Fourth Standing Committee on Statutory Instruments, &c.


Thursday 6 July 1995


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The Committee consisted of the following Members:

Chairman: Mrs. Gwyneth Dunwoody

Bates, Mr. Michael (Langbaurgh)

Berry, Mr. Roger (Kingswood)

Budgen, Mr. Nicholas (Wolverhampton, South-West)

Campbell, Mr. Ronnie (Blyth Valley)

Chidgey, Mr. David (Eastleigh)

Eagle, Ms Angela (Wallasey)

Forman, Mr. Nigel (Carshalton and Wallington)

Gardiner, Sir George (Reigate)

Hargreaves, Mr. Andrew (Birmingham, Hall Green)

Khabra, Mr. Piara S. (Ealing, Southall)

Olner, Mr. Bil (Nuneaton)

Porter, Mr. Barry (Wirral, South)

Rooney, Mr. Terry (Bradford, North)

Stephen, Mr. Michael (Shoreham)

Taylor, Mr. Ian (Parliamentary Under-Secretary of State for Trade and Technology)

Thurnham, Mr. Peter (Bolton, North-East)

Touhig, Mr. Don (Islwyn)

Waller, Mr. Gary (Keighley)

Mr. J. D. W. Rhys, Committee Clerk

3 Fourth Standing Committee on Statutory Instruments &c. Thursday 6 July 1995


Draft Employment Protection (Increase of Limits) Order 1995

10.30 am

The Parliamentary Under-Secretary of State for Trade and Technology (Mr. Ian Taylor): I beg to move, That the Committee has considered the draft Employment Protection (Increase of Limits) Order 1995. I say at the outset how delighted I am to be under your chairmanship, Mrs. Dunwoody. You will not misinterpret me when I say how surprised I am to be under anybody's chairmanship this morning, having discovered only recently that a new responsibility fell on my shoulders. We all have unexpected pleasures in these difficult and changing times. The order increases the maximum amount of most of the awards that industrial tribunals can make to individuals whose statutory employment rights have been infringed. It also affects the amount of redundancy payment that is payable to employees. I have the pleasant duty of announcing that increases will be made, and I am sure that the Committee will welcome them. Employment protection legislation requires the Secretary of State to review certain limits annually, Those include the limits on the amount and duration of guarantee payments; on the weekly amount payable from the national insurance fund under the insolvency payments in respect of certain debts; and on the amount of a week's pay that is used to calculate redundancy payment, the basic award of compensation for unfair dismissal and the additional award for an employer's failure to comply with an order of re-employment. We—the general "we", which encompasses as many different people and Departments as possible—consulted widely to discover the reactions of employers and employee bodies. As a result of our consultations, and having taken into account the general level of earnings, the national economic situation and other matters that had to be considered, we propose that the limit on the daily amount of guarantee pay should increase from £14.10 to £14.50—roughly by the retail prices index-and that the limit on the amount of a week's pay should increase from £205 to £210. The consultation revealed no significant pressure for changes to the duration and period of guarantee pay. We propose, therefore, that the relevant period within which payments can be made will remain three months an and that 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 on 19 June in which he explained why those limits would not be 4 increased—I refer, of course, to the then Secretary of State for Employment. The legislation also places limits on the compensatory award for unfair dismissal and the special award, which may be made in cases in which dismissal is for trade union or health and safety reasons. Although the Secretary of State is not required under statute to review them, we have used the consultation to consider those limits as well. The general compensation limit was last raised two years ago. The special award reflects fundamental protection against people being dismissed for trade union membership or non-membership, or because of trade union activities. Since the Trade Union Reform and Employment Rights Act 1993, the award also covers certain health and safety dismissals. The level of the limits in that case acts as compensation for the individual and as a real deterrent against employers repeating such action. It is right that there should be a modest increase in the awards this year, and we propose that it should be broadly in line with the level of inflation. The proposed new limits would be as set out in the order. I am delighted to have been able to put the essence of the order to the Committee. In the capacity of a Minister at the Department of Trade and Industry and in the name of the President of the Board of Trade, I shall look forward to pursuing these matters further.

