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Public Sector Exit Payments (Limitation) Bill

Volume 673: debated on Friday 13 March 2020

Second Reading

I beg to move, That the Bill be now read a Second time.

The Bill is simple: it imposes upon the Treasury a duty to make regulations under section 153A of the Small Business, Enterprise and Employment Act 2015. You might think it extraordinary, Madam Deputy Speaker, that we have to legislate to require the Treasury to implement legislation that we in the House approved in 2015 and that I have been promised by numerous Ministers since is on the cusp of being brought into law. It has not yet been brought into law, and the consequence is that the taxpayer is probably about £1 billion worse off—the benefit to the Exchequer of the provisions in the Act was about £200 million each year.

It is against that background that I was very pleased to have a meeting with the new Chief Secretary to the Treasury. He has some background knowledge of this that dates back to before even I took an interest, because he was on the Public Accounts Committee when it looked at this issue in the early 2010s. The beginning, after the Committee had looked at it, came in January 2015, when the current Home Secretary, who was then a Treasury Minister, announced that it was intolerable that there were so many exit payments of such large sums. She called it a long-overdue reform and said:

“It’s not right that hard-working taxpayers, many on low salaries, have to fund huge payouts.”

As a result, after the Conservative election win in May 2015 the then Chancellor confirmed the commitment to legislate that was in our 2015 manifesto, saying:

“We will end taxpayer-funded six-figure payoffs for the best paid public sector workers.”

Then, in 2017, when nothing had happened, I had the temerity to ask the Chancellor of the Exchequer on 27 June

“when the Government plans to bring forward secondary legislation to implement the policy”,

and the answer I got on 6 July from the then new Chief Secretary, now the Secretary of State for International Trade, was:

“The Government announced in 2015 that it intended to end six figure exit payments for public sector workers. We legislated for a £95,000 cap in the Enterprise Act 2016 and are currently in the process of drafting the necessary regulations.

In the interim, the government expects every part of the public sector to demonstrate that it is using public money efficiently and responsibly and to ensure that pay and terms are always proportionate, justifiable and deliver value for money for taxpayers.”

Having received that non-committal reply, I asked more questions and then introduced a private Member’s Bill in the 2017-19 Session that was exactly the same as this one, except with different dates.

As a former local government leader, I was involved in many cases in which we had to ensure that the person leaving had received the correct money and final settlement, but does my hon. Friend agree that some of these people have often been working for a local authority —I can only speak for local authorities—for decades? Their salaries will have increased over time, and there should, whatever the legislation, be flexibility in such cases. If a case is sensitive, the local authority should be given powers to ensure that that person is given the amount of money that they are due, but not too much for the public purse.

That was a very long intervention, Madam Deputy Speaker, and I am afraid that I do not really agree with the tenor of it, which excuses some of the appalling behaviour that is taking place in local government. A recent article in The Times revealed that Steven Mason, a former Northumberland County Council chief executive, was given a £370,000 pay-off, but took up a job four months later at South Tees Hospitals NHS Foundation Trust on £180,000 a year, despite Ministers having pledged to take back exit payments if the recipient returned to the public sector.

One reason why I got interested in this subject was that I was concerned that proposed local government reorganisation in Dorset would be an excuse for a whole lot of public officials employed by local councils to look after each other’s interests at the expense of the local taxpayer and give themselves big handouts. I am afraid that my worst fears proved to be well founded, and some unconscionably high payments were made as a result.

I take the view, unlike my hon. Friend, that this issue is urgent and overdue for action. Indeed, I think an alternative title to my Bill might be the Overcoming Sir Humphrey’s Resistance Bill, because the resistance of the civil service to what is proposed in this Bill is a textbook example of how the civil service can conspire to frustrate the will of Parliament and, indeed, of the elected Government. How is it, all this time later, that we do not even have the regulations? We have not even had a response to the latest consultation, which was originally promised to be delivered in 2018. I went to see the then Chief Secretary back in 2017 and said to her, “Has it occurred to you that this measure is supported by almost everybody in politics and in public life? Has it occurred to you that the resistance to it is coming from the civil service, because they are going to be losing out as a result of the implementation of the Bill?”

