Official Report 543KB pdf
We reconvene the meeting. Under agenda item 2, the committee will take evidence on legislative consent memorandum LCM (S4) 31.2, on the Small Business, Enterprise and Employment Bill, which is United Kingdom Parliament legislation. I welcome the Minister for Business, Energy and Tourism, Fergus Ewing, and Ricky Verrall, who is head of structure and capacity of Government at the Scottish Government.
Minister, would you like to introduce the LCM, please?
Yes. Thank you, convener. I am grateful for the chance to address the committee on the supplementary memorandum that the Deputy First Minister lodged on 13 January.
The committee considered the wider devolved aspects of the UK Government’s Small Business, Enterprise and Employment Bill in its meeting on 8 October last year and noted that a supplementary LCM on the provisions on public sector exit payments might be brought forward, subject to the Scottish and UK Governments reaching agreement on the policy.
Following the committee’s earlier consideration, the two Governments reached agreement that, in the interests of securing value for taxpayers’ money and of public sector labour market mobility, the exit payment provisions should apply to senior staff movements within similar parts of the public sector across the UK. The Deputy First Minister agreed with the Chief Secretary to the Treasury to progress a supplementary LCM on the understanding that the original provisions in the bill would be amended to confer powers on the Scottish ministers in relation to relevant devolved bodies. The Chief Secretary to the Treasury agreed to that on 5 November 2014. Appropriate amendments to the bill were tabled on 7 January for consideration by a House of Lords Grand Committee. Those amendments were agreed on 26 January. The bill, as amended, is expected to go to report stage in the House of Lords in March.
The supplementary memorandum outlined the relevant amendments to the bill, which cover four related substantive measures and one minor consequential change. In essence, the bill, as amended, provides for the Scottish ministers, rather than the Treasury, to make regulations on qualifying exit payments that are made by devolved public bodies with devolved workforces. Those regulations will be able to include certain provisions—for example, on exemptions from a repayment and on duties to ensure that repayments are made.
The bill also provides for the Scottish ministers, not the Treasury, to waive or give consent to waive repayments of exit payments made by devolved bodies. It provides for regulations, whether made by the Treasury or the Scottish ministers, to be made by negative procedure. That is on the ground that the regulations are likely to need frequent updating and will not be used to amend primary legislation or create offences.
While the memorandum covered the amendments as tabled and subsequently passed in the Lords, the committee will wish to know that the Treasury has just notified us that it expects to introduce further clarifying amendments at report stage. They will make it explicit that the purpose of the provisions is to recover qualifying exit payments from individuals who return to work within a year of leaving. That reflects the underlying policy position and therefore has the Scottish Government’s support.
The amendments to the bill and the further clarifications that are proposed will give effect to the agreement reached between Scottish and UK ministers in a way that allows the Scottish Government and the Parliament to determine the detail of future Scottish regulations, including which devolved bodies to include within the bill’s scope.
The Scottish Government is rigorous in its pursuit of value for money across the public sector. Audit Scotland and the Accounts Commission produced a report in 2013 into early departures from the public sector, including local government, and recommended controls over the re-employment, within the same body, of individuals who receive early departure deals. That approach was supported by the Public Audit Committee. The measures provided for in the bill more than respond to that recommendation, extending as they do to re-employment within a similar part of the public sector.
I therefore ask the committee to support the draft legislative consent motion.
Thank you, minister. I know that members have one or two points. I will start by asking about a general policy point. We have all been familiar over the years with situations in which highly paid people in the public sector—this applies only to people earning more than £100,000 a year—have left but have found themselves re-engaged, not as employees but as consultants, earning large sums of public money on a contract basis. Will the measures apply only to those directly employed or will they impact on those who are contractors?
Generally, those individuals who receive exit payments from the public sector and then return, off payroll, to the same or a similar role, for example as a contractor, are included in the scope of the proposals. However, I accept that in some instances individuals who leave may continue to have a limited form of engagement with the public sector, for example where an individual is employed by a large consultancy firm. In those instances, it would be an unfair restriction of trade and probably impose a disproportionate level of complexity and costs to recover exit payments. Under the relevant provisions of the bill, the regulations therefore seek to differentiate between those two groups and there would be further consultation on a proposed definition as part of the regulations.
