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Superannuation Bill

Volume 520: debated on Tuesday 14 December 2010

Consideration of Lords amendments

After Clause 1

Consultation in relation to civil service compensation scheme modifications

When I opened the debate on Second Reading in September, I set out—at some length, I regret to say—the history and background of compensation in the civil service since 1859. I do not propose to do the same this afternoon. However, it is timely to bring the story up to date as regards what has happened since the Bill left this House on 13 October to go to the other place.

I reiterate that from the day I first announced that the Government intended to reform the civil service compensation scheme on 6 July, extensive discussions have taken place between my officials—and myself on a number of occasions—and the civil service trade unions. Proposals were put to the Council of Civil Service Unions on 24 September. In the event, the council did not accept those proposals, but five of the unions—Prospect, the First Division Association, the Prison Officers Association, the GMB and Unite—approached the Government directly and asked to continue discussions on those terms. There followed an intensive period of meetings between the five unions and officials, which on 5 October resulted in an agreement between the negotiators on terms that might form the basis of a new compensation scheme. Later that day, the five unions wrote to confirm that they had accurately recorded an agreement that all their negotiating teams were able to recommend positively to their executives as being the best that might be achieved in negotiation.

Soon after 5 October, agreement was reached between the Government and the trade union negotiating teams. The POA’s executive committee voted to distance itself from that agreement and to request further discussion. The sixth union, the Public and Commercial Services Union, withdrew from the talks at the point when the five other unions had agreed to negotiate separately with the Government. While the Bill was in the other place, the Government agreed a number of changes to it, and this House now has the opportunity to consider those. The group of amendments that we are dealing with responds to a commitment that I made when we discussed this on Report—that is, to reinforce the requirement for meaningful consultation on any changes to civil service consultation schemes.

The new clause includes a clear requirement that future consultation on any changes that would reduce the value of the civil service compensation scheme must be undertaken

“with a view to reaching agreement”,

and it requires a report to be made to Parliament setting out the details of the consultation that had been carried out with the unions. My noble Friend Lord Wallace of Saltaire accepted an Opposition amendment in the other place to delete wording that would have limited the content of that report to such information as the Minister considered appropriate. Lord Wallace also agreed that we would table written ministerial statements in both Houses when the imminent new scheme is laid before Parliament to draw attention to it and to the steps that have been taken to consult the unions. Furthermore, we agreed to limit to three years—this is the subject of the next group of amendments—the power to revive the caps in the Bill by order, and to drop our proposals that would have allowed that time limit to have been extended by a further six months at a time.

During the Bill’s passage through the other place, the Government remained committed to trying to reach an agreement with the Council of Civil Service Unions. I made a number of personal approaches, both orally and in writing, to the PCS general secretary and to the POA inviting the CCSU to put forward alternative proposals for a reformed civil service compensation scheme and seeking to engage further. I reiterated the Government’s continuing aim of reaching an agreement with all the unions. I have offered every opportunity to those unions that wish to engage constructively in negotiations. As I said, five of them did so, and their proposals formed the basis of the agreement on which the new proposed scheme is based. If the Bill goes through its processes and achieves Royal Assent, I would intend to lay that scheme before Parliament before Christmas.

On 9 November, the Council of Civil Service Unions wrote to me with suggestions for areas that could be considered in further talks, and I responded on 15 November. I have to say that the suggestions made in the council’s letter would have had the effect of reducing the level of compensation paid to many lower-paid civil servants, and so it could not form the basis of further discussions. Having a new scheme that provides genuinely better protection for the lowest-paid civil service workers, many of whom are members of the PCS, has been crucial in all the discussions we have had. As I have made clear throughout the process, including when I made the announcement of our intention to reform and on Second Reading, that is crucial to the aims of the coalition Government.

I explained to the Council of Civil Service Unions that, in the absence of detailed proposals from the PCS, work would have to proceed on drafting the rules for a new scheme. Last week, my officials sent the draft rules for the new compensation scheme to the Council of Civil Service Unions to seek its views. Those rules will form the basis of the new compensation scheme, which as I said I intend to lay before Parliament as soon as possible, assuming that the Bill completes its passage and achieves Royal Assent.

The Lords amendments are intended to reassure the House, the unions and all stakeholders that the Government will consult fully with the unions should there be future proposals to change the compensation scheme that would reduce the benefits for civil servants. They merely put into statute what has always been our intention. Arguably, that requirement is already contained in the Superannuation Act 1972, but the amendments will put it beyond peradventure or doubt.

The amendments reflect the lengthy consultation process that I have just described. They are Government amendments that were made in the other place to respond to commitments that I made on Report and Third Reading. I am grateful for the constructive involvement of the unions and those on the Opposition Front Bench throughout the process of refining the amendments to achieve the maximum consensus.

Lords amendment 1, which is the lead amendment, inserts a new clause after clause 1. As I said, it makes it clear that consultation should be undertaken

“with a view to reaching agreement”,

and it requires that a report of that consultation be laid before Parliament. The new provisions will apply when there is a change to the compensation scheme that will result in reduced benefits. The report would have to include details of

“the consultation that took place”,

the steps that were taken

“with a view to reaching agreement”

with the unions or other persons consulted, and

“whether such agreement has been reached.”