My hon. Friend is highlighting an important point. Is he aware that the same issue arises in Scotland, where we have police chiefs, university bosses and other public sector servants getting paid huge six-figure sums as they leave their taxpayer-funded jobs?

I am sure that the issue does happen in Scotland, and I hope the measures will apply across the whole country, although the latest consultation document that the Government issued indicated that there might be different treatment in different parts of the United Kingdom.

The matter has reached the stage of being a public scandal, because money is tight and the Bill is a means of recovering £200 million a year for the taxpayer, both locally and nationally. It is unfortunate that, as a result of answering questions from me, successive Ministers have had words put into their mouths or put on the record that have now proven to be completely untrue, I am afraid. What more can one say? The current Chief Secretary has assured me that he will not fall in the same trap as his predecessors.

The regulations could be issued pronto. Why have they not been? We were told that there needed to be a consultation. After a lot of pressure, the consultation was issued in April 2019, and the responses had to be in very quickly by July 2019. Have the Government yet issued their response to those responses? No, they have not, because it is all so complex.

The hon. Gentleman is rightly drawing attention to a significant problem. Is there not another aspect to it, which is that many of these individuals, quite frankly, should not be being given any payments, because they should actually be being sacked for failure to perform their jobs? They are taking sums of money and then transferring to other parts of the public sector, where they will have a repeated pattern of failure. Is there not a need for a real change in culture inside the public sector, particularly, I regret to say, inside management levels of the national health service?

The right hon. Gentleman is absolutely right about that. That is why organisations such as the TaxPayers Alliance are trying to work with the general public to raise the profile of these subjects. What is happening is a concerted fraud upon the taxpayer by these officials, who are cosying up to each other and ensuring that they are the only people who do not suffer as a result of their own incompetence.

In one of my small local councils, Hambleton District Council, two officials have had pay-offs in excess of £300,000 over the past three years. One of them was only earning £100,000—“only”, he says. The local authority says that it wants the measures brought forward so that it can cap future payments. Does my hon. Friend not agree that it is high time that we did that?

Absolutely, I agree with that. Of course, the Government said that pending the implementation of the regulations, they would ask the public sector to comply with the spirit of them and the primary legislation that had been passed, but I am afraid that is almost impossible for local councillors and, indeed, the Government to do in practice, because we need to have the law in place. That is why I hope we will hear from the Chief Secretary that we will get the law on the statute book later this year so that public sector exit payments are limited to £95,000.

Clause 2 of my Bill suggests that we should give notice to all people who might be thinking of getting ahead of the game that they would be subject to the provisions of the Bill in respect of any public sector exit payments agreed after 1 April 2020. I do not know whether the Chief Secretary thinks that to be a sensible safeguard, but I hope it will find favour.

It is ridiculous that we should have to legislate to force the Government to introduce regulations. Many new colleagues are here today. I should tell them that on Fridays the Government often promise the earth and never deliver. My right hon. Friend the Member for East Yorkshire (Sir Greg Knight) introduced a Bill to deal with rogue parking operators last year. It got on to the statute book and everyone thought that the Parking (Code of Practice) Act 2019 meant that we would get rid of rogue parking operators. It may be months or years before anything effective is done in regulations.

Does my hon. Friend accept that the Government have been rather distracted in the past few years getting Brexit done?

I am not sure that that is an adequate excuse. It could be a justification for everything, but in the Treasury it is an issue of priorities. There is no reason why, if hon. Members are given a promise that something is going to be done on a particular date, that promise should not be honoured.

The hon. Gentleman should come down a bit harder on that explanation from his hon. Friend, who is fundamentally saying that the Government are incapable of chewing gum and walking at the same time.

