Anna Soubry
Main Page: Anna Soubry (The Independent Group for Change - Broxtowe)Enterprise Bill [ Lords ] (Sixth sitting)
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The Minister for Small Business, Industry and Enterprise (Anna Soubry)
Good afternoon, Ms Buck; it is a pleasure to serve under your chairmanship. I shall explain why this clause should not stand part of the Bill. The clause was inserted by the Lords, and I can understand why it was felt that that was the right thing to do. There is a general agreement that the Green Investment Bank—there is no debate about this—has been extremely successful. It is beginning to return some money and has also made it very clear to the market that it is possible to invest in excellent green projects and get a return.
The time has now come for us to sell the Green Investment Bank, so getting back the money that has been invested by the taxpayer and, most importantly, ensuring that it goes into the private sector not just for the sake of it, but so that it can continue to do its excellent work and, crucially, be free to raise equity.
We have always said that the Green Investment Bank will still be green after privatisation. Green investment is what it does, and it is difficult, frankly, to believe that anybody would want to buy it or have a share in it unless they subscribed to its fundamental core business, which is to invest in green projects. We have to be realistic: why would anybody buy it if they wanted to turn it into some other bank?
We also said that the only reason we had to repeal the green protections from existing legislation was to allow the Green Investment Bank to be off the Government’s balance sheet post-sale. In other words, we have to do this—repeal the green protections—or it will still, in blunt terms, be on the Government’s books. However, if we repeal them, it will be off the books and in the marketplace and able to trade in the way that it has been doing.
However, because we understand the concerns of hon. Members and noble lords in the other place—indeed, many of us share those concerns—we have found a device to protect the Green Investment Bank’s green purposes but without the need for legislation. In other words, to use a phrase that has been used quite a lot so far this week, we are having our cake and eating it.
The Green Investment Bank will implement a special share to be held by an independent company—that is, independent of the Government, Parliament and the Green Investment Bank itself. The special shareholder, as it will be called, will have the right to approve or reject changes to the Green Investment Bank’s green purposes if such a change is ever proposed. Work is under way now by the Green Investment Bank to put that in place and it will be implemented at the point of any sale. We will not repeal the current statutory protections until that point. In other words, there will be no gap in protection.
To provide further assurances to hon. Members that we will do this, the Secretary of State said on Second Reading that the special share will be put in place, and the chairman of the Green Investment Bank, Lord Smith, wrote to Lord Teverson on 5 February to give him that assurance. Baroness Neville-Rolfe, who is a Minister in Department for Business, Innovation and Skills, also wrote to Lord Teverson on 17 February saying the same. On that basis, we believe that we do not need green protections in legislation.
Kevin Brennan (Cardiff West) (Lab)
Were that proposal to be implemented, it would in effect do the same as is being proposed in clause 32, which still remains part of the Bill at the moment. The key question, however, is not that, but whether that will satisfy the Office for National Statistics in relation to whether the Green Investment Bank will be treated as being on or off the books, as that seems to be the Government’s primary concern. What guarantee can the Minister give about that?
Anna Soubry
The best thing that I can say and do is this. I am very grateful because I have copies not just of the letter from Baroness Neville-Rolfe, but of the letter from Lord Smith who, as we all know, is the chairman of the Green Investment Bank. He wrote to Lord Teverson of Tregony. I am more than happy to share the letter in whichever way is best, whether by sending a copy to all members of the Committee or even by putting it in the Library. Although, actually, it is not my letter to put in the Library, I am more than happy—and I know that the noble Lord is more than happy—for it to be shared with everyone. I will not read it all because it is rather long and, interestingly, deals with a number of matters, but I want to put his words on the record. He wrote:
“In this letter I would like to set out the steps GIB plans to take to deliver the full spirit and intent of the Lords’ amendment. The only substantive difference between this plan and the Lords’ amendment is that the establishment of a special share would not be required by statute. Requiring the special share by statute is a key indicator of public control preventing the company’s re-classification to the private sector. GIB instead will create a special share in the bank on a non-legislative basis, to enable the company’s re-classification to the private sector. This is essential to give GIB the freedom to borrow without this impacting on public sector net debt and more importantly to allow GIB to raise equity. GIB intends to have in place a clear process detailing how a special share will be created and will set out that process, and show our progress in delivering it, before the Enterprise Bill returns to the Lords. It is my intention to share our progress as transparently as we can, as a means of building confidence that the special share can be put in place without the requirement to do so in law. I would also note that the current statutory protections over the green purposes will remain in place until the point that the special share is implemented. There will be no gap.”
Now, we all want the Green Investment Bank to continue its investments in the green sector, but I hope that everybody in the Committee will accept the noble Lord’s words about exactly what he is now undertaking. As he says, we should protect the special green background of the bank—the whole thrust of it. He is already doing that to protect its special workings. There will be no gap, and it will therefore continue as it is sold and, no doubt, in perpetuity.
Kevin Brennan
I have a copy of the letter, as Lord Smith also sent it to Lord Mendelsohn on our Front Bench and he was also involved in the amendment. Will the Minister confirm, however, that the letter contains no indication of the view of the Office for National Statistics about using this mechanism, rather than the mechanism currently in clause 32? As far as I can see, the letter contains no reference to the ONS directly approving this mechanism.
Anna Soubry
I undertake to find Lord Smith, and I will ask him for his views. In the meantime, I can tell the hon. Gentleman that we believe that the proposal will satisfy the ONS. As he can imagine, my officials have engaged with the ONS for some considerable time and have continued to do so specifically about this proposal from the Green Investment Bank. We are satisfied that it will allow the Green Investment Bank to move to the private sector and to protect its green objectives.
Baroness Neville-Rolfe, in her letter to Lord Teverson, who moved the amendment in the other place—it matters not that he is not of the political persuasion of anyone on this Committee—said:
“I would like to reiterate the commitment that the Secretary of State made in the House of Commons during Second Reading of the Enterprise Bill on 2 February, that a special share will be created in GIB with the power to protect the green purposes.”
I therefore seek to persuade the Committee that there is no need for this clause, notwithstanding the fact that the noble lords, with great respect to them, inserted it in the Bill after a debate. Given that the Green Investment Bank has come up with this device—I do not mean that in a bad way; quite the contrary—I seek to persuade the Committee that the rightful concerns about the future of the Green Investment Bank’s green objectives are now properly secured for a very, very long time. On that basis, I will ask the Committee to agree that clause 32 should no longer stand part of the Bill.
Kevin Brennan
It is nice to see you again in charge of our proceedings, Ms Buck. We come to an unusual role reversal in that the Minister is arguing that a clause should not stand part of the Bill, and we are arguing that it should. In fact, she is so keen that clause 32 should not stand part of the Bill that she tabled amendment 30, which was not selected, to delete it. The amendment was not selected because, in essence, it was otiose, as the correct way to get rid of a clause is to vote against it following a stand-part debate, which is what she now proposes. I interpret the tabling of the amendment as a kindly way to indicate the Government’s position to the Opposition, rather than any incompetence on her part, although she wrote to my hon. Friend the Member for Wallasey (Ms Eagle), the shadow Secretary of State, following Second Reading to indicate that she wanted to get rid of the clause. As the Minister has rightly indicated, the Secretary of State gave such an indication on Second Reading.
The Minister wants to get rid of the clause because the Green Investment Bank would remain on the Government’s books after privatisation, according to the Office for National Statistics, if there was any suggestion of statutory control of its purpose. Of course, there is currently statutory control of the bank’s purpose. The first point one might raise is whether the Government should allow that ONS ruling to drive policy in this area. It seems pretty obvious that they should not allow the ruling to drive policy so powerfully, but they are so obsessed with being able to say certain things about public debt that they are unwilling to allow a technical issue—that is what this is—that does not truly reflect problematic public debt to spoil their narrative on public finances. That is driving their obsession with removing statutory protection for the Green Investment Bank’s purposes. Ironically, that does not always happen. The Treasury is all too ready to allow UK borrowing to be part of the financing of the Asian Infrastructure Investment Bank. The Treasury was not worried at all that public debt will be part of the financing of that bank, yet it is extremely reluctant to allow the same for our own Green Investment Bank.