In the meantime, the relevant clauses of the bill make a general provision that the future regulations may provide for exit payments to be repaid within a prescribed period where an individual in receipt of such a payment becomes an employee or a contractor of a prescribed public sector authority or a holder of a prescribed public sector office.
Thank you for clarifying that.
I question why a public sector authority would release someone or allow them to go in the first place if they knew that they might have to bring that person back. I realise, of course, that there are different conditions.
I refer to paper 4, paragraphs 8 and 9 on the salary limitation. We know that some public sector jobs are attached to the Treasury in London. Surely, though, because there are salary differentials and the general gradation of salaries in London and here is different, there is a case for creating a separate Scottish level to ensure that we capture as many people as possible who leave. Should the £100,000 limit be reduced?
We wanted to ensure consistency of approach and fair treatment of relevant individuals in the public sector not only in Scotland but across the border. A salary of £100,000 is fairly handsome, wherever one is based. No doubt there are different standards and costs of living in different parts of the country, although in London the difference is perhaps most marked. We do not want to make the measure too complicated, and we think that the principle of having regulation over exit payments is correct. Audit Scotland, the Audit Commission and the Parliament’s Public Audit Committee all recommended that regulations are necessary, particularly in the light of some well-publicised individual cases, which I do not propose to rehash here.
Broadly speaking, the policy approach is that, when one retires, one retires and does not immediately come back the next day and carry on as is, having received a large exit payment. Regulation is necessary to deal with that. No policy or legal approach will be perfect in this regard, but we feel that consistency of approach and treatment is, broadly speaking, the correct approach.
11:45Obviously, there are salary differentials for commensurate senior public sector jobs north and south of the border. However, a number of individual posts in Scotland attract salaries above the proposed £100,000 threshold. As an example, for members’ interest, those include more than 60 directors and chief executives in the national health service in Scotland, five chief executives of devolved Scottish public corporations, 14 chief executives of devolved Scottish non-departmental public bodies and more than 100 senior level posts across Scottish local authorities. A great many people in leadership roles in the public sector in Scotland earn more than £100,000, which is a pretty handsome salary by anyone’s reckoning.
I do not claim to have a great deal of sympathy for those who might lose out as a result of the mechanism—very few people would—but the purpose or policy objective, with which you say the Scottish Government agrees, is clearly not to tackle unequal pay and the problem of high pay in our society. If it was, I would say that it is long overdue, but that is clearly not the objective. Is there a reason in principle why the arrangements for compensating people for loss of employment should be different in the public and private sectors?
The policy intention behind the regulation of exit payments is narrowly defined. As Mr Harvie rightly says, it is not really about addressing equality. It addresses the particular cases in which those who are in leadership roles retire and then the next day carry on as is but in a different arrangement, having received a very large pay-out. The public are concerned about that. The approach to the issue on both sides of the border is principled but proportionate.
Mr Harvie raises the somewhat different policy matter of whether public and private sector compensation payments should be treated differently. The public and private sectors are in essence somewhat different, for a large number of reasons, so it would be difficult to equiparate the treatment of compensation payments in those sectors. For example, conditions in relation to security of tenure in the public sector are different from those in the private sector. We are perhaps straying off piste here but, in general, the public sector has defined benefit pension arrangements, whereas increasingly in the private sector that is a rara avis. It is impossible to equiparate the public and private sectors. Therefore, interesting and perfectly legitimate though Mr Harvie’s question is, it is perhaps one for consideration on another day.
I enjoyed that term.
The point is that the mechanism is intended to deal with one specific kind of abuse, and we know that the same kind of abuse happens in the private sector, in many cases with much greater sums of money. Why is that not a problem?
In law, we tend to deal with specific situations and principles and turn to other matters that might require legislation at a later date. If it is of any consolation to Mr Harvie, I share his concern about the size of bonus payments, for example, that some bankers have received. I have said so in the chamber and on many other occasions. The power in relation to the matters we are discussing rests with the UK Government and it has, for reasons that it can explain, declined to deal with that particular issue.
