Government to review ministers’ severance payouts but rejects immediate reform

The Government has said it will consider reviewing the rules for taxpayer-funded ministerial severance pay, but rejected calls for immediate reform.

Cabinet Office minister Esther McVey said the principle of making “reasonable” payments “remains sound” given ministers can be removed at any time, telling MPs: “The Government doesn’t currently intend to reform severance pay for departing ministers, although I am happy to review it.”

Ms McVey, asked to guarantee the review will take place and changes implemented ahead of this year’s general election, replied: “No, I can’t because what we’ve said is it’s essential that it has due process on the floor of this House.”

Ministerial severance pay debate
Minister without Portfolio Esther McVey (James Manning/PA)

Labour had sought to present a Bill to Parliament aiming to change the system after it emerged nearly £1 million was spent during the political chaos of 2022.

Ministers under the age of 65 are entitled to a loss-of-office payment amounting to a quarter of their ministerial salary if they are not appointed to a new role within three weeks.

Former prime ministers Boris Johnson and Liz Truss both received £18,660 after resigning while Kwasi Kwarteng was given £16,876 when he was forced out as chancellor after less than six weeks in the job, according to Government figures.

Shadow attorney general Emily Thornberry said Labour is not seeking to scrap system, but said it was originally introduced so that ministers who had given “long and dedicated service” could “adjust to the loss of that salary”.

Ms Thornberry highlighted the level of ministerial churn in the final weeks of Mr Johnson’s premiership and then under Ms Truss, saying: “For every one case in the last financial year where a Tory minister decided that accepting that severance payment would be inappropriate in the circumstances, there were at least six or seven cases where the opposite was unfortunately true.

“That is why we find ourselves here today trying to fix a system of ministerial severance that has been brought into disrepute by dozens of its most recent beneficiaries.”

Labour wanted to overhaul the rules to ensure departing ministers get a quarter of their actual earnings over the previous year.

It would also claw back compensation if individuals return to the front bench while still benefiting from the severance pay.

Labour said its changes would have cut the £933,086 bill for severance payments relating to the Mr Johnson and Ms Truss administrations by nearly £380,000.

Ministerial severance pay debate
Shadow attorney general Emily Thornberry (Maja Smiejkowska/PA)

Replying for the Government, Ms McVey said: “The Government accepts that this legislation is now a third of a century old and that it may be an appropriate time to review it and consider changes.

“This is not, however, the right time or place to do it. Proper consideration needs to be given to new legislation.”

Ms McVey said in 2022 a “small number of severance payments were paid incorrectly to departing ministers”, adding: “While the incorrect payments were caused by an administrative error and the former ministers concerned were at absolutely no personal fault whatsoever, it is important that the Government seeks to recover that money.”

Former Tory cabinet minister Nadine Dorries last month said she will hand back more than £16,000 she mistakenly received in severance pay.

Ms Dorries turned 65 several months before leaving her cabinet role.

Ms McVey also said MPs need to be “careful not to change policy on the basis of exceptions that will occasionally occur under governments of all different forms”.

Ms McVey later said severance pay cannot be looked at as a “standalone issue” as it is part of the overall package that governs payments linked to ministers.

She went on to say the Government has demonstrated “restraint” on ministerial pay, saying: “Ministerial salaries are today lower than they were when this Government took office in 2010, which in real terms constitutes a significant pay cut.”

MPs heard ministers of state received £42,370 in April 2010 compared to £31,680 today.

Conservative former minister Richard Fuller suggested abolishing the severance payments altogether, saying: “When people are struggling, it is galling that people who already earn £80,000-a-year salary for being a Member of Parliament, and then earn more on top of that for ministerial duties, are then given another payment when, for whatever reason … they get a severance package.”

Labour’s motion to introduce a Bill was defeated by 275 votes to 192, majority 83.