Mary Creagh
Main Page: Mary Creagh (Labour - Wakefield)Enterprise Bill [ Lords ] (Sixth sitting)
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Mary Creagh (Wakefield) (Lab)
I know from my time shadowing DFID that many questions were raised about the fact that we chose to be foundation sponsors of the Asian Infrastructure Investment Bank. There were a large amount of questions about the human rights implications, in particular about the sort of projects the bank would be investing in, given that—along with the other founding partners—it is under Chinese state Government control, when they have a completely different approach to human rights and natural resource exploitation, particularly in sub-Saharan Africa, to that of our own country and the Department for International Development.
Kevin Brennan
I wish I had spent my lunch hour more productively, because somebody pointed out to me that a report is out today on human rights, businesses and the Department for Business, Innovation and Skills. With a busy day in Committee, I have missed the opportunity to give a brilliant response to my hon. Friend’s intervention. Nevertheless, she is right, and on trend in terms of today’s news cycle.
I am not saying that it is easy to solve this problem. As Kermit the Frog said, it is not easy being green. This is not an easy area to navigate, but the Government seem to want to make it more difficult than it is already. As I said earlier, the Green Investment Bank was an embryonic idea under the last Labour Government. It was mentioned by the former Chancellor of the Exchequer, Alistair Darling, in one of his Budgets and it was being developed in the Cabinet Office and in the Department for Business, Innovation and Skills when I was a Minister in both.
I was very pleased when the coalition Government brought forward proposals, having worked up those ideas so that they were workable, and when the Bill was passed and the bank was set up. I was also pleased about the good start the Bill has had and how well it got under way, which Members have also mentioned. There have been some criticisms about the straitjacket the Treasury might have put on the Green Investment Bank, but nevertheless it has been able to participate in the financing of projects that otherwise probably would not have taken place and that make a real contribution to meeting our commitments under the Climate Change Act 2008. I think we are all agreed that its creation is a good news story.
The Treasury does not want it appearing on the books because of the targets the Chancellor set for debt and deficit reduction. However, when we consider what we are doing here, we have come to a strange pass when even something that we all agree would be a good thing—that is, even good borrowing—is bad if it is on the Government’s books, and for no other reason than that. Sometimes we seem in this country to be the prisoners of public accountancy conventions in making public policy, rather than people who use common sense, as we are supposed to do in Britain, about when borrowing is good and effective and is used to invest—after all, that is what we are talking about—in growing our economy in the future in a sustainable way. During very difficult years following the banking crash, in which we were sometimes in recession, a significant part of recent growth in the UK came from the green economy. By some estimates it accounts for a million jobs in the low-carbon sector, worth more than £100 billion. It is disappointing that the Government are in danger, if they are not careful, of undermining one of the key drivers of that sector. If we were able to tap into our country’s potential in respect of wind, wave and tidal power, we could create hundreds of thousands more high-quality, sustainable jobs for our economy.
The CBI’s “The colour of growth” report says we have a £130 billion share of a global low-carbon marketplace that is worth about £4 trillion. That will rise hugely, given the opportunities around the world in years to come, but we are in danger of slipping down the ranks. We must not abdicate at this point our leadership on this issue. If we do, our prosperity, as well as our environment, will ultimately suffer.
Privatisation is not the only way that the Green Investment Bank could go out and borrow in the market; that could be done under the current legislation, in any case. However, because of the Government’s financial orthodoxy and desire to be able to say what they want to say about their targets, they are extremely reluctant to allow the Green Investment Bank to do it.
Mary Creagh
One thing that came out in the Select Committee’s evidence session was that the Green Investment Bank was very keen for the Government to retain their minority shareholding in the bank. That confirms my hon. Friend’s point about the fiscal orthodoxy with which the Government are pursuing this sale. Obviously, the bank’s green purposes would be protected as long as the Government’s minority share was in place.
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
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.
Kevin Brennan
We have had a very exciting afternoon, as I am sure you would agree, Ms Buck. The Government have adopted what might be called the “Boris principle” on voting—namely, that they can ignore the result of the first vote if they do not like the way it came out and demand a second. We live and learn about parliamentary procedure. We obviously respect your ruling on the matter, Ms Buck, with absolute and total respect.