I repeat that the Government are committed to consultation with the unions. Like the previous Administration, we will always seek to reach agreement with all unions on changes to the compensation scheme. We know from experience that that may not always be possible, and in such cases, the report will explain why.

The effect of Lords amendments 2 and 3 is that the consultation provisions will come into force two months after Royal Assent. That is the standard interval before the commencement of new legislation. However, because of the need for certainty, the other provisions of the Bill will come into force immediately on Royal Assent. As a consequence, the requirement to publish and lay before Parliament a report on the consultation will apply to future changes to the compensation scheme, and not to those currently being developed for implementation when the Bill is enacted.

A requirement for a report on the current consultation would be nugatory, because no one can claim that there has been anything other than long and extensive consultation, carried out not just by myself and my officials, but by my predecessor in this process, the right hon. Member for Dulwich and West Norwood (Tessa Jowell), and the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who is now on the Opposition Front Bench. This process goes back a long time; there have been three years of drawn out extensive consultation and negotiation. Parliament is well aware, and nobody can have any doubt, that the process has been extensive and thorough; it has been described by the right hon. Gentleman, the right hon. Lady and myself. Equally, it would be wrong to risk a further delay, while a report was prepared and laid before Parliament, before the proposed scheme could be introduced. I have agreed, as Lord Wallace said in the other place, to table written ministerial statements to set out what consultation there has been.

I hope the House will recognise that the Government are seeking to provide the additional reassurance that was sought by the Opposition, and that the changes to the Bill meet my earlier commitments.

May I start by expressing my gratitude to the Minister for the Cabinet Office and Paymaster General for the way in which he has brought the House up to date on his discussions and negotiations, for the tone and tenor of his remarks this afternoon, and for restraining himself from repeating the history of civil service compensation since 1859? The whole House is in his debt for that.

As we have said throughout all the stages of the Bill, we agree that civil service compensation is in need of reform. Indeed, we set it on its way. We now need to take account of the result of the judicial review, which tells us that what is needed is reform, but the right reform made in the right way. As we set about that exercise, and what I hope is the finalisation of our debates on the Bill this afternoon, it is incumbent on us to remember that for 500,000 civil servants—people who have given their lives to working in the public service—the Bill should not be a “blunt instrument” for negotiating purposes. For many people, it is about how they might keep their home, help their children through university or avert financial hardship while they have to look for a new job. The House must remember that the Bill’s provisions are important and will have real-world impacts.

On Report, my right hon. Friend the Member for Dulwich and West Norwood (Tessa Jowell) made it very clear that there were several areas in which we thought the Bill was not quite perfect and needed modification. The first cause of worry was what was then new clause 1. Throughout the process we have recognised the need for reform of the Superannuation Act 1972, and the High Court judgment made it very clear that there was a case for ensuring that the Government could compel a settlement and that no one union could veto changes to the civil service compensation scheme. However, the Government’s ability to compel a settlement must be an activity of last resort once it is clear that common agreement cannot be reached. That was why we were not able to support new clause 1 on Report. It would have allowed the Government simply to impose changes to the scheme at any point, without consulting either the work force or representative trade unions.

We are very pleased that the Minister has made substantial progress as the Bill has proceeded through both Houses. As he eloquently summarised it, the latest draft of the new clause, which stands before us as Lords amendment 1, requires a report to Parliament on the consultation that has been carried out with trade unions if there are any further reductions in future. I was particularly grateful to hear him confirm that future consultation on changes would have to be undertaken with a view to reaching agreement. That is substantial progress and we are pleased that the Government have accepted our arguments on some helpful changes. No doubt we could quibble about the details, but the thrust of the Government’s changes is in the right direction. We will therefore support Lords amendments 1, 2 and 3 and the consequential Lords amendment 7.

It is rather sad that, again, there are relatively few people in the Gallery when we are debating such an important issue. We need to value the work of people who work for society and all our public servants. Obviously the terms of the civil service compensation scheme do not affect those in the NHS or local authorities, who have varied schemes that are often much worse than even the proposed new terms of the civil service scheme.

This is an important matter, and I am pleased to support the Lords amendments. They make it very clear that we will be bound by good practice and enter into proper and meaningful consultations, with a view to coming to an agreement. Although one particular trade union may continue to try to veto the scheme, that does not mean that we should ignore the need to try to obtain an agreement using a reasonable approach. I am very pleased with the Government’s strategy of protecting people on lower incomes. That is an excellent thing to do, so I am pleased to support the Lords amendments.

Lords amendment 1 requires the Government to consult with the aim of seeking agreement, and provides for a report to Parliament in due course. Lords amendments 2 and 3 will bring the Bill into force two months after Royal Assent and I find it extraordinary that the Government see that as some form of concession, because the bulk of the staff who will be made redundant in the coming period will be made redundant under a scheme that is still to be imposed. The Government intend that that scheme will be introduced within the two months after Royal Assent, so there will be no report to Parliament, no commitment to consultation and no commitment to take steps to reach agreement, as is embedded in Lords amendment 1. The terms of the scheme, as they stand in the original proposals in the Bill, will be imposed. So although Lords amendment 1 proposes a system whereby there is at least some commitment to parliamentary scrutiny of the willingness and commitment of the Government to negotiate and seek an agreed settlement, Lords amendments 2 and 3 take away that commitment, because we know that the scheme will be amended within the two months to which Lords amendment 1 does not apply.

