Second Standing Committee on Statutory Instruments, &c.


Wednesday 31 January 1990


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The Committee consisted of the following Members:

Chairman: Mr. Ted Leadbitter

Bevan, Mr. David Gilroy (Birmingham, Yardley)

Bright, Mr. Graham (Luton, South)

Butcher, Mr. John (Coventry, South-West)

Chapman, Mr. Sydney (Chipping Barnet)

Fry, Mr. Peter (Wellingborough)

Gow, Mr. Ian (Eastbourne)

Grant, Sir Anthony (Cambridgeshire, South-West)

Haselhurst, Mr. Alan (Saffron Walden)

Hayhoe, Sir Barney (Brentford and Isleworth)

Lloyd, Mr. Tony (Stretford)

Miller, Sir Hal (Bromsgrove)

Mullin, Mr. Chris (Sunderland, South)

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

Parry, Mr. Robert (Liverpool, Riverside)

Primarolo, Ms. Dawn (Bristol, South)

Thompson, Mr. Jack (Wansbeck)

Wallace, Mr. James (Orkney and Shetland)

Young, Mr. David (Bolton, South-East)

Mr. J. R. Rose, Committee Clerk

3 Second Standing Committee on Statutory Instruments, &c. Wednesday 31 January 1990

[MR. TED LEADB1TTER in the Chair]

Draft Employment Protection (Variation of Limits) (No. 2) 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 Employment Protection (Variation of Limits) (No. 2) Order 1989. The purpose of the order is well known. It has been laid in accordance with section 148 of the Employment Protection (Consolidation) Act 1978, which requires the Secretary of State to review the upper limits on the amount of a week's pay used for calculating certain payments and awards under Employment Protection Legislation. In reaching their decision this year, the Government have sought to quantify an obligation that we acknowledge exists—to review those limits in the light of the overall level of inflation, while being mindful of the effect that any increase could have on business. We are not required to consult, but nevertheless we have as usual consulted relevant employer and employee organisations. Those consultations reveal, not surprisingly, that in general employers are against any increase on the ground of the extra costs imposed on industry while employees are in favour of increases in line with average earnings. Having considered those views, and having taken other factors into account as the Secretary of State is required to, we have decided to increase the limits by about 6.8 per cent. Thus, the limit on a week's pay will rise from £172 to 184 and the limit on the daily amount of guarantee pay will go up from £11·85 to £12·65. Other limits on guarantee pay—dealing with the question of how many days within how many months—will not be increased this year. My right hon. Friend the Secretary of State has laid a report explaining that. With those remarks, Mr. Crowther, I commend the order to the Committee.

The Chairman: Order. There has been an error. I am not Mr. Crowther; I am better looking.

Mr. Nicholls: I aplogise, Mr. Leadbitter. I trust that that error will not lead to a libel action.

10.33 am

Mr. Tony Lloyd (Stretford): It is grossly unfair that the television cameras are not present, because the Minister is wearing his television tie. A matter as important as employment protection should be debated on television to show that each year 4 a Minister makes a similar speech. Indeed the Minister could have read the speech that was made last year if the figure of 6·8 per cent had been changed. The Minister used the phrase, "to quantify an obligation that we acknowledge exists". which is elegant but it should read "that we know exists." For the past 11 years, with few exceptions, Ministers have explained to the Committee why the Government were not uprating the order in line with inflation. It is not good enough for a Minister to say every year that the Government are striking a careful balance between the obligation to employees, which they know exists, and the needs of employers. Last year, the Minister said that employers had asked for an uprating no higher than the general inflation rate. However, the Government did not raise the limit by the employers' maximum acceptable level. Once again, they kept the figure below the inflation rate. The 6·8 per cent awarded this year is also below the real rate of inflation which last year was about 7·8 per cent. Inflation was about 8 per cent over the second half of last year. I am not sure when the decision to uprate was made, but 8 per cent is a fairer comparison if we use the retail prices index as a guide. As most of the people who qualify for the awards are on low incomes, it would be better to use the low-paid price index published by the Low Pay Unit; which accepts that inflation to to December last year was about 8·5 per cent. There is a difference between the amount by which Government have uprated the awards and the amount by which they should he uprated if inflation and the needs of the recipients are taken into account. Last year, in reply to my question on the same issue, the Minister told the Committe why the Government would not uprate the awards to bring them into line with inflation. He said that employment protection legislation would act as a brake on job creation, and that "Research deposited in the Library by the Department of Employment shows that up to 10 per cent of employers have complained about the disincentive effect of such legislation." [Official Report, Fifth Standing Committee on Statutory Instruments, &c., 8 March 1989; c.7–8.] I spent much of the past 10 months trying to find that research and, having found it, I have discovered that it does not bear out his comments. It states that six firms expressed a reluctance to recruit additional labour because they feared subsequent unfair dismissal claims. That is not a realistic sample from which to draw such conclusions. It is ridiculous to conclude from it that 10 per cent of British industry is against the awards, and it is unacceptable to use such an example to limit the awards. They are directed specifically at people who need the Government to protect them. By definition, employment protection awards are designed to protect people at work. The Government should realise that by consistently failing to uprate the awards by bringing them in line with inflation they will further disadvantage those people in society who are already disadvantaged. As I have said in previous years, we will not vote against the legislation, which would make things even worse than the Government have already made them, 5 but I hope that the Minister will this year take seriously our complaint that since 1979 the awards have steadily decreased in real value.

Mr. Nicholls: The hon. Member for Streford (Mr. Lloyd) suggested that my speech gave him a sense of déjà vu. I do not wish to be pedantic, but I had the feeling that I had heard his speech before—and I know the date and place. It is difficult to achieve a balance between the various criteria used for updating the awards. The hon. Gentleman mentioned the retail prices index. A balance has to be found, and we think that the 6·8 per cent estimate of inflation at the time of the review was fair. It may comfort the hon. Gentleman to know that 6·8 per cent is the highest increase since 1981, and he may wish to take that into account.

Mr. Tony Lloyd: Will the Minister confirm that the reason why this year's award in higher than any since 1981 is that inflation is massively higher now than it has been at any time in the past 10 years?

Mr. Nicholls: The hon. Gentleman cannot have it both ways. He cannot complain that we are not keep 6 ing up with inflation and then, when I point out that this year's increase is the highest since 1981, claim that that is the result of inflation. I have no doubt that in 1981 the hon. Gentleman's predecessor said that the award was not high enough. Evidence has to be reviewed constantly, and different people will draw different conclusions from it. From my business experience, one of the factors to be considered when taking on labour is the possible consequences if that labour has to be shed of unfair dismissal or, more importantly, redundancy. The evidence is there, for what it is worth, although I have not overused it. It is a difficult judgment for the Government to make. I assure the hon. Gentleman that when we meet again next year I shall try to vary the script, but onlyon the understanding that he does likewise.

Question put and agreed to.

Resolved, "That the Committee has considered the draft Employment Protection (Variation of Limits) (No. 2) Order 1989.

Committee rose at eighteen minutes to Eleven o'clock.


Leadbitter, Mr. Ted (Chairman)

Bright, Mr.

Chapman, Mr.

Fry, Mr.

Haselhurst, Mr.

Hayhoe, Sir Barney

Lloyd, Mr. Tony

Miller, Sir Hal

Mullin, Mr.

Nicholls, Mr.

Primarolo, Ms.