PARLIAMENTARY DEBATES

HOUSE OF COMMONS

OFFICIAL REPORT

Fifth Standing Committee on Statutory Instruments, &c.

DRAFT UNFAIR DISMISSAL (INCREASE OF LIMIT OF BASIC AND SPECIAL AWARDS) ORDER 1989

DRAFT UNFAIR DISMISSAL (INCREASE OF COMPENSATION LIMIT) ORDER 1989

DRAFT EMPLOYMENT PROTECTION (VARIATION OF LIMITS)ORDER 1989

Wednesday 8 March 1989

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The Committee consisted of the following Members:

Chairman: Sir John Stradling Thomas

Barnes, Mr. Harry (Derbyshire, North-East)

Batiste, Mr. Spencer (Elmet)

Bendall, Mr. Vivian (Ilford, North)

Boscawen, Mr. Robert (Somerton and Frome)

Dicks, Mr. Terry (Hayes and Harlington)

Field, Mr. Barry (Isle of Wight)

Gill, Mr. Christopher (Ludlow)

Lloyd, Mr. Tony (Stretford)

Martin, Mr. David (Portsmouth, South)

Nicholls, Mr. Patrick (Parliamentary Under-Secretary of State for Employment)

Reid, Dr. John (Motherwell, North)

Ridsdale, Sir Julian (Harwich)

Sackville, Mr. Tom (Bolton, West)

Stanley, Sir John (Tonbridge and Mailing)

Strang, Mr. Gavin (Edinburgh, East)

Wallace, Mr. James (Orkney and Shetland)

Winnick, Mr. David (Walsall, North)

Wise, Audrey (Preston)

Ms. E. C. Samson, (Committee Clerk)

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3 Fifth Standing Committee on Statutory Instruments, &c. Wednesday 8 March 1989

[SIR JOHN STRADLING THOMAS in the Chair]

Draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1989

10.30 am

The Parliamentary Under-Secretary of State for Employment (Mr. Patrick Nicholls): I beg to move, "That the Committee has considered the draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1989."

The Chairman: I understand that it is the wish of the Committee to take with this, the draft Unfair Dismissal (Increase of Compensation Limit) Order 1989 and the draft Employment Protection (Variation of Limits) Order 1989.

Mr. Nicholls: The draft Employment Protection (Variation of Limits) Order 1989 has been laid in accordance with section 148 of the Employment Protection (Consolidation) Act 1978. The legislation requires the Secretary of State to review in each calendar year the upper limit on the amount of a week's pay for calculating certain payments and awards under employmwent protection legislation. The awards concerned 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 legislation also requires the Secretary of State 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 payments. In carrying out the review, the Secretary of State must consider the general level of earnings in Great Britain at the time of the review, the national economic situation as a whole and any other matters that he considers to be relevant. Although there is no statutory obligation on the Government to consult about those limits, it has been our practice to do so. Again this year we have sought the views of a wide range of organisations as to what changes, if any, should be made to the limits. In general, employers' organisations opposed any increase on the ground of the extra costs imposed on industry, but if there was to be an increase, they suggested that it should be modest and no higher than the rate of inflation at the time of the review. Employee organisations, on the other hand, were in favour of increases at least in line with the increase in average earnings. Having considered those various points, we propose to increase the limits by roughly 5 per cent. That means that the limit on the amount of a week's pay bill will increase from £164 to £172 and on the daily amount of guarantee pay from £11.30 to £11.85. As I have said, the Secretary of State is also required to review the limits on guarantee pay. Guarantee pay is paid to employees for a limited period in certain circumstances when they are not provided with work throughout a day when they would normally be 4 required to work under their contract of employment. None of the organisations consulted saw a need to change those time limits, so the relevant period within which payments can be made will remain three months and the specified number of days in that period for which such payments can be made will remain at five. The Secretary of State laid a report at the same time as the draft order, in which he explained that those limits would not be increased because they still seem to strike a fair balance between the employers' obligations and the employees' rights. It may help the Committee if I explain that, in reaching our conclusions, we had in mind the fact that some employers are inhibited from recruiting by the employment protection legislation, and one of our prime concerns is to encourage employment by reducing the burdens on business. Yet at the same time we are committed to safeguarding the essential rights of employees. We believe that the proposed increases strike the right balance between the interests of employers and their employees. The second draft order, the Unfair Dismissal (Increase of Compensation Limit) Order 1989, has been laid before the House in accordance with section 75(2) of the 1978 Act. It revokes the Unfair Dismissal (Increase of Compensation) Order 1986, which set the limit on compensatory awards for unfair dismissal at £8,500. The new order raises the limit to £8,925, an increase of 5 per cent. The limit is not subject to annual review but may be increased from time to time. It was last raised with effect from 1 April 1987 and we considered that a further modest increase would be appropriate this year. The award compensates the employee for the loss suffered as a result of an unfair 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 the employee would have had but for the dismissal. The limit also applies to compensation payable in certain cases involving unreasonable exclusion of expulsion from a trade union and in cases of sex or racial discrimination. The proposed increase is in line with those proposed for the limits covered by the first draft order. Again, we believe that the order represents a sensible balance between safeguarding the essential rights of employees and avoiding placing too heavy a burden on employers. The draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1989 has again been laid before the House in accordance with sections 73(4B) and 75(7) of the 1978 Act. The awards were originally introduced by the Employment Act 1982 and apply to dismissal for trade union membership or activities or non-membership of a union. Those special provisions wee introduced to protect the individual's right to choose whether to join a union, and the awards were intended to act as a deterrent. Again, the limits are not subject to annual review but may be reviewed from time to time. 5 We have decided that the limits on those awards should be increased by a percentage similar to those on the other awards. Therefore, the minimum basic award will be increased from £2,400 to £2,520, and the limits that apply to the calculation of the special award will be increased from £11,950, £23,850 and £17,900 to £12,550, £25,040 and £18,795 respectively. I commend the orders to the Committee.

