts, or salaries like that? We must do something about it”, rather than see the reality.
We cannot get away from the economic argument. Earlier, one of my hon. Friends feared that, if he drifted on to the subject of the wider economy he might be accused of irrelevancy, but that subject is not irrelevant. We see a clear divide between the two sides of the House, not because Labour Members are not concerned about the deficit but because we have a different view of the economy, how it should be built, and how we should emerge from recessions. Members on the other side of the House obviously see the public sector as a drag on the economy and something that must be shrunk, and they tell us that lo and behold, the private sector will leap up to pick up the pieces.
Members on those Benches may find it disappointing to hear, but it is what many of my constituents who work in the public sector are hearing. They are witnessing a concerted attack on the sector and on public service. I am sure that many Members on the other side of the House genuinely believe that the public sector is pulling the economy down, but we do not believe it. We believe that we must not at this stage cut the public sector in such a way that the economy is put at risk, but that is what will happen if the Bill is passed.
Public sector cuts will increase unemployment, and my constituents are asking me where the other jobs are. Over the past few weeks redundancies have been announced by Standard Life, which is a big employer in my city, and by the Royal Bank of Scotland, which has also been a big employer there. My constituents are seeing such developments all around them. The construction industry has an administrative side, and people might otherwise have thought of working in that, but the sector has been decimated, and they know that there are no jobs.
We could all throw in such terrible examples. Members have spoken of low redundancy payments in the private sector, but we could cite the amount of money that Fred Goodwin received when his employment was terminated. Is it right for us to “equalise down”? We talk of equality, but why is it assumed that we should look to the least good employment conditions, and try to reduce the conditions of our public servants to that level? Some workers in the private sector do not receive sick pay. Where will it stop? Are we going to say, “That is a good idea—perhaps we should equalise downwards”? Such thinking constitutes a slippery slope, and in my view it is quite wrong. I am not surprised that my constituents are anxious.
Like some of my colleagues, I visited the local Jobcentre Plus during the summer break, and in many ways I found it an inspiring experience. It is a far cry from the old days when the staff sat behind glass barriers, frightened to come out, and people on the other side sat on chairs that were fastened to the ground—presumably in case they lifted them up and threw them—to arrange to sign on. A real effort has been made to do something that every party in the House considers important—to get people back to work—but how can that be done if the morale of the people who should be doing the job has been lowered?
I do not think that the Bill is the right way to deal with the situation. If we were serious about the outliers, the Bill would be about them. If the problem is people on very high payouts—we have heard about that from several Members today—why is the Bill not about that? If that is the problem, the Government should deal with it, rather than introducing a Bill which will hurt all civil servants including the low-paid, and which is being used as a bargaining tool to force people to agree to even worse terms than those proposed by the Government. What is clearly being said is, “If you do not agree to much worse terms than you have at present”—although perhaps slightly better terms than those in the Bill—“the terms in the Bill will be what you have.” That is really what the legislation is about.
I declare a strong constituency interest in the Bill. Like many other Members, I have my fair share of constituents who work in local offices of central Government Departments such as the Department for Work and Pensions and Her Majesty’s Revenue and Customs. For the moment, I also have constituents who do important work involving the environment and the countryside at Natural England and the Commission for Rural Communities. But, of course, most of those in Cheltenham who describe themselves inconspicuously as civil servants work at GCHQ. They form the largest part of what the Prime Minister has rightly described as
“the finest intelligence services in the world.”—[Official Report, 6 July 2010; Vol. 513, c. 175.]
GCHQ traces its roots directly to the wartime Government Code and Cypher School at Bletchley Park, which, as we now know, made a huge contribution to victory in the second world war. That contribution, however, remained largely unknown and unrecognised for decades because of the absolute discretion and loyalty of those anonymous civil servants—people like my own parents, who worked at Bletchley and, later, at GCHQ. When the history books are written 60 years from now, who knows what silent victories we will learn were being achieved as we spoke here today, and which will remain secret for decades to come because of that same brand of loyalty? I must say that, on the face of it, this Bill is a pretty poor reward for the loyalty of my constituents in GCHQ and of all the other civil servants in Cheltenham.
It has been suggested that, on average, public sector pay has caught up with private sector pay. I will not invite a repetition of the earlier altercation across the Chamber about which is higher, but neither of the sets of figures cited were based on directly comparable jobs and careers, and that is what really matters. A constituent who wrote to me put it very well:
“I’ve had a long career in the public sector and watched my university friends prosper in the private sector. They have had company cars, private health care and almost without exception greater earnings. In compensation I had more flexible working, a good pension (although not as good as friends in the insurance industry) and the knowledge that I wasn’t in a hire and fire culture. Yet now, all the benefits are under attack but I can never make up for all those years of lower pay.”
The mathematicians, linguists and IT experts at GCHQ are some of the finest minds in the country and had they chosen to work for Vodafone or Hewlett-Packard they would have undoubtedly earned more—perhaps much more—but they chose to serve us instead. As one of my friends who worked at GCHQ once wryly told me, “It does inhibit you a bit in job interviews when you’re asked to describe your work over the last few years and you have to say, ‘I’m not allowed to.’”
GCHQ may be a rather extreme example, but it is true that many civil service careers do not translate easily into private sector job opportunities, especially if they have been very long careers in the civil service. The key point has been made by the hon. Member for Hayes and Harlington (John McDonnell), my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) and others: our civil servants make life choices based on the promises we make to them. They make decisions about their homes, where they live, the schools their children attend, and above all they make career choices and financial decisions. They expect that if the day comes when it really matters we will keep our side of the bargain and repay their loyalty as promised. Well, that day has obviously come.
There is no question but that the Government are right to take drastic action to prevent further damage to our economy. I regret it deeply, but there is no question but that many civil and public servants will inevitably have to lose their jobs. The last Labour Government knew that too. The Cheltenham offices of Her Majesty’s Revenue and Customs, Natural England and the Commission for Rural Communities are all closing, with inevitable redundancies. As overall departmental cuts bite there will doubtless be more, although I truly hope that an organisation as vital to the national interest as GCHQ will be looked at with the most extreme care.
There is also no question but that the Government are right to look at the civil service compensation scheme, which may now be more—possibly much more—generous, especially to top earners, than we can afford. That was certainly the conclusion of the Labour Government when they too tried to curtail the scheme to control costs. As the hon. Member for West Suffolk (Matthew Hancock) said, it is true that, if we do not economise enough here, we will have to economise somewhere else.
For all those reasons I understand why Ministers had to look closely at the scheme. Labour tried and failed to curtail the scheme by compulsion, but, of course, this Bill does not simply repeat that attempt at compulsion. It reduces the limit on redundancy compensation to one year’s pay, which is even more drastic than Labour proposed. Incidentally, it is also more drastic than the terms that apply in other areas of public service such as the NHS or local government.
