The Treasury says the move will bring an end to “golden goodbyes” in areas such as the NHS, public bodies and local government.

However, the consultation document published today reveals that the government is proposing an exemption from the new pay-off cap for “public financial corporations and subsidiaries”.

This will include institutions such as The Royal Bank of Scotland, Bradford and Bingley and Northern Rock – all of which have received billions in government bailouts.

Leslie Manasseh, Prospect’s deputy general secretary, said: “The public sector already has to bear the burden of austerity and now, once again, it feels like it is the workers in the civil service who are being punished, while banks are being left to carry on business as usual.

“The government always claims that banks need to pay uniquely high salaries to attract talent. It seems that they will also be able to pay uniquely high compensation when those talents are no longer needed.

“Despite attempts to portray the financial crisis as a result of profligate public spending, we need to remember that this is a mess that was largely caused by the reckless gambling of investment banks.”

Broken promises

Moreover, these government plans threaten to rip up a deal on civil service redundancy that had already been agreed with four trade unions, including Prospect, and the last Conservative cabinet office minister, Francis Maude. At the time, Maude said: “It was a package that was fair for civil servants and fair for other tax payers.”

On the new plans, Manasseh says, that it would not just be high wage earners affected but someone earning less than £30,000 could also lose out.

“In many cases refusing to allow a redundancy payment of more than £95,000 is a false economy. It can result in extra costs through having to continue to pay someone for whom there is no longer a role.

“More widely it is shocking that the Conservatives are seeking to unpick an agreement they themselves made only a few years ago. Prospect will take legal advice where necessary and will lobby intensely on this issue,” he said.

For further information:

• Leslie Manasseh    020 7902 6682 (w)   07860 310483 (m) 
• Boc Ly                    020 7902 6602 (w)   07939 343669 (m)