We now come to part 8, which interestingly has nothing to do with enterprise, despite the Bill’s title. This has been called a “Christmas tree Bill”, because it has lots of different baubles on it. If that is the case, part 8 is an Easter egg hanging on the Christmas tree, because it has absolutely nothing to do with enterprise. Nevertheless, the Government chose to include it and it was ruled to be in scope, so it is completely in order for us to discuss these matters as part of the Enterprise Bill.
Let me make it clear from the outset that the Opposition agree that excessive exit payments in the public sector should not be paid, and that abuses in that regard should certainly be ended. The problem with the Government’s approach is that they are attempting to govern by headline in a very complex area. In doing so, they are creating anomalies and unfairness, and—that old favourite of ours—legislating to invoke the law of unintended consequences. That is what is likely to happen as a result of legislating rigidly on this matter, as they are doing.
Governments often resist legislating rigidly in Bills because they understand the mess that can ensue. It was Otto von Bismarck—not Leo from “The West Wing”—who first said that people should not see how two things are made: laws and sausages. This is a very good example of that. Putting such things in the Bill is basically a Government headline for the tabloid press about public sector fat cats—an odious remark that the Secretary of State made on Second Reading, which was an insult to many thousands of decent, hard-working people in this country. By legislating in that way, all sorts of messy, sausage-like substances will seep out.
The first group of amendments to clause 35 are about where an exit cap should be placed, who should be covered and who should be exempt. They are largely probing amendments, but I may press one of them later to test the Committee’s opinion on it, because it refers to what the Government said their intention was in introducing this legislation on exit payments. The amendments also cover an annual revaluation to ensure that the value does not diminish and that more workers are not caught inside the exit cap net.
Let me go through the amendments in turn. Amendment 116 would provide that regulations may make provision to secure that the total amount of exit payments made to a person in respect of a relevant public sector exit does not exceed a maximum of no less than £95,000. In other words, it seeks to ensure that the cap cannot be lowered further without legislation. I would be interested to hear from the Minister what the Government’s intension is on the question of whether it can be lowered without further legislation.
Amendment 109 probes why the cap has not been set at a level similar to the NHS level, which was £145,000. Although it is a probing amendment, I am interested to know why the provision introduces a disparity between different sets of public sector workers. The NHS caps underwent proper research, consultation and subsequent scrutiny, and were seen to be fair. I am afraid that that compares very badly with a completely rushed consultation with minimal research and the resultant limited scrutiny that these Government proposals have had.
In the other place, Baroness Neville-Rolfe said:
“A cap even at the level proposed by the Government will not affect the large majority of public sector workers”—[Official Report, House of Lords, 4 November 2015; Vol. 765, c. GC366.]
Will the Minister supply the Committee with the figures for the workers who would be affected by an exit cap payment of £95,000? The words, “a large majority” are a bit woolly; we need a bit more precision than that when we are legislating. What are the exact projections for the cap of £95,000 and what would the exact projections be if the cap were introduced at £145,000? I do not intend to press the amendment to a vote—it is a probing amendment—but we want to understand who is being affected and what we are talking about. Perhaps the Minister would supply the Committee with the cost to the public purse of the cap set at those two limits. I hope that she is able to do so. If she is not accepting on the grounds of costs, she will obviously have those figures to hand.
Mary Creagh
Has my hon. Friend looked into whether the employees of the UK Green Investment Bank would be covered by the cap? Obviously there are several executives who, as I mentioned previously, get significantly more than the £147,000 cap. Looking into their terms and conditions, I notice that they have a six-month notice period and that pay can be given in lieu of notice. In the event of that happening for one of the Green Investment Bank employees, does my hon. Friend think that this cap would click into force? Give that the Green Investment Bank might not be privatised until 2018 or 2019, how does he think that those employees would be affected?
Kevin Brennan
As I understand it from the Secretary of State, they would be affected only if they were officially classified as fat cats. If they are not affected, they are not officially fat cats in the eyes of the Secretary of State and if they are affected, they are officially fat cats according to the Secretary of State. It remains to be seen whether those employees are fat cats under the Government’s own definition.
