Public Sector Exit Payments (Limitation) Bill

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

There is quite a history to this subject, going back far too many years. Back in 2015, the Government resolved that something must be done about obscenely high public sector exit payments in excess of £95,000 each. At that stage it was estimated that they might be costing the taxpayer at least £250 million a year. The Government legislated to make provision for that to be changed and for exit payments in excess of £95,000 to be outlawed, but the consultation was much delayed.

In the 2017 Session of Parliament, I introduced a Bill to give a bit of impetus to the Government’s agenda, requiring the necessary regulations to be brought forward. I had previously been told by the then Chief Secretary to the Treasury that the Government were “delivering our manifesto commitment” to end these big payouts, and that:

“These reforms will ensure fairness and value for money across the public sector”.

In June 2017, I asked the Chancellor of the Exchequer when the secondary legislation would be introduced, I was told that the Government were

“currently in the process of drafting the necessary regulations.”

As not much progress seemed to have been made, I asked the question again. On 4 December 2017, the Chief Secretary to the Treasury replied that before laying the necessary regulations,

“we will bring forward a consultation in the first quarter of 2018”.

As you might anticipate, Mr Deputy Speaker, no such consultation was forthcoming, so I then asked another question to find out what was happening. I was told:

“To ensure the successful implementation of these changes, a consultation will be brought forward in the next few months.”

That takes us to May 2018, when I asked a further question. In June that year, the Chief Secretary said that the Government “remains committed” to this policy, and that the regulations would be brought forward. Indeed, they were already being drafted, but were subject to “further iteration”. We then roll forward a few years, unfortunately, because the Government ultimately introduced the regulations in February 2021, but no sooner had they introduced the regulations than they decided that the regulations were inappropriate, so the regulations were revoked. What will happen next? We were told that the Government are still intent on pursuing this policy, but nothing much has happened since.

I received a letter from the then Chief Secretary to the Treasury on 20 October 2021 saying that he would not be able to support the private Member’s Bill I had tabled in the previous Session, but that

“we are continuing to consider and develop new policy initiatives to manage spending on exit payments, including an additional approvals process, and mechanisms for clawing back exit payments where individuals resume employment in the public sector within a particular time frame.”

My hon. Friend the Member for Christchurch (Sir Christopher Chope) has shown his dogged determination in bringing this issue back to the House once again. My constituents feel angry when they see these massive payouts, often to people who reappear elsewhere in the public sector on another six-figure salary. That is why it is right that the Government legislated in 2015, which was a long time ago.

Perhaps unusually, I will highlight the good practice of the BBC, which has put in place a voluntary cap. It is £150,000, though, which is 50% higher than the one set out in the Small Business, Enterprise and Employment Act 2015. Of course, the BBC did that only because it had paid £450,000 to a director-general who had been in post for only 54 days. I am sure my hon. Friend will share my concern at the figures in the latest annual report that over the past two years, the BBC has paid out £127 million in severance payments, with 430 of those payments in the bracket of £100,000 to £150,000. While part of that is about reducing headcount at the BBC, which is too large and needs to deliver much better value for the taxpayer, that is still a very high level of money.

The Government did bring forward the regulations, which were passed by both Houses back in September 2020, but regrettably, in the face of complaints from the unions and others, they were withdrawn over what counted as exit payment caps. It was quite a long list, including redundancy payments, payments to reduce actuarial reduction, payments under settlement agreements, severance payments, payment in the form of shares and payments on voluntary exits. There is obviously an issue that needs to be tackled. My hon. Friend spoke about the consultation published last August, and I think we would all be keen to hear from the Minister when the Government will be bringing forward measures and responding to that consultation, because it is time we dealt with this issue. We legislated for it back in 2015. It is now eight years on, and my constituents want to see action. They want to see an end to this high level of pay-outs.

I commend my hon. Friend the Member for Christchurch (Sir Christopher Chope) for bringing this Bill forward. It is on an incredibly important issue that has been the subject of massive public concern, as my hon. Friend the Member for North West Norfolk (James Wild) pointed out, in relation to the BBC and in national Government. It is also of concern in local government. In my area, the Cambridgeshire and Peterborough Combined Authority hired a chief executive officer who left after eight months and was given a £169,000 payment package last year. Such sums of money are completely incomprehensible to members of the public who pay the taxes that go to such payments. That one was at an incredibly high level that breaches even the BBC guidelines.

There is a fundamental problem. I have been chief executive of two organisations, and one of the horrible things about running an organisation is that occasionally one needs to get rid of people and make payments to them. The statutory payments are incredibly low, so we tend to give payments above that. If someone is working for a private sector organisation, they have a strong incentive to try not to give out too much money. I always capped my payments at one year’s salary. I resisted ever paying out more than that.