The Green Investment Bank is a flagship Government policy, and it is a genuinely innovative policy in the public sector. I praise the coalition Government for introducing it, as I have in previous debates. I should point out that it was initially conceived during the previous Labour Government. It would be a terrible shame if we did not acknowledge that; I am sure that no one in the Committee would like me to leave out anything of factual importance for the historical record. It would be a terrible shame if the Government were not willing to do for our own Green Investment Bank what they were willing to do, and have done, for the Asian Infrastructure Investment Bank. Will the Minister tell the Committee why the Government were prepared to do that for the Asian Infrastructure Investment Bank but not for the Green Investment Bank?
Mary Creagh
I apologise for my late arrival in Committee, Ms Buck. I spent my lunch hour delving into the Green Investment Bank’s remuneration committee, and I have printed edited highlights to share with the Committee.
I am keen to put the record straight. In the discussion that we had this morning, I said that as public sector employees the bank’s executives could not earn more than the Prime Minister. That was the case in 2012-13, when the chief executive earned £139,000, but things changed quickly in 2013-14. The latest figures show that the chief executive is earning £325,000 a year, with £147,560 awarded under the long-term incentive plan. There is also a short-term incentive plan and an offshore wind fund that is linked to remuneration, as well as a 10% contribution to a defined benefit pension scheme, and also life insurance and medical insurance. I want to put that on the record to inform the Committee’s deliberations.
The current rules of the bank, as set out in statute, are to provide for best practice and leadership on remuneration in the financial services industry. That is indeed what the remuneration committee sets out: it sets out very clearly what people are paid. I will come back later to some aspects of the bank’s remuneration, but I was keen to put the record straight on the amount that the chief executive earns.
I return to the clause stand part debate. The Environmental Audit Committee concluded that the protection of the green purposes was the most important objective of any sale; in its view, the sale should not go ahead if those green purposes could not be protected. Our Committee argued that the protections proposed by the Government, centred on assurances from buyers and the commercial logic of continuing to invest in green projects, were not sufficient. We recommended that the Government support the creation of a special share in the Green Investment Bank to protect its green purposes. We accepted that the share should be owned in a way that did not compromise reclassification to the private sector—in other words, that the share was not owned by the Government or a public body.
At the time our report was published, just before Christmas, such a mechanism had been added to the Bill by the House of Lords under clause 32. We have heard from the Minister that she plans to approve the creation of a special share, which the bank itself is somehow going to do. I have a series of questions for her. If the mandate for the special share is not laid out in statute, what guarantee is there of its longevity? If the bank’s board or chief executive changes, or if the shareholders decide to change the special share through a vote at their annual meeting, how will it be protected? How will it be established? The Minister discussed some sort of separate company being set up; would it be registered at Companies House? Who would its directors be? What would their relationship be to the Green Investment Bank and what control would they have when eventually all the shares were sold off? How would it be maintained? What constraints would there be on how it could be used?
On the principle of the sell-off, I return to the Select Committee’s report. It is a shame that the evidence was not really consulted on and there was no real consideration of alternatives. Our Committee was disappointed that the Government appear not to have considered a wider range of options for recapitalising the Green Investment Bank, such as citizen finance—green projects are currently extremely popular given the very low returns people can expect to earn on cash deposits—or the European fund for strategic investment. We were surprised that the Government had apparently undertaken little or no external consultation on the move, especially as the bank’s inception was marked by a laudably high degree of consultation.
Before proceeding with the sale, the Government must publish a robust business case—this goes back to our deliberations on clause 31—and an impact assessment in support of the decision to sell and of the timing of the sales, in accordance with the lessons identified by the National Audit Office’s Comptroller and Auditor General after the Eurostar sale. As part of those publications the Government must also indicate whether the full range of options for the bank’s future, including innovative recapitalisation options, were considered before the announcement of the intention to privatise. If they were not, they should explain why.
On the Government’s minority share, the Select Committee’s report also recommended that, in line with the bank’s own wishes, the Government should retain a minority stake in the company for as long as possible to ensure the bank’s future success. It is not only a matter of protecting the green purposes, although that would be a happy by-product, but about the signals the Government are sending to the market at a time of high investor uncertainty and potentially low investor confidence.
In response to the Select Committee’s recommendation, the Government reiterated their plan to sell the bank as a going concern but disagreed that a continued Government shareholding in the GIB would be essential to its future success, without giving any specific reasons for that disagreement. The Government gave no commitment on their future stake, and the Minister’s comments when she gave oral evidence suggested that the plan is eventually to sell the entire Government stake. If there is a phased sell-off, how will the Government use their minority share in the interim period? What is the objection to continuing to hold it? When they have relied so heavily on the bank’s views in favour of privatisation, why do they disagree on that point?
I turn to the green purposes. In paragraph 46 of the Select Committee report, we made it clear that we were keen to ensure that the bank retained its unique role in the green economy. In terms of establishing a special share that is owned in a way that does not compromise reclassification to the private sector, we recommended that:
“The Government should examine and report on the possibility of including under the share’s protection: (a) a nominated set of priority sectors, which would be much wider than that allowed under the State Aid rules and could establish GIB’s focus on specific Sustainable Development Goals in which the UK already excels, such as Affordable and Clean Energy, Industry Innovation and Infrastructure, and Responsible Consumption and Production”—
all areas in which the UK has a clear lead—
“and (b) an explicit statement of GIB’s focus on projects which lack sufficient funding. If such protections via the special share are not practicable, the Government must say how it intends, through the sale, to preclude the possibility of ‘mission creep’ even if the green purposes are protected.”
For example, the new special share could specify, by either volume or value, the type of green investments. That would require some thought and preferably public consultation on either the volume or the value route, because we could end up with one big green project and lots of ungreen projects, or lots of very small green projects and one very big ungreen project. There are pros and cons to both volume and value. There could be some sort of lock between the two or a formula in the shares to ensure that, by volume and by value, the bank’s green purposes are protected.
Finally, our Committee expressed concern that a privatised bank could invest in questionably green projects, such as fracking and coal-fired power stations, although I understand that the Secretary of State for Energy and Climate Change has said that she wants the coal-fired power stations to close by 2025. That concern was exacerbated by the Minister’s comments in oral evidence, where she appeared relaxed about that possibility and implied that it could be possible within the bank’s existing green purposes. The Government’s response to our report claims that it is not possible to place controls on the Green Investment Bank limiting such investments while achieving their aim of reclassifying the bank to the private sector. Will the Minister say whether, through this workaround—the special company and the special share—questionably green projects can be ruled out?
The Government claim that the Green Investment Bank’s business plan sets out a clear path for investment in established green sectors over the coming years and makes no mention of a move into controversial sectors. However, as we know, markets change, economies change, times change and—one day, we hope—Governments change, so things may look very different in 2020. What guarantees can the Government or the bank provide about the nature of its future investments, and what constraints will there be to prevent it from altering its green purposes?
Representatives of the bank told the Select Committee that they are very happy for the Government to remain a minority shareholder. They said that the Government have been a very good shareholder, and they want that continuity in going from being purely publicly owned to being publicly and privately owned. They envisage some sort of hybrid stage. They also want the Government to retain a minority shareholding to demonstrate a commitment to the bank. The bank’s chief executive said in oral evidence:
“with that commitment you will get much more interest in the people wishing to buy the reciprocal 70%-ish, 75%, whatever that number is. That is important in terms of driving the competitive tension in the process to get the best possible price, to get the best possible commitment to the greenness of the Bank going forward, and to make sure that we have an enduring institution here that is around in five years’ time, in 10 years’ time building the clean, green infrastructure the country will still need.”