I cannot think of a better mechanism to incite industrial action. It could be construed as an act of contorted bad faith. Although there have been commitments in ministerial written statements, there has been no commitment to adhere to Lords amendment 1, because it would not otherwise be virtually vetoed by Lords amendments 2 and 3. In my view, that will not only result in industrial relations deteriorating but enhance the potential for legal challenges. It certainly will not enhance the legal protections for which the Government were hoping as a result of the amendments.

The amendments do not address the problematic core of the Bill, which is the imposition of caps and limits on the compensation scheme without the agreement of the unions representing the members affected. I have heard a lot about the four out of the six unions agreeing or recommending the scheme that is being imposed. I remind the House, however, that of the two main unions that represent the vast bulk—more than 75%—of the members affected, one, PCS, or the Public and Commercial Services Union, has not agreed the scheme and is recommending that its members reject it in the ballot; the executive of the other, the POA, has recommended that its members reject the scheme in the ballot, too.

I find it an absolute irony that in any future negotiations, which will, I suppose, probably be relatively minor because the Government will impose the bulk of the change in the next couple of months, the House will have some form of scrutiny of the negotiations as a result of Lords amendment 1, but it will not be able to exercise it in those two months. The reason for that is that if there was a full exposure of what went on in the negotiations, it would provoke even more anger among PCS and POA members.

This has been the worst example of industrial relations practice that we have seen in years. First, there was the use of a “blunt instrument”—I use the Government’s own words—of the threat of a Bill’s being brought forward to impose such severe caps that many would have lost more than two thirds of the redundancy payments that they had acquired as accrued rights over the years. There was then an extremely crude attempt to divide and rule the unions. I believe that the POA is seeking some form of legal redress against the Minister for the Cabinet Office for some of his statements. Those practices have now resulted in the virtual chaotic breakdown of the formal negotiating structures that have held good under past Governments throughout the decades.

If Lords amendment 1 comes into force, at least there will be some reflection of the negotiations that took place—and it might be more accurate. As the Minister has dwelt on the process of the negotiations, perhaps I might put on the record an alternative historical account of what occurred. Yes, the civil service unions—all six of them—sought to negotiate some form of agreed settlement throughout the summer. They did that in the light of the threat of the imposition of a Bill that would cut significantly their members’ redundancy payments.

In September, the Treasury intervened to insist on a cash cap on the new scheme, so there was no room to manoeuvre to improve the scheme beyond that cap. I believe that that significantly undermined the potential for a settlement. On 28 September, the Minister declared that he was pursuing agreement with five of the unions, excluding the PCS, and on 4 October a formal offer was submitted. On 11 October, PCS and the POA held a constructive meeting with the Minister, focusing on the cap on redundancy proposals and making proposals to redistribute from high earners to the vast majority of civil servants, enhancing the protection for the majority.

The hon. Gentleman refers to a report of that meeting, but I can give him another account, because I was there—it was my meeting. No concrete proposals were made at that stage, and certainly not proposals that could in any way remotely or realistically redistribute benefits away from higher earners, whose payments are anyway capped under the scheme that we have agreed, towards the lower paid and particularly the lowest paid, who are much better protected now than they were under the previous Labour Government’s scheme of last February.

My understanding is that on 11 October, PCS and POA tried to explore with the Minister opportunities to make the scheme fairer and more just for their members, and to set out certain parameters in which negotiations could take place. The PCS executive was scheduled to meet on 26 October to consider the next steps in its negotiations with the Government, but on 25 October it received a letter from the Minister, who told them that negotiations had been concluded and that he would implement the proposals that he set out on 4 October. I do not consider that an appropriate way to seek agreement.

As a result, PCS wrote to the Minister on 26 October to say that it was willing to submit proposals. He welcomed that offer and confirmed he would reopen talks if proposals came from the Council of Civil Service Unions, which is exactly what the PCS did—it submitted the parameters and proposals via the CCSU in a constructive approach to reach agreement. The Cabinet Office made no attempt to go into any detail on those proposals or to cost them, and on 9 November, the CCSU submitted terms to open the detail of talks with the Minister, who must have been aware of the background to that letter and of the detail of the PCS proposals. However, on 15 November, he said that the window for talks was closed. Although PCS sent a further letter on 16 November, it was informed that there would be no future talks.

That is a different historical account of those negotiations. The unions, which represented the vast majority of their members, were open to continuing talks to reach an agreed settlement. If amendment 1 had been in place before those talks, the House might have had a more objective historical account of the negotiations than the Minister or I have given—at least we would have had the opportunity of receiving a full report. However, the Minister’s amendments have denied us the opportunity of a report on those negotiations and allow a report only of future negotiations. That is extremely disappointing. It is another act that will undermine civil servants’ confidence that they are being treated fairly by the Government at this critical time in their lives—we are told that 360,000 of them will lose their jobs because of the comprehensive spending review and subsequently.

