Official Report: Minutes of Evidence

The Deputy Chairperson (Mr D Bradley): Grace, would you like to begin?

Mrs Grace Nesbitt (Department of Finance and Personnel): The Small Business, Enterprise and Employment Bill was introduced in the House of Commons in June 2014. It contains provisions on a range of financial policies. Specifically, it contains measures to enable the recovery of what are termed exit payments when an individual earning more than £100,000 returns to the same part of the public sector shortly after his or her exit. It is proposed that those who rejoin public sector employment within a month will repay the whole of that payment and that those who rejoin after a month but less than a year later will be required to pay less, proportionate to the time that they have spent outside public sector employment. The measures are scheduled to have effect from 1 April 2015.

The principle intent of the Bill is to safeguard public finances and ensure that public service funds are not diverted to compensate high-earning individuals for loss of office in cases in which that loss is transitory owing to the individual re-entering paid employment in the sector. The Treasury has proposed that a single set of redundancy arrangements should apply to the whole of the United Kingdom, as that would be good for avoiding barriers to labour mobility.

Our Minister received a formal request for a legislative consent motion (LCM) on the matter at the start of last month. He wrote to ministerial colleagues on 12 November to seek their agreement to lay a memorandum, and it is anticipated that the legislative consent motion will be discussed at the next Executive meeting, which is hopefully tomorrow. The Committee should have received a written update from the departmental Assembly section dated 12 November.

It would, of course, be within the scope of the Assembly to legislate for the provision in its own Bill. However, that legislation would not receive Royal Assent by 1 April. Given the timescale involved, it is the Department's view that the use of the LCM will ensure that high-earning public servants in a devolved Administration are not treated more favourably that their counterparts in the rest of the United Kingdom in that regard. It will also ensure that the same protections for the public purse are seen to be applied consistently at this time when I think that we all recognise that public funding is rather stretched.

I am happy to take any questions.

The Deputy Chairperson (Mr D Bradley): Why is the threshold set at £100,000? Why is it not £90,000 or £80,000?

Mrs G Nesbitt: I am not sure of the thinking behind it. I think that it is felt that £100,000 is a reasonable figure for it to be set at. I am not sure of what workings went in to determining that level of £100,000.

The Deputy Chairperson (Mr D Bradley): Some people might think that £80,000 or £90,000 is reasonable.

Mrs Nesbitt: Some people might think that £30,000 or £40,000 is reasonable in these difficult times.

The Deputy Chairperson (Mr D Bradley): Your paper states that the Bill contains:

Why is it confined to the same part of the public sector? They are public sector employees.

Mrs G Nesbitt: It is about trying to get a balance. Obviously, you want to give people some flexibility. For example, someone might be a high-earning teacher, earning over £100,000. We may not have that many of those, but it could be a head teacher. I am not privy to the salary scales.

The Deputy Chairperson (Mr D Bradley): I have not met that many.

Mrs G Nesbitt: I could not possibly comment on that. I think that the thinking is that you want to give people some sort of choice about where they are going and, if they wanted to go somewhere else, that that would be acceptable. It may be that that will be reviewed in the fullness of time and that it will be deemed to be any part of the public sector.

The Deputy Chairperson (Mr D Bradley): If the principle behind it is, as you said, to save money for the public purse, if the individual were then employed by some other part of the public service, presumably those savings would not necessarily be made.

Mrs G Nesbitt: No, but I think that we must strike a balance between how restrictive and how rigorous you want the practice to be. That is the balance that, rightly or wrongly, has been struck. I agree that you could, if you wished, take a more radical approach.

The Deputy Chairperson (Mr D Bradley): It just occurs to me that it would probably benefit from being a little more rigorous, but, in any case —

Mrs Blathnaid Smyth (Department of Finance and Personnel): I think, Mr Bradley, it is based on the experience of the health authorities in Great Britain, where a considerable number of people who were made redundant just moved to another authority straight afterwards. They have so many authorities in Great Britain that a large percentage of people were re-employed within a short time. We would not have so much experience of that in Northern Ireland.