As I said earlier, any future sale of shares must be preceded by a period of consultation and evidence gathering, and a report to Parliament on the success and impact of the initial majority share sale.
Anna Soubry
I am going to talk about why I seek the support of the Committee in ensuring that the clause does not stand part of the Bill. I am not going to answer all the points that have been made, because, frankly, that would be way off topic. However, there are a number of points that I can address and questions that I can answer, and I hope that that will be helpful.
Anna Soubry
It is not mine to circulate, but I have no problem doing that. I am sure that Lord Smith will not have any problem with it either. It is all on the record.
Anna Soubry
The hon. Member for Cardiff West has said that he has seen the letter. What is important is whether what is in the letter is to be believed. That is what matters, and I respectfully suggest that Lord Smith’s fine words can be accepted. If anyone has got a problem or thinks that in some way I am reading something out inaccurately, I am sure—
Mary Creagh
What the Minister is saying is fascinating, but she is asking the Committee to remove clause on the basis of a letter we are hearing for the very first time in response to our remarks. My hon. Friend the Member for Cardiff West has seen the letter, but I have not, despite the big report that the Environmental Audit Committee did on the bank. It is the Minister’s responsibility to circulate things to the Committee in good time, so that we can look at them and all work from the same bundle of documentation.
What the Minister has said is interesting. I have more questions on the basis of the establishment of a charity and so on that come out of what she said. I would have made a different speech had I been in possession of that letter, but I was not, so I could not. I respectfully suggest that it is for the Minister, in asking us to remove the clause, to give us the reasons why we should do so, by circulating the documentation.
Anna Soubry
It is not for me to tread into what must be a dispute with the hon. Member for Cardiff West. He has the letter. Presumably, Opposition Members met to decide which way they would vote. If the hon. Gentleman has not shared the information, had the debate and said, “By the way, gang, I’ve got a letter here that absolutely sets out all these things,” that is not for me to tread into.
The most important point is not procedure and process—the Labour party has to learn and understand this—but content and delivering in the right way. That is what I am seeking to do. It is absolutely clear that Lord Smith and, most importantly, the Secretary of State and the noble baroness have all given an absolute guarantee in this place and the other place that we will take and have taken all the intent of the clause and put it into action. Members may remember that that is how I began my remarks. I explained what would happen, the process and how we would achieve what Members want us to achieve, and that is the most important thing and that is what is happening.
Mary Creagh
On a point of order, Ms Buck. A whole series of evidence has come to the Committee. Some of it has come in from people, such as the Magnox emails, and I seek your guidance on whether the Committee Clerk has received the letter under discussion. I have not seen or received it in any of the emails that have been sent to us. Given that it is a material point on which we are being asked to vote imminently, I cannot understand why there is this gap.
The Chair
I do not believe that it is appropriate to adjourn the Committee, but the Minister has the opportunity to circulate the letter and I hope that that will be done. Given that we have taken a number of points of order and interventions, I hope that we can quickly revert to the substance of clause 32.
Anna Soubry
I am more than happy to circulate the letter, but the point remains that this is not about process, but substance. I started off by saying—I am happy to repeat it—that we understand hon. Members’ concerns. We have found a device to protect GIB’s green purposes. GIB will implement a special share, to be held by a company independent of the Government, Parliament and GIB itself. The special shareholder will have the right to approve—and so it goes on. I referred to letters, and I read out those letters, though I did not have to do so.
The simple truth is that Opposition Members perhaps now realise that we have grabbed hold of the intention of the noble lord’s amendment that was successfully moved in the other place. Nobody should have a problem with that. As I said from the outset, we have found a device to implement it without passing legislation, to secure the objectives of the Green Investment Bank. Nobody can have any complaint. On that basis, I hope that the Committee will vote to reject the noble lord’s amendment and that the clause does not stand part of the Bill.
Kevin Brennan
I say gently to the Minister that we are not discussing a matter of arid process.
Kevin Brennan
The Minister asks me from a sedentary position why I did not share the letter, yet she is the person whose legislation this is. She is the person who has the panoply of a Bill team of civil servants supporting her in her work. I have told the Committee that I am in possession of a letter to Lord Mendelsohn, which I presume is identical to the letter on which she relies in praying in aid her policy. I have a copy of a similar letter among my papers, which I happened to procure. If she wants to pray mainly in aid a document to support her position as a Minister in Committee, at the minimum, it is a simple courtesy to share that document with all Committee members in advance. She knows that to be true.
All manner of huffing, puffing and bluster will not take away the fact that that is the sort of courtesy from Ministers—whatever political party they come from—that is part of this House’s procedure and has been for a very long time. Rather than trying to defend her position, she should go away and think about what needs to be done, as a Front Bencher, in relation to making arguments and providing documentation to the Committee, as the normal courtesies require.
Apparently, we are going to get the letter circulated to hon. Members at some point, but not until after we have disposed of the very clause that she is praying that letter in aid of, so that she can expunge it from the Bill. That is not good enough. It is a slipshod approach to parliamentary scrutiny, so the Government must improve how they handle such matters in Committee.
Anna Soubry
I did not respond to that because I did not think it was particularly relevant, but I am happy to tell the hon. Gentleman that that is an international bank and, because of that, we are not aware of any legislation over it that comes from this country. I therefore do not think he can make that comparison.
Kevin Brennan
Frankly, sometimes the Minister seems to want to chair the Committee as well as be the Minister on it so that she can decide what is relevant, what is in scope and what is not in scope. The Chair is perfectly qualified to tell us what is in scope when we discuss clauses and amendments to the Bill and I am sure that, if we were out of scope, Ms Buck would be quick enough to tell us. That is not for the Minister to decide. As I have said before, the Government have their way and the Opposition have their say and it is her minimum responsibility to make a good attempt to answer questions that are put to her about the Bill. She really should respond to such inquiries in a more appropriate fashion.
The Minister did not answer that question in the course of the debate and she has not explained fundamentally what the problem is with the Green Investment Bank being on the books. She gives the impression that it cannot be privatised without getting rid of the statutory requirement for the bank to have green purposes to its investment, but it can be. The Government could privatise the bank and hold not a single share in it, it could be completely in the private sector, with every intent and purpose except one: the technical ruling by statisticians in the Office for National Statistics —I am not sure whether boffins is the right term, so I will call them statisticians. I will not call them boffins, as long as she agrees not to call hard-working public sector and private sector workers “fat cats”. The bank could be in the private sector completely, the Government could hold no stake in the bank whatever—to all intents and purposes it would be a private sector company—but it could retain, perfectly legally, a statutory obligation to invest in green projects.
Anna Soubry
I realise that it is a bit embarrassing that the hon. Gentleman has a letter he has not shared with his colleagues, but in any event, it does not matter. The most important thing is that we are going to share it. I assure him—he need have no fear—that if there are any such letters that support a good argument, I will be more than happy to share them with everybody on the Committee. It is not a problem.
Kevin Brennan
I will interpret that in an extremely generous way and take it that the Minister is promising not to rely in future on a letter in this way without sharing it with the Committee, as per the usual conventions and normal courtesies of the House.
I return to the Government’s desire to remove the clause from the Bill. I am not satisfied—I sense, looking around me, that my right hon. and hon. Friends are not satisfied either—that that is the right thing to do at this stage. Not least because of the issue around the letter, we should at the very least be given time to cogitate further between now and Report on the protections in the clause. The Minister is confident on this; she always displays confidence, so there is nothing unusual about that, but it is still not a guarantee.
