HC Deb 15 November 1966 vol 736 cc371-98

10.14 p.m.

The Minister of Labour (Mr. Ray Gunter)

I beg to move, That the Redundancy Fund Contributions Order 1966, a draft of which was laid before this House on 24th October, be approved. The effect of the Order is to increase the weekly Redundancy Fund contributions paid by employers from 5d. to 10d. for a man and from 2d. to 5d. for a woman. Introducing the Second Reading of the Redundancy Payments Bill, I said that the Bill was a landmark in the evolution of our industrial society. This country now leads the way in this area of economic and social legislation.

Unfortunately, pioneering produces its own problems. One cannot lean on someone else's experience; one has to make decisions on the basis of what data lies to hand. I said on that occasion, in referring to the total cost of the scheme, that none of the relevant factors, namely the number of redundancies, the age and length of service of redundant workers and future changes in earnings, could be foreseen with precision, and that only experience would show whether any adjustment was needed.

When a redundancy payments scheme was under consideration my Department made two special surveys of redundancies reported to employment exchanges. It was recognised that firm forecasts could not be made on the basis of this information since the introduction of the scheme was, by itself, bound to change attitudes and practices in industry. Estimates had, therefore, to be made covering a number of assumptions as to the total number of payments and their average amount. I hope that hon. Members will bear with me while I give the House some figures.

The calculations to which I referred produced a mid-point estimate of 105,000 payments a year, totalling about £19 million, of which £13.6 million would be borne by the central fund. To meet this and to cover contingencies, weekly contributions were fixed at 5d. for men and 2d. for women, producing an estimated income of £18 million a year. Hon. Members will recall that these rates were criticised at the time as being too pessimistic. The reverse has been proved to be the case, and I should like to give the reasons for this.

Firstly, the number of claims on this fund has been running since April at an annual rate of 125,000 compared with the mid-point estimate of 105,000, on which the present contributions were based. Secondly, the proportion of over-40's receiving redundancy payments has been higher than in the surveys carried out before the Act. Because of the increase in the scale of payment for years of service over 41, because on average, older workers have longer service, and because the proportion of the total payment met out of the fund increases in respect of years of service over 41, the average per capita payment from the fund has been running, since mid-April, at £180 as opposed to a figure of £130 based on the surveys carried out before the introduction of the scheme.

Thirdly, guarantee payments made direct from the fund where employers are unable to make payments themselves, for example because of insolvency, are running at a higher rate than was anticipated. Lastly, there has been a shortfall in contribution income of just over £500,000 on the expected figure of £18.1m. The cumulative effect of all this has been that the fund has been running at a loss of nearly £100,000 a week on average since mid-April. The balance which was then about £2,600,000 is now exhausted and in its place we have a deficit of £350,000.

By 6th February, 1967, the earliest date from which the contributions can be increased, the deficit may have reached £4,500,000. Temporarily we can meet this situation by borrowing. I have power to borrow from the Consolidated Fund, under Section 25 of the Act, up to £8 million, although the limit can be raised to £20 million, subject to the consent of the Treasury and an affirmative Resolution of Parliament. But this is strictly a temporary arrangement, and to delay increasing contributions would merely aggravate the problem to be dealt with and necessitate a larger increase in the end.

There is no question, therefore, but that an increase in the contribution is needed promptly, for three purposes: first, to clear the deficit; secondly, to enable the fund to build up an adequate reserve so that we do not again find ourselves in a situation like the present; and, thirdly, to cover the future likely level of expenditure. In estimating the future level, we are in real difficulty in that, while firms expect heavier claims on the fund because of the recent increases in the level of unemployment, it is not possible to put a precise figure on future trends, nor is it, in any event, possible to establish an exact co-relation between redundancy payments and the unemployment figures. There is, therefore, inevitably a considerable element of judgment in any attempt to forecast future expenditure from the fund.

In the short run we must obviously expect a relatively high level of expenditure. We put this at an average of £650,000 a week over the next six months compared with a weekly average between mid-April and the end of October of £430,000. In one recent week that level has already been reached. We also think it right to work on the assumption that expenditure will fall back gradually over the following 12 months during which over the whole period it might be, on average, £600,000 a week before dropping to what might be regarded as a more normal level of expenditure—perhaps from the spring of 1968. This more normal level might, nevertheless, be rather higher than the level of expenditure from the fund between mid-April and October this year, because some allowance must be made in this case for possible rises in wages and salaries between now and then which will be reflected in the size of redundancy payments.

It is against this background that I have had consultations with the Confederation of British Industry and the T.U.C. and the nationalised industries. As a result of these discussions, which took into account all the considerations which I have put to the House, I have decided that weekly contributions of 10d. for a man and 5d. for a woman should be brought into operation from 6th February, 1967. On the basis of forecast levels of expenditure, these increases should be sufficient to reverse the present adverse trend and bring the fund into balance in the early part of 1968 and build up a small reserve about a year later.

Sir Harmar Nicholls (Peterborough)

The Minister said that he had had consultations with the C.B.I. and the "big boys". Has he had the views of the small industrialists and small business men who perhaps will find these extra imposts more difficult to bear than the "big boys"?

