My Lords, this group seeks to delay the implementation of the cap, create exemptions or introduce an earnings threshold. I am very grateful to the noble Baroness, Lady Donaghy, for grouping these together.
Amendment 54B seeks to ensure that the cap cannot stop payments of more than £95,000 if they are already allowed under current arrangements. The effect of this would be that employers would have to make amendments to compensation schemes, or to make changes to existing contractual entitlements before the Government could stop such payments. This would have the effect, I fear, of making the exit payments cap ineffective, or delaying it indefinitely.
Amendment 54G seeks to put in place a transitional period of two years after Royal Assent during which the cap would not apply in cases of what she describes as “institutional reorganisation”. The Government do not accept that it would be appropriate to frustrate the intention of the cap by delaying its full introduction for two years. However, the Government recognise that workforce restructuring can be a lengthy and complex process. There may be instances where exits that have long since been agreed will not take place until after the £95,000 cap comes into force. We recognise that there may be instances where it would be appropriate to give effect to such agreements after the cap comes in.
Amendment 54H concerns the power to relax the restrictions imposed by the cap. The clause provides that this is exercisable by Ministers of the Crown, and ensures that any exercise of that power is subject to scrutiny. The Government agree that it is appropriate that the power to relax restrictions be vested outside Ministers in relation to certain bodies outside central government. This includes local authorities. The draft regulations, which noble Lords will now have seen, provide that the power to relax restrictions on exit payments may be exercised by full councils of local authorities in respect of payments that they make.
However, we need to ensure that the level of scrutiny and reassurance remains the same so whoever exercises the power must do so by reference to guidance issued by the Treasury, and must of course keep a record of the exercise of that power.
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I turn to the big group of amendments including Amendment 54D and Amendment 54BB. I obviously recognise that this is an emotive issue and that there will be cases of hard-working, long-serving public servants who may receive less as a result of the cap than they otherwise would have received. Whatever an individual’s level of earnings, however, the Government believe that £95,000 is a generous limit to impose on exit payments, and that payments of more than this cannot be allowed to continue unchecked. As I have already highlighted, the Government recognise that there may be exceptional circumstances where it would be right for a payment to be made of a value greater than the cap. To address this, the clause explicitly provides for the cap to be relaxed in appropriate circumstances. However, we are worried about things such as cliff edges. I reassure the noble Baroness, Lady Donaghy, that local authorities will also be provided with the powers to relax restrictions on exit payments, as I may already have said.
Amendment 54BB would exempt those who have worked for one employer for their whole career but would discriminate against those who perhaps, out of no fault of their own, have had an interrupted career or have chosen to move between employers. Equally, the Government do not believe that it could be right to impose a blanket exemption based simply on a definition of long service. There will also be individuals with long service on very high salaries who, under current rules, can receive payments far in excess of £95,000. I do not think that there is any dispute between us on that today. Regarding Priti Patel, I do not recognise that comment so I cannot answer what she was saying in particular. We have a commitment in the manifesto but I will of course take the point away and find out the exact circumstances and its timing.
The Government’s proposals allow every individual’s circumstances to be considered, whatever their salary or length of service, and guidance will be provided as to when it is right and proper to exercise discretion to relax the restrictions. We do not think it is right to try to limit that in the way proposed in these amendments this evening and, in the circumstances, I hope that noble Lords will feel able to withdraw or not press their amendments.