Another constituent wrote to me that as a civil servant she felt “victimised” by the new Government, and she was a Lib Dem supporter. If there is even a perception of that level of unexpected unfairness from our own supporters, we should hesitate before going ahead with this Bill. It is unexpected because these proposals were in neither coalition party manifesto. In the coalition programme for government there was a promise to reform the scheme and to bring it into line with the private sector. Reform can be very good. It could, for instance, have given civil servants some more of the security of the contractual guarantee of compensation enjoyed by many in the private sector, protecting them somewhat from the whims of Governments. The Bill, it seems to me, deviates radically from good practice and from the principles of the 1972 Act. It contains a compulsory and substantial reduction in the agreed rights of civil servants and, arguably, the legally accrued rights of civil servants to compensation, and will be enacted just when they may need them most and while negotiations are under way. I must agree with other hon. Members that using legislation as a negotiating tool is unworthy of this Government.
If it is intended that the negotiations should lead to a more generous settlement, especially for the lower-paid, which is what the Minister for the Cabinet Office suggested, and that we can therefore expect the repeal of clause 1 by Ministers in due course, that prompts the question of why it is needed in the Bill in the first place. Why not place a more generous cap, perhaps along the lines of the earlier proposals, in the Bill? Why do Ministers need a weapon that they have no intention of using?
My father could not tell me very much about his work at GCHQ, but he once shared with me the news that he had successfully concluded quite tough negotiations about terms and conditions with the GCHQ trade unions on behalf of GCHQ management. They bought him a drink afterwards and he, I hope, retained the respect and loyalty of his colleagues. I am not sure whether PCS will be buying Ministers drinks after all this is over, but as a Government we should, at the very least, aim to retain the loyalty and respect of our civil servants. In Cheltenham, our national security might depend on it.
Those GCHQ trade unions were subsequently banned by a less enlightened Government than this one—something that was mercifully reversed some years later. I am confident that such union bashing lies firmly in the past and that this Government are committed to policies that are transparently fair. I hope that Ministers will, on reflection, agree that this Bill in its current form does not pass that test. They will have guessed by now that I plan to vote against it tonight.
Thank you, Madam Deputy Speaker, for calling me to make a short contribution to this vital debate on civil service superannuation. My comments will be brief and they are intended as constructive reinforcement rather than unnecessary duplication, but it will be a test for Members to see whether they can distinguish the difference.
Let me say at the outset that few in the civil service in my community—and there are many of them—would deny that the civil service pension scheme needs reform. Given that position, there is all the more reason why the reform should focus on renegotiation rather than, as is patently obvious here, on a Government planning to proceed unilaterally with a devastating agenda. I appreciated the Minister’s comments about the virtues and values of the civil service, but the contents of the Bill do not match that unqualified support. Significantly, the Bill tells us much about the nature and culture of this Government who, at the same time as focusing on negotiation, are using a blunt stick to bulldoze through change. They are taking measures forward in legislation that, if enacted, would have a damaging effect on a cohort of modestly paid people who give outstanding service to our community. Indeed, I dispute the fact that they are not profit-making. They make profit, although not in financial terms, through the dividends and benefits that they give to our community, which are much appreciated.
Surely in the aftermath of the judicial review, the opportunity should have been taken to engage in a steep learning curve jointly through further negotiation. A bullish, insensitive and punitive approach destroys trust between Government and a loyal and dependable civil service work force who believe that they are being treated shabbily, to say the least. They believe that they are being marginalised and that they are bystanders in the whole process. It ill behoves a Government who claimed that they would be champions of fairness to act in such a draconian way, trying to push through an unacceptable change without proper scrutiny. The vast majority of civil servants are modestly paid, yet they play vital roles in our society, as we have heard. They keep our borders safe, support our armed services and help the unemployed.
In essence, the Bill does not strike a fair balance between the interests of taxpayers and the legitimate expectations of civil servants, many of whose livelihoods are being threatened. Governments do have to make hard decisions, but they must underpin those with the values of justice, fairness and respect. Those values seem sadly lacking in the approach that has been taken—or at least that is the perception, as the lowest paid appear to be being treated in a reckless and cavalier manner. Let us make no mistake: this Bill is potentially part of a slash-and-burn approach, a highly insensitive attack on modestly paid public servants who, in an economic downturn, are facing real challenges economically.
So where do I see us going? My focus would be on renegotiations that will succeed and make the Bill redundant. So I urge the Cabinet Office Minister to reaffirm his commitment to go that extra mile—to adopt the principles of the February scheme as an initial basis for discussion; to review his definition of reasonableness, particularly in protecting the lowest-paid; and to balance the needs of the taxpayer and the legitimate expectations of civil servants.
The civil servants of this country deserve to be treated with dignity—with fairness, justice and respect. The citizens of this country expect nothing less, and I hope that common sense will prevail in resolving this dispute, and that the Minister will be persuaded to reconsider his strategy and tactical approach in addressing this dispute, and withdraw the Bill.
We have heard many speeches about unfairness and the lack of comparability between the schemes in the public and the private sectors, yet those speeches were unnecessary because, as far as I am aware, absolutely no one—not even the hon. Marxist Member for Hayes and Harlington (John McDonnell)—disagrees that we need more comparability and that the scheme that we are discussing tonight is over-generous and unaffordable.
Quite a few speakers have prefaced their speeches with glowing compliments to members of the civil service but have shown little sensitivity to the position that they would find themselves in if the Bill were passed. There may be a very good argument for changing the terms and conditions, but many members of the unions will have made life decisions based on their existing contracts, and they would be facing pretty severe circumstances, which they could not have planned for in many cases.
I was a trade unionist for 30-odd years and it was a general principle to consult before changing terms and conditions of service; that is a basic rule in industrial relations. It was not good practice to change terms and conditions while consultation was taking place.
The whole of the Government’s strategy is built on a plan to rebalance the economy, and I support that strategy. The rebalancing includes a real determination to increase the nation’s economic capability by increasing the scale of private sector employment to soak up the increased unemployment that will inevitably follow from the reductions in public spending required as part of the plan to reduce the national deficit. As a matter of principle, is it right to add to the sense of uncertainty, and no doubt in many cases the fear of redundancy, currently felt by many public sector workers by seeking seriously and unilaterally to reduce their entitlements to redundancy payments? This is not an emergency measure—unless, of course, it is intended for that purpose.
I say to my friends on the coalition Benches that I believe we are actually entering into a pact, not with each other but with the British public, and that pact is one in which judgment on the coalition is still deferred. The pact has to do with the strategy that I just outlined for rebalancing the economy. The Chancellor said many months ago that the Budget would be “tough but fair”. The public know that it will be tough, but they are watching closely to see just how fair things will be.
Since the judicial review, all the unions have indicated a willingness to engage in further negotiations. That offer should be accepted with good will before we are asked to deliberate. What on earth are we doing getting involved in the nitty-gritty of discussions, consultations and deliberations on terms and conditions of service? That is not our role.
The Bill is important, not just because of the savings to the public purse, which we recognise are necessary, but because of the message that we are sending to those who work in the public sector, and to their representatives. People are committing an act of faith in thinking that we are working in the best interests of the national economy to put things right, but they are watching how we do that.
