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Use of gagging clauses must be controlled, says NAO

By Richard Johnstone | 21 June 2013

Ministers have been urged to ‘get a grip’ on the use of gagging clauses and severance payments when staff leave jobs in the public sector after auditors found a ‘lack of transparency’ in the deals.

The National Audit Office examined the controversial agreements, which have been criticised as acting as a gag on whistleblowers in the NHS. They involve offers of financial payment to workers when terminating their employment in return for keeping the facts surrounding the payment confidential.

Around 1,503 of these 'compromise agreements' are thought to have been reached in the three years to the end of 2012/13, with total payments worth £28.4m agreed, according to Confidentiality clauses and payments.

Agreements can be reached for legitimate reasons, the report found, such as minimising potentially time-consuming processes in managing poor performance, and it is normal that some information is kept confidential.

However, some people offered compromise agreements or who had accepted them told the NAO they had felt ‘gagged’ from speaking out about bad practice as a result.

The report found the use of the deals in the public sector had developed without co-ordinated control. Auditors also said they were unable to get a complete picture of either agreements or payments due to decentralised decision-making across the public sector, including in the NHS, as well as limited recording of their use.

Although the Treasury believes there is no need for central collection of this data, auditor general Amyas Morse said the government must get a grip on the use of agreements.

He said the lack of transparency, consistency and accountability surrounding the current use was unacceptable.

‘With the public purse under sustained pressure and services increasingly delivered at arm’s length, it is important that compromise agreements do not leave staff feeling gagged or reward the failure either of an employee or an organisation. The centre of government should get a grip on the use of compromise agreements in the public sector.’

Public Accounts Committee chair Margaret Hodge said it was ‘staggering’ that there was no idea in Whitehall of whether the deals were value for money. She said this was a state of affairs that could not continue.

She added: ‘The Treasury looks at cases individually, so it can’t say where most applications come from, what the total sums involved are or how much of the amounts it approves are paid by departments, following negotiations.

‘No one has any idea if departments use these agreements excessively to reward failure or avoid unwelcome publicity. Similarly, no one knows whether individuals abuse them by moving around to hide poor performance, picking up payments as they go. Payments may be lower on average and included in contracts, but there are individual cases where obscene amounts have been approved; as much as £266,000 in the Department of Health and £120,000 in the Ministry of Defence.’

Responding to the report, a government spokesman said departments must balance the importance of accountability and transparency against any potential benefits of confidentiality when choosing to make a severance payment.

As part of our robust approach to managing public money, departments wishing to make a special severance payment which is not contractually required must also seek approval from the Treasury. The decision on whether confidentiality clauses are included in settlements is a matter for individual departments.

‘As the NAO notes, confidentiality clauses can have legitimate benefits – the government’s legal advisers provide guidance on their use and we continue to look at ways to strengthen this as central guidance.’

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