Treasury consults on expanded administrative control process for public sector exit payments over £95,000 in central government

The Government has launched a consultation on an expanded approvals process for employee exits and special severance payments (SSPs), and additional reporting requirements, in relevant parts of central government and certain other public bodies.

The consultation and proposed guidance can be viewed here.

The Treasury said the government “believes that staff exits, and corresponding exit payments, have an important role to play in facilitating organisational changes in the public sector. However, it is vital that such exits are agreed through a rigorous process where value for money is considered, and alternatives robustly explored.”

It said the expanded approvals process was intended “to allow for additional scrutiny and assurance of exit decisions, and to provide further insight on the use of exit payments. This will support Government’s wider ambition to reduce the use of large exit payments in the public sector, improving the consistency and accountability of decisions to exit public sector employees at a cost to the taxpayer”. 

For the first time, it will set the expectation that recovery of SSPs should be considered across central government, where such payments are agreed.

The guidance applies to all bodies that are classified as ‘Central Government’ and/or bodies that do not have a specific right to make exit payments as set out in its Framework Document, Articles of Association, Board Terms of Reference or elsewhere, the Treasury said.

The guidance says that if there is any doubt regarding whether an exit payment requires approval, bodies should proactively check their existing delegations and the relevant HM Treasury Spending Team should be contacted to advise on scope of the guidance.

“Some bodies may wish to have powers to approve exits delegated to them above the threshold, either in general or for a set number of exits. Bodies should raise this with HM Treasury via their sponsorship bodies. The Chief Secretary to the Treasury will need to agree such delegations.”

The guidance says that as a specific requirement under Managing Public Money, approval of special severance payments must be given by HM Treasury, unless specific delegations are in place.

It adds: “Even where delegations are in place, bodies/departments should notify HM Treasury of cases which:

  • Involve important quesions of principle,
  • Raise doubts about the effectiveness of existing systems,
  • Contain lessons which might be of wider interest,
  • Might create a precedent for other departments, or
  • Arise because of obscure or ambiguous instructions issued centrally.”

This consultation opens on 8 August 2022 and will run for 10 weeks, closing on 17 October 2022.

Commenting on the consultation, Ian Colvin, Head of LGPS Benefit Consulting, Hymans Robertson said the consultation “takes a slightly different approach from previous government intentions to cap exit payment at £95,000”.

He said: “Rather than apply an absolute cap to exit payments, the proposal seeks to beef up the approval process and to give the relevant department secretary of state the final say on whether a £95,000 plus payment can be made. The expectation is that approval will only be granted in exceptional circumstances.

“The consultation also takes the opportunity to strengthen the approval process for special severance payments i.e. payments to public sector workers on leaving, over and above their statutory or contractual entitlements. Approval, however, will only be forthcoming where very stringent criteria are met.

“The consultation outlined today will only apply to central government bodies so local authorities will be keen to see what DLUHC intend to do in this space and any implications this may have for the LGPS.”