The degree to which the private sector can rise to the challenge of job creation is uncertain. The degree to which the public sector may be asked to contribute to balancing the nation’s books is less uncertain. Efficiencies can and must be found to minimise the impact of budget reductions on front-line services, but no amount of natural wastage and vacancy freezes will remove the need for some redundancies. What message are we sending out if we pass the Bill?
At this most difficult time in the public sector, just when we require the support and good will of the trade unions, we in the heart of Government seek to jab them with a stick—to show them what? That we are tough? In the case of the PCS, possibly it is to teach it a lesson for daring to take us to court. There seems to be resentment against the PCS for stopping Parliament doing something unlawful.
It is the responsibility of all of us who support the public sector to root out and remove inefficient and ineffective public expenditure, because by doing so we defend the sector from those who are ideologically opposed to it. I cannot defend over-generous and unaffordable terms and conditions of service in the public sector, and I have told people who have written to me on the subject that I cannot possibly support them on keeping the current scheme, but I believe that it is wrong, especially at present, when public sector jobs are expected to be lost, to use this House as a means of conducting negotiations with the unions.
I chased my Labour opponent for 20 years and stood against him five times before I managed to get into this House, and one of the slogans that we ran with towards the end of that time was “He never voted against his Government in the interests of his constituents”. Well, I am not about to make that mistake this early in my time as an MP.
This is a mean-spirited, parsimonious Bill that borders on abuse of parliamentary procedures. We heard very plausible, warm words from the Minister for the Cabinet Office; it was almost as though he was in some way sympathetic to the civil servants who will feel the full brunt of this mean-spirited Bill, if it gets through its parliamentary stages. But make no mistake—and I am sure that the civil servants who are following our debate closely will not do so—the Minister for the Cabinet Office has cloaked his iron fist in a velvet glove.
The contributions from Conservative Members left me cold. It is clear that the Conservatives have not changed one iota—they are still the same old nasty Tory party, attacking the most vulnerable and lowest paid people in this country, just as they did in the 1980s and 1990s. We heard some rather sympathetic contributions from Liberal Democrat Members. One or two even said that they will join Labour Members in the Division Lobby. Let us hope that all Liberal Democrat Members have the courage of their convictions and join us in helping to defeat this terrible piece of legislation.
The Finance Bill introduced by the Con-Dem coalition is likely to lead to a double-dip recession. It received Royal Assent on 27 July, and inevitably it will lead to an increase in unemployment. It is against that background that the Superannuation Bill has been introduced, at a time when people are looking for work and finding it difficult to obtain employment. However, the Minister for the Cabinet Office and Conservative Members want to throw people on the dole, leaving them in a vulnerable situation by undermining the terms and conditions that have been built up over many years.
We heard one Member—it may even have been more than one—claim that the measure was fair in some way. The hon. Member for West Suffolk (Matthew Hancock), who regrettably is not in the Chamber, said that the Con-Dem coalition was all about fairness and was progressive as well. The Conservatives ought to look up the meaning of “fairness” and “progressive” in the Oxford English Dictionary, because the legislation that they have introduced is the very antithesis of fairness and of progressive politics. The Deputy Prime Minister himself said in the general election campaign that he wanted to “hardwire fairness into…society”. The Bill, however, is yet another example of how hollow his words really are.
The Bill is the direct opposite of fairness, and it does not strike a fair balance between taxpayers’ interests and civil servants’ legitimate expectations. It provides inadequate protection for some of the country’s lowest paid public sector workers. I wonder whether it is the thin end of the wedge. Many people in the public sector enjoy better severance packages than what is proposed in the Bill—in the national health service, in education, and in local government, the ceiling is two years—but time will tell whether they are next on the Con-Dem Government’s coalition hit list.
The Minister for the Cabinet Office told the House that he would introduce the Bill:
“I will bring legislation to the House as soon as parliamentary time allows in a Bill to limit the costs of future compensation payments for both compulsory and voluntary civil service exits.”
He went on to say that
“I hope that the Government’s invitation to the Council of Civil Service Unions will be received in the spirit it is offered and that they will engage speedily and constructively with a view to reaching an agreed, fair and sustainable long-term civil service compensation scheme.”—[Official Report, 6 July 2010; Vol. 513, c. 3WS.]
What a way to conduct negotiations—introducing legislation in the House, leaving the Parliamentary Secretary, Cabinet Office, the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd), to wield the sword of Damocles over the heads of the civil service unions and people working in the civil service. It simply is not the right way to conduct negotiations.
The Minister for the Cabinet Office has said that he is concerned about low-paid workers, and he repeated that today. Where, however, in the Bill is there a proposal to help those workers? It is non-existent. If he was genuinely concerned about assisting low-paid workers, he would include a provision to deal with the very point to which he referred in July, and again tonight. Once again, words from the Ministers of the Con-Dem coalition are meaningless and utterly hollow.
The Con-Dem coalition seems to be abusing the negotiating protocols by manipulating parliamentary procedures to get its own way, and that will not do. That is not the way to conduct negotiations. It is a sad day for democracy in this country when we see such a Bill before us. The Minister acknowledged that it was an extremely blunt instrument. Then why bother enacting it? Why not take a more sophisticated approach in the 21st century to industrial relations?
To conclude, in the short time that I have, what I find so objectionable about the process is the attempt by the Con-Dem coalition to get the Bill defined as a money Bill to prevent proper scrutiny in the other place. My hon. Friends the Members for Kilmarnock and Loudoun (Cathy Jamieson), for Hayes and Harlington (John McDonnell) and for Birmingham, Erdington (Jack Dromey) have all made that point. The gerrymandering tendencies of the Con-Dem coalition that were so blatantly exposed in the Parliamentary Voting System and Constituencies Bill are permeating other areas of policy making.
The Bill has been drawn up without consulting the work force. The Minister admitted that. Although he tried to wriggle and say, “Of course I’ve had discussions but, you know, the previous Government had negotiations,” he was clearly nailed when that was put to him. There have been no negotiations. The Bill has not been subject to sufficient pre-legislative scrutiny, but that is not particularly surprising, given the experience of the past few months.
This is a bad Bill, which will lead to a bad law. That is why I will vote against it tonight and support the reasoned amendment moved by my right hon. Friend the Member for Dulwich and West Norwood (Tessa Jowell). I call on all Liberal Democrats to have the courage of their convictions and join Labour Members in the Lobby this evening.
I shall be brief, as I have been instructed and as I wish to be. The Bill aims to do something that is necessary—to reform the civil service compensation scheme. I support the aim. It should have been done many years ago. The scheme is not affordable in its current format. But I have a problem with what I have heard in the debate about the Bill being some kind of negotiating tactic. We have been elected to the House as legislators, not as negotiators. It is for Government to negotiate and for Parliament to legislate. I would value the comments of colleagues on that.
The previous Government put a great deal of work into reforming the compensation scheme, which I acknowledge, but it would have been better had they started the process a lot earlier. The work that they put together with the unions was eventually frustrated. The history is known to us all, and I will not repeat it.