10.36 am

Mr. Tony Lloyd (Stretford): It occurs to me that we would be better invoking the Standing Orders that would allow us to hold this sitting outside on a day like this, but having heard the Minister read his brief into the record, I am saddened to have to say that perhaps we are better off within the grey walls of Westminster. The Minister made a similar speech to that which his predecessors have made on the same orders in previous years. It is, however, a matter of some curiosity, to which the Committee should perhaps pay some attention, that we are told that the Secretary of State has an obligation under the 1978 Act to review the orders in the light of the general level of earnings obtaining in Great Britain at the time of the review, the national economic situation as a whole and such other matters as he considers relevant. The Government claim that the national economic situation is a matter of great rejoicing and has greatly improved over previous years, so it cannot be for that reason that the Secretary of State has decided to hold those limits below the rate of inflation. It certainly cannot be because of the general level of earnings, because that has gone up by about 10 per cent over the previous year, whereas the Minister is proposing a 5 per cent increase across the board. Therefore, the reason must be such other matters as the Secretary of State considers relevant. I have tried to glean some insight into what the Secretary of State might have thought relevant in previous years and, indeed, this year. In previous years the present Minister of State, Department of Employment, told us with some pride that the increases proposed by the Government for, for example, 1987, were in line with the retail price index. The Government at the time were sure that the retail price index was right. I notice that the Under-Secretary told us this morning that employers, in asking the Government to strike the right balance, said that they were prepared at least to go up to the present level of the retail price index. We know that the RPI is now increasing at more than 7 per cent. The 5 per cent increase across the board is clearly not even at the level that employers were prepared to stomach. Therefore, Opposition Members are a little dubious about what the Government are trying to achieve. The Minister went on to say that it was a matter of trying to strike a balance, because the Government believe that employment legislation of this type is a disincentive to employment. That point was raised by his predecessors on these orders in previous years and has been well trailed by Ministers in the Department of Employment in may debates over the years. But on no occasion has any one of the Minister's colleagues ever produced any evidence that that is the case. When the present Minister of State was challenged on that point 6 in the equivalent debate in 1986, he said: "the evidence comes from surveys done by the Department of Employment."—[Official Report, Second Standing Committee on Statutory Instruments, &c., 16 December 1986; c.10.] Will the Minister do something that none of his predecessors or colleagues has done and have the courage to tell the Committee that he will make that survey evidence publicly available, so that the Committee, and indeed the nation, knows precisely what conditions the Secretary of State's mind on those matters? If that is the only residual category for holding the rates down, it is time we understood how employment legislation such as this prevents the creation and maintenance of jobs. If the Minister can do that, I might reconsider what I am about to say. It is clear that the Government, in failing to maintain the values of the various payments, are doing a disservice to those who are at work. As even the Minister and his colleagues will concede, this category was created, by the Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order, for those who did not want to be members of a trade union, mainly as a penalty against employers who were prepared sensibly to operate with trade unions what they regarded as the closed shop. In 1986, the then Parliamentary Under-Secretary of State for Employment told this same Committee that those awards "were intended as a deterrent and their real value needs to be maintained."—[Official Report, Second Standing Committee on Statutory Instruments, &c., 16 December 1986; c.4.] Therefore, it is rather curious that this year we are not maintaining even the Government's shining light, the one thing that they feel committed to under the various orders, at the rate of inflation. We are certainly not maintaining it at the rate of average earnings. What has changed in this one aspect between 1986 and this year? Under no circumstance do I regard as the most important of the matters that come before us. I find a rather sad contrast in the Government's attitude. In giving special awards to those who do not want to be members of a trade union, despite their having an opportunity to take part in ballots on the closed shop and all the other procedures introduced by the Government, the Government treat those who want— I am sorry to have to use the word—to blackleg in industry as a special case and are prepared to give them high bonus levels. Yet, to those who are victims of sex or racial discrimination at the workplace—both important in industry as I hope the Minister will accept, and, in terms of absolute numbers, vastly more important than the issue of non-trade union membership—the Government give a much more miserly award, which they have not even uprated for two years. Therefore, far from remotely keeping up with inflation, in real terms the amount has fallen considerably over that two-year period. It is a sad commentary on the Government's priorities. It is not unfair to ask how many people are likely to be affected by the special awards, made because they do not want to be a member of a trade union. How does that number compare with the much larger number of people who are victims of sex or racial discrimination at work? If I am right in my contention that the number of 7 the latter is much higher, the Government's priorities, in allowing these high levels of award for those who do not want to be members of trade unions relative, are grossly wrong. Opposition Members could not oppose these increases, even for the special awards, because it is conceivable that under some circumstances one might be given to a person who is dismissed for wanting to maintain trade union membership. Therefore, it would be foolish and useless to divide the Committee. However, I should be grateful if the Minister would address the points that I have raised, particularly the issues of substance. I appreciate that it is not always easy for Ministers when questions are sprung on them, but I hope that he can, in some form, give answers to the questions that I have posed.