I am not sure that my hon. Friend would have put it quite that way. The House needs to have a mood of intolerance of serial incompetence, if not a conspiracy of silence and inaction among people in the civil service.

No. I am going to bring my remarks to a close in the hope that we will be able to hear something from my right hon. Friend the Chief Secretary to the Treasury before we reach 2.30 pm.

The problem of high public sector exit payments is not only the amount—sometimes £100,000 or £200,000; truly shocking amounts—but the acceptance of such payments by public sector workers when they seamlessly take up employment with another public sector body. For example, a council officer I knew received a £200,000 exit payment from one council and started at a new local authority the following week. There is no statutory obligation to post a declaration of interest in the way we do as Members of Parliament. We would have to declare that payment and it would be on public record. We do not have any sort of mechanism for, say, the chief executive of a council who moves to another council to do that. There is no way to see how much money they have received from the public sector for—we are not sure what. I see this happen again and again in the public sector. I welcome the transparency that we now have for Members of Parliament. We are held to account.

Does my hon. Friend agree that, while we agree on the sentiment of the Bill, we need a wider cultural change and to encourage more diversity in such roles? Organisations should look not at lateral hires but at hires from outside—perhaps more people from the private sector. A cultural change in addition to the initiative in the Bill is perhaps the way in which to bring about proper fundamental change.

Absolutely. I thank my hon. Friend for that intervention. Mergers between the public and private sectors are something that I welcome. Bringing private sector efficiency to the public sector increases productivity and allows for a merger of ideas. I have seen a lot of success in the past, where local authorities and even the NHS have brought the two together. It is something we should look at.

In my constituency, we have many entrepreneurs and self-employed people who work very hard to be successful, and they are somewhat incredulous that a public sector employee who cannot be fired or let go can walk away to another job and take with them a £200,000 exit payment and not even have to declare that as an interest when starting at a new place of public employment. There is scope for looking at this and figuring out how we can hold public sector spending to account, making sure that we have value for money. In 2016-17, it was identified that 500,917 exit packages were paid that exceeded £50,000—almost double the average salary that year. Worse, 1,600 of those exit payments were for more than £100,000—that one-off payment was almost three times the average household income in 2016-17. The total cost of exit payments such as these was a staggering £1.2 billion.

In the running of any organisation, it is important to ensure that a payments system is constructed to incentivise the activities that are desired from employees. I have no problem with that, particularly in the private sector. However, when we are talking about public money that is being used for the public good, a different level of accountability is required. After all, it is all taxpayers’ money at the end of the day.

We need to look carefully at the diligent application of the Government’s balanced approach to economic management. The potentially unlimited sum being paid as exit payments is alarming. We really need to look at value for money and at ensuring that every penny that we give to a public body is used effectively and efficiently. As Members of Parliament, everything that we spend is on the public record—people can see it all. I welcome that level of transparency, but why has that level of transparency not been applied to other areas of the public sector, particularly to executives? We cannot easily access how much a chief executive of a council is being paid, and we certainly cannot access how much they were paid in an exit payment from another council. These are the things that we should be considering and I am glad that my hon. Friend the Member for Christchurch (Sir Christopher Chope) has mentioned these important topics.

I hope that we can improve transparency and accountability in all aspects of public finance, leading to better value for money for the taxpayer. There can be some disagreement about the best criteria and what those are for judging what constitutes value for money, but the core concept is that, when we spend taxpayers’ money, we make sure that we know exactly where it is going.

As my hon. Friend mentioned, the Government have undertaken a consultation on this issue. I believe the consultation creates draft regulations that would apply to the civil service, all civil service agencies, non-ministerial departments, public bodies, the NHS and local authorities. This seems to be adequate scope for the application of this cap.