I support the statement made by my right hon. Friend the Minister for the Cabinet Office on 6 July—a date that I cannot forget as it was the date of my silver wedding anniversary—that a settlement was required which
“will need to be fair, and in particular to provide a higher level of protection for lower-paid workers.”—[Official Report, 6 July 2010; Vol. 513, c. 4WS.]
In saying that, the Minister was echoing the comments of the right hon. Member for Dulwich and West Norwood (Tessa Jowell), when she said last year that the changes proposed at the time were aimed at
“protecting the lowest paid civil servants”.
It is clear that there is agreement across parties that lower paid civil servants should receive protection. That is only right. I ask the Minister to consider how he can best reflect that through the Bill which we, as legislators, have before us. As it stands, civil servants on all salaries are treated in the same way, with no particular consideration being given to those on the lowest pay. I know that he will have given careful thought to how the sentiments of his words on 6 July can best be reflected. They are the same sentiments that informed the Chancellor’s action in the June Budget, when he protected the lowest paid workers from the general pay freeze, as was mentioned earlier.
I, like many colleagues from all parts of the House, want to underline the importance that I place on the work of those concerned. When we speak about people being made redundant in the public sector, we certainly do not want to send out the message that, somehow, it is their fault. If someone is in a job that is no longer necessary or even affordable, we should look at who created that job and why. Governments of all colours have been guilty of being far too quick to take on staff for a new scheme without thinking about the long-term future. People are not playthings to be shuffled around on a whim. That is not to say that I oppose flexibility; I welcome it. But flexibility cuts both ways.
My second point concerns civil servants who have been in the public service for many years. A constituent of mine, working for the Ministry of Defence, pointed out that under the Bill he will, with a reasonable length of service, be entitled to the same payout as colleagues who have worked two or three times as long. He had no self-interest in raising that point; he simply wanted to speak up for his colleagues. I am a great respecter of length of service. Dedication and loyalty, whether in the public service, a private company or, indeed, a relationship is almost always something that we should celebrate. I therefore ask the Minister to look at how that can best be reflected in the Bill.
I shall support the Bill, because I know from what the Minister said today that he understands the points that I have made, but I urge all who are involved in negotiating the new settlement to arrive as soon as possible at a sustainable, practical and affordable long-term scheme.
I too shall be brief, because I know that time is short, and one way in which I can be brief is by associating myself with the eloquent remarks of the hon. Member for Hayes and Harlington (John McDonnell), who is no longer in his place.
I am glad to have the opportunity to speak, as more constituents have written to me to express concern about changes to the civil service compensation scheme than have written to me about any other issue since I was elected in May, so I am very keen to ensure that they are properly represented here today. There is a palpable sense of anger and disillusionment among public servants, and a real feeling that they are being made to pay for an economic crisis that was not of their making.
My constituency in Brighton is home to a large number of civil servants. Under their current compensation scheme, they have accrued rights that will simply be scrapped—torn up and thrown away—by the Government’s proposals, despite the court ruling that a failure to recognise accrued rights is unlawful, and that any amendments to the civil service compensation scheme must be made on the basis of agreement by all the relevant unions.
Morale in the civil service is at an all-time low. One Brighton Pavilion resident who came to see me in my constituency a few weeks ago put it like this:
“Many civil servants will, like me, have planned their finances on the basis that their jobs were reasonably secure and that if they did become surplus to requirements they could rely on a particular level of compensation. I have not, for example, taken out any insurance against not being able to continue to pay my mortgage through loss of employment. The government’s plans for deficit reduction mean that civil service job security is now very questionable, whilst the Bill puts paid to the second part of my planning assumption. I feel unsettled and vulnerable at this unilateral change in what I had thought was the deal with my employer.”
From his words we get a clear sense of a bargain being broken, of a contract being unilaterally torn up and of people being treated as if they were expendable, which is particularly hurtful to many civil servants who have given many years of loyal service. His words also highlight the anxiety and uncertainty that permeates the civil service, particularly those who face a future in which they might not be able to work again.
As many have said in today’s debate, the lowest paid will suffer most, and there are many of them. The Minister for the Cabinet Office himself acknowledged that
“large numbers of civil servants are not very well paid—half of them earn £21,000 a year or less”.—[Official Report, 14 July 2010; Vol. 513, c. 932.]
Yet the scheme before us offers them no protection, and that is the key problem. Its proposals are fundamentally unfair and unjustifiable.
I should like to discuss the context of these changes, because the public sector already faces unprecedented uncertainty in the form of cuts and redundancies under the coalition’s policy of deepening and accelerating the previous Government’s cuts programme. Surely the very least that the public sector can expect is to be given a proper voice in negotiations and the chance to agree a fair settlement.
As with so many of the swingeing cuts on the table, there is a perception that the planned changes to the civil service compensation scheme are not just about saving money; they are also seen by many as an attack designed to weaken the public sector—the same public sector that, for now at any rate, is the backbone of our education system and health service. It also includes civil servants who keep up and running services such as Brighton county court family centre, the Brighton and Hove learning partnership and the city’s benefits service.
I end by pondering the irony of the fact that so many of the civil servants who will be adversely affected by the planned changes to the compensation scheme and to jobs, and by the service cuts, actually work for Her Majesty’s Revenue and Customs. Surely it would be much fairer to help reduce the national deficit by keeping those HMRC workers in their jobs and enabling them to collect and crack down on the £100 billion a year in unpaid and dodged taxes—tax evasion and tax avoidance. That would save public sector jobs and protect working conditions in the process.
In the meantime, it is clear tonight that many of us are not prepared to stand by and see the vast majority of the civil service pay disproportionately for the economic crisis. That is why I shall vote against the Bill.
I am 50 years old and have employed people for about half my life. My company was quite lucky relatively recently; we consulted with staff and were able to agree a deal under which there were no redundancies. However, I had to make redundancies in the early 2000s, and it is not a nice thing to go through, although obviously it is a lot worse to be made redundant.
We need to be aware that at the end of this process some people will lose their jobs. The challenge in politics is the national cake, and to some extent the political process can affect how that is divided. Our difficulty now is that we have to get a time machine and borrow from our children some slices that will be baked in future so that we can put them towards the national cake today. The real challenge is how we get, over a period of time, to the stage at which the amount of cake baked every year is the amount consumed every year.
How do we do that in a just manner? The Opposition have argued that our attempt unilaterally to challenge the contract with the civil service is unfair, whereas their attempt unilaterally to challenge the contract with the civil service was fair. They have argued with our proposals, but those are far more generous than the conditions for the staff of Members of Parliament, for instance. Those staff are all hard-working, but they are subject to the statutory redundancy scheme. Birmingham city council also operates the scheme. My wife works for British Waterways, a public body that also operates that scheme.