Mr. Gunter

As the hon. Gentleman knows, the C.B.I. is a very comprehensive body. It is an amalgamation of big and small. We have followed the normal practice of consulting the C.B.I. and the T.U.C. I will not conceal from the House that I originally intended to increase contributions to Is. for a man and 6d. for a woman in order more rapidly to build up a larger reserve. However, the C.B.I. and the T.U.C. and the nationalised industries all felt that this would have been on the high side and that we were trying to do too much too quickly. In the light of their views, therefore, I decided in favour of 10d. and and 5d., accepting that this almost certainly means that the fund will be in deficit for well over a year and that I will need for that period to use my power to borrow from the Consolidated Fund.

I recognise that these increases will add to industrial costs, but I think that we should see the matter in its proper perspective. The increase will represent a tiny fraction of costs—an average of less than one-tenth of 1 per cent. I am fully aware that it will be said that, taken together, these fractional increases add up to a lot of money.

There is one final point which I should like to make in commending the Order to the House. I have pointed out that there must of necessity be a considerable element of judgment in the provision which we are making for the future. I have tried to strike the right balance between over-caution and over-optimism and have taken into consideration the views of both sides of industry. If in the event the fund should recover more quickly than anticipated and a satisfactory reserve is built up in a comparatively short period, I will be ready at that stage to review the contributions which I now ask the House to approve.

10.26 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

There is room for doubt whether redundancy payments have helped mobility of labour, which is the ultimate objective of the payments. They were argued at some stages as being a cushion against unemployment or work-lessness. They have been described as a golden handshake which is due to redundant men and as compensation for loss of a job or less of opportunity to practise a skill. None of these reasons, however, is valid compared with the test of whether the payments have improved the willingness of people to accept change in a technological society.

One interesting by-product of redundancy payments has been that some people have been converted to capitalism. The Minister of Labour may know of the Consett bakers, the men who were sacked from the Consett Iron Company, who put their redundancy payments together and started a baking business, which is now prospering and outdoing all its rivals in the district. This is one of the best results from the scheme that we can find.

The anomalies in the redundancy payments are well known to all. We all hear stories of men who have been declared redundant going round the corner and getting a job next day with another employer, particularly in the building and construction industry, and taking several hundred £s with them. One is still bound to ask whether there should be a delay or qualiflying period of unemployment before a man is entitled to payment. On the other hand, there is the obvious injustice that a man who is made redundant at, say, the age of 64 perhaps collects a large sum in redundancy payment whereas the man who soldiers on until he retires collects nothing.

Mr. Speaker

Order. I hesitate to interrupt the hon. Member, but we cannot on this Order discuss redundancy in general. The Order makes a specific increase. The hon. Member must relate his remarks to the Order.

Mr. Ridley

I am grateful for your observations, Mr. Speaker. I certainly intend to relate my remarks to the Order, but I hope to show that there are grounds for questioning the proposed increase in the contributions because the end results are, perhaps, something which the House should consider before passing the Order. I will, however, be brief in mentioning these objections to the redundancy payments because that is not the main burden of what I wish to say.

We know also that the principle of first in, first out is not working fairly with regard to redundancy payments, because the first out probably have no claim on them and I doubt very much whether it is fair to give large payments to some and none whatever to others who have been only a short time in employment Finally, there is the anomaly that employees have tended to cling on to their jobs until they are made redundant rather than seek a new job when they see trouble ahead, which would aid mobility of labour.

The anomalies are serious enough to throw doubt on the efficacy of the whole of the redundancy payments scheme. There are psychological arguments against it, too. It is income which the redundant worker needs while he is looking for a new job and training—

Mr. Speaker

Order. The hon. Gentleman is still discussing redundancy in general. He must come to the Order.

Mr. Ridley

Very well, Mr. Speaker; I accept that.

There are serious grounds, including others which I would have mentioned but for your guidance, Mr. Speaker, for questioning whether this is the right way to use the extra money which the right hon. Gentleman is trying to raise.

Sir Harmar Nicholls

On a point of order, Mr. Speaker. For guidance, can you say whether it is possible to separate the obvious anomalies from the argument that this increase for which the right hon. Gentleman is asking is not justified? In order to argue that the increase is not justified, surely one requires to point to the anomalies?

Mr. Speaker

It was when the hon. Member did separate them that I objected. He must link them together.

Mr. Ridley

It is significant that neither in Sweden, nor in France, nor in the United States, is there a compulsory redundancy levy, nor compulsory redundancy payments. The arguments against the whole of this scheme were advanced on many occasions in the past by my right hon. and hon. Friends, who always preferred wage-related benefits to be brought in first. The right hon. Gentleman did not do this. He would, I think, agree, with hindsight—and I am only speaking with the advantage of hindsight —that we might have been more sensible to have put more of industrial money into the wage-related benefits scheme and into retraining grants rather than at this stage to increase the amount which we are raising for redundancy payments. I should like to see us continue to build up retraining grants and unemployment benefits, and to separate the latter from the sickness benefit which is of a totally different nature. This is perhaps where we should consider whether it is wise to pass this Order.

