No civil servant earning less than £25,000 will be hit by the government's plans to cap redundancy payouts at £95,000, business minister Anna Soubry has claimed, as she sought to defend the proposals from cross-party criticism.
The Enterprise Bill includes a plan to place a limit of £95,000 on severance pay-outs for civil servants and staff across the wider public sector.
The Treasury has said it wants end exit payments "far in excess of those available to most workers in the public sector or wider economy", while business secretary Sajid Javid has said the cap will put an end to "fat cat" payouts.
Cabinet Office mulls further cuts to exit pay and axing of early pension access in Compensation Scheme overhaul
Treasury to press ahead with £95,000 cap on civil service exit pay-outs
But civil service unions have warned that the cap – which will take into account not just lump sum payments, but also early access to unreduced pensions, and non-financial benefits such as extra annual leave – will also hit long-serving staff on lower pay.
The plans came under fire in the Commons this week as MPs debated a series of amendments – both ultimately defeated – to the Bill.
Labour and the Scottish National Party proposed two changes that would have exempted public servants earning less than £27,000 from the cap and see it rise in line with inflation.
Speaking during the debate, Labour MP Kevin Brennan accused ministers of having "put things in the Bill that are meant to get them a headline in the Daily Mail and The Sun".
"If abuses are going on in relation to public sector exit payments, we are perfectly willing to say they should be stopped, but we need to look at what the clause actually does," he said.
"It picks the figure of £95,000 to generate a headline saying that the Bill will stop fat-cat public sector exit payments of more than £100,000.
"However, what it does not elucidate very well is that that £95,000 is not just a cash lump sum, but includes the so-called strain payments that are paid into workers’ pension funds when they are forced into redundancy before retirement age.
"That is money they will never get in their pockets — they are not walking away with £95,000. They are not fat cats earning more than £100,000, and some are on relatively modest incomes. The Bill will also capture many people in the private sector, which the government were also not keen to elucidate on."
"Extraordinary public servants"
The plans were also questioned by former Conservative former defence minister Sir Gerald Howarth.
While the Aldershot MP did not side with the Labour amendments when it came to the vote, he said he had an "enormously high regard" for the "extraordinary public servants" working for agencies including the Ministry of Defence's Science Technology Laboratory and the privately-run Atomic Weapons Establishment who were set to be affected by the cap.
"It is easy for the newspapers to produce graphic headlines such as 'Civil service pen-pushers get massive pay-offs', but I am talking about slightly different people," he said.
Howarth added: "They work at the forefront of technology to ensure that the nation remains safe and that our realm remains secure. I know from talking to my constituents that people at the AWE, which has been privatised, are very unhappy indeed.
"The AWE is a unique and important facility. It is the only place capable of designing and producing the successor to our Trident nuclear missile system, and indeed of maintaining Trident until its successor comes into force.
"I am told that morale at the AWE is at rock bottom. To remove the last major benefit of working there—pay has been historically low because of the decent benefits—risks the nuclear deterrent, in some people’s opinion."
Howarth urged Soubry to "have a discussion with the Treasury to determine whether this matter can be looked at again", saying the cap was "not fair on some of our most dedicated scientists who [...] are working to keep us secure".
"The cap will curb only the top end of exit payments"
Responding for the government, Soubry said the Conservative manifesto had been "very clear that we would introduce the cap and that we would set it at £95,000".
"It is extremely important to remember that this relates to redundancy pay," she said. "The cap will curb only the top end of exit payments—just the top 5% in value of all exit packages across the public sector."
And the minister said she wanted to make it "absolutely clear" that the cap would not hit officials on lower salaries.
"The Cabinet Office has confirmed that no civil servant earning below £25,000 will be captured," she said. "Some earning around £25,000 may be captured, but we can find no such example."
Soubry added: "We also think it unlikely that anyone earning less than £27,000 would be hit by the cap. It is important that we remember that it is extremely rare in the private sector for anyone on a wage of £25,000 to expect, on redundancy, a payment of £95,000—nearly four times their annual earnings."
Labour also tabled an amendment seeking to exempt public servants at a number of government-owned but privately-run sites from the cap. When it came to the vote, both amendments were defeated.
The Enterprise Bill will now head to the House of Lords where peers will get a chance to further scrutinise the government's plans.
The plan to cap exit payouts comes as the Cabinet Office consults on wider changes to civil service redundancy terms under the Civil Service Compensation Scheme.
As well as the £95,000 cap included in the Enterprise Bill, the Cabinet Office has set out plans to cut the tariff used to calculate civil service redundancy payouts and end employer-funded early access to pensions.
The CSCS was last overhauled in 2010 after lengthy talks with civil service unions, but the Cabinet Office says it now believes that deal is “not fully delivering against its aims” and is encouraging staff facing redundancy “to hold on in the expectation of better terms later”.