Basically, the Bill creates a negotiating position that means that the trade unions cannot veto any agreement. That is the normal situation for employers. Employers can present their staff with a new contract, and the staff have either to take it or leave it. That is what has happened in all the pay and grading reviews in local government across the country. Pretty well all local government employees have gone through the process of being presented with a new contract. What is happening now is that a new contract is being presented. We have said that we are aiming to protect the lower-paid. The most important thing to try to do is protect people against unnecessary redundancies. That is the critical thing.
If six years’ redundancy has to be paid to somebody, how can things be reorganised in a cost-effective manner? They cannot. Even paying three years’ redundancy creates a major problem because it costs more that year to make somebody redundant than to continue to employ them. That means that those not covered by the redundancy schemes are the ones to whom people go to find the savings. That does not seem fair.
I do not think we should indulge in a race to the bottom. It needs to be recognised that this is the Government’s opening position. People who argue that we should propose the final solution here in Parliament are obviously no good at playing poker; one does not reveal one’s hand. We cannot expect the Minister to say, “We’ll settle for X.” The Government need to have a negotiating position, and the trade unions cannot be in a position whereby they can veto it—that would be absurd.
We need to think about our employees. I have always been concerned about the people whom I employ personally, and in the same way we should be concerned about those whom we employ collectively through UK plc. Options that may not cost the Government much money could be looked at to improve the situation. For example, constituents of mine who are civil servants have raised the issue of two civil servants living in the same household who are both under the threat of redundancy. I ask the Minister to consider whether it would be possible for one such civil servant to nominate the other, so that if one of them were made redundant the other would be protected against redundancy. Then at least the household would not lose both incomes, but only one. That would be an example of flexibility. It would not necessarily cost the Government any money, but it would protect people from the worst aspects of this process.
Similarly, in certain circumstances people might like to move towards a job share if the Government were willing to pay them a sum of money for that reorganisation, which might cost less than voluntary or compulsory redundancy. That would reduce the wages bill and the deficit without necessarily putting people in a very difficult personal position. We need to work with employees to try to minimise the effect on people.
As a former PCS worker and someone who until April this year was earning £15,300—I worked in the Child Support Agency for 18 months—I find some of the things you are saying quite offensive. Every worker has a right to work—surely you do not make decisions about whether a husband or wife, or a partner in the household, has that right.
Furthermore, if the Bill is rejected tonight, proper consultation might be re-entered into. I took industrial action against our former Government. I voted for that action having been consulted by the union and following the procedure that the Government started with us in 2009. I e-mailed the then Minister and went through all that process. What you are saying is contradictory. You are saying that people should be consulted, but only after a decision has been made. Do you not think—
I am suggesting that the Government could try to ensure that there are not two redundancies in the same household, whatever circumstances we are in. We all accept that redundancies are going to occur in the public sector, so why cannot we try to minimise the effect on households by ensuring that both partners need not be made redundant?
Similarly, there are opportunities whereby people can transfer to the private sector. Obviously the objective is to help people to find jobs in the private sector. A severance fee, equivalent to voluntary redundancy in some senses, paid when people find a job in the private sector could be a way of reducing costs to the public sector but doing so in a way that does not make public servants suffer. At the end of the day, we should be thinking about the effect on the public servants who work hard for this country. We need to recognise that and work in partnership with them.
There are all sorts of opportunities within my own company. I have had people take sabbaticals in the past. In certain circumstances the employer will say, “We can plan for that person to go away for a year and then come back.” It suits them to do that, it has reduced the cost to the public purse, and it is in the interests of the employee. Possibilities can be considered, in partnership with the work force, that improve the situation so that everybody wins.
As a consequence of the reduction in the national cake—gross domestic product or however one wishes to see it—we face a very difficult situation that has to be dealt with. The Labour party has proposed its own version of a unilateral contract change and we have a different version, but something needs to happen. I will support the Government tonight, because I agree with the exact proposals put forward in the Bill. We need a negotiating position so that the trade unions cannot veto any changes, and I have responded clearly to my constituents by saying that I do not think the trade unions should have a veto on contractual changes. The time has hit 20 minutes past, so I shall finish by saying that I shall support Second Reading.
Thank you, Madam Deputy Speaker, for giving me the opportunity to make the last Back-Bench contribution to the debate. Some of the contributions that we have heard from the Government side of the House have been quite astonishing, and many of the civil servants who will be directly affected by what we are debating must have been amazed by some of the things that they have heard.
As always since the general election, coalition Members are trying to blame the economic policies of the previous Government for the economic crisis that the whole world has been in. I sometimes had different views from some of my Front-Bench colleagues about the economic strategies that I wanted the Labour Government to pursue, and in particular I would have liked them to intervene to regulate the banks earlier and deal with issues such as bankers’ bonuses and the financial sector. However, low-paid civil servants were not to blame for the economic downturn, nor indeed were the economic policies of the Labour Government.
We are here today debating not how to deal with the high pay of those in the banks, which have had huge public investment, or bankers’ bonuses or bank regulation, but issues associated with the estimated 600,000 public sector workers who will lose their jobs if the Government carry out the policy that they have outlined. Today we are talking about civil servants, but I believe that in a few weeks or months we will be back here talking about how the Government want to erode the terms and conditions of workers in other parts of the public sector as well. That is shameful, and it is particularly appalling that those on the lowest salaries in the public sector should have their terms and conditions eroded because of the difficult situation that we are in. It is also appalling economic policy, because in many parts of the country where civil servants and other public sector workers are going to lose their jobs, there are no other jobs available.
The Minister said that half of all civil servants affected by the scheme earned £21,000 or less, and the Government also seem to accept that the provisions in the Bill for those workers are not fair. They themselves say that they want to offer something better, although we have heard no detail today and have been asked simply to trust that the Minister will do what he can to get a better deal for those people.
We have to deal with the realities in the Bill as presented, and the reality is that the amount of money that many people get now if they are made compulsorily redundant or take voluntary redundancy in the public sector is not sufficient to take them through to the time when they can get another job. If the provisions in the Bill go through, they will lead to a lot of people living in poverty. People will lose their homes, as at least one Member described in outlining the circumstances of an individual civil servant, and they simply will not be able to cope. Those who will be in the most difficulties may well be those who would currently be entitled to three years’ compensation—older workers who have worked in the public sector for a very long time. In the world we live in, they will not be able to get another job. We all know the difficulties in which older workers find themselves when they seek alternative employment.
It may be that the current provisions are good for some individuals on the highest terms, conditions and pay, but if we compare jobs like for like, we will see that graduates who have worked hard for many years in the civil service probably would have received a better remuneration package had they worked in the private sector. At the same time, many of those on the lowest incomes, such as women cleaners and women who look after young children in nurseries, probably have a more attractive package in the public sector, because they earn more than the minimum wage, and have sick pay, pensions and protection provisions of the kind addressed in the Bill. Those are the people whom we should defend. We should not tell them that if they worked for the minimum wage for the worst private employer, they would have a worse deal than they have in the public sector. We should drive standards up, not use the current economic difficulties as an excuse to implement such policies. Some in the Conservative party who set the agenda wanted those policies irrespective of the economic conditions. I am therefore pleased to hear that some Liberal Democrat Members will take a stand on this matter. We are considering the Bill today only because many Conservative Members would impose such terms and conditions irrespective of the economic conditions.