I cannot say in all honesty that I am convinced the special share proposal—interesting though it is; I am certainly not ruling it out—provides a guarantee that the green purposes of the bank will be protected, without a clear indication from the Office for National Statistics, rather than the coded message the Minister has given the Committee. On that basis, I will resist the removal of the clause from the Bill at this stage, so that we can consider it on Report. If Government Members choose to exercise their majority and the clause is removed from the Bill, despite the debate we have had, we will certainly want to consider that further on Report.
Kevin Brennan
On a point of order, Ms Buck. The Question was that the clause stand part of the Bill. The Committee voted that the clause should stand part of the Bill. The Minister cannot then move that the clause should not stand part of the Bill.
Anna Soubry
We announced on Second Reading that the Government will accept the intent of clause 33, but will table tidying-up amendments. That is what we now seek to do with new clause 5.
The clause was added by an amendment in the Lords and inserts a near-identical replica of a clause in the Small Business, Enterprise and Employment Act 2015, including the provisions on market rent options. Discussions with Opposition Front Benchers and pub tenants clarified that their main concern was that the first part of the pubs code consultation proposed that the market rent-only option should only be offered to tenants on a rent increase. The intent of the amendment was to prevent that.
The second part of the pubs code consultation, which was published on 4 September, sought views on whether the condition for a rent increase or rent assessment should remain or be removed. The consultation document confirmed that the Government did not intend to frustrate access to market rent-only options. The consultation on the pubs code regulations closed on 18 January.
The evidence in the consultation showed that there was a risk that our proposals would limit significantly the ability of tied tenants to choose MRO at rent assessment. Many recent rent assessments have resulted in no increase. So, contrary to our intentions, a large number of tenants would be denied the offer of MRO at their rent assessment. We have therefore tabled a new clause to ensure that the effect of the Lords amendment is absolutely clear. It puts beyond doubt that MRO will be available at rent assessment, irrespective of the level at which the rent is set. Finally, as the pubs code regulations will be made under the Small Business, Enterprise and Employment Act, we have ensured that the territorial extent of the new clause is in keeping with the 2015 Act by formulating the pubs provision as an amendment to it.
Other points at which MRO will be made available were subject to the consultation regulations. We will publish responses when we have analysed and considered the responses on all the issues raised in the consultation. The point, in short, is that the measure should have been in the Bill, but was not. The noble Lords understandably and rightly added it. We do not seek to undo their work. The new clause does nothing more than tidy up the measure and make it effective.
Anna Soubry
I am glad that we all agree. To make it absolutely clear, new clause 5 will replace clause 33. I hope all Members of the Committee will vote in favour of these amendments. I know it sounds strange to vote against clause 33, but the new clause will replace it and all that will happen is that we will honour the full intention of the other place by making sure that their amendment is better written and any loose bits are tied up. We want anybody who is listening to this to know and understand that the full weight of what the other place put into the Bill will stay in the Bill—it is just that we have tidied it all up. We are all as one.
Bill Esterson
Briefly, I hope that the Minister’s confidence is justified that this does what she says it does and that it achieves what was agreed by Parliament in the previous Session, what was in the Small Business, Enterprise and Employment Act 2015 and the essence of what the Baroness said in March and what was agreed in the Lords. I hope for her sake that that is all true and that it really will deliver for pub tenants. I take those assurances away. We have got to this point; it has not been the Government’s finest hour—I think the Minister acknowledges that—and with those remarks we will support what the Government are doing.
Anna Soubry
Again, the new clause replaces clause 34; it tidies up and clarifies but does not change the intent of clause 34. I make that absolutely clear. It clarifies that it relates to avoidance of all regulations made under part 4 of the Small Business, Enterprise and Employment Act—the pubs code—not just the Act itself. It makes clear that business practices occurring after the Act was passed in March 2015 can be reported on. It amends the 2015 Act rather than leaving a separate provision in the Bill. It makes the territorial extent consistent with the 2015 Act; in other words, it makes it consistent in England and Wales.
Bill Esterson
I do not intend to detain the Committee on this section except to say that the Minister’s explanatory statement makes very clear where we stand: that this is intended to clarify the effect of the Lords amendment. With that assurance, as I said in my closing remarks on the previous provision, assuming that all is going to go ahead and that this will be brought back later to be voted on, the sector is happy as things stand.
We have finally got where we need to get to on the pubs code. I am sure there will be a decent degree of scrutiny of the implementation of the code, the role of the adjudicator and how the pub tenants’ relationship with pub companies operates in the future. With those comments, I am happy to go along with what the Minister is proposing.
The Chair
As with the previous clause, new clause 6 will be dealt with at a later stage. We are now considering the Question that clause 34 stand part of the Bill.
Question put and negatived.
Clause 35
Restriction on public sector exit payments
Kevin Brennan
I do not believe the provision is retrospective—retrospective legislation is rare in the direct sense—but it certainly affects existing agreements and undermines previous agreements that the Government made and said were fair and would stand for a very long time. In the case of contractual obligations, the provision raises serious questions as to whether the Bill as it stands is legally sound. As well as the practicalities of the measure to include notice pay in the cap, there is also the impact on those who are too ill to work. Modelling by the National Association of Head Teachers shows that a headteacher who is compelled to leave work due to developing a physical condition and who is unable to work out their notice due to illness will be significantly worse off compared with an able-bodied head because of the proposed cap currently being drafted to include pay in lieu of notice. Does the provision to include notice pay and holiday pay comply with the provisions of the Equality Act 2010? What advice has the Minister had on that?
My next point relates to the way in which schools are run, because they are different from other organisations in relation to notice for obvious term-time reasons. The Government have committed to academise poorly performing schools. That can often include the removal of a headteacher from a school. How would that be possible under the provisions if that same headteacher decided to work out their notice, rather than leave straightaway? That is what anyone would do if their payment in lieu of notice was to be included in the exit payment. If a school is trying to make a fresh start under a new head, it will find it very difficult to remove the incumbent swiftly, because that person will seek to work out their notice rather than depart immediately. That is understandable, because who would act in a way that was financially disadvantageous to them in such circumstances?
The real problem is that notice periods for headteachers are often exceptionally long. If a headteacher is leaving just after Christmas, their period of notice might not technically run out until after the summer holidays in some cases. Schools and pupils could suffer under these plans if there were such delays. Has the Minister considered that? What is her response to that problem?
Amendment 105, on which I may well seek the Committee’s opinion, provides that regulations may exempt from the public sector exit payment cap those earning less than £27,000. Amendments 115, 105 and 106 offer protection for low to moderately paid public sector workers who have provided long service. I will not repeat the arguments made earlier, but the fact remains that excluding workers who earn less than £27,000 per year would protect workers earning the average wage of £26,400. A promise to protect those workers was made by the Government; that is the point.
Kevin Brennan
The Minister shakes her head, but the then Treasury Minister specifically made that promise. I will read the quote again:
“those earning less than £27,000 will be exempted to protect the very small number of low earning, long-serving public servants.”
I cannot imagine anything more emphatically clear being said by a Government Minister, so why has that exemption not been included in the Bill? Amendment 105 would provide that exemption. As such, unless the Minister can convince us otherwise, we should insist on the Government keeping their word by pressing the amendment to a Division.
Amendment 108 is about the waiver process. The Government’s consultation response made mention of a waiver process and said that the full council would
“take the decision whether to grant a waiver of the cap in cases involving Local Authorities and for local government bodies within their delegated powers”.
In the Lords, Baroness Donaghy said that despite the assurances made in the consultation response, there was no reference to that in the Bill. That is a crucial issue for local government and should be dealt with in the Bill, rather than through secondary legislation. The Government’s draft statutory instrument allowing a waiver if the full council agrees has been published. That does not give local government the certainty it needs if it is to continue the job of restructuring itself in the face of the huge cuts to it. We have already seen agreements dealing with pay and conditions that were drawn up in 2010 disregarded just six years later. There is a concern in local government that it is not being given the certainty on waivers that it expected to see in the Bill, and it would like to know why.