The Deputy Chairperson (Mr D Bradley): OK. We mentioned the "same part". How would you define a "short space of time"? How long is a "short space of time"?

Mrs G Nesbitt: To recover the money? I have set out that for recovering the money —

The Deputy Chairperson (Mr D Bradley): No. You state:

How long or short is that "short space of time"?

Mrs Smyth: Right. There will be guidance provided on that. I think that it is within six months, but there could be a tapering effect.

The Deputy Chairperson (Mr D Bradley): OK. In the paper, you also state:

Mrs G Nesbitt: Yes.

The Deputy Chairperson (Mr D Bradley): In that case, what will it mean in practice, and what is the rationale for exclusion?

Mrs G Nesbitt: I think that it is felt that those are things to which people are contractually entitled. I suspect, as Blathnaid helpfully reminded us, that, in the health sector, there may have been extremely generous provision. I am not talking about the health sector in Northern Ireland, I add. The health sector in GB may have provided very generous packages, over and above what a particular compensation scheme for the sector provided. Again, it goes back to the point that I made about striking a balance between what people are entitled to, what they may get and the overall cost to the public purse. However, it is an area for which there will absolutely have to be more detailed guidance.

The Deputy Chairperson (Mr D Bradley): In the past, we have seen highly-paid public servants retire and then be invited back by another Department as a type of independent person to adjudicate on an inquiry, or whatever. That is quite useful, because they have the knowledge of government and the skills required, and they might be able to look at a different Department in a more objective way. Will that type of consultancy role — let us call it that — be shut down?

Mrs G Nesbitt: No, because that concerns people who have retired. The matter that is before the Committee is not about people who have retired but about those who have received a redundancy payment.

The Deputy Chairperson (Mr D Bradley): OK. Have members any other questions?

Mr Girvan: I would like to ask about the figure of £100,000. I appreciate that there might not necessarily be that many who meet that criterion. I do not know how they came up with the rationale for that, because I believe that there are many who take advantage of the situation. Let us use schools as an example. School principals were getting a salary of perhaps £80,000 to £90,000, just falling short of £100,000. I might say that there are many principals who get over £100,000.

The Deputy Chairperson (Mr D Bradley): Are you looking at me, Paul?

Mr Girvan: I appreciate that. Some of them have, through the schools rationalisation programme, ended up taking redundancy and getting a fairly lucrative package, before going back into teaching.

Mrs G Nesbitt: As supply teachers.

Mr Girvan: Yes, as supply teachers. They are probably working every bit as much as they did before —

Mr McQuillan: More, probably.

Mr Girvan: — for a higher amount of money per day, because they are on call. I do not know how they came up with the figure of £100,000. It does not necessarily address the issue.

Mrs G Nesbitt: It may not, because I am conscious that earning patterns are very different in Northern Ireland.

There are two points that I will make to the Committee. The best way to get something in place quickly is to use a legislative consent motion. If there is a requirement and a desire to look at the particular workings of that to see whether we should do something different in Northern Ireland, I am sure that that could be considered. To pick up on the point about people moving between different sectors, that is too generous, and on your point, Mr Girvan, about the quantum being set at £100,000, at this time, for us to try and do something differently, it would take a significant amount of time to get a piece of legislation through the Assembly. I recommend doing the legislative consent motion at this time, and, if it is felt that there is a need to revisit that, it can be looked at again.

Mr Girvan: I will use an example that some people will not like, but I will say it anyway. Local government in Northern Ireland had an exit scheme for councillors who wished to leave council. As a consequence of leaving council, they received a modest amount of money for the time that they were there. It had to be 12 years before they qualified to get anything. After 12 years, they received a small amount for every year — £600 — which added up, but there was an upper limit. If they ever wanted to run again for council, they would have to pay back the total amount that they had received. That is what happened in local government. Those of us who gave more than 12 years to local government and happened to be in the Assembly received nothing. That is an argument for another day, but there is an unfairness there. Councillors received a smaller amount of money, yet people on £90,000 can do whatever they want. They can receive all their money and not pay anything back by virtue of being £10,000 short of the £100,000. I appreciate that we should go through the LCM process, but I still think that we should look at this ourselves at a later date.