The Bill will be fast-tracked through Parliament as a money Bill, which we should discuss, because it is just one of many measures that will erode the terms and conditions of some of the lowest paid in the public sector. In many of the communities that we represent, there will be devastation if the proposed cuts in public services happen. Facilities for which individuals and communities have fought for generations, including community centres and libraries, will close. There will be no alternative jobs for jobcentre workers who lose their jobs as a result of the Bill. I suspect that, if we do not pay for people to do jobs, it will cost the state a great deal more in benefits and other support that it must provide.
The Bill is wrong morally in that it effectively unilaterally changes contracts of employment, but it also bodes ill for the future. If that is how the Government intend to conduct industrial relations in the public sector, we have a very bumpy ride ahead. The comprehensive spending review is coming up, and civil servants know that many of their heads are on the block. They are distraught at the proposals. I hope that they go out after this debate and tell their representatives, particularly those on the Government Benches, how they feel about their policies. The Bill is not good for the public sector or the private sector, because it says that we need to take everybody down to the lowest standards and that it is okay to rip up contracts. People who have worked for an employer for 20 or 30 years may have done so on the understanding that they have a contractual entitlement to a particular package if they lose their job, but the Government believe that it is completely acceptable to come along, rip that up and say, “We’re going to give you a lot less.”
I hope the Government are defeated tonight. Even if they are not, they have a struggle ahead, and I hope that they are defeated when we debate the Bill again.
We have had a good and thorough debate, with some thoughtful and powerful contributions from Members on both sides of the House, including my hon. Friends the Members for Edinburgh East (Sheila Gilmore), for Glenrothes (Lindsay Roy), for Derby North (Chris Williamson) and for North Ayrshire and Arran (Katy Clark), as well as the hon. Member for Brighton, Pavilion (Caroline Lucas).
The difficulty that we face as we prepare to vote on this issue is that the words we have heard from the Dispatch Box are very different from those that are written in the Bill. On 14 July, the Minister for the Cabinet Office set out his approach to the reform of the civil service compensation scheme. He said:
“I want to engage with the unions quickly to develop a scheme that protects the lowest paid…we need to negotiate”.
When I pressed the Minister to take the previous Government’s reform package as the starting point for those negotiations, he accepted, as he did again at the Dispatch Box this afternoon, that had
“that scheme been in existence when the coalition Government came into office, a pressing case would have been made to leave it as it was and work on that basis.”—[Official Report, 14 July 2010; Vol. 513, c. 932.]
It was a good beginning, with an acknowledgement of the merits of the previous Government’s reform package, set out in February, and a clear undertaking to protect the lowest-paid.
Unfortunately, our hopes were dimmed when this draconian Bill was published just 24 hours later, with no prior consultation with staff or the trade unions. The Minister was open and transparent about the purpose of the Bill. He said that it is not the final word. Indeed, in a phrase echoed by my hon. Friend the Member for Birmingham, Erdington (Jack Dromey), the Minister described the Bill as a “blunt instrument”. It contains a sunset clause and powers to repeal at any stage. In no sense is it a reformed scheme: it simply places a cap on the existing unreformed scheme. It means, typically, that a civil servant earning £21,000 a year who is made compulsorily redundant and who would get £63,000 under the existing scheme—and would have got £60,000 under the February 2010 scheme—will get just £21,000. Someone earning £18,000 who would have got £54,000 under the existing scheme or the February 2010 scheme, will get just £18,000.
The truth, which has been freely acknowledged by Ministers, is that the Bill is a negotiating device to ensure drastic cuts in the civil service compensation scheme. But as legislators we have to ask what will happen if those negotiations do not succeed. The Chair of the Public Administration Committee, in a thoughtful speech, warned about the dangers that might lie ahead in terms of legal challenge and delay. It is good to know that he and his Committee will keep a watchful eye on this legislation and other matters.
My hon. Friend the Member for Hayes and Harlington (John McDonnell), who chairs the PCS parliamentary group, has described this Bill as a landmine Bill, and he set out his definition of that. Whether that is true or not, there are real dangers if this Bill passes through Parliament while parallel negotiations go on outside that remain uncertain and, if unsuccessful, could create real resentment among those whom they affect.
There is no argument from my party about the need for reform. Indeed, we engaged in considerable detail in those reforms before the election. The focus of our reform was the vast majority of civil servants who do vital work on the front line of our public services. They include those who work in jobcentres trying to reconnect unemployed people with work; those who work in our prisons dealing with difficult and dangerous offenders and ensuring that our communities are safe places to live; and those who deal with tax credit claimants, ensuring that families have at least a decent minimum income on which to live. Most of those people, as we have heard from many hon. Members, work for modest rewards. Indeed, the Minister has said on several occasions that half of all civil servants earn £21,000 a year or less.
I genuinely want to give the right hon. Gentleman the benefit of the doubt—that is my starting point. I want it to be true when he keeps repeating the claim he makes in the Chamber and the media that he wants to protect the lowest-paid, but at some point those words have to turn into action, and he has to put flesh on the bones. My real concern this afternoon is that his comments have raised expectations above anything that his Government are likely or willing to deliver.
In particular, I urge the right hon. Gentleman and his ministerial colleague, the Parliamentary Secretary, Cabinet Office, the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd), to look again at the proposal that the previous Government agreed with five of the six trade unions, and which even now could provide a realistic, practical starting point for negotiation with all six of the unions—namely, that any civil servant on a salary of less than £20,000 a year who is made redundant would be entitled not to 12 months’ or 15 months’ salary, but to three years’ salary. Labour Members will be tabling an amendment to that effect in Committee, and I encourage the Minister to indicate this evening that he and his colleagues will, when that moment comes, show that they mean what they say when they talk about protecting the low-paid and support that amendment. At the very least, that would be a clear indication, in their discussions and negotiations with the trade unions, that they are acting in good faith and mean it when they say that they want to protect the lowest-paid.
My hon. Friend the Member for East Kilbride, Strathaven and Lesmahagow (Mr McCann) was among a number of Members on both sides of the House who reminded us that this debate and these proposals come before us in the context of deficit reduction, so it is important to remind the House, as my right hon. Friend the Member for Dulwich and West Norwood (Tessa Jowell) made clear, that our reform package would have saved £500 million over three years. The Government have pledged that, however tough life becomes as a result of the cuts that they introduce, fairness will be the watchword. How many times have we heard that from the Government Front-Bench team? But what is fair about the regressive provisions in the Bill that mean that maximum redundancy payments mirror exactly what an individual earns? If someone earns £100,000 a year, under the terms of the Bill their payment would be £100,000. If someone earns £50,000, the payment would be £50,000. And if someone earns £20,000, it would be £20,000, not the £60,000 promised in the reform package that we negotiated and set out in February.
