The announcement in the Queen’s Speech that the government is planning to cap exit payments made to public sector workers – to bring an end to what it calls “six-figure payoffs for the best paid” – is as disappointing as it is predictable. I have a number of problems with the plan, both in terms of substance and tone.
First things first: let’s deal with substance. In 2010, the FDA negotiated new redundancy arrangements twice. We first sat down with the outgoing Labour government, before these proposals were challenged in the courts just prior to the election. The second round was conducted with a Conservative minister – Francis Maude – leading the negotiations. He described the resulting deal as “fair for the longer term”.
Perhaps we’ve got different ideas on what “longer term” means, but this announcement can only undermine confidence in the government’s willingness to honour its own agreements. What, materially, has changed since 2010? Public finances, we are told, are on the up. The new redundancy arrangements have helped the civil service to reduce its workforce dramatically over the last five years. In the main, reductions have been achieved through voluntary exits, while at the same time the cost to the public purse has been significantly less than would have been the case with the previous scheme. Win-win, you might be forgiven for thinking.
But it appears not, and this brings me on to my second point. What is actually driving these changes seems evident from the language used to describe them. Ministers speak of “hard-working taxpayers” on low salaries having to fund “huge pay-outs when well-paid people get made redundant”. We hear about “fat cats and golden goodbyes”. And even the government’s official communications channel, GOV.UK, uses the phrase “six-figure pay-outs for the best-paid public servants”.
Now, far be it from me to get in the way of a nice bit of senior public servant-bashing, but let’s deal with some facts. If the redundancy cap is to include the cost of early payment of pension – a valued and valuable tool used across public and private sector schemes to incentivise people to volunteer to take redundancy – then these proposals will hit those earning just above the median salary level in the civil service.
If someone has spent most of their career in the service, it’s not unusual for them to have a preserved pension of around one-third to a half of their salary. If they opt for early payment of pension as an alternative to a redundancy payment, which is then paid seven or eight years before pension age, then suddenly they’re hitting the magic “six figure” ceiling. Civil servants at executive officer level could potentially be affected.
And of course, this cap is not just about the civil service, so it will have an impact on teachers, nurses, paramedics, firefighters and police officers – everyone’s favourite public servants. Indeed, this was recognised by the Conservatives when they made the announcement in January, as they indicated that there would be protection for anyone earning less than £27,000 per annum. Why build in protection if it’s not going to affect public servants at this level? So while the rhetoric might focus on fat cat public servants, the reality is that this will potentially hit hundreds of thousands – if not millions – of public sector workers.
It is also particularly worrying that the government chooses to use this kind of language against its own “hard-working taxpayers”, some of whom happen to earn above-average salaries. Senior public servants receive those salaries because they do big, important jobs. They may earn higher than the average salary in Britain, but as regular readers of my column will be tired of hearing, they also earn significantly less than they would doing equivalent jobs in the private sector: even the government’s own evidence demonstrates this, time after time.
Whether it’s the cap on salary set at the same level as the prime minister – and if there is a more illogical and pointless piece of political rhetoric dressed up as a policy I’d like to see it (answers on a postcard please) – or the annual fingers-in-the-ears approach to the recommendations of the Senior Salaries Review Body, the government almost appears embarrassed that they employ senior public servants at all.
Senior officials know that they are being set a huge challenge, delivering the government’s policy objectives within such tight fiscal constraints. That is, to some degree, what they sign up for. But what they don’t sign up for is to be denigrated for the heinous crime of being paid better-than-average salaries from the public purse.
Arbitrary caps – whether it’s on pay levels or redundancy payments – may make good soundbites before an election, but they rarely make good policy. The civil service faces a huge challenge over the coming years. It needs to continue to attract and motivate the best talent, while at the same time managing another significant reduction in staffing. I fail to see how this sort of approach can help it do either.