I do not wish to dwell on the wide ramifications of this Order and, as you, Mr. Speaker, have suggested, I will deal in particular now with the proposed increase before us. The Order proposes to double the contribution from 5d. to 10d. a week. But, as the right hon. Gentleman himself said, the expected increase in what will be paid out of the fund is from about £400,000 a week to about £600,000 a week, which is only roughly a 50 per cent. increase. So, although he is expecting only a 50 per cent. increase, he is proposing a 100 per cent. increase in the levy. The 5d. which is already paid yields somewhere in the region of £18 million, or a little under, in a full year. Now it is proposed to charge another £18 million, which is a burden upon industry.

I agree with the right hon. Gentleman that everybody in the House and in the country under-estimated the level of the payments, the cost of this scheme, at the time that it was going through the House. That was before 20th July, when it became part of the Government's policy to "shake out" labour and cause a lot more redundancy. Now it is obvious that the fund is inadequate and, as the right hon. Gentleman said, the fund has already gone into deficit.

The question I should like to ask is this. Is it wise to place even this small extra burden on industry at this time? We have had the imposition of Selective Employment Tax which is still causing contortions in industry. We have had the Corporation Tax which in effect is a very big impost upon our businesses. Lately a lot of industrial training levies have been brought out on various different industries. Those are a further tax. On top of that, we have the biggest financial squeeze in the whole of our history.

I question seriously whether this is the time to come along and place even one-tenth of 1 per cent. more on business costs. I suggest also that this is not a very good time to do it, when the country is having a wage and price freeze, and everyone else is being asked to keep prices and wages at the same level. If nothing else, it is not a very clever piece of timing on the right hon. Gentleman's part.

Surely the right principle is that the proper level of the contribution should be the average cost of the payments out of the fund over a period of many years. Quite clearly, this is not an average year. It is the Government's whole policy to cause redeployment and a shake-out of labour, and this could not be called an average year. The right hon. Gentleman has not enough evidence on which to base his claim that 10d. a week is the right charge to levy.

There are two alternatives, and he must give us reasons why he has rejected them. He could have let the fund go into deficit, or he could have made a direct Government grant to the fund. He has power to do both those things under the Redundancy Payments Act.

I want to explore both those possibilities briefly. First of all, as regards letting the fund go into deficit, if I may make a comparison with the Unemployment Fund in the 1930s, which was a period of really heavy unemployment, in June, 1929, that fund went into a deficit of £37 million. By 1933, it had gone into a deficit of £115 million. In terms of our currency today, that represents something like £500 million. By the time unemployment had passed the peak, the fund started to pay back the deficit which it owed the Exchequer.

It is a very sensible conception that, when there is a peak in unemployment or in redundancies, it should be financed by temporary borrowing and paid back when a trough is reached in years to come. They had a conception in those days of what they called "the balancing point". It started off at 1 million unemployed, and it rose later to 1.2 million unemployed. Based upon that, contributions were raised. Nevertheless, that was not enough, and the fund went into this very serious deficit. The Labour Party of the time pressed hard for the Government to write off much more of the debt or make a contribution themselves. I should like the right hon. Gentleman to tell us why he does not feel that he can let the fund go into deficit, at least until we know what the average level of redundancy payments is likely to be over a reasonable period of years.

Secondly, on the question of a direct contribution by the Government, under Section 35 of the Act they have power to pay up to £8 million, to be increased by Order to £20 million, if they so wish. I do not see why the Government should not make a contribution to this. If redundancy payments are designed to aid mobility of labour, which I take it they are, then mobility of labour is one of the Government's main national objectives. Why should they not make some contribution from the Treasury to what is, after all, Government policy?

The Unemployment Fund in the 1930s was raised on the basis of a third from each party—Government, employers and employees—whereas this Redundancy Payments Fund is all falling on the employers, none of it on the Government and none of it on the employees. I should like the right hon. Gentleman to tell us, when he winds up the debate, why there is to be no Government contribution to the fund.

Moreover, what I have said is more poignant when one thinks that it is the Government who are creating unemployment. It is their deliberate policy to shake out labour. We question seriously the efficacy, the planning and the practicality of what they are doing. Be that as it may, there is no doubt that it is the Government who are trying to bring about a change in many jobs, the hastening of the decline of some industries and the growth of others which can only put a greater burden on the fund. I therefore think that they have an obligation to say why they are not going to contribute to the cost of this fund.

During our discussions in Committee my right hon. and hon. Friends pressed the Government very hard to accept a new Clause which said that where the Government were responsible for creating the redundancies, the Government should pay. The Clause was turned down by the Government, and one can now see why they turned it down. One reason given for doing so was that the Government accepted responsibility for making redundancy payments to civil servants. What an argument that is when one sees it now. The Government were going to have to pay as much as any private employer because they were going to make a lot of civil servants redundant, but in fact we have seen a vast accretion of civil servants, and a rundown of productive, exporting, technological, dynamic industries. The redeployment is from exports to tax keeping, from technology to bureaucracy. As the Government have had to pay out hardly a penny in extra redundancy payments because of their economic policy and their use of manpower, should not they accept some of the cost of the redundancy payments which they have created in private industry by their financial policy?

