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Payoffs rife in public sector, MPs claim

24 January 2014

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Public sector organisations have shown a “worrying” lack of transparency around severance payments for poorly performing employees and staff that leave after raising concerns, the government has claimed. 

A report from the Public Accounts Committee (PAC) has called for “effective safeguards” which can ensure that employees who use settlement agreements feel protected when raising matters of public interest. 

Settlement agreements are used to terminate employment contracts. However, they can include confidentiality (“gagging”) clauses so that certain information is withheld. 

High profile cases in the NHS have highlighted areas where the employer’s interest was considered over public interest, PAC has said. 

The former chief executive of Morecambe Bay NHS trust, Tony Halsall, was given £225,000 when he stood down amid concerns over baby deaths. 

In 2007, an NHS whistleblower was offered £120,000 to keep silent about the case of Peter Connelly, otherwise known as Baby P. 

Figures from the National Audit Office show that 88% of compromise agreements across the public sector contain a confidentiality clause. However, figures for the NHS show the average payment was just £13,700. 


Margaret Hodge MP, chair of the Committee of Public Accounts (pictured) said: “It is clear that confidentiality clauses may have been used in compromise agreements to cover up failure, and this is simply outrageous. We heard evidence of shocking examples of using taxpayers’ money to ‘pay-off’ individuals who have flagged up concerns about patient or child safety.

“It is vital that people feel free to speak out to help prevent terrible tragedies or even deaths, and protecting the reputation of an organization, such as the NHS, at the expense of public safety is unacceptable.”

The Cabinet Office will now write up guidance for the public sector on the appropriate use of settlement agreements and severance payments. 

Organisations will have to get approval directly from the Cabinet Office if they want to work outside of the proposed terms. 

The PAC report reads: “The Cabinet Office guidance should set out how lessons are going to be learnt across government to prevent reoccurrence where a failure of process has occurred within an organisation.”

Sue Covill, director of employment services at the NHS Employers organisation, said: “We accept that the wording of these compromise agreements has sometimes confused people and this had to change. NHS Employers is widely circulating guidance to ensure these documents leave signatories in no doubt that they retain the important legal right to raise concerns in the interests of patient care.

“Compromise and settlement agreements can be used wisely and help save taxpayers money.