In a move the coalition government says will bring public sector redundancy deals into line with ‘best practice’ in the private sector, payments for redundancies will in future be capped.

At present it is estimated that there are some 1,700 workers whose public sector job disappeared from under them who have been kept on the payroll because it was more expensive to give them their contractual redundancy payments. This costs £50 million a year while they sit in a ‘talent pool’ waiting to be ‘redeployed’.

This situation can arise where a long served public servant could qualify for a pay-off of up to 6.2 years salary. So someone on £25,000 p.a. could qualify for a redundancy pay out worth £155,000.

What the government wants to do is cap this at 12 months for compulsory redundancy and 15 months for a voluntary pay-off.

Average payouts are currently running at about £60,000, which has cost the taxpayer £1.8 billion over the last three years.

The Labour government had tried to cap the payments at two years, something even most unions agreed had to happen. But the move was defeated in the courts after action was brought by Public and Commercial Services Union (PCS). Now it looks like they will have to fight an even stricter set of rules. Many other unions and their members will be unhappy at the overall outcome and may even blame PCS for not taking the earlier better deal.

Cabinet Office Minister Francis Maude said this direction was taken reluctantly.

"Our system of a permanent politically impartial Civil Service is one of the jewels in our constitution and it is rightly admired throughout the world for the way it serves the elected Government of the day.” He said “I am a huge admirer of its professionalism, and strongly support the values and ethos that underpin it. Sadly, the huge deficit we inherited means there is a real urgency now for change. It is for this reason, and in the light of the current deadlock, that we have had to reluctantly start this process today. I've already been impressed by the way that, in just a few weeks, civil servants have come up with tens of thousands of ideas for making savings and shown a real willingness to do things differently, and, had the PCS shown the same willingness to negotiate as the other five Civil Service unions, then today's action might not have been necessary. This is just the beginning of the process. I want to make it absolutely clear that we see today's Bill as the basis for immediate discussions to start. What is on offer now is simply untenable and completely out of kilter with what is on offer in the wider public sector and the private sector. Our ambition now is that a negotiated, sustainable and practical long-term successor to the existing scheme can be agreed – one that is flexible and appropriate for current economic climate and also fair for lower paid workers.”

There is the argument that no government would take this course unless it had the intention of using the new rules. This has worried many. Dai Hudd the deputy general secretary of Prospect, which looks after 120,000 civil servants says that tens of thousands face potential redundancy through no fault of their own. “The government wants to rip up their rights in a way that would do justice to King John, but it will not work. These rights are protected by law and bully boy tactics will not get round that fact.” He said.

The capping of payments will be achieved through a new bill, which will also amend a 1972 act of law that only allowed such changes with union approval. It was this law that the PCS relied upon to get Labour’s attempt to cap the limits thrown out.

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