I am not alone in thinking this. The Economist on 27th October last, when discussing the proposals which are before the House tonight, said: This would be quite wrong. In the long term the fund may well balance itself out; the present heavy drain on it is is coming before it had accumulated a decent reserve. The economy is receding, unemployment growing, employers are already groaning under the Selective Employment Tax. It would be silly to increase this other payroll tax now; merely in order to preserve what looks like (but is not really) the insurance principle of the fund. If the fund is proving an even more useful instrument than was originally expected, it should be helped to do the job by a direct Treasury contribution. I think that that is a very fair criticism.

We cannot estimate what the fund will need to discharge its responsibilities until we have the figures for a considerable number of years, and in any case far more information than we have before us at the present time as to the number of redundancies. In answer to a Question which I asked a few days ago, the right hon. Gentleman said that 8 or 9 million people changed their jobs a year, whereas, as far as we can make out, only about 100,000 people are claiming redundancy payments. This discrepancy between 8 or 9 million who change their jobs, and about 100,000 who claim redundancy payments, needs explaining.

In addition, we need to know how many people will be shaken out by the Government's policy. When will they be shaken out? When will the Government relax the credit squeeze? If, on top of the annual flow of redundancies, we have a greatly increased number of redundancies caused by the policy pursued by the right hon. Gentleman and his hon. Friends, obviously we shall have to try to estimate the cost to the fund.

I think that it is clear that the Government have not done their deep thinking on the whole of the financing of their redeployment policy, or mobility of labour policy, or whatever one likes to call it. As I said when we debated redeployment, the financies for the whole of this business are in a muddle. All the money is to be raised directly from the employers. Money for industrial unemployment benefits is raised from both sides of industry. Training costs are raised almost entirely from the Exchequer, and the relationship between all these grants is clearly out of line. Equally, the source of finance is clearly cut of line, and until the Government take a long cool look at the whole of these mobility grants, I do not believe that we will begin to make sense in our redeployment of labour policy.

We do not intend to vote against this Order, but I have made some fairly astringent comments on it because I hope that the right hon. Gentleman will not just accept the position as it is, but will be prepared to consider these anomalies and these difficulties which have come upon us all as something of a new phenomenon. Only by experimenting with things like the Redundancy Payments Act can one tell what is wrong. This is the occasion for us to admit that perhaps we did not get it right, just as it is for the Government to admit that they did not get it quite right at the t me. I hope that the right hon. Gentleman will let us know the Government's views on some of the important points which arise in considering the Order tonight.

10.45 p.m.

Mr. Tarn Dalyell (West Lothian)

Many of my constituents had reason to be glad of the Act. Although I am not sure that gratitude is appropriate today, they certainly appreciate the efforts of my right hon. Friend in bringing in the Act. But tonight we are concerned with the increases provided for by the Order. I would certainly be prepared to accept the difficulties to which my right hon. Friend referred, and their cumulative effect. Those who criticise are perhaps exercising hindsight. I suspect that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) recognises this. These things are difficult to judge.

I want to ask one question on the increases. Does not my right hon. Friend agree that some of the money that might otherwise be involved could be devoted to off-the-job adult retraining? In places like Bathgate we want jobs first rather than benefits. The scheme to which my right hon. Friend referred a week ago on Monday would be a vital contribution, certainly in the Bathgate area and the area of B.M.C. redundancies. Such a scheme could make a great deal of difference to firms which do not obtain grants at present because they are not expanding rapidly enough, but which need an upgrading of skill.

Could not some of the money involved in this scheme be used to help the alternative scheme of off-the-job adult retraining? I have given my right hon. Friend notice of this question.

10.47 p.m.

Mr. John Page (Harrow, West)

The Order and the speech of the Minister this evening are a frank admission of the colossal failure of Government planning and the complete punch-drunkenness of the Government. We had the Second Reading of the Redundancy Payments Measure only in April, 1965. At that time the Ministry of Labour had a mass of information about the pattern of redundancies as they had occurred previously. It had ample opportunity to discover what redundancies were likely to occur. The Ministry carried out the task efficiently and effectively. Since the Minister has quoted from his own speech perhaps I may, also. He said: In deciding on the right level of surcharge required to finance the Fund, we have, very naturally, been anxious not to impose a bigger charge on industry than was justified by the need …The total cost of redundancy payments will depend on the number of redundancies, the age and service composition of workers made redundant, and future changes in earnings since the payments will be based on earnings."—[OFFICIAL REPORT, 26th April, 1965; Vol. 711, c. 44.] The policies which were forced upon the Government have completely changed the pattern and have caused the planning, which was quite adequate and accurate in the first place, to fall out of joint. It is because of the policies of the present Government, the policy of the sack, which they refer to as "redundancy" the policy of unemployment, which they refer to as "redeployment"—

Mr. Gunter

The hon. Member has the argument wrong. He is suggesting that the Order has been precipitated by the measures of 20th July, but the outgoings of the fund in the first week in November were less than in some weeks in June.

