The Parliamentary Secretary, Cabinet Office (Baroness Anderson of Stoke-on-Trent) (Lab)

My Lords, this order is a necessary measure to address the historical misapplication of the Ministerial and other Salaries Act 1975, which sets ministerial and other officeholders’ pay. The other officeholders are the Leaders of the Opposition in both Houses, the Speakers in both Houses, the Opposition Chief Whips in both Houses and two Opposition Assistant Whips in the House of Commons. In 1997, a formula was introduced to link pay increases for Ministers and certain officeholders to senior Civil Service pay bands. The formula set out that ministerial salaries should be increased by the average annual change in the midpoint of the senior Civil Service pay bands. During the financial year 2023-24, the Cabinet Office identified that the formula had been misapplied. Since the introduction of the formula in 1997, the salaries of Permanent Secretaries had often been excluded from the calculation, despite the legislation not permitting such an exclusion. This technical misapplication of the law has happened under successive Administrations, over several decades. The formula was originally proposed by the Senior Salaries Review Body, which recommended that Permanent Secretary pay should not be included in the calculation for ministerial pay. The Government believe the policy that has been often applied since 1997, in line with the Senior Salaries Review Body recommendation, is the correct approach and are introducing this Order in Council to ensure the law aligns with long-standing policy. The order performs two primary functions. First, it resets the statutory salary levels for all Ministers and specified officeholders. Given the misapplication has been applied for several decades, resetting the salaries in law provides legal clarity and a baseline for any future uplifts. These reset figures were calculated based on the average annual change in the midpoint of the senior Civil Service pay bands including the Permanent Secretary pay band for each financial year since the misapplication was identified, in line with the formula set out in the legislation. Secondly, the order amends the formula to exclude the Permanent Secretary pay band from future calculations. This change simply formalises the policy approach that has been applied in practice, by all Administrations, for over two decades. For the initial year beginning 1 April 2026, the order sets out a transitional measure where the higher of the old or new formula will be applied to ensure that no individual is disadvantaged by the order’s retrospective effect. The impact of this order is minimal; it affects only ministerial office holders and a small number of other office holders in Westminster. Due to incomplete records, it has not been possible to determine the exact financial impact of this misapplication. Analysis shows that no individual has gained or lost a substantial amount. I want to be clear that for Ministers, this order will result in no change to actual take-home pay. The Prime Minister has maintained the policy of freezing ministerial salaries, and Ministers will continue to waive their statutory entitlement. In fact, ministerial salaries for Members of the House of Commons have not increased since 2008. Ministerial salaries were actually cut in law, via an Order in Council, in 2011. Lords ministerial salaries have not risen since 2008 and were cut in 2011, but in 2019-20, they began to claim their full salary entitlement. They were again frozen in 2020-21 and remain so today. The other officeholders make a personal decision on whether to take the salary they are entitled to in law or to waive part of the salary in line with the ministerial salary freeze. The order therefore does affect the salaries paid to these individuals who choose to take their entitled salaries. The Government have been unable to calculate their annual pay increases while work on this order was ongoing, so we will provide back payments covering annual pay increases owed to current and former officeholders in these roles dating back to 1 April 2023. The legislation is also linked to the salaries of the Chairman and Deputy Chairmen of Ways and Means in the other place, whose salaries increase through the same formula but are paid by Parliament. They will also receive back payments dating back to 1 April 2023. The total cost of back payments to the Government is just over £15,000. This is for the roles paid by the Government: the Leaders of the Opposition in both Houses, the Speaker in the House of Commons, the Opposition Chief Whips in both Houses and two Opposition Assistant Whips in the House of Commons. The total cost of back payments to Parliament is between £7,000 and £19,000. This is for the roles paid by Parliament: the Chairman and Deputy Chairmen of Ways and Means in the other place and the Lord Speaker. It is important to note that the majority of the back payments represent money that would have been paid if the misapplication had not been identified. I am grateful to the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments for their consideration of this Order in Council and for their respective reports. I shall briefly address the issues they have raised. The Secondary Legislation Scrutiny Committee noted that it has taken three years for the Cabinet Office to resolve this issue. Although a small issue, it is a complex and technical one; it is right that the Government took the time to ensure that the misapplication was addressed correctly, and I am sure that noble Lords will support this order which addresses this long-standing misapplication of the law. The Joint Committee on Statutory Instrument has reported that this Order in Council appears to have retrospective effect without the express authority of the parent legislation. The Cabinet Office considers that the Act provides power for limited retrospection, and that the retrospective effect of this order is justified and fair. This is because backdating of salary increases is normal practice given that, for senior civil servants, salary increases are usually not known until the summer but pay increases take effect from the 1 April. In addition, as I have set out, the impact of this order is minimal, affecting Ministers and a small number of other officeholders. In summary, the Government are bringing forward this Order in Council to address a historical misapplication of the Ministerial and other Salaries Act 1975, which sets ministerial and certain officeholders’ pay. This is a necessary measure to address a technical misapplication of the law and will ensure that the law aligns with long-standing policy. I beg to move.