Superannuation Bill

Baroness Noakes Excerpts

Wednesday 10th November 2010 Grand Committee

[Lord Wallace of Saltaire]

The caps, as the noble Lord will be aware, are there in case litigation were to prevent the new scheme going into operation, so that there would be an alternative. However, the caps can be repealed by negative order and the intention is that that order would be placed the day after Royal Assent, if all else is in play.

[Baroness Noakes]

Can my noble friend explain what kind of litigation might be anticipated and therefore the need for Clause 2? Clause 1 is self-contained and does away with the need for agreement in relation to a scheme, and Clause 2 has these caps, which are inconvenient because they will get in the way if they are not what we want to bring into effect. The Minister just explained that we might need these caps if there is litigation. What sort of litigation could follow once this Bill has been enacted, doing away with the need for consent?

[Lord Wallace of Saltaire]

Neither the previous Government nor this Government expected the challenge to the agreement presented by the PCS on the previous occasion. The outside possibility with which we are concerned is a successful challenge that might ask for judicial review under the Human Rights Act and might under certain circumstances go as far as the ECHR. That process could last for some considerable time.

[Baroness Noakes]

If it is the case that we are providing some kind of insurance policy against litigation that might take us all the way to the European Court of Human Rights—I think that is unlikely, but let us assume that that is going to happen—why are the Government providing caps that are so out of line with anything that they think they are going to agree? It is perfectly plain that Clause 2 is something to wave at the unions to say, “If you don’t agree, this is what we will do to you”. It is not a reasonable fallback position if Clause 1 is litigated. I am still very confused about the structure of the Bill, as I explained to the Minister at Second Reading.

[Lord McKenzie of Luton]

The noble Baroness has raised a very pertinent point but, in terms of the litigation—whatever the outside risk of it might be—that could come from challenge under the human rights legislation, what leads the Government to assume that that might be successful in relation to a scheme that would not be equally successful in relation to the legislation around the caps? You would expect them both to be subject to the same sort of challenge.

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[Baroness Turner of Camden]

I support both opposition amendments. When I first read the text of government amendment 2, I thought that I really could not accept an amendment that states,

“such information as the Minister considers appropriate”.

I do not think that that is satisfactory wording to have in an arrangement by which a Minister is bound to report to Parliament. It should not be up to him to decide what information is appropriate to report to Parliament. I do not think that that is acceptable. Therefore, I support these two amendments, which are reasonable in relation to the text of the government amendment. However, as I said earlier, I have some doubts about the Government’s attitude on these matters anyway.

[Baroness Noakes]

My Lords, perhaps the noble Lord, Lord McKenzie, could give a precedent for a consultation report being required to be both laid before Parliament and approved by Parliament. It seems to me that this is a novel procedure that the noble Lord is suggesting. I am not sure that he has made a case for a novel procedure in this Bill.

[Lord McKenzie of Luton]

My Lords, that is an interesting question. I am not sure that I could quote a precedent, but the fact that it may be novel does not mean that it is not a good idea. Are we not dealing here with something that is quite a significant step? To date, there has been the requirement for agreement. We know why agreement could not be reached when we tried it and why, although it has not run its course yet, it is proving to be challenging as well.

We are moving from a position where there had to be agreement from everyone to one where there need be no agreement. That is in the context of a compensation scheme that will impact the lives of tens of thousands of people in a very big way. Therefore, it is not unreasonable that a process should be undertaken whereby Parliament has the chance to ask whether these have been genuine negotiations. I should make it clear that I do not in any way challenge what has happened today as not being a genuine attempt to reach agreement—I am certain that it has.

A big step is being taken here in asking others, in particular the trade unions, to give up that right for agreement, so requiring that there be a process of Parliament to say that the requirements of consultation and engagement have been met should be something that they would wish to look at. I stress that I am not saying that Parliament should have the opportunity to unpick an agreement and to substitute its own view on what the agreement should be, as that should come from the negotiation. That is the basis on which I moved Amendment 3.

[Lord McKenzie of Luton]

The noble Lord raises a good point. The problem with drafting one’s amendments and writing one’s speaking notes later is that one realises that one might have covered matters in a fuller way. However, if, for example, in a particular case Parliament was clear on the basis of the report that there had not been a proper, full and sensible negotiation, one could envisage that the adverse changes to the compensation scheme—we are talking about adverse changes—would not be supported and that there had to be another process to address that. I accept that the amendment as drafted does not flesh out that detail, but we will reflect on that before Report stage.