Mr. Page

The Minister has had the opportunity of studying those figures and I have not. This is the pattern which Government policies have been following. The forecast of the Ministry should not have turned out to be so wildly wrong. The fact that the payments required have had to be more than doubled within a year of the scheme's inception, and the very large burdens put on industry—

Mr. Gunter

Let us get this straight before we become more involved. The fund was running into trouble in April. Therefore, as I said in my speech, our forecasts were wrong, but they were not quite as wrong as those of the hon. Gentleman's own party, who wanted a contribution of only 4d.

Mr. Page

Though recently in power, my own party did not have behind it the machine of the Ministry of Labour. It would not have precipitated a plan like this with insufficient data. The Minister is saying either that insufficient trouble was taken with the forecast or that the forecast was wrongly done. I cannot see why the forecast should have proved to be 100 per cent. out. To add £30 million to the costs of industry is counterproductive and against the general policies of the Government in trying to get prices down and make our goods competitive.

10.53 p.m.

Mr. John Biffen (Oswestry)

I wish to make five very brief points. The first concerns the assumption by the Minister that consultation with the C.B.I. is the equivalent of talking to industry. This assumption is frequently made and ought not to go unchallenged. I was delighted that my hon. Friend the Member for Peterborough (Sir Harmar Nicholls) pointed out that a large number of small firms for whom this Order will have a special and burdensome significance are not represented in the C.B.I. Perhaps most important, the large and growing retail trade is excluded by the C.B.I. charter. These points are of modest significance in relation to the Order, but they should not be overlooked. We are constantly being told that consultation in the hushed corridors of the C.B.I. is the equivalent of talking to British industry. Nothing could be more misconceived.

My second point concerns the figures of redundancies. In relating the consequences of paragraph 2 of the Order, the Minister kindly informed the House of some prospective figures which he thought might indicate the outgoings of the fund. We accept that a large element of hit or miss calculation must be involved; no one would suggest that it lies within the competence of his Ministry to be too precise in estimating the future outgoings of the fund. Nevertheless, he obviously did not present those figures after having abstracted them out of thin air. They must represent some idea of actual numbers of individual declarations of redundancy.

It would, therefore, be of value and interest if the right hon. Gentleman would say what number of people are represented by the figures, particularly since there has been a great deal of misunderstanding and lack of appreciation about what is expected to be the future trend of unemployment and redundancies in the coming 18 months consequential on Government policy. Tonight the Minister has a first-class opportunity to remove many of those misunderstandings by converting the figures into numbers of men.

My third point is whether or not redundancies can be identified. Many hon. Members have had experience of putting Questions to the Minister of Labour in recent weeks seeking to determine the consequences of some recent Measures. We are constantly told that the Department is unable to give the number of redundancies. I accept that the regulations apply only to redundant people who had been employed for more than two years with one employer. Nevertheless, it would be valuable if the right hon. Gentleman could confirm that in future we may expect more information, more quickly and in greater detail, about the consequences arising out of the redundancy legislation, a part of which is this Order.

My fourth point concerns evidence of abuse. Undoubtedly in recent months a great many cases have been brought to the attention of hon. Members where the Redundancy Payments Scheme has not been used in the spirit in which it was originally introduced. My view—and, to some extent, the Minister's comments confirmed this—is that the Scheme is more likely to be abused in a period of over employment than in a period when the labour market is more evenly balanced. I was not surprised when the right hon. Gentleman said that redundancy payments would not necessarily be related to the levels of registered unemployed, but it would be useful if the Minister could give more information and, perhaps, interpret his remarks in that respect.

I wish, as my fifth point, to reinforce the arguments adduced by my hon. Friend the Member for Harrow, West (Mr. John Page). Whatever might have been the attitude struck during the Second Reading of the piece of legislation from which this Order flows, the experience of what has happened—the experience of the extraordinary miscalculations—must plant in each of us some doubts about the efficacy of centralised planning and forecasting.

We are constantly being enjoined, not only by the Government but by a great deal of the so-called independent and weighty weekend Press, that the House of Commons and the Government generally should take unto themselves more and more decisions and more responsibility for the central allocation of resources. Whenever that happens, it is just as well that we remind ourselves that—

Mr. Deputy Speaker (Sir Eric Fletcher)

Order. That does not arise on this Order.

10.59 p.m.

Sir Harmar Nicholls (Peterborough)

Because my hon. Friends and I do not intend to vote against the Order should mean that the Minister will pay even more attention to the arguments we adduce. In other words, because we will not delay the passage of the Order, the right hon. Gentleman should ensure that we get what is adequate.

The Minister's comments showed that his request is premature and that while he has some of the facts which would seem to justify asking for this increase, he does not have all the facts. However, the fact that he went a certain distance means that the fuller information cannot be all that long delayed; and I should have thought that he would have delayed imposing this increase until he was in a position to say for how long it will last.

If the Minister had waited until he had all the facts and information that can be obtained through his Ministry, he should have been able in a few months to state the increase, if he had to have one, and put a time limit on it. In answering my hon. Friend the Member for Harrow, West (Mr. John Page), the Minister showed that the figures for the first week of this month, which he has but which I assume we do not yet have, are not as bad as in April. Therefore, it seems that the amount of money that will be extracted from the fund could be on the downward trend.

