Labour announces proposed reforms of ministerial severance payments

Labour has vowed to close three 'glaring loopholes' in the rules governing severance payments for ministers leaving office, which it says would have cut almost £380,000 from the severance bill for 2022/23, reducing the amount paid out to outgoing ministers in that financial year by more than 40 per cent.

The reforms will mark the biggest shake-up to the rules since they were first introduced more than thirty years ago. Since 1991, departing ministers under the age of 65 have been entitled to a quarter of their annual salary no matter how long they have been in their latest post, or the circumstances under which they leave their jobs, and must only give back that payment if they are re-appointed to another role within three weeks.

Thanks to the unprecedented turnover in ministers last year under the Johnson, Truss and Sunak administrations, it was revealed this week that the total ministerial severance bill for 2022/23 came to £933,086.

Labour has today pledged to introduce three reforms to the severance rules if the party is elected later this year:

1. Rather than receiving a quarter of their final annual salary, departing ministers will only receive a quarter of their actual earningsover the previous twelve months as a minister, minus any period covered by a previous severance entitlement. That would stop individuals who have only served for a few weeks in a role claiming three months of wages at their final salary level when they depart

1. Any individual who returns to ministerial office while still enjoying the benefit of their previous severance payment will have the corresponding proportion of that payment clawed back. That would stop individuals enjoying a full three-month 'loss of office' payment even if they return to the front bench during that period

1. Any minister who leaves their job while under investigation for allegations of misconduct or breaches of the ministerial codewould have their severance suspended and then quashed entirely if the allegations were upheld, bringing their treatment into line with the rules for civil servants and special advisers.

Labour has calculated that, if those reforms had been in place during the current Parliament and the existing age limits properly enforced,the severance bill for 2022/23 would have been cut by more than 40 per cent from £933,086 to £555,093, with 76 of the 98 individual payments being reduced. Among the ministers who would have been affected are the following:

- Chris Pincher and Peter Bone, who respectively received severance payments of £7,920 and £5,593, despite being investigated for misconduct, would have had those payouts quashed entirely after the allegations against them were upheld.

- Bone was also one of five frontbenchers handed payouts in error, having been aged over 65 at the time of their departure. Properly enforcing that rule would have cancelled the £16,876 paid to Nadine Dorries, the £17,742 paid to Baroness Stedman-Scott, and payouts totalling £10,072 to Sir David Evennett and Maggie Throup.

- Brandon Lewis, who received two payments totalling £33,572 in just four months after leaving his jobs as Northern Ireland Secretary in July 2022 and Justice Secretary 16 weeks later, would have had his entitlement cut to £13,594.

- Grant Shapps, who claimed his full three-month payout of £16,876 after quitting as Transport Secretary on 6 September 2022, would have had to repay more than half that amount after returning to Liz Truss's Cabinet six weeks later as Home Secretary.

- Greg Clark and Shailesh Vara, who both spent fewer than nine weeks as Cabinet ministers in the last days of Boris Johnson's administration, would have had their entitlements reduced from £16,876 each to just £2,775.

- Robert Buckland, who returned to the cabinet for just 111 days as Welsh Secretary between July and October 2022, and accepted a full three-month severance payment after leaving again, would have received £5,036 rather than £16,876.

- Ranil Jayawardena, who spent seven weeks as a Cabinet minister (at Defra) under Liz Truss, after spending the rest of the year as a junior trade minister on a much lower salary, would also have had his entitlement reduced from £16,876 to £7,464.

- Simon Clarke also spent seven weeks as the Secretary of State for Levelling-Up under Liz Truss and received a £16,876 payout; if this had reflected his time on a lower salary as Chief Secretary to the Treasury, it would have been cut to £9,122.

- Chloe Smith followed the same pattern, stepping up from Minister of State at DWP to become Secretary of State for Work and Pensions for just seven weeks under Liz Truss; her payout would therefore also have been reduced from £16,876 to £9,076.

- Kit Malthouse was another who spent the majority of the preceding year in a more junior ministerial role as Police Minister before claiming a £16,876 payout at the end of his spell as Education Secretary; his entitlement would have been cut to £10,619.

- Jacob Rees Mogg, who claimed a £16,876 payout in October 2022 would also have been paid according to his actual earnings over the previous 12 months, including 3.5 months as Leader of the House of Commons, reducing his entitlement to £14,264.

- Johnny Mercer, who accepted a £7,920 severance payment after two months in the role of veterans minister, then controversially told his local paper that he had not done so, would have had that payout reduced to £1,302.

- Greg Hands, who claimed £7,920 in severance when he left his Minister of State job at BEIS on 7 September 2022, only to return to an equivalent job at DIT on 9 October, would have had just under two thirds of his payout clawed back.

- Kemi Badenoch, who accepted a £7,920 payout when she quit Boris Johnson's government on 6 July 2022, but then returned on promotion to the Cabinet under Liz Truss two months later, would have had £2,832 clawed back.

- Julie Marson, who served 75 days as a whip in the last weeks of Boris Johnson's administration and the first fortnight of Liz Truss's, then returned to the same role five weeks later under Rishi Sunak, would have had her payout cut from £4,479 to £920.

- Lia Nici, who helped fill out the junior ministerial ranks under Boris Johnson after the mass resignations of 6 July 2022, and then helped shore up the whips’ office under Liz Truss, would have seen her severance payment reduced from £4,479 to £1,588.

- Andrea Jenkyns, who was promoted from assistant whip to education minister on 9 July 2022, and walked away after sixteen weeks with a Damehood in Boris Johnson's resignation honours and £5,593 in severance, would have had that payout cut by £775.

