Official Report: Minutes of Evidence

The Chairperson (Ms Lo): Good morning, Linda and Peter. Thank you very much for coming. An issue was raised before you came in. I am sure that you will have a lot of questions from members. It is very timely that we have the head of human resources (HR) here, too. Before you walked in, we were talking about capacity building with councillors. We know that that is going well. Maybe you can brief us on how well it is going. Are stakeholders also being well-equipped with regard to the new community planning powers coming on board soon? Members, you all have the paper.

Do you want to start and give us your briefing?

Ms Linda MacHugh (Department of the Environment): Thank you for the opportunity to come and talk to you today about the Local Government Reorganisation (Compensation for Loss of Employment) Regulations (Northern Ireland) 2015 — a very catchy title. I am joined by Peter Gregg, who heads up my HR reform team. He is not the head of HR for DOE. His team is very small, but it has been looking at all the HR legislation and setting the general principles for a number of HR issues that have been created because of local government reform. Could I also record our thanks that you agreed to consider the SL1 for these regulations today? These are regulations that absolutely have to be in place for 1 April.

The background to the regulations is that they provide new councils with the mechanism to compensate persons who suffer a loss of employment due to local government reorganisation. Having one scheme set in statute will ensure that a fair and consistent approach is taken to severance across the whole of local government. However, I must stress that this scheme applies only to severance cases directly related to reform. The compensation scheme that these regulations will enable has already been negotiated and agreed by local government management and trade unions through the local government reform joint forum. That was some time ago. During this process, the terms and conditions of the scheme have been reconfirmed through the forum.

The starting point for the negotiations was what happened in health, because it was felt that it was important that there be parity of treatment between the health part of the review of public administration and the local government side. The regulations will remain in force from April 2015 until the end of December 2019 as it was felt that that period would be required to allow new council structures to bed in and any potential redundancies resulting from the bedding-in process to be identified and come into effect.

In terms of the content of the regulations, the scheme has two elements. There is statutory redundancy, which everybody is entitled to, and a compensation element. Because the statutory element of the agreed scheme is already provided for in legislation, these regulations deal with only the compensation element of the negotiated scheme — the enhancement, if you like. The compensation element is equal to statutory redundancy pay multiplied by 3·46. That multiplier of 3·46 equates to approximately 104 weeks' pay, which is the maximum permitted under the 2007 regulations that relate to redundancy.

We consulted on the regulations. We received 13 responses, and the majority came from councils and local government organisations. As a result of the consultation, three minor amendments were made to the regulations. Importantly, nothing was changed to the actual agreement of the scheme. The three amendments made it absolutely clear in the legislation that Arc21 was covered by these regulations. We have now added into the revised draft a joint committee of a council which has been constituted as a body corporate, which is the legal entity that Arc21 is, so it is definitely included in the scheme. Also, the use of statutory redundancy payment in the scheme caused some confusion amongst respondents as the application of the statutory cap to any calculations would be affected by that definition. This will be addressed through the issue of operational guidance to make it absolutely clear what we mean by statutory redundancy payment.

Finally, a number of councils requested qualification of the term "a week's pay". This term is defined in the Employment Rights (Northern Ireland) Order 1996. The regulations have been amended to identify the applicable legislation under which this term is defined.

The regulations are the legal articulation of the compensation element of the agreed severance scheme which was negotiated through the joint forum. They fulfil the Department's requirements under the Local Government Act (Northern Ireland) 2014 and article 19 of the Superannuation (Northern Ireland) Order 1972 to bring in regulations for the compensation for loss of office within a statutory framework.

The production of guidance is being done through the local government reform joint forum. Again, we have got management side and trade unions involved to agree the guidance. That will provide local government with all the information it needs to implement this staff severance scheme. At this point, I will stop talking. Peter and I are very happy to take any questions that you have.

The Chairperson (Ms Lo): Thank you very much, Linda. That is a very clear run through of it. How many staff are you talking about and how much money will be involved? I know that a sum of money has been put aside by the Executive.

Ms MacHugh: No: that was for councillors' severance, which is a completely separate issue.

The Chairperson (Ms Lo): So, staff costs will be borne by local councils.

Ms MacHugh: Yes. The rationale for not asking the Executive to cover it is that any severance agreed to has to be on a business case. The scheme has been geared to the other cap in the wider scheme. It has to be shown that the payback period is a maximum of 3·25 years. If another body were paying for this, you could find cases where people were being made redundant because they fancied a package, whereas this has to be based on a clear business case. Councils have to show that in the long term there will be savings as a result.