What is fair about a set of negotiations carried out against the backdrop of a Bill that threatens severe cuts if the trade unions do not agree to a new scheme that dramatically reduces the provisions in the civil service compensation scheme? And what can be fair, as the hon. Member for Southport (Dr Pugh) asked pointedly, about unilaterally rewriting a contract with staff, either from a moral or even perhaps a legal standpoint?
I agree with much of what the right hon. Gentleman is saying, but surely the Labour party believes in reforming the present system, so should it not be supporting the Bill on Second Reading, moving its amendment and then voting against it on Third Reading only if that amendment fails?
The reasons it was declared illegal relate to the standing of the original legislation—the Superannuation Act 1972—and there is nothing preventing the Minister for the Cabinet Office and his colleague the hon. Member for Ruislip, Northwood and Pinner from sitting down tomorrow with the six trade unions and taking our February 2010 proposals as the starting point for negotiations. I urge the right hon. Gentleman to do that—he is in his place now. I was just reminding the House that he accepted that had the proposals gone through before the election, there would have been a pressing case for leaving it well alone. We are where we are, but it is fair to suggest that that could be the starting point for negotiation.
I ask again: what is fair about sending a message to loyal, dedicated, hard-working staff that they would be better off if they decided to go voluntarily, rather than staying in the job that they are committed to and running the risk of being made redundant compulsorily, resulting in a 20% reduction in the payment that they would receive? My hon. Friend the Member for South Down (Ms Ritchie) asked what was fair about deep cuts in the conditions of staff who run the very services on which those with the least in our society depend, including jobcentre staff and those who deal with tax credit claims.
I shall turn now to what I regard as the misuse of a Bill in the pursuit of these draconian changes to the civil service compensation scheme. I particularly commend the pertinent comments made by my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson), who has considerable experience as a Minister in Scotland. Mr Speaker, you will be pleased to know that I shall not comment on whether or not this should be a money Bill. I am sure that you will take advice on that and make your decision when the Bill finishes its proceedings in this place. I am sure that you will not need advice from me; you will get it from others.
Having heard the promise of so many reforms and changes, it was bizarre, so early in this Parliament, to hear Ministers openly saying that they hoped they would never need to use the Bill. How bizarre is that, so early in the Parliament? Government Bills should be about putting policy into legislation, not about providing negotiators with a backstop bargaining chip, especially when so much about the Bill remains unclear and uncertain. The 12-month and 15-month caps are entirely arbitrary; they have been plucked out of the air. No rational explanation has been given, and no evidence brought forward, to explain why those time periods have been chosen. The equality impact assessment does not even acknowledge the potential impact on older and longer-serving civil servants, who stand to lose huge sums of money and who might very well be those who find it the most difficult to find alternative employment.
Ministers cannot tell the House how much money would be saved as a result of the Bill, because they do not yet know how many civil servants will be made redundant as a result of their cuts. Perhaps the Minister could say a little more in his winding-up speech about the negotiations. I recognise the constraints involved, and I do not expect him to carry out negotiations across the Dispatch Box this evening, but even an indication about the mood of the negotiations would assist hon. Members. Are Ministers close to agreement? Does the Minister believe that the Bill will actually be needed? When are the next meetings scheduled to take place? Does he expect to be able to come back after the conference recess and tell us on Report that substantial progress has been made, and that we might not need the Bill after all? If he is not going to table amendments when the Bill goes into Committee—the Minister for the Cabinet Office indicated that it was not his intention to do so—will he heed the advice of the hon. Member for Vale of Glamorgan (Alun Cairns) that he should go as far as he can to indicate the kind of measures that he and his colleagues are considering?
My hon. Friend the Member for Hayes and Harlington is right: it is unacceptable to expect hon. Members to vote for a Bill that is so far-reaching in its impact without knowing the detail of the provisions that sit beside it. If the Minister cannot go a little further in providing that detail, I believe that any sensible Member will be forced to conclude that words about fairness are just that, and that the only way to vote tonight is in favour of the reasoned amendment and against the Bill.
This has been a serious debate. It has been very sober in tone, and that is entirely right because we all know that there is tremendous anxiety out there about job losses and potential changes to the compensation scheme. Many Members have received representations on this matter, and many came to the House today to express strong constituency interests. They included my hon. Friends the Members for Cheltenham (Martin Horwood), for Stafford (Jeremy Lefroy) and for Vale of Glamorgan (Alun Cairns), and they represented those interests very strongly.
What was striking as I listened to the debate was the consensus about the need for reform. That was not seriously questioned. The issue before us, then, is how, in seeking to reform the compensation scheme, we strike the right balance in treating fairly civil servants who lose their jobs or give them up voluntarily. As was stressed consistently throughout the debate, particularly by my hon. Friend the Member for Gloucester (Richard Graham), the issue is especially important to the large number of civil servants who are not well paid. How do we strike the right balance between being fair to them and discharging our responsibility to the taxpayer at a time when there is tremendous pressure on the Government to get public spending under control, as my hon. Friend the Member for South Staffordshire (Gavin Williamson) emphasised? My hon. Friend the Member for West Suffolk (Matthew Hancock) was entirely right to introduce the concept of fairness to future generations when talking about the need to get the deficit under control and tackle it with vigour.
As for the case for change, my right hon. Friend the Minister for the Cabinet Office made the Government’s starting position very clear. This legislation is not an attack on the civil service. Many Members have placed on the record their appreciation of the crucial work undertaken by civil and public servants every day and across all Government Departments, and no one recognises that more than a young, new Minister with no experience of Government who relies on civil servants and the dedication and support that they give.
We simply believe that the current arrangements for compensating civil servants are unaffordable and unsustainable. My hon. Friends the Members for West Worcestershire (Harriett Baldwin) and for Vale of Glamorgan were right to express the surprise that their constituents would feel on understanding that in this day and age public servants are eligible to receive payment of up to three times their annual salary or, for older workers, enhancements to pensions and lump sum payments costing more than five times their salaries. That seems disconnected from constituents’ experience of the real world, disconnected from statutory terms—a point well made by the hon. Member for Birmingham, Yardley (John Hemming)—and clearly out of kilter with terms in the private sector, as my hon. Friend the Member for Devizes (Claire Perry) argued.
The view of the coalition Government is that the status quo is unacceptable. As we made clear in the coalition programme, we want to bring this scheme more closely into line with that of the private sector. Critically, that view was shared by the previous Government, who tried to reform the scheme honestly, but ultimately without success. That view was apparently shared by five of the six unions involved in the negotiations, as they agreed to the package on offer. The case for change seems to have been accepted by the majority of speakers.
On affordability grounds alone, a responsible Government dealt the hand that we have been dealt on the public finances would have had to take action. As my hon. Friend the Member for West Worcestershire pointed out, there is also a risk of the current situation distorting decisions and creating unfairness. We do not want to take decisions on people’s future based on how easy or cheap it is to make them redundant. The effect of the current scheme is to make it particularly expensive to make the highest-paid public servants redundant. We do not want uncertainty to drag on, as it is bad for everyone and will breed only more insecurity. We want the uncertainty to end decisively.