Amendment 112 would subject the amount of the cap to an annual re-evaluation. Amendment 122 covers a similar subject. It is vital that any proposed cap is flexible and updated on a regular basis to take into account differences in pay and increases in separate areas of the public sector. In considering the scope and impact of the policy, it is important to note that the proposal to make the cap effective at £95,000 means that it will not just impact on higher paid senior managers.
If the £95,000 figure is not uprated, it is likely to affect more and more grades, so we ask the Government to consider re-evaluating it annually, perhaps using the same uprating as for public sector pensions. Similarly, will the Minister open discussions with the relevant stakeholders on technical considerations such as whether the cap will include other means by which an individual can access an unreduced pension, such as on compassionate grounds?
Uprating is important if workers are not to fall further behind. Having the uprating enshrined in primary legislation rather than being devolved to secondary legislation would ensure that it is reviewed annually. I would be interested to hear the Government’s explanation for why they are not picking this route and why they want to do it through secondary legislation. We will listen to that explanation with an open mind.
Amendment 114 would exempt from the cap those earning below the national average wage, who, by definition, could not be called the best paid—they would, however, be called fat cats by the Secretary of State. It is hard to see how the Government can include that group of workers if that is really what they think the measure is about. What are the specific reasons for not including people earning below the national average wage in an exemption from the exit cap? The only way those workers could get up to the cap is through decades of long service, and surely that kind of loyalty is not something the Government want to punish.
How many workers earning below the national average wage will be included in an exit cap of £95,000? I would be interested to hear the Government’s figures. I am sure they will have crunched the numbers carefully in considering and developing the policy, and I presume the Minister will have the figures to hand and examine them carefully before deciding whether to oppose our amendment.
It has been widely mentioned—this is really important and I will come back to it later—that the then Exchequer Secretary to the Treasury, the right hon. Member for Witham (Priti Patel), said in January 2015 on exit payments:
“This commitment, which will be included in our 2015 General Election manifesto, will cap payments for well-paid public sector workers at £95,000.”
I give her credit for her clarity on that. She went on to say:
“Crucially, those earning less than £27,000 will be exempted to protect the very small number of low earning, long-serving public servants.”
That commitment was given by a Treasury Minister a year ago. When the Conservative party manifesto came along, it said on page 49:
“We will end taxpayer-funded six-figure payoffs for the best paid public sector workers.”
On Second Reading in the House of Commons, the Secretary of State for Business, Innovation and Skills said that the measures were needed because
“Too many public sector fat cats are handed six figure pay-offs when they leave a job”—[Official Report, 2 February 2016; Vol. 605, c. 817.]
If someone is affected by this provision, according to the Secretary of State they are a fat cat. The amendments will allow us to explore exactly why that is a dreadful thing to say.
Mary Creagh
Has my hon. Friend seen any figures on the impact of the measure according to gender? Does he know whether there has been a gender impact assessment? I am thinking in particular of people who have worked for a long time as, say, teachers or nurses and who will be above the £27,000 a year de minimis requirement set out by the Treasury Minister, but who find themselves unable to continue, perhaps after a traumatic event or injury at work, and are able after a period of 30 years to leave. How does he think they will be affected? Does he see that there could be a discriminatory impact?
Kevin Brennan
My hon. Friend’s astute intervention saves me from going into too much detail on that score, but she is absolutely right: we simply do not know the equality implications of the measures, particularly in regard to gender, because the Government have not supplied us with the figures. It seems intuitively highly likely that the impact will be skewed heavily against female workers in the sorts of occupation that she outlined and perhaps in other public sector occupations.
The Bill, as it stands, does not have any such exemption as the Treasury Minister indicated it would last year. As far as I can make out, that was not the initial intention or, indeed, what was stated in the Conservative party manifesto. Despite the Government’s arguments, while the public sector exit payment cap includes pension entitlement within its scope—that is a key issue—it will affect employees on even lower salaries, as current pension protections wither on the vine.