Which public authorities will be allowed to exercise a waiver, and which will not? If there are exemptions from the waiver, will the Minister explain her logic in deciding which public bodies should be exempted and which should be included? The Government have done much to try to remove schools from local authority control. Will the waiver apply to all schools in local authority control? Will waivers apply to academy schools? Will there be a level playing field between the two categories of taxpayer-funded schools, or will one be favoured more than the other?
The ability of a local authority or other public sector body to seek a waiver would concur with the Government’s professed desire for local democracy and localism in general. Will the Minister explain how she drew up the rules for including or excluding public bodies and her role in the monitoring of waivers?
Anna Soubry
It has been a good debate and I will be the first to admit that there have been some good contributions. It is absolutely right that we should go into the matter in detail. It has to be said at the outset that the Government are acting on what was very clear in the manifesto promise upon which we were elected. We said that we would cap the public sector pay-out to end six-figure pay-outs. I am bound to say, as somebody who was self-employed for nearly 20 years, that this is the sort of stuff that simply never came my way at all. That does not mean to say that I do not have any sympathy for people who—and this is the most important point—are made redundant. That means that they had a job and, suddenly, they do not have a job. We have to recognise that we are talking about people who are being made redundant.
To answer the hon. Member for Wakefield directly, people who are made redundant because of ill health are not touched by the cap at all. I hope that we can deal with that claim. We have to set this in some context. In terms of statutory redundancy in the private sector, I am reliably informed that the maximum statutory payment that someone could receive if they earned £25,000 and had worked for some 30 years is £14,250. I am told that the evidence is that the average payment is in the region of £16,000. We have to set what happens in the private sector in sharp focus and contrast that with what happens in the public sector.
We have heard much about modelling, in effect, of what happens when people are on lower pay and find themselves being made redundant. They first thing to say, of course, is that nurses do not get made redundant. On the contrary. It is fair to say that we are rather keen to employ more nurses, not to make nurses—nor, indeed, teachers—redundant. In any event, the Cabinet Office has confirmed that no civil servant earning below £25,000 will be caught by the cap. We are not saying that there are not exceptions. To be truthful—and I always want to be truthful—we cannot actually find an exception. I will go through some examples that I hope will give some assurances to people. We cannot actually find an example—we are not going to say that there are not any but we cannot find one—of somebody who could be earning £25,000 but finds themselves having a payment, on being made redundant, of more than £95,000 and therefore having it capped.
A senior manager at grade 7 in the civil service with a classic pension scheme who leaves aged 55 with 30 years’ service would not be caught by the cap if he or she were earning below £50,000. A prison officer earning £28,000 with 34 years’ experience would be able, even with the cap in place, to retire on a fully unreduced pension aged 52. A tax inspector aged 52, earning £60,000 a year with 25 years’ experience, would have a pension of £17,500 per annum instead of £19,000.
The hon. Member for Livingston was specifically concerned, and many others would be concerned, at the thought of a nurse being made redundant. Frankly, it is difficult to conceive but it might happen. I am trying to imagine what the circumstances could be. No one earning below £47,500 in the NHS will be affected by the cap and the vast majority of nurses earn below that figure. To satisfy the hon. Lady—I know that she specifically raised that point—we said that we would go away and look at it all and that is exactly what we have done.
Catherine McKinnell
I thank the Minister for giving way, and I would very much hope, obviously, that she would be truthful. The information she provides gives some reassurance for today but, given that the £95,000 will not be indexed by the Government, will she explain how longer-term security will be provided? Also, if she is so confident that no one will be affected, why will the Government not accept the £27,000 cut-off that they seemed to promise before the election but are not delivering in the legislation?
Anna Soubry
Let us make it clear that what a Minister said before the manifesto was written does not count as a manifesto commitment. The manifesto is what matters the most, and in it we made it clear that we would place the cap at £95,000. I can go only on the figures—I specifically asked for them. Someone on £25,000 who has worked for 30 years in the private sector will get a maximum of £14,000 and we are talking about people in the public sector who have been working on that same salary for the same length of time having their payment capped because it might exceed £95,000. We really must see the cap in context.
Catherine McKinnell
Will the Minister clarify something? When she talks about someone in the private sector earning a maximum of £14,000—
Catherine McKinnell
Gaining a maximum pay-out of £14,000. Is the Minister talking about a statutory redundancy payment or a private contractually agreed one? If it is the latter, how does she know what all the private contracts provide for?
Anna Soubry
That example shows the profound difference between the private and public sectors. I do not for one moment say that people who work in the public sector do not work hard, but we must take a long, hard, honest look at the terms and conditions of those who are paid for by other taxpayers, to ensure fairness and equality between the sectors.
Catherine McKinnell
I thank the Minister for giving way. She is not comparing like with like by saying that the statutory redundancy payment is all that a private sector employee would get. In the vast majority of cases there would also be a contractual sum that would or could be agreed, and her analysis is, therefore, unfair.
Anna Soubry
I am just putting out the figures on statutory redundancy payments, and setting the context—it is important that we understand the context. That does not mean that there are not lots of people working in public service on low wages—my own brother works on a very modest wage within the NHS. We have to look honestly at those terms and conditions. My hon. and learned Friend the Member for South East Cambridgeshire made an important point. She struggled to think of examples of people on £25,000 who had worked for 30 years and would, in the event of being made redundant, be entitled to more than £95,000. That is all I am saying. That is why such examples are so interesting and, I think, make my point.
I will give some more examples. A librarian, earning £25,000 and with 34 years’ experience, would, even with the cap in place, be able to retire on a fully unreduced pension at the age of 55. A health and safety inspector earning £50,000, with 20 years’ experience, would receive a pension of £12,000 per annum, rather than the £12,500 they would have received before the cap. I think we would all struggle to imagine teachers being made redundant, but a classroom teacher earning £38,000, which is the maximum of the upper pay range, with a normal pension age of 60, would not be caught by the provisions.
We know that the armed forces are exempt. Again, I am grateful to my officials, because I asked why and whether they were put into a special case for good reasons such as the nature of their service. In fact, I am helpfully advised by my officials that, given the higher payments to those in more senior ranks, who can get quite substantial amounts of money for redundancy, we are looking at that situation and ensuring that there is a responsible attitude and pay-out.
Mary Creagh
Earlier, I made the point about the impact of potential gender discrimination. Has the Minister done any sort of gender impact assessment of the working of the two rules, in particular given the exemption for the armed forces, which are dominated by men?
Anna Soubry
I am not aware of any tooling, but I do not see this as a question of gender at all; rather, I think—
Anna Soubry
I am sorry, I really do not see it as a question of gender. If it was a question of a large number of public sector workers being women and tending to be low paid, the hon. Lady might be making a good point. Therefore, it behoves all councils, of whatever political persuasion, to ensure that they do not in any way, shape or form discriminate against women, nor should they see certain jobs as jobs for women or as in some way for pin money; and, if we are honest, local authorities of all political persuasions have done that over the years. I am delighted to see that those old-fashioned, outrageous attitudes are beginning to move.
Anna Soubry
No, I am going to make some progress, if I may. I did not intervene on any hon. Members, because I want people to be able to develop their arguments.
I will go through the list. Among firefighters there have been few if any formal redundancies. They receive statutory redundancy entitlements and the other staff fall under local government arrangements. People might want to know about the judiciary. Why are judges not covered? Judges cannot actually be made redundant. Magnox workers we will deal with in connection with the next group of amendments.