[Baroness Noakes]

My Lords, the noble Lord, Lord McKenzie, rests his argument on this being a very big change that requires Parliament to be involved. We have to be clear that, in the private sector, the practice is not for redundancy schemes to be agreed. If it was the practice in the past, it is not now. In the private sector, the practice is clearly that redundancy terms are not hard-wired into employment contracts—that was the evidence given to the other place in the Public Bill Committee—and, in my experience, even those organisations that had collective agreements around redundancy have moved away from that relatively straightforwardly. This is not a big deal; it is just modernisation of the terms and conditions that operate in the Civil Service.

[Lord McKenzie of Luton]

My Lords, I did not base my argument on the fact that there was comparability with the private sector. We know the history of the scheme—the Minister helpfully recapped on it on Second Reading—and that the prospect of compensation arrangements was an integral part of the terms and conditions, historically. It might be challenged as not necessarily the case now, but what people accepted in terms of salary, pension rights and compensation opportunities was seen as a package that was seen as collectively valuable. I suggest that it is a big step, for the people affected, to move away from that. It is right to do it—we have made that clear and support the Government in seeking to do it—but we think that there ought to be protections around it so that Parliament has a role and an opportunity to take a view on whether the process that should be undertaken, in a sense, to justify giving up unanimity is robust.

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[Lord McKenzie of Luton]

My noble friend has, as ever, made a passionate and powerful case for ensuring that people are treated fairly, particularly in relation to compensation when she brought up pension rights. The amendments are an alternative means of achieving something that we have further amendments for later on. They are essentially seeking to get rid of the caps. We obviously support that.

In a sense, this approach is predicated on Clause 1 not standing part of the Bill, which it did. It is now more difficult for these to fit together, but the concept of getting rid of the caps is something that I thoroughly support.

The amendment raises the difficult issue of the extent to which there must be agreement. Again, we are at one in recognising that there must be a proper process. There must be a consultation and every effort made to end up with a negotiated settlement. My right honourable friend in the other place, Tessa Jowell, made clear that we accept that there would be circumstances in which changes would have to be made that did not rely upon agreement. We do not do so lightly, and nor, I am sure, does the Minister. To that extent, we may differ a little on my noble friend’s amendment, but we have some other amendments constructed to achieve, in large measure, the same thing: to get rid of those caps and the right to revive them at the earliest opportunity.

[Baroness Noakes]

The noble Baroness, Lady Turner of Camden, has said twice this afternoon that the civil servants who are potentially affected by the Bill are often not very well paid. This may have been the case in the past, but all recent studies show that on pay levels up to £40,000 or £50,000—that is, “well paid”—public sector employees are better paid than their equivalents in the private sector. What may have happened in the past, and may have been part of this notional package whereby people say, “I accept low pay and get a better pension and redundancy”, has, over the years, been completely eroded. The terms and conditions are collectively out of balance with private sector comparators. In particular, pay levels at the lower levels are high.

[Lord Wallace of Saltaire]

There are, however, a substantial number of low-paid civil servants. I am rather surprised at the number of them earning less than £21,000, most of them working outside London. One of the Inland Revenue computer centres is half a mile from Saltaire, and I am well familiar with average rates of pay in the northern part of Bradford. The reason why the scheme is set to be biased in favour of those earning less than £23,000 is that there are a very large number of them. There are a small number of extremely well paid civil servants; the changes in the compensation scheme are also to limit the payouts to which they might be entitled.

The amendments of the noble Baroness, Lady Turner, seem designed to remove the substance of the Bill. To rehearse briefly, the intention behind the Bill is to bring to a close two years of negotiation by successive Governments with the trade unions, to change a compensation scheme designed nearly 40 years ago, which does not fit current conditions or circumstances.

Amendment 5 would, in practice, go further than the requirement in Section 2(3) of the Superannuation Act 1972, which, as I have explained, we have already needed to amend. First, under Section 1(3) of the 1972 Act, it is for the Minister to judge who should be consulted—

“persons appearing to the Minister … to represent persons likely to be affected by the proposed scheme”,

or with those persons themselves. However, rather than requiring the agreement of those who have been consulted on this basis, Amendment 5 would prescribe that consultation must take place with “the relevant trade unions” and, indeed, that these unions must agree.

We have already explained the efforts that successive Administrations of all parties have made, and which some of the trade unions have made, to reach such agreement. We are setting out in primary legislation and have reiterated in both Houses our commitment to meaningful consultation but, as I have described, our intention in adding Clause 1 was to remove any union veto on changes to the Civil Service Compensation Scheme. I cannot imagine that any of your Lordships will be surprised to learn that, after more than two years of consultation, the Government's view on this is resistant to change.

