MPs vote to cap civil servants' redundancy pay

MPs voted to place a cap on "unaffordable and unsustainable" redundancy pay in the Civil Service.

The Superannuation Bill, which aims to cap payoffs at one year's salary or 15 months for voluntary redundancies, was given a second reading by 326 votes to 244, Government majority 82.

An amendment calling for the previous Labour government's reform proposals to be implemented instead was defeated by 329 votes to 240, Government majority 89.

The Bill cleared its first Commons hurdle and now moves to its detailed committee stage.

Thousands of Civil Service posts are expected to be scrapped after next month's spending review, as Whitehall department budgets are cut by an average 25%.

Civil servants can currently get three years' salary if they are made redundant, with those recruited before 1987 entitled to as much as six years.

Opening the debate, Cabinet Office Minister Francis Maude urged civil service unions to agree new redundancy terms and make the Bill "a dead letter" before it becomes law.

He issued a personal plea to Mark Serwotka, general secretary of the Public and Commercial Services (PCS) union which went to court to block previously agreed reform, as he expressed hope that a deal could be reached.

But he warned that a single trade union would not be allowed to stand in the way of reforming the current arrangements.

Negotiations on reform to the system under the previous Labour administration were blocked after 18 months when the PCS won a legal challenge in the High Court.

Mr Maude said while he thought that agreement was too generous, there would have been a "pressing case" to leave it in place had it been finalised.

The current scheme made it "prohibitively expensive" to get rid of highly-paid, long-serving staff, meaning lower-paid workers were disproportionately hit if job cuts were needed.

Sometimes this meant as many as 10 low-paid workers being laid off, instead of one more highly-paid staff member.

He said the current system was far more generous than the statutory redundancy payments available to most low-paid people in the private sector, which are no more than 32 weeks' pay capped at £380 a week - the equivalent of around £11,000.

"The current scheme is unaffordable, it is unsustainable," he said. "The level of payments under the current scheme would be excessive even if we were not facing such a difficult financial situation."

Mr Maude described the Bill as a "blunt instrument" as he expressed hope that a negotiated deal - including more protection for lower-paid workers - could be agreed.

"I do not want this to end up being something which is unilaterally imposed. I want there to be a genuine, consensual arrangement, where all six civil service unions agree to a new, sustainable long-term scheme," he said.

Shadow Cabinet Office minister Tessa Jowell agreed that the current redundancy scheme provided "overly generous and disproportionate benefits for some very highly-paid people".

This was why the Labour government proposed in February to end the "overly generous settlements", which would have saved "over £500 million over the next three years", she said.

"So yes reform is needed but it needs to be the right reform made in the right way. Right because it's fair, workable and particularly ... provides protection for the lowest-paid."

The Bill was being used "very deliberately to force the trade unions into compliance", which was a "very unusual use of parliamentary procedure", she warned.

The legislation exposed signs of tension within the coalition as a handful of Liberal Democrats indicated they would vote against it.

Martin Horwood (Cheltenham) said the legislation was "pretty poor reward" for civil servants' loyalty, while David Ward (Bradford East) said: "Just when we require the support and the goodwill of the trade unions at this most difficult time in the public sector, we here at the heart of Government seek to jab them with a stick."

And Lib Dem John Thurso (Caithness, Sutherland and Easter Ross) said he would not support the Bill as he believed in a "moral contract between the state and its employees".