I ask the Minister, even now, if he would not consider preparing the case to let us know how long the increase is likely to last. That is very important. He showed in two sentences of his speech that he is aware that this is an extra impost on business generally. He let it be known that he was aware of the damage that the Corporation Tax and Selective Employment Tax cause. If what he calls this extra small impost is added, the stage is approached where a large proportion of smaller and medium-sized industries do not know how to plan their tenders because of the extra imposts that are being piled on them. They do not know where they are, and as many of them are sub-contractors to big exporting companies this may well injure our general export potential.

The right hon. Gentleman should not come here with half a tale. I should have liked him to delay his request for extra until he could say that he would deal with some of the anomalies. There are so many that their cost could well be the reason why we must have the increase. I am certain that my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) was on very strong ground when he reminded the Treasury Bench of the anomalies.

A case was brought to me of people who had been employed in a theatre production with had gone on for a fairly long time, and at the end of its run they were being moved from one production to another. But as that particular contract was ending they were able to claim redundancy pay. Even more surprising, they were all part-time workers and, more surprising still, one was a civil servant, who, under the terms of his Civil Service contract, should not have had a part-time outside job. But this matter went to a tribunal and he got his redundancy pay. If that sort of anomaly is extensive, as some of us believe, it should be rectified. If the right hon. Gentleman had delayed asking for the increase until he could bring in a way of dealing with those expensive anomalies it would have been more acceptable to the House and the country.

Above all, I reinforce the point made by my hon. Friend the Member for Harrow, West. The appearance is given that the Ministry of Labour is not completely in charge of its own Department, that it makes a decision one year and before a year is up it finds that all its assumptions and estimates were wildly out. When the prestige of the Ministry is so important in maintaining tranquillity in industry generally, and the Ministry's reputation is more important than ever, it would have been useful to delay rather than disclose this lack of knowledge.

I do not know whether my hon. Friends' words will have any effect, but I wonder whether the Minister could tell the House whether he intends to deal with the anomalies and would be prepared, in return for our giving permission to put on this extra impost, to clear out some of them, which give as much truoble to him as they do to those of us who criticise him tonight.

11.4 p.m.

Mr. John Pardoe (Cornwall, North)

The Liberal Party gave a general welcome to the Redundancy Payments Act on Second Reading, and I do not wish to indulge in too detailed criticism tonight. Many of the criticisms I would make have already been made, though perhaps not in the same spirit as that in which I would have made them.

First, I challenge the insurance principle. These necessary increases show that any insurance principle in a matter in which it is not possible to calculate the risk is the wrong principle to apply. The Liberal Party has said this over and over again in relation to our insurance social security system as a whole, and I say it again on this Order.

Moreover, where one cannot calculate the risk and, as here, where it is manifest that the calculations made were wrong—I accept that they were wrong for very good reasons—it is the wrong method to try to balance the books, and it is certainly wrong to try to balance them from year to year. It is wrong to whip contributions up and down according to the state of the labour market.

The Minister has said that the main reason for having to raise these contributions is not the state of the labour market as a whole. Presumably, therefore, the reason is that the pattern of redundancies has changed fundamentally, very largely, I suspect, as a result of the working of the Act. I want him to give, if he can, the figure for the level of unemployment which was taken into account by the Government actuaries when calculating this scheme in the first place.

Next, on the specific point of the change of pattern, we have a doubling of the contribution for men but the contribution for women has been raised 2½ times. Does this mean that there has been a substantial shift in the pattern of redundancies as between men and women, and, if not, why have we this greater increase in the contribution in respect of women than in respect of men?

I do not object to an earnings-related benefit, but it is financed out of flat-rate contributions, and the increase we are being asked to approve here merely highlights that this is the wrong way to redistribute within our economy. If we are trying to redistribute, as I think we should be, it is wrong to finance an earnings-related benefit out of a flat-rate contributions. I am against flat-rate contributions of any kind, and particularly in such matters as this. A percentage, for example, would be very much better.

I come to that point now. I under stood the Minister to say that we could not lean on other people's experience. I have two constructive points to put to him in which I lean on other people's experience, for, although we may not have had experience of redundancy payments, other countries have. The first experience I mention is the American. Redundancy is not always the fault of the firm. Obviously, there are occasions such as, for example, a time of credit squeeze, when a firm is forced to make—

Mr. Deputy Speaker

Order. I regret having to interrupt the hon. Gentleman, but he is going very wide of the narrow subject we are debating, namely, whether these contributions in this country should be raised.

Mr. Pardoe

I accept your guide lines, Mr. Deputy Speaker, but I think that what I have to say is closely relevant to the question of contributions. Obviously, if I am opposed to increased contributions, as I am, it is only constructive to put forward an alternative way of doing it. I am merely putting to the Government a suggestion for action which they might take.

Mr. Deputy Speaker

Order. The hon. Gentleman cannot criticise the general principles of the Act. That is not open for discussion on this Order.