I was asked a number of other questions, including about academies, which are classified as part of the public sector—I will deal with that one in a moment. On pension top-up, it is often the case that those with the highest salaries will receive the greatest top-up, and we know that there are some examples of that. In answer to the hon. Member for Wakefield, the Green Investment Bank could well be in scope if it remains in the public sector as defined by the Office for National Statistics. If we are successful and the bank is sold into the private sector, it will not be in scope. Another important point is that the £95,000 cap represents only 5% of exits to date. As we might imagine, those primarily affected are the highest paid. That is an important statistic.
Catherine McKinnell
Will the Minister address the point about indexation? I appreciate that she is giving helpful statistics about the number of people affected or likely to be affected today, but it would also be helpful to keep in line with rising prices and wages into the future.
Anna Soubry
That is a good point. I am more than happy to take that one away and give her a response later.
Lucy Frazer
Subsection (9) states:
“Regulations may substitute a different amount for the amount for the time being specified in subsection (1)”,
so it looks as if there is provision to up the cap in future.
Anna Soubry
I am grateful to my hon. Friend. Another question that has been asked is why so much will be in secondary legislation. One reason why we are doing that is that it is genuinely a much better way to introduce something that will undoubtedly—I am not going to pretend otherwise—have its complications and nuances. It is important that we do not just introduce blanket rules, but have provisions to look at any cases that might or should be exempted.
Somebody asked a question—forgive me for not remembering who, but I think it might have been the hon. Member for Wakefield in an intervention—about the national health service, which, as she identified, has a cap of £160,000. This legislation will affect the existing cap, taking it down to £95,000.
I want to make some progress and deal with the amendments. Amendment 109 seeks to raise the cap to £145,000. I would argue that it is unclear whether the Opposition favour completely uncapped exit payments or a cap set at what could be over 10 times the maximum statutory redundancy. The Government have made it clear, however, that we want to put the figure at £95,000. We were very clear about that in our manifesto.
Amendment 105 seeks to impose a £27,000 earnings floor for the cap, but the cap will have no impact at all on the large majority of public sector workers. As I have said, it will affect only the top 5%. We are really struggling to find an example of any civil servant earning below £25,000, for example, who would be in any way affected by the cap. Those earning below £27,000 will not be caught and, in any event, we believe that this represents a generous package that many will be entitled to.
Amendments 106 and 115 would exclude those in long-term service. There may be some instances where individuals with very long-term service on more modest salaries could be affected by the cap, but as I have explained, the £95,000 represents a generous package compared with what is available to those on similar pay in the private sector. The majority of long-serving employees caught will be those with high or very high salaries.
Amendments 112, 116, 122 and 128 relate to annual revaluation. Amendments 112, 122 and 128 all seek to subject the cap to annual revaluation, while amendment 116 seeks to impose a minimum level of £95,000 for the cap. All those amendments fail to offer the flexibility that the clause provides for. The clause allows the Government to amend the level of the cap to take into account all prevailing circumstances, with the additional scrutiny of the affirmative procedure. Any form of fixed-term revaluation would just create an artificial and arbitrary mechanism. As any amendments to the cap require an affirmative procedure, the current mechanisms for changing the cap offer both flexibility and full parliamentary scrutiny.
Amendments 104 and 121 would exclude pension top-ups and payment in lieu of notice. We are not discussing retirement in the normal manner; we are discussing the additional top-ups linked to redundancy, funded by employers. As I mentioned previously, any earned pension that has been accrued by an individual is outside the cap. Again, it is really important that everybody appreciates that any sums of money paid by an employee into a pension pot of any description—anything accrued by them through their own money—is outside the cap. These top-ups linked to redundancy can greatly increase the value of pension payments above the level that has been earned through years of service. They often represent a substantial amount of an individual’s exit payments.
Payments in lieu of notice are also part of an exit payment and can be substantial for high earners—again, the emphasis really is on high earners—as some recent high-profile exits have shown. Excluding such payments would not just be unfair, but provide an obvious loophole to avoid the effect of the cap.
Amendments 108 and 124 relate to extending the waiver to local authorities and public authorities. Although we note and agree with the intentions of amendment 108 to give the full council of a local authority waiver power, I would argue that the amendment is unnecessary. Our indicative regulations, published on 3 November 2015, demonstrate that it is already our policy to give the full council of a local authority waiver power, and that will be articulated in the final regulations.
Amendment 124 seeks to grant all public sector authorities waiver powers. However, the potential inappropriate use of settlement agreements and exit payments more widely is precisely why the clause requires approval by a Minister of the Crown— rather than the employer—to relax the cap. Ministerial or full council approval means that the power will be exercised objectively with full accountability and will prevent circumvention and misuse.
For all those reasons, I very much hope that Committee members will take the view that the amendments add nothing and are not necessary, and that the Government have done the right thing by introducing the cap at £95,000. The reality is that in any event very few, if any, lower-paid workers will be affected if they are made redundant. It has to be said again that, compared with what is available in the private sector, an exit payment of £95,000 for someone who has been on low pay must be seen as generous.
Kevin Brennan
Let us make sure that that “very few, if any” is none. We have the opportunity to do that now. We could fulfil the Government’s objective and, if the Minister is right that no lower-paid workers will be affected, it would cost nothing at all, but it would provide assurance to people who are not fat cats on high pay in the public sector that the provision is not intended for them and will not affect them.
Kevin Brennan
Yes, and that is exactly how bad law gets made, as we know. Therefore, I encourage the Minister to give some further thought to those points if she has not already decided how she will deal with them.
Amendments 111 and 125 would provide protections for whistleblowers—my hon. Friend mentioned this earlier—and remove them from the cap on exit payments. Capping payments could act as a deterrent to whistleblowers. There is concern across the House about the unintended consequences of an exit cap on whistleblowers’ willingness to come forward. Whistleblowers are public-spirited individuals who, when they spot an injustice or malpractice, make it public. We have seen their value not just in the public sector but in the private sector as well, but whistleblowing often leads to a backlash from the authority or business concerned. As a result, many whistleblowers do not continue to work in the same industry, understandably, and they often suffer financially as a result of their brave actions.
It is possible that such workers might think twice about whistleblowing if they are to be further punished financially by the proposed cap. Will the Minister update us on the latest view of the Treasury and her own Department on relaxing the cap for whistleblowers? The Government would do a grave disservice to openness and transparency in the public sector if they did not afford those brave individuals the protection they deserve.
Anna Soubry
I get slightly agitated when it is suggested that we did not think of something. Obviously we have thought about this issue, and we have already discussed with officials precisely those two points about people who have been booted out or unfairly dismissed for whistleblowing or through discriminatory injustice by their employer. As we know, tribunals—unusually, given the powers of the various tribunals—can give an award that is basically unlimited, meaning that in such circumstances, people who have done the right thing by whistleblowing or who have been treated unfairly through discrimination would find themselves unfairly treated by the imposition of a cap. We are absolutely alert to that issue.
Anna Soubry
I do not know why the hon. Lady is saying no. That is exactly the mischief that the amendments seek to cure. We understand exactly what the trap could be. The other thing that we absolutely understand is that only a tribunal can find that somebody has been made redundant or dismissed unlawfully because of their whistleblowing or because of discrimination. In other words, people must go through the whole process of giving evidence, with all the trauma involved, in order to get a finding. The difficulty is ensuring that we know on exactly what basis someone is entitled to a substantial amount of money in damages, in effect, for injustice.
If they have not gone all the way through to a determination by tribunal—everybody is wildly and rightly encouraged not to go all the way through the process but to settle, avoiding all the trauma, costs and loss of time—the problem is then that usually, although it should not be so, they will be subjected to a confidentiality agreement, or to some device that satisfies everybody. They get the money to which they are properly entitled, but nobody says, “Actually, yes, we did sack you because you are a whistleblower.” We are absolutely alert to the possibility that the measures could create problems.