In addition to souring the industrial relations climate, the Government have opened up a vista of legal challenges—under article 11 of the European convention on human rights and article 1, protocol 1—which has occurred before. Amendment 1 is the Government’s attempt to find legal cover for their infringement of those articles, particularly article 11, but it does not go far enough. In fact, amendments 2 and 3 take away that cover completely in respect of the current negotiations. The Government’s proposals are legally precarious to say the least. I am sure that there will be a legal challenge from PCS. I believe that it will be successful.

In the previous Government’s negotiations, PCS threatened legal challenge, and it was advised by civil servants—they met us a week before the general election was declared—that the Government were confident of winning in court. The same civil servants advise this Government of the same thing. They were wrong before the election, and I believe that they are wrong now. In fact, PCS is yet to lose a case against the Government. We have the prospect of tens or perhaps hundreds of thousands of civil servants being made redundant. If the Government’s proposals are overturned, the civil servants who are made redundant under the imposed scheme could seek legal redress and compensation, which could run into many millions of pounds.

The challenge will be on two grounds. The first will be article 11, which is meant to protect the right of trade unions to negotiate on behalf of their members. Until 2008, the European Court of Human Rights treated the right to collective bargaining and the right to strike merely as examples of individual aspects of freedom of association that states could choose as means of complying with article 11, ensuring that unions could at least be heard. However, Demir and Baykara v. Turkey changed the atmosphere and legal standing of article 11 and that of the right to collective bargaining. The grand chamber resiled specifically from the original rulings and elevated the right to collective bargaining to the status of an essential element of article 11. Interference with this right has to be justified against the background of the historical circumstances of the country. However, in this country, there is a long history of the right of civil servants in negotiations and of collective bargaining by the civil service, which I believe enforces the article 11 rights of this particular union. On that basis, I believe that the amendments do not go anywhere near far enough to protect the Government from legal challenge.

The second basis for a legal challenge against the amendments, which fail to provide the Government with cover, is that dealt with by the Joint Committee on Human Rights. The amendments fail to address the need for agreement by the unions over their protected and accrued rights under the compensation scheme. Article 1 of the first protocol of the European convention on human rights insists on the right to peaceful enjoyment of possessions. Under the scrutiny of the Joint Committee, the Bill has been found to be lacking in providing that protection. First the Government argued that they were not possessions, but that was quashed by the law courts in their last judgment against the previous Government.

The Joint Committee found the Government’s arguments over possession to be unacceptable. They are accepted then as accrued rights, which means that they can be interfered with only as a result of agreement—amendment 3 insists not on agreement but simply consultation—or if the interference is justified. However, the Joint Committee determined that the Government had brought forward no justification—and, in fact, had not even addressed seriously the justification for interference with these accrued rights, which the civil service has garnered over years of negotiation and service. For that reason, the amendments will fail to protect the Government against further legal challenge.

I urge the Government, therefore, to think again. On the legalities of the Bill, even as amended by the Lords amendments, we are entering legal quicksand, and the Government will regret that. I think they recognise that and have inserted the changes into the legislation rather than the original scheme because they were worried about the scheme being quashed very quickly in the UK courts of law. Even with the amendments, however, the Government are entering an industrial relations minefield and a political morass. So I urge the Government, even at this late stage, to step back. PCS, the POA and the other unions are still willing to meet and negotiate, to see whether a reasonable settlement can be obtained. I urge the Government to take up the offer of getting back around the table.

The unions are willing to negotiate because these measures will have such a significant impact on their members. In Committee, we heard example after example of the impact on individual lives of such a severe deterioration in the redundancy payments being offered to civil servants. The POA and PCS are reflecting the views of their members about this Government’s threat to their redundancy payments. It is for that reason that the POA and PCS are willing to get back round the table and seek a reasonable agreement with the Government.

However, I believe that, failing that, there will be legal actions and industrial action. They will undermine the credibility of this Government in any future negotiations or when they want to make changes not just to the scheme in question, but to other conditions of service across the civil service. Surely it is better to bring along a willing work force—a committed work force, with high morale and people who are willing to implement the Government’s policy with enthusiasm because they enjoy their jobs, rather than people living under the threat of being made redundant without adequate compensation. I urge the Government, even at this late state, to back off—to pull the Bill this evening, enter negotiations, get back round the table and seek an agreed settlement that brings in all the unions, rather than trying to divide them in the way that the Government have.

I am grateful to the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who spoke from the Opposition Front Bench, and to my hon. Friend the Member for Birmingham, Yardley (John Hemming) for their support for the amendments and for where the Government have got to. I would like to say one or two words in response to the points that have been raised.