Mary Creagh
That is a key point. We know that people working in the public sector have certain protections. In some services, those protections kick in at age 50, and in others at age 55. By including pension rights, people who may be forced to retire on the grounds of ill health or their simple inability to carry on working will find a cap on exit payments, meaning that they can get the six months’ notice. But the far more lasting injustice will be that their pensions cannot be made up as though they had worked to 60 or, in some cases, to 65. They will suffer detriment for the rest of their lives through loss of pension income that will not have been made up.
Kevin Brennan
That is not what we are discussing here. We are discussing the terms and conditions that public sector workers signed up to in agreement with the Government. In many cases, such people may have been in service for a long time and may well have given up the opportunity to earn more in the private sector by working as loyal public servants.
During the clause 26 discussion on Report in the Lords, Baroness Neville-Rolfe indicated that a drop of £500 would not be disproportionate for someone previously entitled to a pension of £12,500. I have to say that a drop of 4% is significant for somebody on a relatively small income, especially when that income is below that of someone on the national minimum wage. To say that a 4% cut is not significant is highly misleading.
The Government made the case in the House of Lords that leaving with a payment of £95,000 or above would be a large amount for any employee. For example, the Minister in the other place said that she does
“not accept that those exiting with a payment of £95,000”—
which is not the case—
“will generally be subject to hardship”.
The idea that someone will receive £95,000 is a myth. A large amount will never actually be seen by employees on low to average incomes, because the payment includes compensation paid to the pension scheme. My noble Friend Baroness Hayter pointed out that
“they cannot go off and use that money to live on while trying to retrain or move or find another job; it is an actuarial payment that never comes near their bank account… This is not a sum of money they can use to buy themselves an annuity to help train or move or anything else—it is money they never see.”—[Official Report, House of Lords, 30 November 2015; Vol. 767, c. 984-985.]
Mary Creagh
On the point made by the hon. and learned Member for South East Cambridgeshire, I did a quick Google search and discovered a headline relating to Tesco, which we have discussed in Committee previously:
“Ousted Tesco boss is handed £20million payoff”.
I do not know whether that was three times his annual income, but that is what the Daily Mail reported was received by Philip Clarke, 54, who stepped
“down after 3.7% drop in like-for-like quarterly sales”.
Kevin Brennan
As ever, I cannot fault my hon. Friend’s interventions, even if I might fault her sources from time to time. She is right to point that out to the Committee. Let us take a hypothetical example of how someone might be affected. The Government are trying to make out that people will not be affected, but, to take her point, if we take someone who has been a librarian in the public sector for 34 years and who has reached the age of 55 with a career-average salary for pension calculation purposes of £25,000, their pension accrued at one 49th per year of service would add up to £510.20 for each year of service. With 34 years of service that would come to £17,346.93. Under the regulations, if it came to pass that that person had to leave the service owing to redundancy, they would get a pension of £17,346 11 years earlier than the normal retirement age of 66. Therefore, if we take those 11 years and count in the pension, that adds up to £190,816 of pension paid before normal retirement age.
The payment required by the pension fund to enable that unreduced pension to be paid would be likely to breach the Government’s proposed £95,000 exit cap. There are technical reasons why it does not add up to the full amount of £190,000, but the so-called strain payment required is highly likely to exceed the Government’s proposed cap, so the employer would not be able to make the member redundant without breaching either the proposed cap or the current local government pension scheme regulations.
On Report in the House of Lords, Baroness Neville-Rolfe said of that example that that person would not be affected by the cap if they were aged 52. That is correct, but that misses the point as no pension payment would be in play if someone were made redundant earlier than age 55. That would be a simple redundancy payment, paid directly to the member of staff in the normal way, which would be unlikely to breach the cap. The issue is with people made redundant after the age of 55 who are automatically entitled to early retirement rather than a straightforward redundancy settlement.
It is important to note that in the example I gave the normal retirement age is 66 and while many local government employees who are currently 55 will have some protections in place to mitigate the worst effects of such a cap, that will not be true for all employees, nor will it be true for staff as time moves on. We must remember that the proposals are expected to be in force for some considerable time and all current protections are withering on the vine as we speak.