There may be an up-front cost to councils. We have extended the capitalisation limits so that councils can borrow money to cover severance costs if they choose so to do.

The Chairperson (Ms Lo): Where would they borrow the money from, Linda? Can they borrow from different places?

Ms MacHugh: They can borrow from the Consolidated Fund, which they access through DFP and is open to local government as well as central government, or they can take out a commercial loan. Typically, commercial loans are at much higher rates, but councils do that on occasions. However, it is important that councils can see a payback within the maximum of a 3·25-year period.

The Chairperson (Ms Lo): The top-up is fairly generous — two years' pay, roughly.

Ms MacHugh: Yes, it is, but as I said the peg for that was what happened in the health sector.

The Chairperson (Ms Lo): Do you know roughly how many jobs are going to be lost?

Ms MacHugh: No. We were aware, initially anyway, about the very senior jobs. We went through the recruitment process for 11 new chief executives, so we are aware that there will be job losses at that level, but that it could take a bit of time.

The Chairperson (Ms Lo): Are there 15 chief executives going? Are there financial directors going?

Ms MacHugh: Except if, in some councils, suitable alternative employment is found for those chief executives. Again, through the joint forum we have negotiated a vacancy filling procedure whereby those whose jobs are at risk have to be considered for any suitable job before it is opened to a wider group. That was to minimise the number of redundancies that would result from reform.

The Chairperson (Ms Lo): How many posts are there when Arc21 is included?

Ms MacHugh: I am sorry; how many posts?

The Chairperson (Ms Lo): How many posts are there in Arc21 that may have to go? They are now being included.

Ms MacHugh: I do not think that there are any immediate plans to change anything in Arc21. They wanted to be included, and it is right that they are included because they are a local government body. My understanding is that there are no immediate plans to change the management structure in Arc21 at this point in time.

My colleagues in economic policy division are putting legislation through to extend the life of Arc21, or change its legal entity, because at the moment the councils that make up the body are the old councils, so they have to change the names. I think that they are simply transferring the organisation into the new set of councils.

Mr McElduff: I am interested in the situations of individuals. I am aware of some of them but I will not mention them in detail. What happens if, for example, an individual's name is been drawn out of a hat for transfer? I believe that a hat has been used to pick names when people are being relocated.

Ms MacHugh: Are you referring to transfers within local government?

Mr McElduff: Yes.

Ms MacHugh: Right.

Mr McElduff: It is my understanding that, in some cases, a hat was used to draw out names for transfers from DOE Planning Service to the new councils. In some cases, names were drawn for relocation to places 40 and 50 miles away from the current work setting. In at least a couple of cases that I am aware of, the individuals cannot cope with it in terms of stress and having particular health circumstances and conditions. The layperson observing it would say: that person should not be expected to travel 40 or 50 miles. That is not doable. In most cases, the travel involved is doable and it is something that has to be done, unfortunately. I have some sympathy for those who have to manage an exercise like that. Will it be reviewed, in the short term, for those for whom this is not working out?

Ms MacHugh: This is not my area of responsibility. Central HR and planning have been dealing with what is a very considerable change for their staff, not only in relocation but to a new employer. My knowledge of it is that the starting point was not just drawing people out of a hat to choose where they were going. There was a staff preference scheme, whereby staff were asked to identify, all things being equal, where they would like to be located. One of the issues was that we had to wait for some time, in some cases, for councils to determine where their planning office was going to be.

My colleagues, in planning and central HR, worked over a lengthy period of time with local government and staff to try to resolve the issues as far as possible. My understanding is that, by and large, most people got their first choice or, if not, their second choice of location. Clearly, the planning system has to move; it has to be functional; and staff need to move with it. I admit that I do not know what the plans are, or about individual cases; and I do not know whether there are plans to review it. However, if you want, I can take this back to HR, or —

The Chairperson (Ms Lo): We can write to HR, Barry, and ask them about it.

Mr Boylan: Thank you very much for your presentation. This is one of a number of SL1s that will come before us, and we have a big body of work to ensure the transfer, over the next 12 months, and that transition run as smoothly as possible. I have a few points.

Arc21 is included. It is one of the waste management groups. I do not know whether the Southern Waste Management Partnership (SWaMP2008) is included.

