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New Legislation to Limit Civil Service Redundancy Payments

CAB 122-10 
6 July 2010

As part of the Government’s deficit reduction plan, the Minister for the Cabinet Office, Francis Maude, has announced that he will begin the process of introducing legislation as soon as possible to cap the amount of redundancy payments made to civil servants to bring them in line with the best practice in the private sector.

Making the announcement, Francis Maude said the Government had made the decision to legislate “with reluctance”, but that it had become necessary because of current economic climate and the unilateral action taken by a single union (PCS) to contest the previous Government’s reforms.

The Bill will limit the cost of future redundancy payments by:

• Capping all compulsory redundancy payments at 12 months’ pay; and
• Limiting payments for voluntary exits to fifteen months salary.
• Accrued pension rights will not be affected by the new legislation.

Francis Maude made it clear the Government wants to proceed by negotiation with the unions and confirmed he is writing to Paul Noon, the Chair of the Council of Civil Service Unions (CCSU) to invite them to discuss this.   He said that the Government hopes to agree with all the unions a permanent and sustainable new scheme, which is appropriate to the times, but also gives additional protection to lower paid civil servants. Under the current scheme, some longstanding employees are eligible for a package worth more than six years’ pay.

Francis Maude said:

“Our system of a permanent politically impartial Civil Service is one of the jewels in our constitution and it is rightly admired throughout the world for the way it serves the elected government of the day.  I am a huge admirer of its professionalism, and strongly support the values and ethos that underpin it.  Sadly the huge deficit we inherited means there is a real urgency now for change.  It is for this reason, and in the light of the current deadlock, that we have had to reluctantly start this process today.  I’ve already been impressed by the way that, in just a few weeks, civil servants have come up with tens of thousands of ideas for making savings and shown a real willingness to do things differently. And, had the PCS shown the same willingness to negotiate as the other five Civil Service unions then today’s action might not have been necessary.

“This is just the beginning of the process.  I want to make it absolutely clear that we see today’s Bill as the basis for immediate discussions to start.  What is on offer now is simply untenable and completely out of kilter with what is on offer in the wider public sector and the private sector.

“Our ambition now is that a negotiated, sustainable and practical long-term successor to the existing scheme can be agreed – one that is flexible and appropriate for current economic climate and also fair for lower paid workers.”

Today's announcement comes on the day Francis Maude is due to address civil servants at the annual Civil Service Live event.  In his speech, he will set out his vision for the next chapter of Civil Service reform and what kind of service it needs to be by 2020.

His speech will praise the work done by civil servants in the aftermath of the General Election and say that the transition to the new coalition government exemplified the excellence of their work.  It will also acknowledge that there has been significant progress in recent years in increasing capability within the Civil Service, including the ground-breaking Capability Review programme.

But, he will also outline the need for more changes ahead, saying the economic challenges mean the Civil Service has to go further and faster to increase professionalism than ever before.  And, as part of this drive to become more efficient and effective, the Civil Service has to address straight away some historic anomalies in Civil Service terms and conditions and that includes looking at compensation.

Notes to editors

1. Earlier this year the previous government put in place a reformed scheme with the agreement of five out of the six Civil Service unions.  The sixth, PCS, sought judicial review and succeeded in having the scheme struck down by the High Court following a wider interpretation of what was protected under the 1972 Superannuation Act than had been the view within Government.
2. Today's legislation is not intended to prevent changes to rights to compensation for loss of office.  Also, this new legislation does not affect accrued pension rights.
3. Under the current scheme a longstanding employee may be entitled to compensation which is at times hugely out of kilter with the 30 week statutory redundancy scheme and comparable arrangements in the wider public and private sectors.  Some longstanding employees are eligible for a package worth over six years’ pay.
4. A copy of the letter from the Minister for the Cabinet Office, Francis Maude, to Paul Noon [PDF 60KB, 2 pages], Chair of the CCSU, is available.
5. The written ministerial statement is available

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