Treasury plans fresh crackdown on civil service exit payments

Chief secretary to the Treasury says government is "committed" to payout cap
Steve Barclay said he was "alarmed by the size of payouts". Photo: Allstar Picture Library Ltd / Alamy Stock Photo

Ministers have promised a fresh crackdown on exit payments for civil servants, just weeks after scrapping regulations capping payouts at £95,000.

Chief secretary to the Treasury Steve Barclay has said the government remains “committed” to its policy of limiting exit payments and will issue new guidance within three months, despite a U-turn last month on its previous attempt to enact the policy.

The Treasury introduced regulations capping exit payments at £95,000 – a Conservative Party manifesto commitment in the 2015 general election – in November, after years of consultations and delays.

But it dropped the regulations after just three months, after a group of public sector unions launched legal action against them.

In mid-February, the department said after an “extensive review” of the application of the cap, the government had concluded it “may have had unintended consequences” and the regulations should be revoked. 

It also said departments, arm’s-length bodies and other departments that had paid out capped sums to former employees while the regulations were in effect were now being “encouraged” to make up the difference.

But speaking to a think tank last week, Barclay said ministers are now working with lawyers to find a “legally watertight” way of limiting payouts.

“We are working with senior counsel around approaching the issue in terms of what we opt in, as opposed to what we opt out,” he told the TaxPayers’ Alliance.

Exit payments that have attracted attention in recent years include a “compensation payment” of £248,189 to Mark Sedwill when he stepped down as cabinet secretary before his five-year term was up last year.

 “We have committed to this as a policy, and within the next three months, we will be putting out guidance to departments to particularly target discretionary payments, things like severance payments. We will have a clamp down on that,” Barclay, who campaigned for limits on so-called “golden goodbyes” when he was a backbencher, said.

He said: “I was alarmed by the size of payouts often linked to poor performance, often where people had a habit of reappearing at a later date elsewhere in the public square.”

TaxPayers’ Alliance chief executive John O'Connell welcomed Barclay’s comments and said new regulations should “cast a wide net to ensure top mandarins and town hall bosses can't just slip through with endless exemptions and legal loopholes”.

A Treasury spokesman said: “We remain committed to bringing forward proposals at pace to tackle unjustified exit payments.”

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