Ms MacHugh: It is not included because it does not employ people in its own right.

Mr Boylan: It is made up of council —

Ms MacHugh: Yes, they are council employees. Anybody who is working on behalf of SWaMP2008 would be covered already.

Mr Boylan: What about the other group, the North West Region Waste Management Group? There are three groups altogether.

Mr Peter Gregg (Department of the Environment): They will be included anyway as part of council staff.

Ms MacHugh: Arc21 is the only one of those groups that employs staff in its own right, as a separate body corporate. We had to make sure that, if by any chance its circumstances changed up to 2019 as a result of reform, their staff would have cover under the scheme.

Mr Boylan: The issue of the chief executives was raised by the Chair. We are down to 11 chief executives. You say that some of the former chief executives have taken up other appropriate positions within local council structures. Given the new dynamic of the councils, have new jobs being created for that? I can imagine that there was opportunity to do that.

Mr Gregg: What has really been happening since the 11 new chief executives and new shadow councils came on board is that a lot of design work has been going on about the organisations that will take effect from 1 April, and how that will look in terms of top management teams. A mixture of things will happen to any of the chief executives who were unsuccessful in the competitions. Some might choose severance, and they are entitled to that. In a couple of cases, some have decided to go already. Some will be offered other posts. That will be the preference in many cases, to be offered other director posts, and they will be negotiated; but the severance scheme is not an automatic thing. It is there, should they choose to use it, but it will very much be an individual choice. I think it is a mixed bag, to be honest, across the piece, as far as any displaced chief executives go.

Mr Boylan: No problem. We need to move it forward fairly quickly; is that what you are saying to us? Is there a time frame?

Mr Gregg: Yes, it will be 1 April because, in effect, the local government joint forum's intention was that the severance scheme would start to apply from that date. I do not want to give the impression, and it is certainly not the message from councils, that wholesale numbers of people will start leaving. In fact, some councils have said that there is a severance scheme there but that they are nowhere near ready to start talking about it because they have to focus on services. Expectations have to be managed very carefully because quite a significant number of staff could think, "There is a severance scheme and I want to go", but the councils have been —

Mr Boylan: But surely they will be working through their own programmes, strategies, business plans, what they will be able to deliver and how they deliver that.

Ms MacHugh: Absolutely.

Mr Gregg: That is right. That is why it is over a four-year period. Knee-jerks and a whole load of people going after 1 April this year is probably not a very sensible idea. The power for that rests with councils.

The Chairperson (Ms Lo): Obviously, each new council will look at its functions, the staff posts, the restructuring and what posts will be redundant. Is it compulsory that staff who hold posts that are deemed redundant must go under the severance scheme?

Mr Gregg: Compulsory redundancies are to be avoided where possible. It is not to be ruled out, but a whole series of different steps have to be gone through according to various policies and themes developed under the joint forum. At-risk groups, as we call them, have to be considered for other posts in the whole of local government first, and it works down a sort of scale on which compulsory redundancy is very much at the end. The possibility of using the scheme to do that exists but it is certainly not envisaged by the joint forum. It is difficult to be specific, but I do not imagine that that should occur in many, if any, cases. Again, it is within the council's gift to decide that. There is still a job of work to do. There is a lot of knowledge and experience in local government. People may have to move around and may have to be flexible, but posts are there and there is a certain amount of protection under the Transfer of Undertakings (Protection of Employment) Regulations 2006 for them as well.

The Chairperson (Ms Lo): Although, the idea behind reducing the number of councils is to save money, and the headline is £148 million. To achieve that reduction, we are inevitably talking about staff cuts.

Mr Gregg: There will be a reasonable public expectation that, when you amalgamate any organisations, you reduce the size of your workforce. That has to be done carefully and on a phased basis and should take all individual circumstances into account.

The Chairperson (Ms Lo): I agree with you.

Mr Gregg: It is very much about getting the organisational structure lined up for the services you want to deliver, and I think that councils and chief executives will focus, and have been focusing, on that first and foremost and then deal with individual cases.

Ms MacHugh: A lot of work was done by the new councils on their organisational design during their shadow period. The Department provided some support. We supported the design of a toolkit for organisational design, not to suggest to councils that there is a model that they should be following but to give them a series of questions that they need to ask themselves to determine what structure and what kind of council best suits their local needs.

