Civil Service Compensation Scheme offer “imminent” — as Treasury sets out framework for cuts

Offer to unions on civil service redundancy shake-up could come as early as today, CSW understands, as Treasury sets out broader reform "framework"

By Matt Foster

26 Sep 2016

The Treasury has confirmed that it is pressing ahead with cuts to redundancy pay across the entire public sector — but civil servants may get a better-than-expected deal when a final offer to unions is made imminently.

Ministers announced in February that they wanted to make public sector exit pay “fairer, more modern and more consistent" in a bid to drive down public spending.

Two consultations — one from the Treasury on the entire public sector and another from the Cabinet Office specifically on the Civil Service Compensation Scheme — were subsequently launched, with both documents laying out plans to cut the tariff used to calculate exit payments and lower the maximum number of months’ salary that can be paid to departing public servants.

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While CSW understands that a final offer on the Civil Service Compensation Scheme — which was renegotiated in 2010 — has yet be made to unions, the Treasury on Monday published the response to its consultation which sets out the “overall, centrally-set framework” for exit pay reform that will apply across the public sector.

The Treasury makes clear that while each part of the public sector workforce will be able “to reach agreement on packages of reforms appropriate to those workforces”, it expects the key elements of the reforms — which it says could save “up to approximately £250 million a year” — to be:

  • a 25% cut in the tariff used to calculate exit payments, from four weeks’ pay for every year of service down to three weeks’ tariff. The Treasury also says employers “could apply tariff rates below these limits”;
  • a ceiling of 15 months on the maximum number of months’ salary that can be paid, down from the current 21 months;
  • a maximum salary on which an exit payment can be based, which the Treasury it will expect schemes to align with the current NHS limit of £80,000 “as a starting point”;
  • a new taper on the amount of lump sum compensation an individual can get the closer they get to their normal pension age; 
  • moves “to limit or end employer-funded early access to pension within exit packages”.

The Treasury also promises to take specific measures “appropriate to each workforce”, including limiting the ability of employers to top up employer-funded pensions as part of exit packages. 

The Cabinet Office has yet to publish its response to the specific Civil Service Compensation Scheme proposals, meaning the precise changes to civil service exit pay are still be confirmed. However, union sources indicated to CSW that an offer from the Cabinet Office was “imminent” — and could come as early as this afternoon.

While the Treasury's consultation response makes clear that it has not significantly shifted its position since outlining the proposals earlier this year, sources close to the separate civil service talks said that they expected some elements of that offer to be more generous than both the Treasury framework published today, and the initial position set out by the Cabinet Office in its earlier consultation document.

The decision to look again at redundancy pay for civil servants has been heavily criticised by public sector unions since it was first announced in February. Unions are particularly angered that ministers have chosen to revisit a 2010 deal on the compensation scheme which was described at the time by Cabinet Office minister Francis Maude as “fair, affordable and sustainable”.

Despite criticism of that move, the FDA, Prospect, the GMB, Unison and the Defence Police Federation opted to take part in talks with the Cabinet Office on the CSCS changes. CSW understands that a key element of those negotiations has involved pushing for explicit assurances that any new deal will be long-lasting as well as for better terms for low-paid staff with long service that are likely to be hit by the reforms.

Unite, the POA, and the the Public and Commercial Services (PCS) union — the civil service’s largest union — chose not to take party in the latest round of talks, however, with PCS arguing that the Cabinet Office had sought to impose “outrageous” pre-conditions on its negotiating team.

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