Amendment 115 would seek to protect workers who earn less than £27,000 and have many years of loyal service. The Government’s manifesto referred to “best paid workers”, so I wonder whether they consider a worker earning £27,000 a year to be one of the best-paid workers in the country who should be covered by the cap. I do not think that was the original intention—in fact, I know that, because as I said earlier the right hon. Member for Witham, when in the Treasury, said that
“those earning less than £27,000 will be exempted to protect the very small number of low earning, long-serving public servants.”
She did not think that they were fat cats at that time and she thought they should be protected, so we need to understand why that is not happening in the Bill.
Why not accept amendment 115? Will the Minister outline the unusual circumstances, as Baroness Neville-Rolfe did, in which workers will be caught out? Why was a lower earnings floor not included given that the Government promised that a year ago in their manifesto, which said that they would pursue the “best paid workers” and that that was the cap’s intention? Of course, once the election was over, the Government ignored what they had said. The Minister referred to the small number of low-earning, long-serving public servants, but can this Minister supply the Committee with her estimate of how low-paid and long-serving workers will be affected by the cap?
I was going to talk about the poor quality of the consultation. I do not want to detain the Committee for too long, but the consultation was in no way of the same quality—I pay tribute on that score at least to Lord Maude—as the consultation done when caps were introduced previously in the civil service. Further problems have emerged as a result of how poorly the consultation was conducted. Usually, a full consultation takes 12 weeks rather than the four weeks taken by this one, which began on 31 July 2015 and concluded on 27 August 2015. Problematically for a lot of workers in education, of course, that coincides exactly with the summer recess, and the measure could have a big impact in schools and education. The National Association of Head Teachers has pointed out that there are particular problems relating to the proposals as a result, and that it did not get a proper opportunity to consult its membership about them.
That takes me to amendment 128, which would ensure that the restriction on public sector exit payments is set at a level linked to inflation and earnings growth, of which arbitrary fixed caps do not account. If the cap is introduced, there must be a commitment to index-linking it to ensure that it meets the original intention without becoming more and more punitive over time. Any cap must include a mechanism for index-linking in line with pay and prices.
This is a long group of amendments; I apologise, Ms Buck, but I must go through each one. Amendment 104 would exclude from the cap compensatory payments made by an employer to a pension scheme that do not go to the person leaving the service. That refers back to strain payments, which I was discussing earlier.
Mary Creagh
My hon. Friend is making an excellent point, and I agree particularly with his amendment to ensure that exit payments are linked to inflation and earnings growth. Otherwise, the cap would become an arbitrary bar that could dissuade people from going into public sector jobs.
For the record, I wanted to draw to my hon. Friend’s attention, particularly in terms of pensions, the payoff of £3.6 million made to Richard Glynn, chief executive of Ladbrokes. When Dalton Philips, chief executive of Morrisons, left after a chequered reign, his payoff was £4 million. The boss of Barclays, which of course is partially state-owned, left with £28 million in cash and shares. On the pensions point, the disgraced chief executive of Volkswagen, Martin Winterkorn, left with a €21 million pension pot. Just to be clear about the—
The Chair
Mary Creagh
I am not clear whether the provision applies retrospectively or about how far back it goes. Does it not potentially open the door to class actions from large groups of people? I can see one class action in development from the Magnox employees, who are working for a privately owned company that has been nationally owned. Does my hon. Friend find it interesting that the Minister was so keen to resist our amendments this morning that would have provided transparency on the remuneration of executives of the Green Investment Bank yet is so very keen to impose a cap on people working for a formerly state-owned company that is now a private company?
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.
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.
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.
Mary Creagh
Does my hon. Friend think the Minister was being slightly misleading when she said that people in the private sector would be entitled only to the maximum statutory redundancy pay of £14,500? That is the statutory maximum, but, as I said in earlier interventions, when people are made redundant they are often entitled to pay in lieu of notice, so it is slightly misleading of the Minister to use the statutory maximum for redundancy in the private sector as a comparator.
Kevin Brennan
I do not think the Minister was being misleading, because had she been, it would have been out of order, but she was perhaps using an example that was not directly comparable, if I can put it that way.