Exit caps abandoned in stunning victory

In a stunning setback for the Westminster government, it has had to abandon the law commonly known as the Exit Cap Regulations, which it only introduced on 4 November last year.

In the minds of the government these regulations were introduced to cut big pay outs to the highest paid public servants when they were made redundant. They set a ‘cap’ to pay outs of £95,000, which sounds a lot.

Except that the way the government introduced the regulations meant that moderately paid staff could have been caught up by the law. In particular, it would have affected those in the local government pension scheme (LGPS) who were made redundant over the age of 55, as their benefits are payable immediately without any early retirement reduction.

Employers have to cover additional money for the early retirement (so-called ‘pension strain costs’) and when these are added on top off any redundancy payments, this can quickly mount up and exceed the £95,000 cap.

UNISON and other unions made a legal challenge that was due to be heard in a few weeks. However, just as we were finalising our evidence, the government backed down – sneaking out the news on a Friday evening, hoping to dampen down any press coverage.

The government says that it has ‘disapplied the regulations’, with a view to revoking them completely, because it may have had ‘unintended consequences’.

It’s hard to believe that, after five years of detailed discussions, during which UNISON has consistently pointed out the flaws, the government has only just seen the evident perverse incentives and consequences. What it did spot was that UNISON’s cause was just and it was going to lose.

Sadly, some members have already gone under the new regulations and others were in the process of being made redundant. The regulations have been disapplied from 12 February, but not backdated to the 4 November – although the government has called on employers to act as though it had been. So unpicking the consequences for members affected will not be straightforward and UNISON will need to keep its legal options open.

We can also expect that a further set of draft regulations, aimed at introducing the exit cap into the LGPS, with additionally proposed reductions in severance payments and reduced pensions for those over 55, and which UNISON also strongly opposed, are likely to be put on hold and redrafted.

UNISON calls on the government to abandon any future plans it may have of reintroducing an amended set of regulations. The government would be wiser to pay tribute to the public sector workers keeping this country going rather than trying to take away their hard-earned pay and conditions.

Thank you to all branch members who lobbied MPs and Ministers in response to our previous requests.