- Julia Lopez, who received £7,920 after quitting her job as Minister of State for Media in July 2022 only to return to exactly the same job nine weeks later, would have had £2,750 of her payout clawed back, while Matt Warman – who did the job in the interim – would have had his entitlement cut from £7,920 to £1,314.

- Alec Shelbrooke, Jackie Doyle-Price and Rob Butler, who all enjoyed short spells on the front bench under Liz Truss, and left with severance payments totalling £21,433 plus a knighthood, a damehood and an OBE respectively in her resignation honours, would have had their payouts reduced to a total of £2,682.

- Jonathan Gullis, who enjoyed his first and – as yet – only stint as a minister during Liz Truss's seven weeks in charge, for which he earned £2,993 in wages then claimed £5,593 in severance, would have had the latter entitlement reduced to £748.

- Marcus Fysh, who earned just £2,248 in wages during his thirty-eight days as a trade minister in Liz Truss's government, five of them spent on a £7,443 taxpayer-funded visit to Bangkok, would have had his £5,593 payout cut to £562.

- Brendan Clarke-Smith, who spent sixteen weeks as a junior minister in the Department for Education (under Johnson) and the Cabinet Office (under Truss) – would have had his severance claim cut from £5,593 to £1,684.

- Rehman Chishti, who spent just two months as a Foreign Office minister in the late stages of Boris Johnson's premiership (including two days as a candidate for the Tory leadership), would have had his payout cut from £5,593 to £936.

- Damien Moore, Mark Jenkinson and Darren Henry, who found themselves as assistant whips in the chaotic last five weeks of Liz Truss's administration, each earning around £1,723 in salary but pocketing severance payments of £4,479 when those jobs ended, would have had their entitlements cut to £454 each.

- And Liz Truss herself, whose seven weeks as Prime Minister has entitled her to claim £115,000 per year for life under the Public Duty Costs Allowance as well as three months of the Prime Minister's salary in severance, would at least have seen the latter payment slightly reduced under these reforms, from £18,860 to £17,143, a cut of £1,717.

Jonathan Ashworth MP, Labour’s Shadow Cabinet Office Minister, said:

"When the drafters of the 1991 legislation put the 'loss of office' rules in place, they surely never expected them to produce the kind of payments that we saw in 2022/23 under this shambles of a government: £933,086 going direct from the taxpayer into the pockets of Tory MPs as a reward for political chaos and a crashed economy, including almost £50,000 of payments to ministers who were over the age limit to claim them.

"Among the beneficiaries were MPs who had never served as ministers before filling out the front bench in the dying days of the Johnson administration; acolytes of Liz Truss, whose time in government began and ended with her own short reign in No.10; and a host of Rishi Sunak favourites quitting their jobs to put pressure on his predecessors, then returning a few weeks later when he became Prime Minister.

"Most disgraceful of all, we saw individuals who were never fit for ministerial office in the first place being forced to quit after their shameful conduct was exposed, but still walking away with a payout from the taxpayer.

"Under the current rules, every single one of those Tory ministers was legally entitled to three months of severance at their final salary level, no matter how long they had been in post, no matter the circumstances of their departure, and – in most cases – no matter how quickly they returned to the front bench. These are the glaring loopholes that Labour's proposed reforms will seek to close."

Ends

Notes:

The Ministerial and Other Pensions and Salaries Act became law in February 1991, and can be found here:https://www.legislation.gov.uk/ukpga/1991/5/enacted

It is worth noting that some ministers – e.g. Dominic Raab, Baroness Penn and Lord Parkinson – voluntarily chose to have their severance entitlements in 2022/23 reduced in line with the second of Labour's proposals, while others – e.g. Steve Barclay, Guy Opperman and David Rutley – chose to return their payments in full when they returned to new ministerial posts. Another Cabinet minister – Gavin Williamson – was pressured into turning down his severance payment after quitting his Cabinet Office post due to allegations of past misconduct, in line with Labour's third proposal.

Below is a full list of the reductions in severance payments to outgoing ministers in 2022/23 that would have been produced if Labour's proposed reforms had been in place, adding up to a total saving of £377,993. Alongside each name, the table shows the department from which their severance payment was received, along with a hyperlink to the 2022/23 annual report for that department where the payment is recorded, or in the case of the Attorney General's Office, the PQ answer where they were disclosed.

It should be noted that the departmental annual reports are not always a reliable guide to the amounts payable to individuals – either in salary or severance – due to typographical errors and other unexplained anomalies. Where necessary, the analysis below has corrected the figures in those reports to give a more accurate estimate.

The reasons why each minister would have had their entitlement reduced under Labour's proposals are also indicated alongside their name:

* Individuals marked with an asterisk earned less in the twelve months before their departure than the final salary on which their original severance was based, and would therefore have had their payout based on a quarter of their actual ministerial earnings in the previous year, minus any period covered by a previous settlement entitlement.

° Individuals marked with a circle returned to ministerial office while they were still within the period covered by their severance entitlement, and would therefore have had the corresponding proportion of their payout clawed back.

ꜝ Individuals marked with an exclamation point left their jobs because of allegations of misconduct or breaches of the ministerial code, and – under Labour's proposals – would have had their severance entitlement suspended and then quashed entirely after those allegations were investigated and upheld.

^x Finally, individuals marked with a cross are those who should not have received a payment at all from their departments under the law as it currently stands, because they were over the age of 65 at the time of their departure.

In addition to the severance payments listed above, there were 22 severance payments in 2022/23 which would have been unaffected by Labour's proposed reforms, totalling £277,107. With those added to the totals above, we can calculate that the total severance payments as claimed in 2022/23 were £933,086, the total payments as they would have been with Labour's reforms in place (and the current age limit rules properly enforced) are £555,093, and the resulting savings would have been £377,993.