A crackdown on public sector payoffs could save hundreds of millions of pounds, the Government has announced.

In a move that will hit local government workers and others in the NHS, civil service and other parts of the public sector, exit payments will be capped at £95,000.

The Government says modernising public sector pay and conditions has already saved £12 billion.

New rules will also ban private healthcare packages and restrict the use of confidentiality clauses.

Chief Secretary to the Treasury Greg Hands said modernising the public sector workforce was a key part of paying down the national debt.

‘Reforming public sector redundancy payments could save taxpayers hundreds of millions of pounds by 2020 and will ensure that public sector workers get a fair deal by ensuring greater consistency in redundancy pay-out terms between workforces.

‘New guidance for public sector employers on pay and terms will set out what is acceptable and what isn’t.

‘Taxpayers’ money shouldn’t be used to pay for private health insurance and gagging orders to cover up bad practice.’

The Employment Lawyers Association (ELA), however, describe the draft regulations as ‘unnecessarily complicated’ and say they are likely to be unhelpful to all involved be they employees, employers or prospective employers.

Paul McFarlane, chair of the ELA sub-committee responding to a consultation on the draft regulations, said:

‘As ever, the devil is in the detail. The regulations as drafted would create unnecessary confusion which could prove costly to any one of the parties involved and could discredit Government efforts to crackdown on a perceived wrong.

‘It also seems unnecessary to make those seeking to comply with the Regulations have to refer lots of other legislation before being clear about what they need to do.

‘Some extra time now spent on ironing out all of the wrinkles is much more likely to deliver an effective end product for Government.’