As I said, I heard no serious arguments against reform. The debate on the Opposition side, honest as it was, was mostly about process and how the Government are going about this business. Strong reservations were made about the possible certification of the legislation as a money Bill, but that is clearly a matter and a judgment for you, Mr Speaker, at the end of the Bill’s passage.
My hon. Friend the Member for Harwich and North Essex (Mr Jenkin), the Chairman of the Public Administration Committee, raised concerns about the risk of a legal challenge to the Government’s approach and wanted comfort on the robustness of our legal advice. He will be aware that trade union members and some hon. Members have placed on record the risk of a legal challenge, so he will not expect me to go into the details of the legal advice. I can confirm, however, that it is robust.
The main argument from Labour Members was, “Why not go back to the deal that was almost struck? Why not amend the legislation so as to impose the terms agreed with the five unions earlier this year?” The truth is that the previously agreed terms were struck down by the courts and were not accepted by the Council of Civil Service Unions. Although those terms had much to recommend them, we would prefer not to see some aspects in the new scheme—for example, compulsory terms more generous than those on voluntary departure. Rather than embedding the scheme in primary legislation, we have sought to limit the costs of the current scheme while discussing the contents of a new scheme.
While I understand the concerns expressed by many Members about process, I believe that there is a danger of missing the central point. Reform is necessary—the status quo is not an option—and we want to achieve reform through negotiation. The Minister for the Cabinet Office has informed the House of his meetings with the Council of Civil Service Unions on 13 July, and of an imminent meeting. There are ongoing discussions almost daily, which he has described as genuine and sustained. We have sent a clear signal of flexibility on terms for voluntary redundancy, and have expressed a clear determination—this will be important to the House, given the concerns that have been expressed—to agree on terms that are fair to the lower paid. The model that we are exploring seeks to taper the protection given to the very lowest paid, but the limits and thresholds of such protection are clearly a matter for detailed negotiation, and should not be the subject of speculation in the House.
Why is the Bill necessary? It is necessary until we can reach an agreement with all the unions, because the current position enables them to veto any meaningful reform—a point grasped by the hon. Member for Birmingham, Yardley and many others—and they have demonstrated a willingness to use that power. Until we have secured agreement, we would be failing in our duty to the taxpayer if we retained the status quo and did not address the excesses.
The Bill does not itself introduce a new scheme, but merely limits the amounts that can be paid out under the terms of the current scheme. We have made it clear that those limited amounts represent the absolute minimum that the Government are prepared to offer staff. My hon. Friend the Member for Harwich and North Essex described that as an austere statutory base, but what was not mentioned was that the Bill makes it possible to adjust the amounts in one direction only, namely upwards. The Government seek to provide an example for other employees on good practice in relation to staff issues, and therefore have no desire to limit payments to the statutory minimum. The Bill caps the amounts to be received by staff departing on voluntary terms to payments calculated under the current terms, but limited to a maximum of 15 months’ pay. For those who are formally dismissed, the limit will be 12 months’ pay.
The Bill contains a sunset clause, and its effect can be brought to an early end if we are able to agree on a new scheme. We genuinely hope that that will happen. My hon. Friend the Member for Harwich and North Essex asked about the need for a sunrise clause as well as the sunset clause. I think it is impossible for us to be sure of every circumstance that could lead to a need to revive the Bill. The Government are therefore keen to maximise their negotiating flexibility. If we are unable to agree on a new scheme with the unions, the Minister for the Cabinet Office will have to renew the caps every six months by affirmative resolution.
The tone of the debate was extremely serious and consensual when it came to the need for reform, but I took exception to the suggestion by some Labour Members that the Government had no sensitivity in relation to the human consequences that might be forced on them. Labour Members chortle, but that suggestion is offensive to any Member on this side of the House. I do not think that anyone goes into politics to make other people redundant, except their direct political opponents. It is deeply offensive to ascribe the wrong motives to the Government. The coalition’s priority is to reach a long-term agreement on a new scheme with all the unions involved: an agreement that is fair to the civil service and fair to the taxpayer. The Bill is needed in case we are unable to reach such an agreement. It introduces caps so that we can limit the costs of the current scheme while we discuss the content of the new scheme.
I do not intend to embark on any party-political knockabout during the last few minutes of the debate. A key issue raised was process, which is important because it can demonstrate fairness. One of the failures of the House in the past has been the way in which it has rushed through legislation. A lack of scrutiny, both here and in the other Chamber, undermines the potential for good legislation.
The Speaker will determine whether this is a money Bill, but the Government have designated it thus, and I should be grateful if the Minister would clarify the reason for that. Given the definition in “Erskine May” of a money Bill, I see no reason why a Superannuation Bill can be so designated. I think it would be useful to rehearse the arguments in front of the Speaker, so that a wise decision can be made.
I understand the argument. It is based on the fact that this is about money and public expenditure, but as the hon. Gentleman knows the main point is that my view is irrelevant because it is the judgment of the Speaker that counts and the Speaker will make his judgment before the Bill completes its passage through Parliament. It is ultimately a matter for the Speaker to decide.
Whatever the result of the vote on the amendment, the Minister is right to say that the tone of the debate all day has been in favour of reform of some kind, so is he as surprised as I am that we have just heard from the Opposition Front Bench that they will vote against the whole Bill, which means they will be voting in favour of £500,000 payouts to some at a time of such economic difficulty?
My hon. Friend makes an important point about the lack of coherence in the Opposition’s position. They have set out clearly, and confirmed today, that they recognise the need for reform—and we have paid full tribute to the very honest effort they made when in government to reach an agreement. They recognise the reality of the situation, which is that effectively one union is holding the situation and the process hostage, and in all responsibility to the taxpayer we cannot let that continue. We have to break the deadlock, and that is the purpose of this Bill. It is needed in case we are unable to reach an agreement with the unions. It introduces caps so that we can limit the costs of the current scheme and we can go about the very serious business of reducing public expenditure while we discuss the contents of the new scheme. The critical point is that the Government’s aim is to reach an agreement that is sustainable through negotiation. Those negotiations are ongoing and vigorous, and they are being held in good faith.
Will my hon. Friend take this opportunity to correct the Opposition on one other point, which is that it would not in fact be possible to return to the February settlement because that has, effectively, been nullified by the courts? Even if all the unions now agreed to the February settlement, that settlement has been kyboshed by the courts, and even if they had agreed to it at the time, had there been a challenge in the courts and it had been successful—and it would have been—that would have nullified the settlement. This Bill is therefore indispensible.
My hon. Friend makes an extremely good point and he states a fact that I have placed on the record before: that the previously agreed terms were struck down by the courts and were not accepted by the Council of Civil Service Unions. The deal failed, and there is no guarantee that it would succeed in future.
It is important to be clear about this. The ruling was not about the content of what was proposed by the previous Government and agreed by five of the unions; it was about the fact that the legislation did not allow the Government to compel the solution. It is important that Members are clear about that before they vote tonight.
Question put forthwith (Standing Order No. 62(2)), That the Bill be now read a Second time.
Bill read a Second time.