Mr. Pardoe

I said that I was not trying to criticise the general principles, Mr. Deputy Speaker, but in the context of the request for increased contributions, which has come about for various reasons, I am suggesting that there is experience on which we can lean. The Minister said that there was no such experience. I am merely answering that point. The Minister said that we could net lean on other people's experience. But I will try to relate my remarks to the present increases.

I believe that we should relate these increased contributions to the experience of the use of manpower within individual industries. In other words, it should not be a general increase across the whole board, as the Minister is now asking us to approve. For instance, in the building industry in America—

Mr. Deputy Speaker

The hon. Member cannot go into that kind of discussion on this Order. Those matters have been laid down in the Act. We are limited in this debate to the question whether the contributions under the Act should be increased in the way proposed by the Order.

Mr. Pardoe

Then I shall not mention the American experience. The Minister has probably got enough from my remarks so far to know what I am talking about. It is at least one constructive suggestion made tonight, even though it may not be within the rules of order.

My next point, too, may not come within the rules of order because it relates to German experience, but if we are to make people redundant we should ensure that they are made redundant in a way that comes within the terms of agreement within the works council. Within the German experience, for instance—

Mr. Deputy Speaker

This really has nothing to do with the contributions which are the subject matter of this Order.

Mr. Pardoe

I am sorry, Mr. Deputy Speaker, to have gone on so long, but I will only say that we welcomed the Bill in the first place, and I was trying to make two original and constructive contributions to this debate. I am sorry they have been out of order, but I should like to have a word with the Minister later.

11.13 p.m.

Mr. Kenneth Lewis (Rutland and Stamford)

Listening to the Minister, I thought he would make a very good candidate as a Chancellor of the Exchequer who would get away with an increase in taxation with as little reaction from the House as any Chancellor of the Exchequer has ever done. He made his usual sympathetic approach, but I am not sure that the House is justified in taking this increase in the same way as he did.

This is an increase in a contribution on an insurance principle, but it is an increase in taxation which industry has to bear and which, on top of all the other increases that it has recently had to bear will, as my hon. Friend the Member for Peterborough (Sir Harmar Nicholls) has said, affect those industries that are concerned with keeping down prices in order to compete in the export market.

The increase arises not out of any misforecasting by the Minister of Labour—it has nothing to do with him; I think that his forecasts were reasonably right—but out of a change of policy after he had made his forecast. Despite what the right hon. Gentleman said to my hon. Friend the Member for Harrow, West (Mr. John Page) about the payments out being higher in June than subsequently, the fact is that it is because the payments out of the Redundancy Fund from June have been higher than was estimated prior to July that the right hon. Gentleman now has to ask for an increase in contribution. It is because the payments out are unexpectedly heavy because of the July measures taken by the Government that he is here now.

The House and the country should note one interesting thing. The Minister said that the increases in redundancy payments to the over-forties were rather higher than were expected. What is being done about this? It is, perhaps, the worst feature of the Government's policy that so many people over the age of 40 are being put on the labour market. What is the Minister doing to retrain such people or to find them new jobs? The right hon. Gentleman mentioned £180 as being the average payment to someone over the age of 40. That does not last long. Such a man finds it more difficult than any other to get another job. I see no sign in the Government's policy that they have taken special account of this or intend to take action specifically to help these people.

People over the age of 20 or 30 can quite easily get new jobs. People over the age of 40 have higher expenses than the others because their families are at an age requiring a regular income. There are many tragedies in this category at the present time. The Government must think, in terms of their present policy, about what they intend to do to deal with this situation.

The right hon. Gentleman gave the impression towards the end of his speech that the fund, in due course, will show a surplus. Incidentally, I was interested to note that the amount payable for women has been increased by more than for men. I do not know why this should be so. The original amount struck should, in my view, have been doubled outright for both men and women.

Sir Harmar Nicholls

The woman always pays.

Mr. Lewis

As my hon. Friend says, the woman always pays.

The right hon. Gentleman said that there will be a surplus in the fund in due course. That means that he is setting the increase rather higher than necessary. If he is to get a surplus, at some stage he will surely bring the amount down, for clearly we do not want an increasing surplus in the fund. Surely, if the new figures mean a surplus in due course, the increases could have been less than what is proposed. Surely it is necessary to put on increases of rather less in the year or two ahead. This is a time when the Government should be trying to lighten the load on industry. The Minister should explain why he is so increasing the amount that, in due course, the fund will have a surplus.

The Government recently introduced the Selective Employment Tax. A large section of industry is supposedly to get a rebate. The Minister is used to talking with the C.B.I. which will tell him that the amount industrialists are to get back, by the time they have paid their administrative costs, will not amount to much. The increase in redundancy payments is taking away what is left of the repayments from the tax, which at the beginning was a nonsense and is even more so now in view of this Order.

These increases represent an increase in taxation. The Order has, of course, been brought in late at night, which no Chancellor of the Exchequer would ever get away with. I congratulate the right hon. Gentleman on the fact that he has been able to get away with it.

11.20 p.m.

Sir Edward Brown (Bath)

I apologise for the state of my voice. I am just back from illness but I had to stay for this debate. I am sure that the Minister will agree that we gave him our support for the Redundancy Payments Act and I am equally certain that he regards this Order with some sadness as well.

