Question to the HM Treasury:

To ask Mr Chancellor of the Exchequer, pursuant to the Answer of 4February 2016 to Question 24536, what assessment he has made of the number of exit payments in the private sector above £1 million; and what assessment his Department has made of the effect of such exit payments on pay inequality within and between the public and private sectors.

Exit payment terms and contractual arrangements, including the number of individuals on those terms, vary significantly across the private sector and within the public sector. The Government has made no specific assessment of the number of exit payments in the private sector above £1 million. The Government accepts there may be examples of terms in the private sector that match or exceed those in the public sector; including some private sector exit packages that exceed £1 million. Conversely, the Government has seen no evidence that redundancy terms such as employer-funded early retirement, which are widely available across the public sector and often cost employers tens, or even hundreds of thousands of pounds per person, are replicated to the same extent in the private sector.

The Government has a duty to ensure public sector exit payments are fair and provide value for money to the tax payer. This is why, in the 2015 Spending Review, the Government announced it would consult on further cross public sector action on exit payment terms to ensure greater consistency within the public sector and reduce the cost of redundancy pay-outs. This consultation was launched on the 5 February 2016 and can be found at the following link: https://www.gov.uk/government/consultations/further-consultation-on-limiting-public-sector-exit-payments.

The Government believes that the remuneration of senior staff in the private sector is primarily a matter for companies and their shareholders. Comprehensive reforms were introduced in 2013 to require companies to put their forward-looking pay policies, which must include details of their approach to exit payments, to a binding shareholder vote at least every three years. Companies are therefore only able to make exit payments within the limits that have been approved by a majority of shareholders.

Overall, public sector pay remains on average comparable to private sector pay, and public sector defined benefit pensions are amongst the best available. HM Treasury analysis, as well as independent studies, show public sector pay at a premium for most of the last Parliament, and a significant continued premium when pensions are taken into account (IFS October 2014).