The first point to make is that the coalition Government are deeply committed to supporting the civil service and supporting its independence. We profoundly believe in the ethos of public service and political impartiality that motivates the civil service and with which it is imbued. We wish to support that, and, just as with the previous Government’s attempt to reform the compensation scheme, nothing in what we are attempting to do should be interpreted as anything other than a desire to treat people fairly and achieve the right balance between the interests of the taxpayer and the interests of hard-working, dedicated civil servants who, as the hon. Member for Hayes and Harlington (John McDonnell) said, have in many cases spent their lives in public service. We honour and respect that, and we want them to be treated fairly. I want to put that firmly on the record.

We were happy to accept the point that consultation must be serious, which is why we accepted an amendment that said that consultation has to take place with a view to reaching agreement. It is not enough for the Government to go through the motions. I do not think that anyone who has taken part in the consultations and negotiations that have brought us to this point would say that they were about going through the motions—I think the right hon. Member for Birmingham, Hodge Hill would bear that out. Rather, they were about serious work aimed at getting agreement, and it is a matter of great regret that such agreement has not been reached. The suggestion that the ability for collective bargaining has in some sense been reduced and that this is a breach of the European convention on human rights simply does not stack up. The changes that we are making actually strengthen the commitment to consultation, making it more necessary that, in making any future changes, the Government should consult seriously, with a view to reaching an agreement. The commitment on collective bargaining is enhanced, not diminished.

I have listened to the debate with great interest, particularly on the consultation with the POA, PCS and the other unions, but what is the position, both in the current negotiations and in any future consultations relating to the provisions that we are debating, on those who are not in unions? We found from our experience of negotiating with civil servants in Northern Ireland that many were not in unions, which raised a whole lot of other issues. How does that play into the consultation provisions that the right hon. Gentleman is introducing and the current negotiations?

The right hon. Gentleman raises a good point, which is that it is by no means true that all civil servants belong to a trade union. The figures show that something in the region of 60% of civil servants belong to a trade union, but many are unrepresented. I am not sure that the Superannuation Act 1972 or what we are proposing in the Bill makes requisite any particular form of consultation with those who are unrepresented. However, he raises a good point that those who engage in future consultations should be alive to.

The hon. Member for Hayes and Harlington referred to his concern that, because the consultation requirement will not be commenced for two months, there will somehow be no obligation to consult. There has been extensive consultation. He raised concerns about the proposals that he claims were made by PCS and the POA, but the outline suggestions that eventually emerged from PCS, if implemented within the cost envelope, which I have always said exists and which would have existed under whichever Government were in power, would have had the effect of reducing the compensation available to those over pensionable age—that is, those over 50 and approaching retirement—and reducing the benefits available to the lowest paid. I say again that our primary concern has been to ensure that there is proper additional protection for those who are lower paid.

I am sure that the right hon. Gentleman would not want inadvertently to mislead the House. Just for the record, that is contested by the unions themselves, because it was open to the discussions that the union was hoping to pursue with him, but which he declined.

The concern raised by the unions at the time was that there was insufficient compensation in the scheme that we were developing with the other unions for those who were above the £23,000 salary underpin. We could have increased the compensation payments for them only by taking away from others. The only ways in which that could have been achieved—these suggestions were canvassed—would have been by lowering the £23,000 underpin so that all those earning less than that would have been penalised, or by taking away the significant protection that rightly continues to exist for those over 50. I recognise that someone who started work as a civil servant as a teenager straight after leaving school, and who has worked as nothing else until leaving the civil service in their 50s, might not find themselves in a fantastic place in the labour market. It is therefore right that there should be proper protection for people in those circumstances. That is why protecting those approaching retirement and the lowest paid people in the civil service was an absolute priority for us. I believe that the scheme that we have put in place meets those commitments and priorities.

Two pieces of information have come out on this. First, we received a Cabinet Office circular from the right hon. Gentleman which sets out in detail how the negotiations went. It specifically makes the point that PCS made a proposal that would have reduced the amount of money being made available to lower paid staff in order to pay for enhanced benefits for those at the higher end of the scale. However, the trade unions have said that that is not the case. In order to give us more information about the negotiation process, can the Minister provide the figures to demonstrate how much would have needed to go to those at the top to cover those enhancements, and how much would have been taken away from those at the bottom?

It is really hard to do that, because, as I pointed out in the letter that I sent to all Members, there were only outline suggestions made by PCS. Back in September, five of the unions—the five not including PCS—wrote to me with some proposals that they had signed up to, and that PCS had declined to sign up to. At their request, we entered into discussions with the five unions, and the ensuing proposals formed the basis of the new scheme that we have developed. They are not totally reflected in the scheme, but they formed the basis for it. I constantly and consistently urged PCS to join that process and to make concrete proposals, but it had declined to sign the letter that the other five unions had signed, despite being asked to do so by the five unions.

That protracted process involved meetings with Mark Serwotka of PCS and Steve Gillan of the POA, at which I urged them to make concrete proposals that would enable us to work towards a full agreement. All that emerged, however, after protracted delays, were outline suggestions. When asked how any additional protection for higher-paid people—not highly paid people, but those above the £23,000 underpin—was to be paid for, the only suggestions were either to lower the underpin, which would have meant that all lower-paid workers would have been penalised, or to reduce the protection available to those over 50. We were not willing to do that because providing protection was a priority for us.