That is why the regulations will deal specifically with such instances. We will issue good guidance to all public authorities so that in instances where there is a settlement—in other words, where an organisation says, “Yes, we accept that we made you redundant because you blew the whistle, and that was the wrong thing to do, but we are not going to go all the way to tribunal; we are going to settle beforehand”—the parties must clearly mark in some way the reason why they are settling, so that the payment can be exempted from the cap.
The hon. Member for Cardiff West and I are both trying to cure the same mischief. The question is how we achieve that. The trouble with the amendments is that they would open the process to abuse because somebody could claim to be a whistleblower without in fact being a whistleblower—they could be a fantasist. Such cases are rare, but it is a dangerous loophole that could be opened up, which is why we must ensure that we have a mechanism so that we know whether a person who is entitled to a large sum of money because they have either blown the whistle or have been discriminated against is not subject to a cap. We aim to do that through regulations.
In the case of a settlement agreement, where there is no finding by a tribunal, the claim might not be genuine for the reasons I have just explained, so appropriate scrutiny is essential before making exit payments over the cap. We will issue guidance to assist relevant authorities in determining when to use their discretion to relax the cap. Obviously, they should relax the cap if they have accepted that somebody has been unfairly dismissed or made redundant because they were a whistleblower. I hope that makes sense.
Catherine McKinnell
As a former employment lawyer, I can not help feeling that the Minister is creating a potential can of worms. Even though the issues may not be successful at tribunal for one side or the other, it is often in the employer’s interest to settle a case simply on cost grounds where the case would cost more to fight than to settle. From what the Minister is saying, it is not clear that the provision will allow for such circumstances and will not significantly complicate the situation for public sector employers across the board.
Anna Soubry
Forgive me, but I thought I had made it absolutely clear that this is about settlement agreements. Obviously we do not want people to go to tribunals; we want people to settle. In the case of a settlement agreement—this is the point—there is not a determination by a tribunal. Conciliated by ACAS or agreed privately, there is no finding by a tribunal, but the claim may not be genuine, so appropriate scrutiny is essential before making exit payments over the cap. [Interruption.] The hon. Member for Newcastle upon Tyne North says that I have not said that, but I have just said it again. Guidance will be in place to assist relevant authorities in determining when to use their discretion to relax the cap, so it will be made absolutely clear. If a public authority employer is of the view that somebody has been unfairly dismissed either because they are a whistleblower or because they have been discriminated against, guidance will make it very clear that they should relax the cap to allow for an extra-large payment to be made.
Hannah Bardell
Unison has raised concerns that a perverse incentive will be created for employees to avoid settlement via the early conciliation process, which is the optimum stage. What is the Minister’s view of that?
Anna Soubry
That is exactly what this is all about. It is about ensuring that, when two parties reach their settlement, the employer understands that it must not impose the cap. If the employer is admitting, “You have been made redundant in the wrong way. We accept that you are a whistleblower. Somebody said that they were going to make you redundant, and they did the wrong thing,” it has to make that clear when deciding the amount of damages to be awarded: “We find that you were a whistleblower. We find that you were discriminated against.” By doing that, the employer can relax the cap without any hassle or difficulty. I do not think it could be more clear.
Catherine McKinnell
To put it politely, the Minister is severely optimistic if she thinks that this is straightforward, because it is not. She will know that a settlement agreement is only entered into when neither party will accept liability. Therefore, it is not as simple as the employer accepting liability for something and entering into an agreement. Would it not make more sense to simply accept the amendment and to exempt all such agreements and arrangements from the cap altogether?
Anna Soubry
Absolutely not—and for the exact reason that the hon. Lady gave: we know that lots of people in settlement agreements will not accept liability. We also know that if we agree to the amendment, we will open the floodgates for people to make spurious claims that they have been made redundant on the grounds that they were a whistleblower. We will then get into a nightmare situation where there is a hearing to determine whether that person’s claim is accurate. Members are not letting me make progress, so that I can further explain this provision, which we have put some thought into.
Ministers of the Crown and Scottish Ministers will have discretion and be able to delegate it in the normal way. Under draft regulations, discretion will also be held by full council for local government bodies and for Welsh Ministers. A blanket exemption from the cap would unfortunately open the door to sweetheart deals designed to avoid the effect of the cap, based on dubious claims.
On amendment 125, there is no need for a regulatory referral scheme for whistleblowing claims. Whistleblowers can already make a disclosure directly to the relevant regulator or other prescribed person. Settlement agreements cannot stop them; the law is clear on that. There is no need to require that whistleblowing claimants have access to legal advice before entering into a settlement agreement. The Employment Rights Act 1996 already makes settlement agreements unenforceable unless the employee has received independent advice, so there is no need to require Ministers to produce guidance on settlement agreements for whistleblowers. In fact, we have already had three guidance documents in 2015 alone.
We have looked at this issue. Although I am not an employment lawyer, I am an old lawyer, so I can see the difficulties, but I am satisfied that the way we craft the regulations and, most importantly, the guidance we give to employers will cure the mischief that we all want to be cured.
Kevin Brennan
This is a complicated area. We have skirted over it a little bit, but there are real concerns about the implications for things such as early conciliation, which I raised under amendment 110. It has been rightly pointed out that that is a concern to trade unions, and Unison in particular. There is also a concern about the impact on whistleblowers. I think that the Minister was trying to give the Committee an assurance, in her own unique way, that the Government are committed to ensuring that genuine whistleblowers—
Kevin Brennan
And, as the Minister rightly says from a sedentary position, people who are discriminated against are not impacted when made redundant. I will not press the amendments to a vote at this stage.
Anna Soubry
As the hon. Gentleman might imagine, I often am quite robust with my officials. I am keen to ensure we get this right. If we need to go away and make another tweak, we will, because I want to be sure we get this right.
Kevin Brennan
The Minister said in response to one of our amendments that, in such areas, secondary legislation is often a better way to do things. If the Bill were rigid, it would create the kind of anomaly and cause the kind of concern raised by myself and other Opposition Members.
I take at face value the Minister’s commitment to go back and think about this, and we will have an opportunity on Report to explore some of these issues further and to ensure that we get the right sort of response from the Government. No doubt, those who watch our proceedings will have listened carefully to what the Minister had to say. Perhaps she will provide the Committee with some further information to help our proceedings on Report. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Kevin Brennan
I am afraid it is me again. Hopefully, we do not have too much longer to go this evening.
This third group of amendments on clause 35 is about exit payments, which we have already started debating, and whether the Bill—my hon. Friend the Member for Wakefield, who is not in her place at the moment but has been here for the vast majority of our proceedings, raised this issue earlier—will retrospectively apply to agreements that have already started.
Let me first turn to amendment 113. A public service agreement was introduced by Lord Maude in 2010 that saved a significant amount of money in the first year in which it was implemented. More than 90% of one union—Prospect—voted for it. The review was based on research, analysis, consultation and, I think some would agree, a degree of give and take. It was an attempt to find a solution that was fair to both the taxpayer and the employee. It was supposed to settle the issue of access to pensions for 25 years, but now 100 pension schemes will be forced to change their rules. People made plans on the basis of those renegotiated conditions, which were supposed to last for 25 years. They had a significant effect on those workers’ life plans and the decisions that they made.
Comparing the quality of the process and the outcome, the 2010 review and the present review are light years apart. That has added to the worry of many workers, particularly those who are in a state of limbo when considering the outcome of the Bill. Why have the Government not considered allowing workers who were covered by the 2010 Maude agreement to continue to be covered by its terms and conditions? If that is not possible, will the Minister at least consider letting workers who started the process under the Maude review continue through to completion?
