Back in 2013, Essex County Council was heavily criticised due to the amount that had been paid out on exit payments in settlement agreements. However, since then, according to the most recent research conducted by the TaxPayers' Alliance, the average payout per employee has gone up even further, and is at a level that is well above the national average in terms of local authorities.
Settlement Agreements
Research on local authority settlement agreements carried out by the TaxPayers Alliance found that in the 3 year period between 2016-19, local authorities across the country entered into 6,980 settlement agreements in total, with £98,059,105,00 paid out overall
The report highlighted that the average payout was £14,048.59, whilst the highest amount paid out in total was by Stoke-on-Trent City Council, who paid out £8,552,433.00 with respect to 371 settlement agreements. This was also the highest number of settlement agreements entered into by any one Council, and included a pay out of £195,463.00 to just one particular individual, the highest known individual pay out by a local authority during the 3 period in question.
The highest average payout during the 3 year period was by Basingstoke and Deane Borough Council, with an average payout on their settlement agreements of £79,628.00. That Council paid out a total of £398,139.50 on 5 settlement agreements.
Essex County Council
According to an article published by the East Anglian Daily Times, during the 3 year period between 2010-13, Essex County Council paid out £1.1 million on 69 settlement agreements. The average payout was £15,942.00. One of the 69 employees concerned received £80,000.00.
Essex County Council was criticised at the time by councillor Julie Young. She stated: "The Council is promoting as one of its core principles openness and transparency with the public, yet this very recent data published on compromise agreements does not provide any reassurance to the public that the council is doing enough. Spending over £1m of public money to effectively silence 69 departing employees is nothing short of excessive. These agreements should not be used as a costly tool to brush under the carpet possible council failings at the tax payer’s expense."
The then TaxPayers’ Alliance campaign director, Robert Oxley, added: "It’s deeply worrying to see tens of thousands of pounds wasted on gagging clauses. Council bosses should not use compromise agreements as they are an opaque and unaccountable way to spend taxpayers’ money. If staff aren’t up to the job then they should be let go, not paid off with tens of thousands of pounds. Any payoffs should be out and in the open so residents can scrutinise their value and be assured that their money is not being used to hide council bungling."
Nevertheless, the Council defended their use of settlement agreements. A spokesperson stated: "The use and terms of any compromise agreements, or settlement agreements as they are known, are considered on a case by case basis. A compromise agreement is only authorised when it can be justified as being a cost-effective way of closing down a dispute with or claim from an employee or ex-employee and minimises unnecessary expenditure or time being incurred in defending claims which would otherwise divert resources away from the council’s business of providing public services."
TaxPayers' Alliance Report
In its recent report, the TaxPayers' Alliance found that the average payout by Essex County Council on settlement agreements between 2016-19, had increased to £18,379.67. This was £4,331.08 above the national average of £14,048.59 amongst local authorities. The Council entered into 20 settlement agreements during this period, and paid out a total of £367,593.40 on them.
In its submission to the Government consultation on public sector exit payments on the 17th October 2022, the TaxPayers' Alliance stated: "It is imperative that the government introduces stricter controls on public sector exit payments. Across central and local government, the total number of exit packages in 2018-19 and 2019-20 totalling more than £100,000 was 2,350, at a cost of roughly £400 million...[T]he proposed guidance should go further and instead prohibit all exits and payments exceeding £95,000...The current system for exit payments is not equitable for taxpayers...too many...exit payments [exceed] annual salaries...This is especially lacking equity when employees commence new work in the public sector after receiving an exit payment and not repaying it."
