The First-tier Tribunal (Information Rights) has recently held, in the case of T W Gibson v Information Commissioner, that a District Council was required to disclose the financial details of its former Chief Executive Officer's Compromise Agreement, because it concerned the use of public funds.

The Tribunal agreed that most of the information in the Agreement was exempt from disclosure under section 40(2) of the Freedom of Information Act 2000, as there was a strong expectation of privacy in relation to a Compromise Agreement, and, as a result, disclosure would be unfair.  However, it did not consider it to be reasonable for the ex-CEO or the Council to expect that the information in the Agreement relating to the use of public funds could be hidden from the public on the basis of a confidentiality clause agreed between them. 

The Tribunal's reasoning rested largely on the facts that (i) the ex-CEO was the council's most senior officer, and, as such, "should expect their actions to be subject to greater scrutiny"; (ii) there was a public interest in the remuneration levels of top council officers; and (iii) the CEO had left the council during a financial crisis, with a £800,000 overspend and a need to save £2.5 million.  In these circumstances, the legitimate interests of the public outweighed the legitimate interests of the individual, and the balance was tipped in favour of disclosure of the financial details of the settlement package.

The relevant section of the Freedom of Information (Scotland) Act is almost identical and likely to be interpreted in the same way.  Public sector employers across the UK should be aware that the financial details of any negotiated exit package with a senior officer are very likely to be disclosable under the freedom of information legislation if a request is made, and that any agreed terms as to confidentiality will not be effective to prevent such disclosure.  In any event there is now a requirement in England and Wales for public authorities to publish, in their accounts, the individual financial details of any severance payments to senior officers earning more than £50,000 per annum.  Whilst not yet required to do so, authorities in Scotland are encouraged to follow a similar practice.

This increased transparency is likely to lead to greater scrutiny of any negotiated exit packages, particularly in view of the ongoing background of swingeing public sector cuts and their impact on delivery of essential public services. 

It will be doubly important, therefore, for a public authority proposing to enter into a settlement with a senior member of staff to ensure that it has considered fully the financial implications of the package, including any pension costs, and has acted within its powers.  It will also be important to take into account non-financial matters such as potential damage to the authority's reputation, especially in circumstances where there have been performance issues and it could be perceived that the package amounts to a "reward for failure".

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