Second Standing Committee on Statutory Instruments, &c.




Tuesday 16th December 1986



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The Committee consisted of the following Members:

Chairman: Mr. Albert McQuarrie

Beaumont-Dark, Mr. Anthony (Birmingham, Selly Oak).

Budgen, Mr. Nicholas (Wolverhampton South-West)

Deakins, Mr. Eric (Walthamstow)

Eyre, Sir Reginald (Birmingham, Hall Green)

Fenner, Dame Peggy (Medway)

Field, Mr. Frank (Birkenhead)

Freeson, Mr. Reg (Brent East)

Fry, Mr. Peter (Wellingborough)

Gow, Mr. Ian (Eastbourne)

Grylls, Mr. Michael (North West Surrey)

Knight, Dame Jill (Birmingham, Edgbaston)

Lee, Mr. John (Parliamentary Under-Secretary of State for Employment)

Leighton, Mr. Ron (Newham North East)

Lester, Mr. Jim (Broxtowe)

Redmond, Mr. Martin (Don Valley)

Sainsbury, Mr. Tim (Hove)

Short, Ms. Clare (Birmingham, Ladywood)

Wainwright, Mr. Richard (Colne Valley)

Mr. R. Lambert, Committee Clerk

3 Second Standing Committee on Statutory Instruments, &c. Tuesday 16 December 1986

[Mr. ALBERT MCQUARRIE in the Chair]


10.30 am

The Parliamentary Under-Secretary of State for Employment (Mr. John Lee): I beg to move, That the Committee has considered the draft Employment Protection (Variation of Limits) Order 1986.

The Chairman: With the agreement of the Committee, it will be convenient to discuss at the same time the other orders before us, namely: The draft Unfair Dismissal (Increase of Compensation) Limit) Order 1986. The draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1986.

Mr. Lee: The draft Employment Protection (Variation of Limits) Order 1986 has been laid in accordance with section 148 of the Employment Protection (Consolidation) Act 1978. Under that legislation the Secretary of State is required to review in each calendar year the upper limit that is imposed on the amount of a week's pay for calculating certain payments and awards under the employment protection legislation. Those are redundancy payments, the basic and additional awards for unfair dismissal, and debts that can be paid under the insolvency provisions of the Act. The Secretary of State is also required to review the limit on the amount of guarantee pay due to an employee in respect of any day on short time or temporary lay-off, and the duration of such payment. In making the review the Secretary of State has to consider the general level of earnings obtaining in Great Britain at the time of the review, the national economic situation, and any other matters that he considers relevant. We have consulted a wide range of organisations in the course of the review. As in previous years, the consultations brought a different response from organisations representing employers and those representing employees. Employer organisations argued against any increase on the grounds of extra costs to industry, or suggested that increases should be modest. Trade unions, on the other hand, argued for increases at least in line with average earnings. Having carried out a review this year we therefore propose to increase the limit on the amount of a week's pay from £155 to £158, that is, by 1·9 per cent. We propose to increase the limit on the daily amount of guarantee pay from £10·70 to £10·90, or 1·8 per cent. 4 There will be no increase in the other limits relating to the duration of guarantee pay. The specified number of days in the relevant period for which such payments can be made will remain at five, and the relevant period will continue to be three months. The Secretary of State laid a report at the same time as the draft Order, giving his reason for the decision, which is that both limits still seem to strike a fair balance between the employers' obligations and the employees' rights. I make no apology for restating the Government's belief that the employment protection legislation, taken as a whole, has acted as a brake on recruitment. The Government are anxious to remove the barriers facing businesses and to encourage the creation of new jobs. At the same time, we recognise the need to safeguard the essential rights of employees. The proposed increases in the limits strike a fair balance between the interests of employers and employees. The Unfair Dismissal (Increase of Compensation Limit) Order 1986 has been laid before the House in accordance with section 75(2) of the 1978 Act. It revokes the Unfair Dismissal (Increase of Compensation Limit) Order 1984, which set the limit on compensatory awards for unfair dismissal at £8,000, and raises the limit to £8,500. That represents an increase of 6·25 per cent. The limit is not subject to annual review but may be increased from time to time. It was last raised in 1984 to come into effect in April 1985. The award compensates the employee for the loss suffered as a result of the dismissal, including loss of earnings from the dismissal to the date of the tribunal hearing, future loss of earnings, and loss of benefits such as pension and other entitlements that he would have had but for the dismissal. The limit also applies to compensation for discrimination in employment under the Sex Discrimination Act 1975 and the Race Relations Act 1976; and to compensation payable in certain cases involving unreasonable exclusion or expulsion from a trade union. As the limit was not increased last year we have increased it this time by a higher percentage than the other limits. As with the increases proposed in the first draft order, we have achieved a sensible balance that safeguards the essential rights of workers without overburdening employers. The draft Unfair Dismissal (Increase of Limits) of Basic and Special Awards) Order 1986 has been laid before the House in accordance with sections 73(4B) and 75A(7) of the 1978 Act. These awards which were introduced by the Employment Act 1982, apply to dismissal for membership or non-membership of a union. The limits are not subject to annual review, but may be reviewed from time to time. These special provisions were introduced to protect the individual's right to choose whether to join a union. They were intended as a deterrent and their real value needs to be maintained. 5 Therefore, we have decided to increase the basic and special awards by 4·6 per cent. That means that the minimum basic award will be increased from £2,200 to £2,300. We also propose that the limits that apply to the calculation of the special award should be increased from £11,000, £22,000 and £16,500 to £11,500, £23,000, and £17,250 respectively. I commend the orders to the Committee.