Mrs G Nesbitt: It may well be something to look at. From personal experience in my family, I know about the issues of supply teachers. It has been talked about quite a bit in the media over many years, but this issue is not going to solve that.

There are a number of sectors that require closer scrutiny at a point in time. It may be helpful to look at the levels and at what it actually means to work in another part of the public service.

The Deputy Chairperson (Mr D Bradley): I am overcome with sympathy for Paul, but I will try to go forward in any case.

On the points that Paul made about councillors and school principals, I am not aware of any school principals who go back to the chalkface after retiring, but anyway. Are we not talking about a situation here in which we need our own legislation? You have said quite clearly that the LCM is based on the experience of English health authorities, which is not really relevant here. Therefore, why are we doing it?

Mrs Smyth: Treasury would like to have a UK effect to this, because people could transfer between Great Britain and Northern Ireland. It is likewise with the other devolved Administrations.

Mrs G Nesbitt: I accept the points that Committee members have made that it could be more radical, but if we do not have at least the same provision here —

Mr D Bradley: Is the LCM not going to restrict us, considering that there may be other areas in Northern Ireland that we want to exert some control over?

Mrs G Nesbitt: I do not see it as being restrictive. It could be seen as a first step. If we do not do this, we run the risk of somebody getting a large package in a health authority in England and then coming to work here, where the reclaiming bit would not apply. Therefore, I think that this should be best described and best seen as at least a first step in consistency at this level. If the devolved Administration in Northern Ireland decides that something more radical and more severe is required from the perspective of the individual, there is absolutely no issue with that being looked at.

The Deputy Chairperson (Mr D Bradley): Is it the Department's view that we wait to see how this turns out and then review the situation? Have you discussed that?

Mrs G Nesbitt: My personal view at the minute is that I would just like to get pension reform through. There needs to be a reality check about what we are able to do.

The Deputy Chairperson (Mr D Bradley): From the point of view of legislation.

Mrs G Nesbitt: Yes. The biggest challenge that we have facing us —

The Deputy Chairperson (Mr D Bradley): I am not talking about doing it immediately. What I am saying is that, if the LCM is laid and passed in the Assembly, will you, at some future date, review how effective it is and decide whether there is a need for fresh legislation?

Mrs G Nesbitt: There would have to be a review to see whether the legislation did what it was intended to do. Members have made very helpful points, such as asking whether the level is appropriate. There is also the issue about transferring to different parts of the public sector and whether that is a good idea or a bad idea. All the detail of the change would have to be looked at, evaluated and reviewed as normal business.

Mr McQuillan: You have sort of answered my question. If we do not adopt the legislation and people transferred from England to here, they could do that and still keep their big redundancy pay.

Mrs G Nesbitt: Yes. That is my understanding.

Mr McQuillan: Do you know of any recent cases in which that has happened and people did not transfer from England but were made redundant here with a big package and came back to work in some other part?

Mrs G Nesbitt: At the minute, that can happen anyway.

Mr McQuillan: Yes, but have there been any cases that you know of?

Mrs G Nesbitt: I have no information on that.

The Deputy Chairperson (Mr D Bradley): Thank you, Adrian. How will the Department ensure that the measures contained in the LCM are implemented? In other words, how will you police it?

Mrs G Nesbitt: There will be detailed guidance produced on that to inform employers, as well as guidance on the public sector pension scheme.

The Deputy Chairperson (Mr D Bradley): Will the guidance come with the laying of the LCM or after?

Mrs G Nesbitt: I think that it will be after. It will become effective in April 2015, so we have a little bit of time to prepare the guidance.

The Deputy Chairperson (Mr D Bradley): When will the memorandum be laid in the Assembly?

Mrs G Nesbitt: That is dependent on it being considered and agreed at the Executive meeting tomorrow. I would like to think that it will be laid fairly soon after that.

The Deputy Chairperson (Mr D Bradley): Can I seek agreement to write to the applicable trade union, which is the FDA, for comment on the proposed LCM in the meantime?