10.44 am

Mr. Nicholls: I shall do my best to answer the questions posed by the hon. Member for Stretford (Mr. Lloyd), because I appreciate his concerns, and I should be able to satisfy some of them. Even while I speak, I shall be actively thinking about the figures of those who would qualify for basic awards, for which he has asked. If the figures do not come to me while I am speaking, I undertake to write to the hon. Gentleman and give him the information that he requires. The hon. Gentleman talked about the considerations that the Secretary of State has to take into account in deciding to review these matters. He is right in thinking that they are the general level of earnings, the national economic situation and any other matters that he considers relevant. Clearly, the general economic situation is extremely good, but unemployment must continue to come down and employment growth must continue on the present scale. Anything that acted as a serious fetter or brake on that would not be in anyone's interest. Therefore, and I make no apology for returning to this point, there is always a balance to be drawn between safeguarding essential rights on the one hand and making sure that we do not kill off job creation on the other. Ultimately, where one draws the line, where one sets those limits, is a matter if not for the judgment of Solomon, certainly for the judgment of the Secretary of State. Even when the Redundancy Payments Act was brought in in 1965, not as it happens by a Conservative Government, the concept of limits and uprating was there. With that in mind, one has to draw appropriate limits. The hon. Gentleman asked what evidence there is that employment protection legislation can act as a brake on job creation. Research deposited in the Library by the Department of Employment shows that 8 up to 10 per cent of employers have complained about the disincentive effect of such legislation.

Mr. Lloyd: In relation to these orders?

Mr. Nicholls: No, in relation to employment protection generally, of which the orders are part. The research shows that, even if only 10 per cent of employers say that the legislation amounts to an inhibition, that would nevertheless add up to a sizeable number of jobs. In the end, it is self-evidently true that employment protection legislation can act as such a brake, and where one draws the line must be a matter of judgment. The hon. Gentleman drew a distinction about the special—one might almost say, although he did not, "punitive"—awards to protect those who choose not to be members of trade unions, essentially those dismissed for not agreeing to take part in a closed shop. There is indeed such a category, but benefiting from preceisely the same level of special compensation are those who are dismissed for trade union activities. Misery may sometimes seem to make strange bedfellows, but the awards are even-handed. We do not have any figures on the number receiving special awards. All that we can say is that it is extremely small. I am grateful to the hon. Gentleman for saying that he and his hon. Friends will not vote against the orders. A balance has to be drawn about where the limits should be, and we should like to think that we have them about right.

Question put and agreed to.

Resolved, That the Committee has considered the draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1989.

Draft Unfair Dismissal (Increase of Compensation Limit) Order 1989

Resolved, That the Committee has considered the draft Unfair Dismisssal (Increase of Compensation Limit) Order 1989.—/Mr. Nicholls.]

Draft Employment Protection (Variation of Limits) Order 1989

Resolved, That the Committee has considered the draft Employment Protection (Variation of Limits) Order 1989.—[Mr. Nicholls.]

Committee rose at Eleven minutes to Eleven o'clock.

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THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:

Stradling Thomas, Sir John (Chairman)

Barnes, Mr. Harry

Batiste, Mr.

Bendall, Mr.

Boscawen, Mr.

Dicks, Mr.

Field, Mr. Barry

Gill, Mr.

Lloyd, Mr. Tony

Martin, Mr. David

Nicholls, Mr

Ridsdale, Sir Julian

Sackville, Mr.

Strang, Mr.

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