Following on from an earlier point, the Minister will know better than most of us that these negotiations are complex. He has said that it was difficult at times to calculate the overall consequences. That is why the Public and Commercial Services Union—through the Council of Civil Service Unions as the Minister requested—put forward outline proposals for detailed negotiations with staff. However, the Minister for the Cabinet Office then closed the window for those negotiations, just as they were becoming productive. There are complexities and if the Minister objected to issues like that, those points could have been taken up in the next round of negotiations.

I have to take issue with the hon. Gentleman’s phrase about the process just beginning to become productive, because it was not. The outline suggestions were vague and the only way of paying for them would have been by taking money away from lower-paid workers or people approaching retirement. We explored whether there was any other source from which those funds could be redistributed, but it turned out that there were no alternatives.

If that is the right hon. Gentleman’s only concern and his only objection to the position of PCS, supported by the POA, why can he not simply reopen negotiations now to resolve the matter?

The hon. Gentleman talks as if this were a trifling consideration, but it is not. This process has been going on for three years. If the Bill goes through the remainder of its stages and on to the statute book, the new scheme that I hope to lay before Parliament before we rise for the Christmas recess, superseding the current scheme, will have been the product of many months—indeed, years—of protracted discussions. I know that he disagrees, but I have to say that despite repeated requests, the PCS has been tardy, to say the least, in coming forward with proposals and has, at best, made outline suggestions but never concrete proposals that could have formed the basis of an agreement. The other five unions did, and I am grateful to them for their engagement, which enabled us to forge a new scheme—as I said, we hope to lay it before Parliament next week—that will provide a fair balance between the interests of taxpayers and the interests of civil servants and protect those approaching retirement and the lowest paid.

I am grateful to the Minister for giving way. Let me quote to him his statement to the House on 30 October, when he gave a commitment that he would “strain every sinew” to achieve a negotiated settlement. What I am suggesting is that, if he has identified an issue as an impediment to a negotiated settlement, he should now adhere to his commitment to strain every sinew and meet the unions again. It is no use repeating over and over again the fact that five out of six unions have agreed a settlement. They have not. The two unions that represent the vast majority of members have rejected the Minister’s proposals. Surely it behoves him now to go the extra mile and strain that extra sinew to seek a negotiated settlement before he provokes industrial action or legal challenge.

Those are not concerns that have just arisen; they have been there throughout. I have been forthright in ventilating them with the leadership of the PCS and POA, and they know that. We have been clear about the envelope within which it would be possible to make changes because increasing protection for one group can be done only at the expense of other groups. There is no way around that. That is the basis on which we have formulated the new scheme, which I hope to lay before Parliament before the Christmas recess. That is the basis of my case.

All the Lords amendments to the Bill engage the financial privilege of the House. If they are agreed to, the appropriate record will be made in the Journal of the House.

Lords amendment 1 agreed to, with Commons financial privileges waived.

Lords amendments 2 and 3 agreed to, with Commons financial privileges waived.

Clause 3

Final provisions

The amendments respond to concerns raised by Opposition Members on Second Reading in the other place about the potential for the caps in what is now clause 2 to be revived after being put into abeyance, which is what I propose to do next week before the House rises and before the new scheme is laid. The Government also proposed the amendments to respond to the comments about the unusual use of a sunrise provision in clause 3(4)(c) that were made in the third report of the House of Lords Delegated Powers and Regulatory Reform Committee, published on 28 October. My noble Friend Lord Wallace of Saltaire provided a full response to the Committee in his letter of 1 December. We are grateful to the Committee for its report.

The Committee also commented on the other provisions in clause 3 which would enable, by order, the caps included in clause 2 to be repealed and also to be extended by six months at a time. That would override the so-called sunset provision in clause 3(3), which would otherwise mean that the caps on civil service compensation provided in clause 2 would expire automatically after 12 months. The Committee said that “these arrangements are complex”, but added that the two delegated powers

“do not appear to the Committee to be inappropriate”.

However, the Committee was not so persuaded of the need for the power in clause 3 to revive the caps in clause 2, that being an unlimited power that would have been available to any future Government in circumstances that we cannot predict today. The amendments respond to that point. The Government accept that there should not be an unlimited power to revive clause 2. Lords amendment 6 therefore provides for subsection 3(4)(c) itself to expire three years after Royal Assent, which is in effect a sunset of the sunrise provision. I can see why some people might say that that was a bit complex, but I think that, when fully parsed, it makes perfectly good sense.

The sunset of the power to revive clause 2 would mean that it would be there, as the Government intend, as a fallback to revive the caps in clause 2, just in case they were needed because of future problems in implementing the new civil service compensation scheme. However, the introduction of the three-year time limit should provide a reassurance that the power to revive clause 2 would not be available indefinitely to future Governments.

