The Enterprise bill: public sector pay-outs and devolution

Having made its way through the Lords, the Enterprise bill will get its Commons second reading next Tuesday. In many ways, this bill exemplifies bad post-devolution legislation, as it’s a portmanteau bill with provisions on a range of subjects including a Small Business Commissioner, non-domestic rates, late payment of insurances claims, regulatory reform and other matters. Some of these provisions relate only to England, some of them mainly affect England but have knock-on effects for devolved functions in various parts of the UK, some of the bill’s provisions are UK-wide or GB-wide and relate to reserved/non-devolved matters – but others are intended to apply across the UK or Great Britain while affecting devolved matters. To make matters worse, it extensively amends existing legislation, so working out exactly what it does is no easy task.

One clause that is particularly striking is clause 35, which deals with ‘public sector exit payments’ – redundancy and similar payments made to people leaving public sector employment. It covers not only redundancy and ex gratia payments but also contractual obligations such as pay in lieu of notice or for outstanding leave entitlements, and limits the sum total of such payments to £95,000. The bill delivers a Conservative manifesto promise to ‘end taxpayer-funded six-figure payoffs for the best paid public sector workers’.  These have been particularly notable in recent times with the shake-out of the public sector arising from austerity and also major reorganisations of services, which have often led to individuals taking a pay-off from one job and then moving straight into another.  Another side of the coin, for very senior posts, is how to remove a senior figure like a chief executive who cannot work with a changed political leadership, a common problem in local government. An amicable redundancy settlement has usually been the way to resolve that. (As an aside, putting the figure of £95,000 onto the face of the bill is unusual and likely to cause serious practical difficulties in future, as inflation erodes the value of that amount.)

As is well known, the management of the public sector generally is a devolved matter for Scotland, Wales and Northern Ireland. However, employment law is reserved in Scotland (by Head H in Schedule 5 to the Scotland Act 1998), an undevolved ‘silent subject’ not mentioned in Schedule 7 to the Government of Wales Act 2006 for Wales, though devolved in Northern Ireland. (For Wales, this means the Assembly can legislate for matters affecting employment law where this is necessary for enforcement or making effective a provision relating to a devolved subject, or otherwise incidental or consequential to such legislation; see section 108(5) Government of Wales Act 2006.) So clause 35 has the scope to affect devolved matters considerably if it applies in Scotland, Wales or Northern Ireland.

The Enterprise bill itself is silent about the territorial extent of this clause, which means it extends to all parts of the United Kingdom. The Explanatory notes contain a table confirming that the provision applies to Scotland, Wales and Northern Ireland and saying ‘not applicable’ when identifying whether it is devolved or not. That conclusion is doubtful in each case. In Scotland the Scottish Parliament is to consider a legislative consent motion assenting to the clause – approval has been recommended by both the Scottish Government in its legislative consent memorandum and by the Parliament’s Economy, Energy and Tourism Committee. Similarly, in Northern Ireland the matter has been considered by the Assembly’s Finance and Personnel Committee which expressed a number of concerns about the bill but recommended approval via an LCM. In Wales, although there has been an LCM, this relates only to the ‘Small Business Commissioner’ and non-domestic rating provisions of the bill and not the public sector payout ones.  Those have not been considered by the National Assembly.

What makes the Welsh position even odder is the provision in the Draft Wales Bill published in October to make such public sector payouts a reserved matter. Reservations 144 and 145 in the new Schedule 7A included to the draft bill reserve the following:

144. Schemes for the payment of compensation for or in respect of public sector workers in respect of—
(a) incapacity or death as a result of injury or illness,
(b) loss of office or employment, or
(c) loss or diminution of emoluments.

145. Regulation of amounts payable, or paid, to or in respect of public sector workers in consequence of leaving office or employment.

The upshot would be that Scotland and Northern Ireland will be free to alter the application of the UK rules at some future time, if they wish, while accepting arguments at present for the desirability of having similar rules across the UK. Wales will not; the proposed reservation would prevent it from ever doing so, if it makes it into enacted legislation. That not only distinguishes Welsh devolution from that for Scotland and Northern Ireland, for no very clear reason, but also hampers the ability of the National Assembly and Welsh Government to organise and management the devolved Welsh public sector effectively.

BIS, and its predecessor departments, have never had a reputation for being particularly supportive of devolution. (The department is of course also currently promoting the Trade Union bill, which has raised much anger, and questions of whether devolved legislative consent is needed – previously discussed HERE.) It has also a long track record of being insensitive to devolution questions when they arise, which the Enterprise bill exemplifies. What it doesn’t appear to have realised is that times have changed. Ten years ago, such mis-steps were merely inconvenient and inconsiderate. Now, they have much wider political and constitutional implications.