Ms. Clare Short (Birmingham, Ladywood): As the Minister said, there is an annual review of the financial limits that apply to redundancy payments, insolvency payments—that is the limit of the weekly amount payable under the insolvency provisions for debts such as arrears of pay—and the amount and duration of guarantee payments for short-time work or temporary lay-off. The current provision is only five days in three months. There are also provisions for the uprating of payments for unfair dismissal and for sex and race discrimination. The uprating should be uncontentious. Payments should be uprated in line with average earnings since the issue is about loss of earnings because of the loss of a job. A fair system would uprate yearly in line with the movement of average earnings. However, even in that area, the Government are not willing to do the decent thing. Since 1979 upratings have fallen further and further behind, so that now they are between 30 and 40 per cent. below their 1979 value. We naturally do not want someone to be made redundant, unfairly dismissed or discriminated against. We do not want employers to have to make those payments, but the payments should be great enough to act as a deterrent. Why do not the Government uprate fully in line with the original amounts laid down in the statutes and the movement of average earnings. The implication is that the Government wish to penalise less and do not wish to prevent the actions complained of. I hope that the Minister will agree to put on record what upratings would be required to bring these payments back to their 1979 values in accordance with the movement of average earnings. Last year the Parliamentary Under-Secretary of State, who is now in the Ministry of Transport, argued that the upratings should play their part in the battle against inflation. Perhaps that is the defence of the Minister today. How mean can the Government get? We all know that their counter-inflation strategy is in tatters. Even a Select Com- 6 mittee has confirmed that, and all the mumbo jumbo about M1, M3 and M0 has been quietly forgotten. The counter-inflation strategy consists of deflation, unemployment and the fear of unemployment. The irony is that the victims—the redundant, the short-time workers and those unfairly dismissed—are penalised twice. First, they lose their jobs, and then the benefits to which they are entitled are eroded. The Government's attitude to employment conditions is evident in their constant undercutting. The erosion of benefits for redundancy and unfair dismissal accompanies an erosion of general provisions preventing unfair dismissal and protecting workers from bad employment practices. The Government do not seek to build an economy with high wages, high skills, full employment, good employment conditions and good relations between management and workers. The Government constantly undercut workers and make them vulnerable to unemployment so that they accept low-wage jobs. The orders and the meanness of the upratings are part and parcel of that unacceptable philosophy.

Mr. Lee: I can only believe that the poor attendance by Opposition Members shows that they unanimously support the statutory instruments. I shall write to the hon. Member for Birmingham, Ladywood (Ms. Short) about the details of the financial position since 1979.

Question put and agreed to.

Resolved, That the Committee has considered the draft Employment Protection (Variation of Limits) Order 1986.

The draft Unfair Dismissal (Increase of Compensation Limit) Order 1986

Resolved, That the Committee has considered the draft Unfair Dismissal (Increase of Compensation Limit) Order 1986.—[Mr. John Lee.]

The draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1986

Resolved, That the Committee has considered the draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1986.—[Mr. John Lee.]

The Committee rose at twenty minutes to Eleven o'clock.



McQuarrie, Mr. Albert (Chairman)

Beaumont-Dark, Mr.

Budgen, Mr.

Eyre, Sir Reginald

Fenner, Dame Peggy

Gow, Mr. Ian

Grylls, Mr.

Knight, Dame Jill

Lee, Mr. John

Lester, Mr.

Sainsbury, Mr.

Short, Ms.