10.34 am

Ms Angela Eagle (Wallasey): It is also a great pleasure for me to serve for the first time under your watchful eye, Mrs. Dunwoody, albeit it fleetingly; I hope that at some stage in the future we shall manage to end up on a Standing Committee that lasts longer than I suspect this one will. After yesterday's reshuffle, I wonder whether there could have been a more confused time for us to have considered the order. The Department of Employment appears to have gone off in four different directions and its staff, some of whom have been working on the order, probably do not even know which Department of State they are now working for. I am glad, however, that the Minister has given some helpful advice on what consultations took place when the order was being prepared. I find it difficult to deal with some of the order's details when we are not even sure which parts of the Department of Employment are going to which Departments. There seems to have been a rather odd carving up of the old responsibilities of the Department of Employment. For example, I understand from the official Government press release that the jobseekers' part of the old Department's duties appears to have gone to the Department of Education rather than to the Department of Social Security, which might have been a better home. Goodness knows where industrial tribunals have ended up. We think, however, that as of this morning, they may well be at the Department of Trade and Industry. Presumably we shall obtain more guidance on that and matters will become clearer in the next few days. I must add my shock and disapproval that, 5 with more than 2 million people still unemployed, the Government decided on such a course of action. It is very regrettable. Opposition Members do not intend to force a Division. Our attitude is one of extremely lukewarm welcome for the increases that the Minister announced. It is too little, too late, but I suppose that one has to be marginally grateful for any increase these days. Without opposing the order, I should like to make a few observations about its inadequacies. Its context is that a central part of the Government's strategy has been to deregulate the labour market and to create flexibility, which Opposition Members think is wholly damaging to our ability to compete in an increasingly competitive world market. There are different kinds of flexibility, but the kind that the Government have settled on in their dealings with the labour market is that which is created by removing employment rights and downgrading the protections of individual members of the work force while making a strategic and long-term attempt to weaken the effectiveness of the collective bodies that represent workers in their workplaces—the trade unions—so that they can no longer protect their workers. The past 16 years has seen a systematic weakening of the employment rights that the order represents. Some employment protections have been taken away, while those that remain have been weakened. The Government's inability to increase the limits appropriately year on year—as they should have done—and to keep pace with inflation is yet another example of that weakening, which has removed sanction. If an employer behaves unlawfully, for example in dismissing an employee, the penalties that he is likely to have to pay are much less in real terms than before. The climate is one of fear and insecurity. The Government have weakened the legal protections to which, weak as they were before, individuals could previously appeal. The Government have used low pay and the demand for flexible labour markets to treat people arbitrarily and weaken their recourse to law. They have cowed people into accepting low-paid jobs and called it flexibility. That has created a feel-bad factor so that people still feel insecure—about their mortgage payments, for example—despite a weak recovery. The present framework of law no longer reassures or protects people. I wish to discuss some of the changes in the provisions. First there is the limit on a week's pay which, as the Minister said, is used to calculate redundancy payments, arrears owed to employees in insolvency cases, the basic award for unfair dismissal and the extra award where an employer fails to heed the result of industrial tribunal hearings and reinstate an employee. Those all rely on the limit on a week's pay. Today's decision which, as I said earlier, we welcome in lukewarm fashion, will increase the limit from £205 a week to £210. The maximum basic redundancy payment will increase from £6,150 to £6,300—a very modest increase. If we extrapolate from 1979 and consider the 6 uprating that would have been brought about in relation to the retail price index, maximum redundancy payments would by now have reached £8,611. That represents a significant difference, especially for someone who has been unfairly dismissed. We are talking not about people who have been made redundant because of the economic climate, but about those who have been badly and unfairly treated in law by employers who have not ensured that such weak rights that do exist on the statute book have been applied in practice in treating their employees. These people have been wronged, even according to the criteria of the Government who, after 16 years of deregulation, have deprived people of the protections that they once enjoyed. The real value of the award, which represents the sanction on the employer and the state's function in not allowing individual employees to be treated badly, has diminished. We are extremely disappointed that the value of the awards in real terms has not been increased as much as it should have been. Section 148 of the Employment Protection (Consolidation) Act 1978 states that the Secretary of State—as I said earlier, we are not sure which Secretary of State will be responsible, and I hope that a press release later today will advise us about the situation—has to have regard to "the general level of earnings obtaining in Great Britain at the time of the review; …the national economic situation as a whole; and … other such matters as he thinks relevant." It is reasonable for the Secretary of State to ensure that the limit on a week's pay is kept in line with the RPI. I appreciate that the Minister may be at a disadvantage in the circumstances, but will he try to explain why there has been no increase in the limits since 1992, when increases had taken effect every year before that? We have not only seen real value fall away, but we have effectively had a freeze for the past three years. The limit on guarantee payments is a similar issue and we again welcome it in a lukewarm fashion. It is to rise from £14.10 to £14.50 per day. It is a complex matter to establish exactly what the guaranteed payments do, but under the Employment Protection (Consolidation) Act 1978, employees are entitled to guaranteed payments for days on which they would normally be required to work but on which their employer fails to provide them with any work and lays them off. The statutory entitlement is limited to a specific number of days in a relevant period. The Minister announced today that the relevant periods of three months and of five days will remain, but that there will be a slight increase in the level of the guarantee payments. However, that must be seen against the background of a labour market in which employers have increasingly resorted to zero-hours contracts, whereby people must sit by the phone and wait for their employer to tell them whether there is any work for that day—they might get one or two hours work a week or perhaps none at all. So we have a situation in which individual workers have virtually no rights in contract, yet the guarantee payments that sought to ensure that they received a reasonable level of compensation if they are laid off on those flexible contracts have hardly changed. The value of individual employment rights has been undermined by the Government's failure to ensure that 7 the limits keep up with the rate of inflation; the Government have eroded the real levels of compensation and, therefore, taken away, or at least weakened, the incentives for employers to treat their employees appropriately under law. They have also reduced the remedy for the individual who has been wronged. All that is reprehensible. I shall say a few words about unfair dismissal because the Minister's announcement today means that the compensation for unfair dismissal will rise from £11,000 as a whole to £11,300. As the TUC pointed out as a response to the Minister's request for views in the consultation period, if the RPI had been properly uprated, the penalty that an employer would have to pay in a case of unfair dismissal would be £27,600—so the Government's figures represent a huge erosion of the level of compensation. What signal does that give to a bad employer? I hope that both sides of the House would try to discourage bad employers from pursuing bad practices, yet the statutory instrument implements a virtual halving of the compensation paid to an individual who has been so wronged. That sends completely the wrong message to potential bad employers. The level of compensation should be increased. I should like to know the Minister's opinion on a controversy in that regard. The limit on compensation awards for sex discrimination and race discrimination cases has now been completely removed because of European decisions and it seems increasingly odd that the limit on unfair dismissal should continue at its current level. Are the Government considering the removal of that limit, to demonstrate that they are on the side of employees who have been wronged by bad employers? The Minister is doing a last minute fill-in job and I hope that he will get the information he requires to give me the answers to my questions. Although we will not push the Committee to a Division today, we want to put on record our extreme disappointment at the very modest scale of the rises in payment and at the steady erosion of employment rights over the past few years which means that the remedies in law for people who have been badly treated at work have been withering on the vine.

