Union fury as Treasury confirms plan to overhaul civil service redundancy terms

Treasury consultation confirms plans for wide-ranging shake-up of exit terms – with the FDA union branding the proposals an "ideological attack on public servants"

By Matt Foster

05 Feb 2016

The Treasury has confirmed that it is seeking further cuts to redundancy pay for civil servants – sparking accusations from unions of a "breach of trust".

Late last year it was reported that chancellor George Osborne was seeking to reduce the maximum payment for voluntary redundancy across the public sector workforce to 15 months' salary, down from the current 21 months.

That 21-month limit on voluntary payouts was only agreed after extensive talks with unions in 2010, with the Cabinet Office initially consulting on reducing such payouts to 15 months. 

George Osborne "seeking fresh curbs to civil service redundancy pay"
Treasury to press ahead with £95,000 cap on civil service exit pay-outs

In a consultation document published on Friday morning, the Treasury confirmed its intention to revisit that 15-month limit, and said it was planning to "make public sector exit compensation terms fairer, more modern and more consistent" in a bid to drive down public spending. [Update 8/2: The Cabinet Office has also launched its own consultation on a wide-ranging shake-up of the Civil Service Compensation Scheme. Full details in our story here]

According to the consultation, the specific proposals under consideration by the Treasury – and set to apply to all "current and future public sector employees" – are:

  • imposing the 15-month cap on the maximum number of months' salary that can be taken into account when working out an exit payment, a reduction of six months on the current terms;
  • reducing the maximum tariff for calculating exit payments to three weeks' pay for every year served. At present, officials under pension age who take voluntary redundancy are entitled to one month's pay per year of service up to a maximum of 21 months, while the limit for compulsory redundancies is one month's pay per year of service up to 12 months;
  • setting a maximum salary for the calculation of redundancy payments, with a limit which the Treasury says "could be set at various levels and could potentially align with the NHS redundancy scheme’s salary cap of £80,000";
  • bringing in a "tapering element" to cut the amount of lump sum compensation staff are entitled to as they approach retirement age;
  • and "reducing the cost of employer funded pension top ups for early retirement as part of redundancy packages". 

The document (available in full below) says the government "will consider providing a form of transitional protection" as the new system is rolled out, with exits previously agreed between employers and staff prior to any changes "paid under the previous terms".

And on the new 15-month limit, it suggests some room for manoeuvre, with the consultation saying: "Where employers distinguish between voluntary and compulsory redundancies there may be a case for maintaining a differential by applying a lower limit to the latter. Likewise, where employers offer voluntary exit packages that are not classed as redundancies there may be a case for applying a slightly higher limit to those as part of an overall package."

"Slow the system down to a crawl"

But the proposals have already been roundly condemned by the three main civil service unions.

Dave Penman of the FDA union – which represents senior officials – warned that imposing "arbitrary" caps could undermine efforts to ensure smooth exits as the civil service continues to shrink in size under the Treasury's wider austerity plans.

He added: "Civil servants have the right to be consulted on changes to their redundancy terms, yet the Treasury seeks to prescribe the boundaries of the scheme without any discussion at all. 

"This isn’t about efficiency or modernisation, this is simply an arbitrary decision to cut the terms and conditions of public sector workers.

“One of the success stories for the civil service over the last decade has been how it has managed large scale reductions in staffing with very few compulsory redundancies.

“If the Treasury proposals go through the result will be a longer, more tortuous exit processes that will slow the system down to a crawl, making every civil service staff reduction a long, painful and drawn out process challenged at every stage. 

“At a time when the public sector is challenged with managing another round of major job cuts, this will be seen as a breach of trust on the deal we reached with the government just five years ago and little more than an ideological attack on public servants.”

The union also pointed out that the 2010 reforms to the Civil Service Compensation Scheme were described by then-Cabinet Office minister Francis Maude as being  sustainable "in the longer term".

That view was echoed by the general secretary of the Public and Commercial Services (PCS) union, the largest of the civil service unions. PCS chief Mark Serwotka said: "It is utterly sickening to see the Tories treat civil servants with such contempt, rowing back on promises made just a few years ago.

"In the same way that public sector pensions were slashed on the basis of a lie, there is no justification or need for this and we will be opposing it."

Meanwhile, the deputy general secretary of the specialist Prospect union, accused the Treasury of "misleading the public" by describing redundancy payments as a "giveaway".

He added: “The money paid on redundancy is compensation for the loss of a job that is no longer required, not a payoff for someone who has underperformed. The evidence supporting the government’s claims is flimsy and will be strongly challenged by Prospect through the consultation process.”

"Fix the public finances"

Launching the consultation, which will run until May 3, chief secretary to the Treasury Greg Hands said the government was seeking to "fix the public finances and return the country to surplus so we can pay down our national debt".

He added: "A key part of this is modernising the public sector workforce. Reforming public sector redundancy payments could save taxpayers hundreds of millions of pounds by 2020 and will ensure that public sector workers get a fair deal by ensuring greater consistency in redundancy pay-out terms between workforces."

The document says that while the Treasury would "look to departments responsible for the main public sector workforces to negotiate and agree reforms" stemming from its consultation, it does not rule out imposing the changes through legislation.

"The government would reserve the ability to set a reform framework in future primary legislation depending on progress in implementing the reforms," it says.

And while the Treasury says the savings it expects to generate from the changes "would vary depending upon the exact policy proposals enacted and on the rate of exits in the public sector over the coming years", it puts estimates "in the hundreds of millions over the course of this parliament".

In the section detailing the wider economic impacts of the planned changes, the department says that while there will be "reductions in the spending power of some former public servants" there will be "possibly a greater incentive for some of them, particularly at younger ages, to find new jobs quickly".

It adds: "However, there would also be less strain on public sector employers’ budgets, so, all things being equal, greater ability to pay remaining employees and provide services."

"Proportionate, justifiable, and value for money"

Hands also published a new document on Friday reminding departments of their obligation to keep an eye on public sector pay and terms.

The document, which collates existing guidance, said that while staff "do hugely important work and deserve to be fairly rewarded", pay and terms "must always be proportionate, justifiable and deliver value for money for taxpayers, not least at senior levels".

Osborne announced late last year that the Treasury's policy of capping annual public sector pay rises at 1% would remain in force until at least 2019-20. The cap was imposed in 2012, and followed two years of a pay freeze.

Labour on Friday joined criticism of  the redundancy shake-up proposals, with shadow Cabinet Office minister Louise Haigh accusing the Treasury of launching a "sham consultation".

"Junior doctors' contracts, nursing bursaries, HMRC & BIS office closures and now a clamp-down on terms & conditions for dedicated civil servants agreed only a few years ago. 

She added: "When is this government going to start treating teachers, firefighters and civil servants with the respect they deserve and when will they realise you cannot treat your employees as an irrelevant afterthought? Terms & conditions are a bond of trust between employer and employee and they should be changed in partnership not imposed from the top.”

Consultation on Public Sector Exit Payment Reforms

Share this page