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Ousted ministers will only receive payoffs if they have served in government for more than six months as Sir Keir Starmer overhauls his appointments watchdog.
After repeat examples of ministers receiving payoffs after only serving short stints, the prime minister has tightened eligibility for severance payouts.
He has also scrapped the Advisory Committee for Business Appointments (Acoba) as part of the shakeup, replacing it with a new Ethics and Integrity Commission created from the Committee on Standards in Public Life.
Cabinet Office minister Pat McFadden, who is driving through the reforms, said: “This overhaul will mean there are stronger rules, fewer quangos and clearer lines of accountability.
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Michelle Donelan refused the offer of ￡17,000 in severance pay after a 36-hour stint as education secretary ( PA Wire )
"The Committee on Standards in Public Life has played an important role in the past three decades. These changes give it a new mandate for the future."
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But he added: "Whatever the institutional landscape, the public will in the end judge politicians and government by how they do their jobs and how they fulfil the principles of public service."
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Ministers are currently entitled to a severance payment equivalent to three months' salary when they leave office for any reason, regardless of how long they have been in the job.
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The PM faced calls to go further ( PA Wire )
The rule saw former minister Michelle Donelan reject the offer of ￡17,000 severance pay after her 36-hour tenure as education secretary.
And the political turmoil at the heart of the Conservative government in 2022 cost taxpayers more than ￡3m in severance fees for ministers and advisers across three prime ministers.
Sir Keir’s shakeup would also have seen his own ministers Louise Haigh, the former transport secretary, and Tulip Siddiq, a former Treasury minister, made ineligible for severance pay.
Under Labour’s plans, ministers who leave office after a serious breach of the ministerial code or who have served less than six months will also now not get the payment.
If they return to office within three months of leaving, they will also not receive their salary until the end of that three-month period. But critics called for the PM to go further, blocking ministers who are forced out in disgrace from receiving payouts altogether.
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Chancellor of the Duchy of Lancaster Pat McFadden is overseeing the reforms (James Manning/PA) ( PA Wire )
The Liberal Democrats said Sir Keir’s change was “the right step” but that he “must now go further - ban ministerial severance payouts altogether for disgraced former ministers, as well as stripping Liz Truss of her access to the ex-PM allowance fund of up to ￡125,000 per annum”.
The new Ethics and Integrity Commission will report annually to Sir Keir on the health of the standards system.
It will be chaired by Doug Chalmers, a retired lieutenant general who chairs the current Standards Committee.
The committee was set up in 1994 by then-prime minister Sir John Major, after his government was mired in accusations of "sleaze" following a series of parliamentary scandals.
Sir John warned in a recent speech that a small group of politicians were increasingly breaking the rules, and suggested Acoba needed to be reformed. It has faced repeated allegations that it is toothless and unable to enforce its rules properly.
Ministers have instead decided to scrap it and split its functions between the Civil Service Commission and the Prime Minister's Independent Adviser on Ministerial Standards.
Under reforms to the business appointments rules, ex-ministers found to have breached them by taking on inappropriate jobs will now be asked to repay any severance pay they receive.