In the public sector, it is not your money; you are giving taxpayers’ money away, and often senior managers may well have a conflict of interest. My hon. Friend the Member for Christchurch did not quite refer to it as that, but a lot of senior civil servants will be conscious that they may one day themselves be in a position where they will get a payout, so there is perhaps a personal incentive to make sure that the regime is not capped in any particular way and remains generous.

This is a legitimate issue and an issue of public concern. I had not realised that the payments were so much—they are in the region of £1 billion a year now, and that is fiscally significant. These are not tiny sums of money by national standards. It is frustrating that action has not been taken, when it was in the manifesto eight years ago in 2015. The Government have been repeatedly pushing at it. The consultation that closed last year repeated the point about the £95,000 cap. I should say that with inflation at 10%, that £95,000 is becoming worth less and less, and the cap will bite in at a lower level and more and more people will be affected by it. I would certainly be keen to hear from the Government what they intend to do to finally bring this measure in and implement it. In their consultation, they suggest two different mechanisms for control processes. I would also be keen to hear whether this is just for national Government. It should apply across other parts of the public sector and local government, too. I support the intent of the Bill, and I am keen to hear what the Government have to say.

The Public Sector Exit Payments (Limitation) Bill, brought forward by my hon. Friend the Member for Christchurch (Sir Christopher Chope), has reached Second Reading today, and it does have merit in its endeavour to secure value for money for the taxpayer.

I understand that the Government believe that staff exits and exit payments have an important role to play as regards organisational changes in the public sector, and these exit payments need to be looked at through a rigorous process. After all, it is taxpayers’ money that is paying for such exit payments. I also understand that the Government are seeking to reduce the use of large exit payments in the public sector and are looking to develop guidance on it. There needs to be consistency and accountability about the use of such payments.

I note that the Government consultation closed in October 2022. During the last debate on the subject, the then Minister, my right hon. Friend the Member for North East Cambridgeshire (Steve Barclay), implied that the consultation would be brought forward. I hope that the Minister today might provide an update on the outcome of the consultation and the Government’s response. I draw attention to the merit of the Bill of my hon. Friend the Member for Christchurch.

We on the Labour Benches fully recognise the importance of achieving the best possible value for our taxpayers. I remind the hon. Member for Christchurch (Sir Christopher Chope) and everyone who has spoken in support of the Bill, however, that the Government introduced a public sector exit payment cap in 2020 and it did not work. The cap failed to provide value for the taxpayer, it had numerous unintended consequences, and it adversely affected dedicated, long-serving public servants who earned relatively low salaries, often less than £25,000 a year. Indeed, due to those failings, in March 2021—less than a year after introducing the regulations—the Government were forced to U-turn and revoke the cap.

Let me take each failing in turn. First, far from saving taxpayers money, the cap produced additional costs. Because the regulations treated payments under a settlement agreement, but not employment tribunal awards, as an exit payment, they created a perverse incentive for people to go to tribunal. An employment tribunal is a time-consuming and costly legal process for a public sector employer to go through, and I remind hon. Members that that cost is passed on to the taxpayer.

Secondly, the cap had other unintended consequences—for example, it did not take into account an individual pension contribution, so through no fault of their own, long-serving staff over the age of 55 who were facing redundancy were hit by the regulations. They were obliged to take their pension if they lost their job, so their final exit payment, when combined with their redundancy pay, could easily exceed the £95,000 cap under the regulations.

Finally, when they introduced the cap, the Government initially said that the regulations were designed to prevent large exit payments to so-called public sector fat cats, but in reality the cap hit low-paid workers hardest. Long-serving local government workers, who earned as little as £23,000, were pulled into the cap when their pensions were taken into account.

I am grateful to the hon. Member for Hampstead and Kilburn (Tulip Siddiq) for her advice, but I first congratulate my hon. Friend the Member for Christchurch (Sir Christopher Chope) on securing a Second Reading of the Bill. I thank him and several other hon. Friends for their continued focus on this important issue.

We value our public sector workers and the services they provide, but it is important to take a common-sense approach when considering the terms and conditions that should be on offer in the public sector, and to strike a fair balance between the interests of employees and taxpayers. Such payments must be fair and proportionate, and value for money must be achieved for the taxpayer. That is particularly pertinent at this time, when difficult decisions have had to be taken about the public finances and we look to squeeze more out of every pound of taxpayers’ money. Indeed, one of the Prime Minister’s five pledges is to ensure that our national debt is falling, so that we can secure the future of the public services on which so many rely. That is important because in recent years the Government have been concerned about the overall spending on exit payments, and the number of very large exit payments made to individuals.

Ordered, That the debate be resumed on Friday 17 March.