Public sector exit payments are under scrutiny again following the revocation of the somewhat short-lived Restriction of Public Sector Exit Payments Regulations 2020 in March last year.
The consultation, published by HM Treasury on 8 August, is on Government proposals to introduce a new administrative controls process for public sector exit payments over £95,000 and to amend the existing process for special severance payments (those in excess of an employee's statutory or contractual entitlements).
The consultation closes on 17 October and its stated intention is to allow for additional scrutiny and assurance of exit decisions, and to provide further insight on the use of exit payments. It is also stated to support "Government's wider ambition to reduce the use of large exit payments in the public sector". The government's proposals are set out in the draft guidance accompanying the consultation. There are currently no plans to introduce more legislation, though the Government states that it will keep the policy under review and assess whether "legislation is needed in due course to deliver the stated policy goals of ensuring value for money for taxpayers".
Who will the measures apply to?
The consultation states that it will apply to all bodies in "relevant parts of the public sector"; namely those that are classified as "Central Government" and/or bodies that don't have a specific right to make exit payments as set out in their Framework Document, Articles of Association, Board Terms of Reference or elsewhere.
The guidance makes it clear that if there is any doubt regarding whether an exit payment requires approval, "bodes should proactively check their existing delegations and the relevant HM Treasury Spending Team should be contacted to advise on scope of the guidance".
What are the proposals?
The consultation proposes:
- A new requirement for exits involving a total payment of more than £95,000 including "relevant statutory, contractual or discretionary payments" to be approved by a Secretary of State following submission of a business case.
- A modified version of the existing approval process for special severance payments of any amount, which will require approval from HM Treasury.
- Approval by a Secretary of State and HM Treasury where a total exit payment exceeds £95,000 and includes a special severance element.
- An additional requirement for any exit where relevant payments total more than £95,000 to be reported to the Treasury.
- An expectation that recovery of special severance payments should be considered across central government, where such payments are agreed and an official may be re-employed in the public sector.
What are the implications?
Following the consultation, the intention is to adopt the guidance which is currently published in draft form. As discussed above, the measures will apply to all "Central Government" bodies, as well as those that don't have a specific right to make exit payments as set out in their Framework document, Articles of Association, Board Terms of Reference or elsewhere. It does, however, mark the beginnings of a general push to reduce large exit payments in the public sector, so it may well be that something more widely applicable to the public sector as a whole will be introduced in the coming months.