The second respect in which the noble Baroness's Amendment 5 would go further than the approach set out in the 1972 Act is that it would apply to any changes proposed to the Civil Service Compensation Scheme, not just to those changes that would have the effect of reducing benefits. This would create a new bureaucratic process, in which any change to the compensation scheme including, to pick a trivial example, a minor amendment to its title would require consultation and agreement from all the Civil Service unions. Amendment 6, which is grouped with this, seeks to remove from the Bill the main provisions covering the potential caps on the value of benefits provided under the compensation scheme. This guts the Bill.

The Government are determined that there is a fallback position that can be used and that, bearing in mind the lessons of the previous Administration's scheme, we are not left unable to progress due to some sort of unforeseen legal challenge to the details of the new scheme. We are therefore providing in Clause 2 to have in reserve the possibility of applying caps on the maximum value of redundancy payments under the Civil Service Compensation Scheme: a maximum of 12 months' pay for compulsory departures and 15 months' pay for voluntary departures. Putting these limits in primary legislation leads to greater legal certainty and democratic accountability and, as I have already remarked, the Government can, by negative order, raise the level of the caps, but cannot lower them. I hope that provides reassurance to the noble Baroness and that on that basis she will be willing to withdraw the amendment.

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[Lord Wallace of Saltaire]

My Lords, I feel I should not reiterate the arguments that I have made already about the necessity of Clause 2. My feeling about this is that after two years of negotiations, any Government would have introduced such a proposal. Therefore, I do not want to push this in any partisan way. I am sorry that the noble Lord, Lord McKenzie, thinks that this has soured the negotiating environment. That is not my impression of the quality of the negotiations between the majority of the unions and the Government on this. We have made real progress and both the unions and the Government have been negotiating with clear commitment to reach a consensual agreement in the circumstances in which we find ourselves.

As I described at Second Reading in your Lordships’ House, the caps in this legislation serve several purposes. First, they set out a basis for discussion of reform of the compensation scheme with civil servants and with the trade unions representing them, comparable to best practice in the private sector. Secondly, they provide an interim solution if agreement cannot be reached. Thirdly, they provide a fallback if, following discussions and what we believe to be the conclusion of a new workable compensation scheme with terms improved beyond the caps, we find that we cannot implement it.

If we do not have this clause, we shall be in a state of legal uncertainty in which it is possible there might be a judicial challenge. Primary legislation provides much greater legal certainty, which may be important in the event of protracted litigation, where the case might be referred from one court to another. Therefore, I invite the noble Lord to withdraw his opposition.

[Baroness Noakes]

The Minister said that he did not want to rehearse the arguments he put up before, but I would invite him to rehearse them because that is where the crucial issue lies. The Minister gave three reasons for having Clause 2. One is as a basis for discussion, which is no basis on which to put anything in legislation. A second is as an interim solution if there is no agreement. As I understand it, once we have Clause 1, there is no necessity for agreement, so there is no necessity for an interim solution. The third item is a fallback, if for some reason the Government were not able to implement an agreement under Clause 1. So we come back to the crucial issue of whether Clause 1 is legally robust. If it is not, on what basis is it not legally robust, or potentially not legally robust? If that is the case, what are the differences between a potential lack of robustness in Clause 1 and a potential lack of robustness in Clause 2, if that is what one has to fall back on?

I do not agree with the noble Lord, Lord McKenzie of Luton, that these are punitive caps as I think they are relatively generous compared with what the private sector offers. The Government are indeed prepared to go further and offer a more generous scheme. I have no problem with the quantum but I seek to challenge why we have this clause. If it is just for a basis for discussion, it is no basis on which to legislate. We have to tease out why Clause 1 might be challenged and why Clause 2 would not be challengeable.

[Lord Wallace of Saltaire]

My Lords, logic might suggest that all we need in this Bill is Clause 1. I understand that point, but since the High Court judgment in May, it has become apparent that when the terms of the compensation scheme were subject to legal doubt, the purpose of restructuring within government might be stalled altogether, with consequential financial implications and uncertainty and consequent distress for staff. Having Clause 2 in reserve ensures that, if a scheme is subject to prolonged litigation, there is a provision which produces certainty and can be brought into force to prevent the process of government restructuring being put into limbo. Therefore, this is a reserve power which the Government are asking for which we hope will not be necessary. I stress again that it is a fallback in the event of refusal to agree followed by judicial challenge. The question then arises as to what the default position should be if a scheme is stalled by prolonged litigation. It is right that Parliament should decide in an Act of Parliament what the default position should be, hence Clause 2. I repeat: putting these limits into primary legislation leads to greater legal certainty and thus democratic accountability.