The caps are there as a potential fall-back so that we can be certain—as both the last Government and we have wanted to be—that we can reform the civil service compensation scheme. We have an absolute obligation, in the public interest, to address the unfair and unaffordable nature of the current scheme, and we need to ensure that if a legal challenge is mounted to our revised scheme—and it has been suggested that that may well happen—there is a fall-back option, albeit one that we have absolutely no desire to use. We do not expect or intend to use the powers to impose the caps in clause 2; what we want is to see in operation as quickly as possible is the reformed civil service compensation scheme. We are determined that, if all else fails, there will be a fall-back position so that we are not left high and dry—as the last Government were—because of a legal challenge to the details of the new scheme.

Before the new scheme is laid before Parliament, I intend an order to be made under clause 3(4)(a) to repeal the caps in clause 2 in relation to any new scheme. We intend the order to include a saving provision so that the caps could be applied if, and only if, the old unreformed scheme had to be reintroduced. The saving provision would allow that to happen automatically, without the need to use the revival power by order under clause 3(4)(c). I should make it clear that this saving provision would apply only if there were an attempt to revert to the old scheme. An order under clause 3(4)(c) would be required, subject to the affirmative procedure, if it were ever proposed to revive the caps in clause 2 and to impose them over the new civil service compensation scheme that will be put in place following the completion of this Bill’s passage.

Finally, unless further extended by order under clause 3(4)(b), clause 2 in its entirety—including the saving provision—will expire 12 months after Royal Assent. From that point on, any revival of the caps would have to use the order-making power in clause 3(4)(c), which, because of these Lords amendments, will be available only within three years of Royal Assent. I very much hope that by then the new civil service compensation scheme will be in place and be operating satisfactorily for all concerned—civil servants, departmental employers and the civil service trade unions—and that the taxpayers’ interests and the proper interests of civil servants will be being met. Amendments 4 and 5 are consequential on amendment 6.

The House needs to be aware of what this measure actually means, and I make it clear that I will press my amendment to a Division.

Thank you very much for that advice, Mr Deputy Speaker. I get confused when we are talking about sunset and sunrise clauses.

Let me explain what this measure means. Despite all we have heard today from the Government about their willingness to achieve a negotiated settlement on a new compensation scheme and their wish to ensure that all the trade unions are signed up to it and that it is acceptable both to members of those unions and to people not in those unions, the fact is that they will retain the power, over a three-year period, to impose the caps set out in the Bill.

We should remind ourselves of what those caps are: for a compulsory redundancy, an amount equal to a person’s earnings for 12 months, and that amount for 15 months for a voluntary severance. We heard in evidence in Committee—this has been repeated in the Chamber time and again—that that will mean a cut of up to two thirds in the redundancy payments of many civil servants; 60% to 70% was the figure cited by the Joint Committee on Human Rights. Any Government will have the power to impose those caps at a later date, and to impose that level of penalty on civil servants who are made redundant.

If the Government are confident of being able to negotiate an agreed solution under the new scheme in this coming period, why do they need the right, over a three-year period, to impose these caps unilaterally? I still think that if they sought to do that, it would be subject to a legal challenge, but why would a Government seek to retain that power if they were entering into negotiations with good will, genuinely seeking an agreement, and taking every reasonable step to secure one?

My amendment simply seeks to reduce the period to 12 months, as an act of good will on behalf of this House in respect of its employees in the civil service. I believe the Government have set the period at three years because they want to maintain their original purpose for the Bill, as previously described: to use it as a blunt instrument to bludgeon the unions into submission so they agree to the Government’s proposals. That is unacceptable. I also think this will be another factor that leads to people rejecting the overall scheme in the ballots that are currently taking place, and instead moving on to take action to stop the scheme being imposed upon themselves and their fellow trade union members.

I urge the Government to think again, as 12 months should give them sufficient time to negotiate and introduce a new scheme, and to introduce any reforms or amendments that might be needed to hone it to make it more workable if there were any problems with its implementation. It is unacceptable for the Government to have the threat of this blunt instrument to hold over civil servants for three years. Introducing this measure would be another contributory factor to the deterioration in the relationship between the Government and their staff, who are meant to implement, with high morale, the policies they introduce.

As someone who interests himself in procedural issues, perhaps I could think of the clause as being more like a supernova clause after which the sun will not rise again. Not being a Government Minister, I have the advantage of having no confidential knowledge whatever of the Government’s strategy. The interests of judicial review are relevant given that one would expect a judicial review when the order for the new scheme is laid, as it would be laid under the Bill relatively soon. In those circumstances, the Government will not want to take a completely new piece of legislation through the House because of a judicial review. It is possible to accelerate the proceedings of a judicial review, and the courts would probably look on such an approach favourably given the situation for the country and the importance of having legal certainty, but it is quite important to have the facility to deal with such a situation if it arises. However, I support the idea of having a supernova clause because there is a point at which the sun need not rise again.

I want to speak briefly about Lords amendments 4, 5 and 6, as well as amendment (a), tabled by my hon. Friend the Member for Hayes and Harlington (John McDonnell). During proceedings on the Bill, my right hon. Friend the Member for Dulwich and West Norwood (Tessa Jowell) has consistently raised concerns about the arbitrary caps that the Government introduced at the start of this process, which now form the body of clause 2. I confess that we are still not clear about why the caps are still in the Bill given that clause 1, which was newly introduced on Report, effectively gives the Government the power to impose any settlement after the consultations that we discussed earlier have been completed. We heard, in the Minister’s helpful update to the House, that there is a degree of agreement with at least some of the trade unions, which the Government have declared will supersede the terms in the Bill. Why then do they not seek to introduce a sharp instrument containing the specific terms they have agreed with the trade unions, rather than the blunt instrument containing general powers that is the Bill before us?