On amendment 119, many workers would have already started and completed their redundancy process had they known of the Government’s true intentions last January. They were wooed into a false sense of security by the pledge that the Minister for Employment said would be made, which I referred to earlier. The Government are directly responsible for the many workers who are now trying to complete their redundancy process before the Government pull up the drawbridge with this change of approach. They would have been reassured by the Government’s manifesto pledge to end taxpayer-funded, six-figure payoffs for the best paid public sector workers, because they did not think it was intended to cover them. They would have looked at their pay packet and thought, “I’m on £25,000, £26,000 or £27,000. The Government couldn’t possibly mean me.” Many people who might have considered taking voluntary redundancy would have thought, “I have had that reassurance from the Government. It has been made twice, so they are not thinking about me. I won’t be affected by these measures.” If they had known the full story, they might have changed their decision. They might have finished the exit process by now, so they would not be caught in this widened net.
Many of those people are on low or middle incomes and have not had the ability or the time to save large amounts of money to see them through the crisis of redundancy that they might be facing. What assessment has the Minister made of the number of workers who are already in the process of negotiation? What would the cost to the public purse be if all those who have started the process were allowed to finish and not to fall victim to the retrospective nature of this Bill? I am interested to know what figures the Minister has on that, because if she opposes the amendment today, she will obviously be doing so for a reason.
Will the Minister give us an idea of the Government’s intended date for the implementation of the Bill, assuming that it completes its passage through Parliament? We found out today that it will be considered on Report in the Commons on 8 March, and then there may be reconsideration in the Lords. When does she expect that it will be implemented? What reassurance can she give to workers that, if they have already negotiated exit settlements, the Government will not overturn those plans at the last minute and in effect make them the victims of a retrospective measure? Many of the arguments that I used for amendment 119 also apply to amendment 120, and I respectfully ask for her responses to them.
I turn to amendment 107. In speaking to amendment 119, I mentioned how workers were caught unaware by the Government’s widening of the net. A sensible solution might be to accept that there should be a period of grace, given that there was a change of approach. Amendment 107 would propose a period of two years before the legislation takes effect. Baroness Neville-Rolfe said that that would frustrate the intention of the cap. It would not do that, but it would give people who have plans under way an opportunity to complete them before it comes into force. After all, their expectations were very different as a result of Government’s previous statements.
Anna Soubry
Amendments 113 and 119 would limit the cap to new entrants, as has been described, and therefore not stop existing highly paid individuals from receiving six-figure payouts. That is why I oppose those amendments. Public sector exit payments have cost £2 billion a year in recent years and asking taxpayers to continue to fund exit packages of more than £95,000 for those already employed does not represent value for money and goes against our manifesto commitment.
We signalled our intention to end six-figure exit payments as far back as January 2015. We committed to do so again in our manifesto and in the Queen’s Speech. We have since issued a public consultation and consultation response. Public sector employers can therefore be in no doubt about the Government’s intention to end exit payments of more than £95,000 and should be planning accordingly. To answer the hon. Gentleman’s question directly, the regulations giving effect to the cap will not be in force until 1 October 2016 at the earliest, giving employers and employees time to prepare. The power to relax the cap can address any unforeseen unfairness or hardships that arise, which will include cases where the exit is agreed and scheduled to take place before the regulations come into force, but, for a reason beyond the control of the employee, the exit occurs after they have come into force. For those reasons, I ask the Committee not to support the amendment and I ask the hon. Gentleman to withdraw it.
Kevin Brennan
I will not press the amendment to a vote. I am grateful to the Minister for indicating the earliest date at which the legislation can come into force; it is useful to have that guidance. I do, however, think that again the emphasis on the very highly paid is not correct. Many on lower pay who have made plans accordingly could be affected, but I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Kevin Brennan
I beg to move amendment 103, in clause 35, page 50, line 38, at end insert—
“( ) Regulations shall make provision to require prescribed public sector authorities to consider, prior to making a public sector exit payment—
(a) whether the payment being paid is appropriate; and
(b) whether the payment would provide value for money.”
This amendment would ensure that when considering staff for exits value for money is considered.
Value for money is a key concern, which is why it is mentioned in the amendment. The Government seek to justify a cap on exit payments solely on the basis of the cost of payments to staff between 2011 and 2014, which is not a helpful period to look at because the evidence provided fails to recognise that during that period employment across the public sector was reduced by 790,000, which inevitably affected the cost of exit payments. During that period, civil service employment fell by 107,350 using the current compensation scheme arrangements. No evidence has been offered to demonstrate that an exit payment cap would deliver real value for money and savings into the future, and it could do the opposite, as changing the compensation payments will naturally affect the willingness of staff to exit the public sector, which could lead to higher costs elsewhere.
We have already heard about the deal that Lord Maude described in 2010 as fair to the taxpayer as well as fair to workers; he also said that the deal was fair to employees. The agreement took into account length of service, salary and age, and there was a salary cap that protected against extremes, which resulted in a huge decrease in the number of settlements over £100,000, which is the Government’s intention in the measures before us.
Exit payment caps will have significant effect on workers, whose terms and conditions will be dramatically altered; there will also be an impact on the efficiency of the Government. Both of those issues should be of concern to the Minster. Baroness Neville-Rolfe said in another place that the amendments on value for money were not “necessary or desirable.” She went on to say,
“There is already a fundamental duty on the public sector to ensure that exit payments are value for money and that they are made in the most appropriate manner.”—[Official Report, House of Lords, 30 November 2015; Vol. 767, c. 981.]
What is the clear evidence that imposing the cap does not represent value for money or is not appropriate in a particular case?
Does the Minister now agree that it might have been a mistake not to have the formal impact assessment that colleagues referred to earlier? Even the Dangerous Dogs Act 1991 had an impact assessment that reached some 50 pages.
Kevin Brennan
That is exactly my point. Even the Dangerous Dogs Act had an impact assessment that was 50 pages long. The idea here is that we should not have an impact assessment of a measure that is extremely complicated and affects tens of thousands of workers and hundreds, if not thousands, of public and private sector businesses and bodies. It deserves an impact assessment. It would have made the issue of value for money far more transparent than it is to us in Committee. There is a lack of information about the likely savings to the taxpayer because a proper impact assessment has not been undertaken.
Perhaps the Minister can tell us what proof she is offering that what she is proposing will offer value for money and will bring genuine savings, and that some of the unintended consequences will not militate against that and make any net savings very small or even negative? Where are the facts and figures to support the Government’s claim that the previous schemes did not offer value for money and her new scheme will? In 2010, the scheme the Government introduced was said to offer value for money. Does it still offer value for money now? If not, what has changed in the meantime? Can the Minister guarantee that her changes will not damage the existing value for money that is being achieved as a result of that settlement?
What assessment has the Minister made of the impact of reduction of flexibility brought about by the exit payments cap on the ability of management to manage restructuring of organisations in terms of downsizing? What assessment has she made of the potential impact on staff morale? Is she satisfied that introducing exit payment caps will not actually result in moving costs from one section of the public purse to another. Why are the publicly owned banks the ones that are exempted from the value for money test in the Bill?
I want to mention the fact that the impact on value for money also affects the private sector. Private sector companies working in the nuclear industry will be affected by the exit payment proposals and their impact on value for money. We know about the specific concern in relation to Magnox, which we will discuss further at a later stage. When Magnox stopped producing electricity and moved into decommissioning, the staff were promised that their pensions and severance benefits would be safeguarded. If the Bill goes ahead as it stands, many hard-working and long-serving staff would lose a significant amount of money. There could be a significant impact on value for money in the private sector.
Value for money needs to be looked at in the round, taking in its impact on workers, employers’ ability to manage change, and the knock-on effect on other Government Departments and, indeed, on nuclear safety. I look forward to the Minister’s response.
Ordered, That the debate be now adjourned.—(Stephen Barclay.)