10.49 am

Mr. Bill Olner (Nuneaton): I congratulate my hon. Friend the Member for Wallasey (Ms Eagle) on her excellent response to the Minister. I appreciate that the Minister has just arrived in his position and I congratulate him on it—at least, unlike many of my constituents, he still has a job. The Government have missed a golden opportunity to put into perspective the sums that people can expect when they are unfairly dismissed. More important, when companies go bankrupt, people should also be able to expect a higher payment than the small amount proposed. Will the Minister tell us whether the new figures have been discussed in his consultations with the trade unions and the TUC and whether they are in line with the trade unions' demand for these figures to be uplifted properly? 8 When the Minister replies, perhaps he will comment on the vast difference between the increases proposed in this statutory instrument and the increases in the salaries of the chairmen and chief executives of privatised public utilities. Most people believe that there is an enormous discrepancy and will rightly be angry that their awards have not been increased to the proper amount.

10.51 am

Mr. Ian Taylor: I start by congratulating the hon. Member for Wallasey on her pertinent comments. I am not sure that she has had a great deal of time to prepare either. It is possible to have agreement across the Floor on these matters when they are sprung on us and they are often more complicated than we first realise. In a spirit of collaboration, I am happy to share my sympathies with the hon. Lady. This is an important order and I am delighted at the welcome that our proposals have received from the Labour Front Bench, albeit lukewarm. Any welcome is good and justifies the sympathy I was showing a moment or two earlier. I carefully kept away from the wider politics in my opening remarks, but, as the hon. Member for Wallasey gently touched on it, could I gently touch on it, too? The demise of the Department of Employment should in no way be seen as an indication of a lack of concern by the Government for the unemployed: it is exactly the opposite. It is because we are concerned about the unemployed, that we believe that the association of many of the activities of the Department of Employment with the Department of Education is exactly right. The long-term message to unemployed people emphasises retraining and attempting to find ways of getting them into jobs, with training and enterprise councils providing supportive help. All those services are best provided in the context of lifelong education and lifelong preparation for work. In that sense, the Government's decision is inspired. Wearing one of my many other hats, I am Minister responsible for the north-east. My hon. Friend the Member for Langbaurgh (Mr. Bates), who is always silent on the Government Benches, does an enormous amount of work in the north-west on behalf of his constituents and many others in that region. On my visits to the north-east I am constantly being reminded what people want most of all: opportunities for unemployed people to get into jobs. Increasingly, it is a question of retraining for those jobs. The division of the Department of Employment is very welcome.

Ms Eagle: Will the Minister give way?

