My Lords, as housing associations have been designated as part of the public sector, I ought to declare my interest as the chairman of Housing and Care 21. I will refer to the housing
sector in the course of my remarks on these amendments. Personally, I have deep concerns about this. We know that it was a manifesto commitment of the governing party. It was a good selling point for them because it was populist, but I fear and know that it will result in poor legislation and will have unintended consequences.
I am one of those who is immensely worried about management capability in the public sector with all the demands to reform, change and improve it. But here we are, again putting public sector staff at a disadvantage as against the private sector at a time when, frankly, that sector remains rampant in terms of its conditions, benefits and even its pay-offs, certainly for high-level staff. We will find as a result of this change that we have further difficulties getting the managers that we want for these very difficult jobs, where we are trying to get change and reform. It is not easy and the very best people are needed. I have said this before but 100 good managers are worth £1 billion in public spending. This puts them at a disadvantage.
The noble Baroness, Lady Donaghy, said that this does not just affect the high paid. It also affects some of the lowest paid in the public sector, for all the reasons she set out. This is not simply a populist measure because it deals with the high paid; it affects others. Pensions are the main problem here. There are generous aspects of public sector schemes but we have recently been through a renegotiation on a lot of these and we are now going to break them once again. What is the Government’s word going to be worth in these situations where contractual obligations are being overruled by legislation?
I will give one example from the housing sector. The most difficult job in my career is making changes where people have to be made redundant. I always find it painful, but I have always ensured one thing—you have to show other employees that when you make changes you look after the people who are vulnerable in that situation. Whether we like it or not, we are going to face those situations in the next five years. We have never before seen the reform and change that is going to come in the public sector on the scale that is coming. We will know more when we see the public spending commitments but it is huge. At this precise moment we are undermining morale and will increase resistance to change.
In every housing association I have chaired we have had to make changes and we have sometimes had to make payouts in excess of £100,000. However, I have never regretted doing so because we have saved millions in return. If we give up these opportunities for change by putting in inflexibilities which make change more difficult, it will hold up reform and improvements that need to be made.
It is absolutely essential that there is some flexibility here. Normally, there would be a ministerial guideline that all payments above a certain level should be approved. That should be a normal management guideline instruction, and if this was not part of a populist general election commitment, it is what would happen. It would be the best thing for the public sector. It would provide restraint and a guideline on what is appropriate. Above all, it would provide flexibility for those who deserve payment and need to be protected.
That is what should happen, so anything we can do in this legislation to provide a loophole and some flexibility must be welcomed. Ministers will regret not doing it in a year or two when they are finding it difficult to get change in the public sector or when they are trying to get people to believe agreements they want to make. People will say, “Well, you made an agreement a year ago and you broke it. It was on pensions, something that is pretty important, and you just it let it go, so why should we trust you now when you are trying to make even bigger changes?”.
Equity, sensitivity and trying to get change are important issues and are going to be very important in the next five years. Any Government that go into these changes wearing these handcuffs will find it very difficult to get change and improvements, nor will they deserve to do so. At the end of the day, change is painful and difficult for the employees in the sector where it is being done. They need to be able to say that the people who are being sacrificed for change are being well protected and that their agreements are being honoured. That will actually help achieve change quicker. I hope the Minister will assure us that on Report they will look at giving themselves some flexibility. That will be welcomed.