We are pleased that the Minister has given a clear commitment, in a letter to right hon. and hon. Members, that it is his ambition to

“repeal the caps in clause 3 insofar as they could impact on the new civil service compensation scheme”.

His letter also says that if the caps were ever revived he

“would table an order…so as to increase the caps to such a level that would…reflect what would otherwise apply under the new scheme.”

Most of us will welcome that good progress.

In earlier debates, we raised concerns that the Bill would allow the revival of caps at any time in the future even after a negotiated settlement was in place. We fear that the relevant measure, which the Government call a sunrise clause, would put an undesirable amount of power in their hands during negotiations, as they could simply threaten to revive statutory powers whenever they ran into any dispute on any matter, not just issues of redundancy. Given that it would allow the Government to resurrect the terms of a long-dead provision, it is not so much a sunrise clause as a zombie clause, which would live on for ever. Whatever we call it, the measure is entirely without precedent in a Bill of this nature. Indeed, the only recorded precedent of such a measure is in the Prevention of Terrorism Act 2005.

We are pleased that there will be a limit of three years on the caps if they are revived, and that the Government cannot extend that period. Given what the Minister has said this afternoon, however, I do not see how he can argue that the correct balance of time and the correct limit to any revived power should be three years. The whole House will welcome what the Minister said this afternoon about his ambition that the revival of the caps should never be triggered. If that is true—and I am prepared to accept that it is—I do not see why he cannot accept the very sensible amendment tabled by my hon. Friend the Member for Hayes and Harlington. Although we are happy to accept amendments from the Lords, we shall support amendment (a).

The right hon. Member for Birmingham, Hodge Hill (Mr Byrne) asked why we needed to keep the caps at all. The answer is simple. The caps will be established in primary legislation, but the new civil service compensation scheme, which I hope to lay before Parliament next week, before the House rises, does not have the full force of primary legislation, despite the changes to the Superannuation Act 1972 made by clause 1.

I shall be frank. We want to avoid being in the position that followed the High Court judgment in May this year, which resulted in the previous Government’s February scheme being quashed. The effect of the scheme being quashed is that the existing scheme remains unreformed and in force. Indeed, the old scheme—unaffordable, unsustainable and unreconstructed—is in force today. Of course, in preparing the new scheme we were at some pains to ensure that it would be legally robust, and we shall vigorously defend any legal challenge to it. However, as was apparent from the litigation against the previous Administration’s scheme, there can never be guarantees in litigation. Even litigation that is destined ultimately to fail can be disruptive, because of the uncertainty it causes until the case is concluded.

Could we clarify what the Minister has just said? Is the provision he supports simply a device to be used to prevent UK courts from quashing the Government’s proposals?

I shall be clear: both sides of the House have accepted that the current scheme is unsustainable and needs to be reformed. With the possible exception of the hon. Gentleman, everyone—and certainly Opposition Front Benchers—has accepted that it is unacceptable for it to be possible for a union, or two unions, to veto reform of the scheme. It must be possible for the Government and Parliament to effect reform of the civil service compensation scheme. If there is a successful legal challenge to a new civil service compensation scheme—unlikely though that may seem—we cannot have the position where the old scheme trundles on in its unsustainable, unaffordable and unfair form. That is why there must be a fall-back position for a limited period. We have listened to the arguments and we have accepted that it will be a limited period, so that caps on the use of the old scheme will be in existence, should the new scheme be quashed as the previous Government’s scheme was, by order of the High Court.

What is the right period for the power to revive the caps? Is it one year, three years, five years or 10 years? There is no precise science, because no one knows how long the period is beyond which we could be sure that a successful legal challenge would not be raised. It is our judgment that three years is the right period. That is the view that we have taken. That is why we urged the Lords to agree, and I urge the House to accept that view today. We would thus be agreeing with the Lords in their amendments, and disagreeing with the amendment proposed by the hon. Member for Hayes and Harlington.

Lords amendment 4 agreed to, with Commons financial privileges waived.

Lords amendment 5 agreed to, with Commons financial privileges waived.

Amendment (a) proposed to Lords amendment 6.—(John McDonnell.)

Question put, That the amendment be made.

Lords amendment 6 agreed to, with Commons financial privileges waived.

Lords amendment 7 agreed to, with Commons financial privileges waived.

Terrorist Asset-freezing etc. bill [Lords] (Programme) (No. 2)

Ordered,

That the Order of 15 November 2010 (Terrorist Asset-Freezing etc. Bill [Lords] (Programme)) be varied as follows:

1. Paragraphs 4 and 5 of the Order shall be omitted.

2. Proceedings on consideration and on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on the Motion for this Order.—(Mr Hoban.)