Mr. Taylor: Let me finish my point and then I will willingly give way. As a Minister at the Department of Trade and Industry, it is not, as the hon. Member for Nuneaton (Mr. Olner) said, that I have recently come to the job, but that this task has recently come to me. My job has been temporarily enlarged by the horizons that have been opened up by industrial tribunals.


The Chairman: Order. I felt that I should indulge both Front Benches today, but I hope that they will not take that as a sign that I am not listening to the debate. I remind hon Members that this is a narrow statutory instrument and it would be nice if we returned to its vague area.

Mr. Taylor: I am delighted to be corrected, Mrs. Dunwoody, and I will now oblige. Does the hon. Lady still want to intervene?

Ms Eagle: No.

Mr. Ian Taylor: I think that we will both oblige, Mrs. Dunwoody. I do not accept that employment rights have been eroded but perhaps that is a matter of judgment. The Government firmly believe that they have not been eroded. Indeed, the Trade Union Reform and Employment Rights Act 1993 added significantly to employee rights at work. That was partly to implement EC directives, and the Government felt that it was right to increase protection in other sectors too. If the legislation is weighted too heavily, it could have a negative effect on the jobs market by increasing employers' costs, which would lead them to decrease employment opportunities.

Ms Eagle: Does the Minister think that the fact that the Government have increased the period required to qualify for employment protections—protections which qualify a person for the very payments that we are discussing today—from six months to two years for the full-time employed and to five years for the part-time employed represents a weakening of employment protection law? That is how most sensible people would recognise the increase.

Mr. Taylor: I do not accept that. It has been widely debated in industry that there must be certain ground rules. After much discussion, I think that the ground rules have been got right. I repeat that we have used European directives and have provided additional protection for workers. The debate between employee rights and people's ability to get jobs against so regulating the market that employers are reluctant to offer jobs has gone far wider than the Committee and will continue well after we have ceased to consider the statutory instrument. On redundancy payments, the hon. Member for Wallasey talked about increases not keeping pace with inflation. We are discussing minimum amounts payable. Many employers do better than that. We want to avoid creating impossible situations for small businesses. I stress that we are discussing minimum payments. Limits as a whole are a matter for debate, as one can see from the responses to the consultations. However, best practice suggests that it would be wrong to remove limits, although I am well aware that we have done so in specific cases as a result of European Court of Justice decisions in the case of Marshall v Southampton and South West Hampshire Area Health Authority (No. 2), 10 which related to sex discrimination. Overall, we consider that it would be preferable to keep limits. Once again, we are attempting to find a balance between what employers can reasonably be expected to do and the rights of employees. If that balance goes wrong, more people become unemployed. Flexible arrangements for contract were also mentioned. It is important to stress that part-time employment is an increasingly important part of the pattern of work. There is no lack of respectability in part-time work. Many people, men as well as women, seek part-time work. It is important that we get out of our minds that part-time work is inferior. Flexible working patterns will increasingly become the norm. I am the Minister with responsibility for technology when I am not dealing with statutory instruments such as this, and as such I can assure the Committee that flexibility will become a key part of the working pattern in Britain. For many people that will mean a better quality of life.

Ms Eagle: Does the Minister agree that there are different types of flexibility? It is difficult for someone to pay a mortgage on a zero-hours contract with a guarantee of zero hours work per week. Such people must sit by the phone to be told whether work is available. Although we all want a certain type of flexibility, that type of flexibility is not really welcome or adequate.

Mr. Taylor: I shall not be side-tracked into a debate about zero-hours contracts with the hon. Lady. Employment contracts will be varied. In certain circumstances, they will differ accordance with the needs of particular industries. I share the hon. Lady's objectives: I want companies to invest in their employees and to treat their retraining as a serious part of the exercise, as I said earlier when I spoke about the move to the Department for Education. However, the more the market is regulated from the centre, the more likely it is that employers will not take on the extra labour, which for many people could make the difference between being employed or unemployed. I repeat that with the list the Government are attempting to do the maximum possible without introducing rigidities into the market that deter companies, especially the smaller ones, from offering employment. The hon. Member for Nuneaton referred to trade unions and uplifting. Of course, many trade unions have advanced, in very responsible terms, arguments that would lead to fairly dramatic increases in some limits or the removal of others. But overall they have given the proposals a lukewarm welcome. As I said, a lukewarm welcome is better than none at all, and I am happy to commend the order to the Committee.

Question put and agreed to.

Resolved. That the Committee has considered the draft Employment Protection (Increase of Limits) Order 1995.

Committee rose at one minute past Eleven o'clock.



Dunwoody, Mrs. Gwyneth (Chairman)

Bates, Mr.

Eagle, Ms

Forman, Mr.

Olner, Mr.

Porter, Mr. Barry

Stephen, Mr.

Taylor, Mr. Ian

Waller, Mr.