The Government are due to respond to the consultation by the summer, with the regulations laid before Parliament before the end of 2020. I hope that the Government’s measures will strike the right and fair balance and make sure that the scope of regulatory compensation and the regulatory framework that we put in place are appropriate for the circumstances. That will go a long way in dealing with this issue. I look forward to the consultation’s findings being released in the summer. I hope that this will be something that the Government take forward to ensure that we hold public sector spending to account in a much better way.

I will speak exceptionally briefly because I am keen to hear from the Minister.

I am grateful to my hon. Friend the Member for Christchurch (Sir Christopher Chope) for introducing this important debate on an issue which I know exercises the minds of many of my constituents and other people across the country. For most, the idea of having a redundancy payment of six figures is far beyond their reach. Since the great recession, astonishingly, in a number of high-profile cases, severance payments have been seen to be rewarding failure. I am sure that Members are aware of examples. In Scotland, as I said, a string of police chiefs, university bosses and others have seen six-figure payouts in recent years.

So I am pleased that the Government are taking action on this. I again congratulate my hon. Friend on highlighting the issue. I await to hear what the Government are doing to tackle this important issue.

I pay tribute to my hon. Friend the Member for Christchurch (Sir Christopher Chope) for his work to secure value for money, an issue close to the heart of Her Majesty’s Treasury.

I note that my hon. Friend suggested that Ministers have a tendency to “promise the earth” on a Friday in the House. That is not a charge usually levelled at Chief Secretaries and I will try to allay his concerns, not least with an eye to the forthcoming comprehensive spending review, in case any other Members have a similar expectation.

My hon. Friend also accused Ministers of having words put in their mouths, just reading out what they are given. I hope I can reassure him that I have written my remarks and that they will reflect my long-standing interest in the issues reflected in his Bill.

The Bill raises a legitimate issue, which is shared across the House, as reflected in the interventions: excess payments for people leaving roles in the public sector, often far in excess of what other members of staff in those organisations have earned over many years of service. My hon. Friend, through his Bill, signals his objection. As the Minister charged with overseeing spending, I share his concern. The point at issue is not in dispute for this Government and, in turn, the Government intend to act.

The second issue my hon. Friend raises through his Bill is the amount of time needed to resolve this issue. He is absolutely correct that, in the Conservative manifesto in 2015, we said that we would end taxpayer-funded six-figure payoffs for the best-paid public sector workers. He was also right to highlight and draw the attention of the House to the coverage in The Times newspaper, which has raised a number of recent cases of public servants receiving high-value exit payments. So it is understandable that he has brought the Bill forward, and I thank him for the timely reminder to the House and the Government of the importance of the issue.

My hon. Friend drew the House’s attention to the fact that, as a member of the Public Accounts Committee in the 2010 to 2015 Parliament, I also highlighted the importance of the issue. I hope that that gives him some comfort—along with the remarks I will come on to—as to my commitment as the Minister responsible and as to the Government’s commitment to address the points within the Bill.

I confirm to the House that we intend to publish the response to last year’s consultation this April. I will ensure that legislation is brought forward before the summer recess, providing parliamentary time allows. I will work with fellow members of the Government to ensure that time is found.

I thoroughly agree with the intentions of my hon. Friend, but the Government cannot support the passage of this private Member’s Bill. However, as I say, we will bring forward the consultation and ensure that we move forward at pace. He and I have met to discuss the issue in recent weeks in order to understand and address his specific concerns.

Significant responses to the consultation were received—600 or so—and I assure hon. Members that we have taken considerable effort to go through them in order to ensure that what is brought before the House will reflect the fact that a passage of time has happened, but it is a complex area of regulation, not least in terms of how we capture pension top-ups, for example, within the scope of the cap. There are other issues, such as the additional cost to the employer of allowing an individual access to their pension ahead of the normal pension age; that is the sort of issue that we have been looking at during the time to which my hon. Friend refers.

The issue concerns Members on both sides of the House. I reassure my hon. Friend that—

The debate stood adjourned (Standing Order No. 11(2)).

Ordered, That the debate be resumed on Friday 11 September.