A local government mutual organisation called iESE led that work, and some councils retained iESE to help them through the process of determining what their organisational structure should look like. I think there is a realisation that, whilst they will start working in their new structure on 1 April, they will have to continually review it over the next few years as things bed down and local government starts to get a real understanding of its new powers and functions. Again, because we had this delay of a year in DSD's functions moving, next year they might have to look again. The first question is bound to be, "Where does regeneration and community development sit?" Is it in economic development, aligning with planning or is it more about the social side of what councils will be doing?

Some people think that 1 April is the end of this process. For local government, in many respects it is just the beginning.

The Chairperson (Ms Lo): Sort out the structure first, maybe. It would be much easier that way. It is a pity, though, that DSD could not get the urban regeneration remit off to councils this year.

Ms MacHugh: There was a disappointment, certainly in local government, because it is now a more phased approach. I know that DSD is looking at how it can work with councils over the coming year to prepare for a managed transfer come 1 April 2016.

Mr Boylan: I agree in some respects about the urban regeneration stuff but there is enough to be going on with, to be honest with you. I know that this whole process is about efficiencies, but the main thing is the provision and delivery of services. I would rather see that in place first.

There may be a voluntary exit scheme for people who want to go but, first and foremost, as part of the business plan, needs to be the delivery of service and how that is done. That is our focus. That is the message that the Committee should be sending out. That is what we would like to see.

Urban regeneration is coming along in 12 months' time and they can prepare work for that now. There are a lot of things coming down to local authorities. This transitional period is a testing time, so there is plenty to be focusing on.

Ms MacHugh: The community planning process will be important in looking at that improved service delivery, not just those services that are the responsibility of local government but those that are the responsibility of central government as well.

The Chairperson (Ms Lo): How near are you to completing the guidance? You need it fairly soon.

Mr Gregg: The guidance is drafted. Literally, there are a couple of minor amendments needed to be done to it. It will be circulated to councils and go on to the Local Government Staff Commission's website imminently; so it is there.

It is guidance primarily for HR departments that are trying to apply the scheme as it was drafted, and then the legislation on top of that. We got feedback from HR departments, "Look, how do we interpret this?" During the consultation on the regulations it emerged that there was misinterpretation of some aspects, for example, what we mean by statutory redundancy. We have tried to clarify that. The guidance contains illustrative examples as well, taking a broad range of people's ages.

The Chairperson (Ms Lo): I may be putting you on the spot but compared to the voluntary exit scheme for civil servants, is this scheme a lot more attractive or generous?

Ms MacHugh: It is.

Mr Gregg: The Civil Service scheme is, in statute, 21 months as far as salary is concerned. One of the comparators would be 104 weeks or two years, so it is more generous from that perspective.

Ms MacHugh: We need to wait and see the final terms and conditions of the Civil Service voluntary exit scheme. It is unlikely to be just as generous, but, as I said, the comparator that we used for this scheme is what happened in health. As this is part of the review of public administration, which had three or four elements, it was felt that that was where we needed to seek parity of treatment. That was a clear expectation from the trade unions.

The Chairperson (Ms Lo): It was useful to have that forum to agree things with unions and stakeholders.

Mr Gregg: Anecdotally, you hear that you maybe do not have the same type of workforce in local government as you have in the Civil Service, where many people have many years of service. The age profile in local government tends to comprise people who have come in a bit later in their career. There is more turnover, and so, once you get down to the calculations, there will not be that many people with 35 or 40 years' service at the high salary levels. That is anecdotal. That is our impression from the feedback we get. The overall settlement figures will be based on people's lengths of service and age, and I understand that it is not quite comparable with the Civil Service.

The Chairperson (Ms Lo): Will it be based on the final salary?

Mr Gregg: Yes, based on final salary.

The Chairperson (Ms Lo): There are no more questions for you.

We are looking next at the SL1, which is also under your remit. Maybe you could stay. The next one is the local government pension scheme.

Ms MacHugh: That is Liz Loughran's responsibility. Although the pension scheme has had an effect on the severance scheme, our pension team, which is under Liz Loughran, is dealing with that. I was going to say that it is normal day-to-day business but, of course, it is going through a major reform process at the same time.

The Chairperson (Ms Lo): OK. We will let you go then. Thank you very much for coming.

Members, the statutory rule is subject to negative resolution, and it is proposed that it will come into operation on 1 April 2015. That is the deadline by which it must come in. Are members content for the Department to proceed with making the rule?