The wrong approach to reforming civil service redundancy

By Gregg McClymont MP

Parliament returns this week, and the coalition smash and grab continues. Doubtless, their opportunistic marriage of electoral reform with constituency gerrymandering will dominate the headlines. But an important element of their assault on the public sector will also be carried forward.

The Civil Service Compensation Scheme has a long and complex history – a system of legal entitlements to payments to individuals who lose their jobs through compulsory or voluntary redundancy, which cannot be changed for the worse without formal consultation and agreement with trade unions. The last government tried to change the system too and got agreement from 5 of the 6 unions involved. But Labour’s reform was opposed by the Public and Commercial Services union, who refused to sign up, took the government to court, and had the agreement struck down.

This ‘victory’ is unlikely to be in the interests of their members. The PCS court case was good tactics, but bad strategy. The coalition package offers far less generous terms to civil servants than those offered by Labour. Moreover, as a new piece of primary legislation – rather than the simple administrative change favoured by Labour- the Superannuation Bill threatens public sector unions’ right to consultation and negotiation.

So what, you might ask. Collective bargaining has disappeared pretty much everywhere else in the economy – why not in the civil service too? And isn’t there a strong argument that civil servants should get a raw deal on redundancy payments, if there’s a choice to be made about where a shrinking pot of public money is to be spent?

There are nonetheless two big problems. First, the bill does nothing for those on middle and modest incomes. The Daily Mail doesn’t want you to know this, but two thirds of civil servants earn £25,000 a year or less. They work in job centres, tax offices and public bodies around the country, doing the jobs that enable the state to function at the most basic level. Labour recognized this fact. The previous government offered those on £20,000 a year or less (41% of civil servants) maximum redundancy payment caps of three years’ pay or £60,000 (whichever was greater). The payments were service-related, so in practice only those who had worked longest would get the maximum payments. The coalition, by contrast, offer flat, arbitrary caps on maximum payouts – one years’ salary for compulsory redundancy, 15 months for voluntary. This means that a top official earning hundreds of thousands of pounds a year is entitled to many times more than a Jobcentre employee on £15,000 a year. Instead of benefiting (at least in relation to their superiors), the lowest paid will lose out dramatically.

The coalition claim that they will come up with a solution to this glaring anomaly at some point in the next year. They seem totally unwilling to use the deal Labour agreed with five civil service unions as the basis for further negotiations, or for their new legislation. That leaves many civil servants facing a period of devastating uncertainty – particularly when newspapers are stuffed with talk about 40% cuts to government departments. With the spending round to end all spending rounds due in the autumn, one suspects that the CSCS reform is designed to allow the government to fire large numbers of civil servants cheaply.

In the long run, this isn’t in the public interest. The labour market evidence suggests that many of these people (particularly, of course, those on lower salaries with fewer qualifications) will end up unemployed and on benefits for a significant period. Furthermore, the indirect impact – increased stress and reduced motivation for those left in work – will also be damaging if reform is not sensitively handled. Dispirited and de-motivated public servants lead to reduced productivity and efficiency in the service of the public.

The worry is that the new government has already fatally undermined the trust of the employees it depends upon to implement its policies and serve the public. Civil servants like the HMRC officials in Cumbernauld in my constituency ensure that taxes are paid. Closing in on the £40 billion ‘tax gap’ caused by evasion and avoidance is a task that will arguably require more and better paid staff at HMRC.

Either way, this Bill demands close scrutiny.