All that is beyond scope; we are away off piste. Perhaps the best thing to do when one is away off piste is to return to base, which I now do.
We need to steer back on to the piste.
I am happy to leave it with a wee criticism of the UK Government. I am sure that we can all agree on that.
I am sure that, in his heart of hearts, even the minister does not share that view.
There is an interesting debate to be had about the level of pay in the public sector. People might be surprised at the number of people who are paid more than £100,000. There is a general concern about why public bodies are taking someone off the payroll and then bringing them back in. It must be because they are under pressure on funding and they find a way that makes sense.
What is a graver concern to us is the number of low-paid people working in the public sector who find themselves externalised and do not get the living wage, even though their post might be funded by the Government or the public sector. However, that is for another day.
Minister, following the convener’s question, you said that you would look at the issue of an individual coming back as a consultant and being penalised, but if they were part of a consultancy firm, they would not be. That would be an incentive for all such people to get together in one big group, define themselves as a company, with equal shares, and none of them would have to pay the money back. They could even lob in a wee bit of the money that they do not have to pay back to support the creation of such a company. Do you have firm proposals for dealing with such a situation? If the message to people and public bodies is that they should stop playing about with public funding because the public is offended by it, how will you address the possibility I have described?
As I understand Johann Lamont’s question, it asks how we will regulate to prevent mechanisms that are set up to avoid triggering the repayment of the exit payment, such as consultancy firms. That is a perfectly fair and reasonable point to make and I will reflect upon it when we come to the stage of making the regulations. The regulations are intended to deal with a particular mischief, as legislation often is, so it is incumbent on us to think of the steps that might be taken by clever individuals with smart advisers to circumvent them. It is a perfectly fair point and it is one that I undertake to consider while the regulations are being drafted, particularly since the convener and a member of the committee have made the same or similar point.
One would hope that anybody who is earning more than £100,000 a year in the public sector would be clever.
Well, they can afford clever advisers or lawyers.
I hope that the two are not mutually exclusive.
You said that more than 100 people in Scottish local authorities are earning such a salary. We do not have an exact figure but I would say that the figure approaches 150 to 200. Perhaps I missed it when you said it, but will the powers that are to be conferred on the Scottish ministers apply to the Scottish Parliamentary Corporate Body and officeholders such as the Auditor General and those in Audit Scotland and so on?
Yes, the provisions will apply to the SPCB and its office-holders. We are in discussion with the Treasury and the Department for Business, Innovation and Skills about possible further amendments to the bill, if necessary, to make that absolutely clear. The Deputy First Minister wrote to the Presiding Officer on the inclusion of the SPCB in the bill’s provisions on 18 December 2014. The Presiding Officer replied on 22 December raising no objection to that. Therefore, this will apply to the SPCB as well.
That was my question as well.
If no one else has other points to make, I have one technical question. In its report to this committee, the Delegated Powers and Law Reform Committee was unclear why the powers conferred on the Scottish ministers should be subject to negative rather than affirmative procedure. Will you explain why the Scottish Government took the view that it should be negative procedure?
We gave a lot of thought to that, and we noted the views of some members, including John Mason, that this merited the affirmative procedure. On the other hand, other members, such as Stewart Stevenson, expressed the view that, since the regulations would not involve principles of primary legislation or creation of offences, negative procedure would be appropriate. In addition, it is likely that there will be several regulations—there will be a deal of regulations, many of them dealing with specific public bodies—and we anticipate that they will be of a largely technical nature. We believe that it would be unduly cumbersome and inappropriate to use affirmative procedure in those circumstances.
Therefore, it having been given careful thought, including by me, the Government decided that negative procedure would be appropriate in the circumstances.
If no one has any other questions to put to the minister, is the committee content to recommend to the Parliament that it give consent to the relevant provisions of the Small Business, Enterprise and Employment bill as set out in the supplementary LCM?
Members indicated agreement.
Is the committee content to delegate to the convener and clerk the production and publication of a short, factual report detailing the committee’s considerations?
Members indicated agreement.
Thank you, and thank you, minister. We will now suspend to allow a changeover of officials.
11:57 Meeting suspended.