The Minister has asked us to accept the principle that these increases shall be paid solely and wholly by industry itself. When we established the fund, the principle was that the Treasury would pay together with industry. Now we are told that there is a deficit in the fund, a deficit which will increase as the years go on unless the contributions are increased. Despite the protests, the only conclusion must be that these increases have been brought about by Government policy itself, that the introduction of policy after policy has culminated in a great deal of unemployment, so that much more money has to be found for the fund.

I would be ruled out of order if I went into detail about how this money will enter the economy, and so I will simply leave that thought with hon. Members. We have to worry about the principle. I would have liked to vote against the Order, not because I do not want the chaps in industry to get the right amount of redundancy payment, but because I believe that the Government should honour their side, too. Industry is being asked to bolster up an almost bankrupt Treasury. I imagine that the Chancellor of the Exchequer has told the Minister that there will be no more money from the Treasury for this fund and that he will have to put a levy on industry to see that redundancy payments are kept up. Those of us who work in or are connected with industry will have to tell our colleagues that once more the Government have put the yoke on them.

I am very sad that the right hon. Gentleman has argued the case which he put tonight and I am sure that he is not sincere about it, unless we are missing the point and the increase is to bolster up the Treasury. There is to be a surplus at some time, but where is that surplus to go? That is the question which we shall have to consider carefully as the months go on. I am unhappy because my party has decided not to vote against the Order and I hope that at some time we shall be able to debate it and make our differences of opinion clear in the Division Lobbies.

11.22 p.m.

Mr. Gunter

I am not sure what was and was not in order during the debate, so if I go out of order I hope that I shall be forgiven.

The hon. Member for Bath (Sir E. Brown) should get one thing clear. During the passage of the Redundancy Payments Bill it was always clearly understood that inevitably there would have to be revision and second thoughts of many of the assessments then made.

Mr. Kenneth Lewis

But not so soon.

Mr. Gunter

The hon. Gentleman is right about that. Nevertheless, it was assumed that we would have to look at the position from time to time.

It is true that it emerged very early that our assessments had been wrong. In other words, by April, after only a few months, we were in trouble. I do not know of any Government policies which altered the position within three months. It was the basis of our assessments which was wrong. We were all equally wrong and I can jocularly report that the Opposition were a bit more wrong than we were.

Therefore, it is not Government policies which are to blame for what happened in April. I agree that Government policies with an inherent tendency to increase unemployment—I hope for only a short time—are bound to be taken into consideration when thinking about the future of the fund, but the allegation that the increase has been made at the instigation of the Treasury is not true.

I do not know what the Treasury will get out of it. All that I have suggested, and all that I want—and I think that industry would agree with this, although it might not agree to the increases—is that in handling a fund of this nature, one should have something in the region of perhaps 12 months' contributions in reserve to cover fluctuations in employment.

Sir E. Brown

Industry would surely be much more appreciative if the Government went along and said "This Fund is running at a deficit. We will meet our side as much as we are asking you to meet your side." This would be fair, but the right hon. Gentleman has said that the Government are proposing to give no extra money at all.

Mr. Gunter

That is true and I will deal with it later. The hon. Gentleman the Member for Cirencester and Tewkesbury (Mr. Ridley) raised a point which puzzled me. I think that I may have misheard him because, as I understand it, there is no power in the Act to make a direct grant to the fund. Was the hon. Gentleman suggesting that we should go outside the Act, and that the Treasury should make a grant to the fund? Under the Act the deficit has to be covered by borrowings from the Exchequer, which are limited to £8 million and up to £20 million with Treasury approval and affirmative Resolutions. Those borrowings have to be repaid. The increase in contributions would therefore be heavier.

I did not quite follow another point raised by the hon. Gentleman. He said that there was a movement of 8,000 to 9,000 workers a year. This is true, but it includes people leaving jobs voluntarily, and is part of the pattern of British industry. In addition, there are those retired, dismissed for misconduct and of the remaining redundants, the majority do not have the service qualifications.

I have been asked the interesting question about the figures we took in the preliminary studies to quantify the relationship between unemployment and redundancy. These surveys pointed towards the conclusion that funnily enough, there was no direct relationship between the level of unemployment and the incidence of redundancy. It is relevant to note in this context that the Northern Ireland scheme is not in deficit and yet the level of unemployment is much higher than it is here. It is very difficult to find out where this relationship is.

The question of anomalies was raised and this is where I wonder whether I may go out of order. I do not want anomalies, because there have been allegations of collusion—

Mr. Deputy Speaker

Order. I hope that the right hon. Gentleman will not pursue this subject in any detail.

Mr. Gauter

I will leave it at once.

A point has been made about the C.B.I. not representing the small man. This is always a difficulty, but I thought that under the wide leadership, following the amalgamations which have taken place, that this was to be the pattern. If that be not the case and I cannot negotiate with it, then I do not know with whom I can negotiate. The C.B.I. is supposed to represent the lot.

In fairness to the C.B.I., I must say that the idea that it does not represent the small man is not good enough. I have always found it to be very tender and delicate towards the interests of the smaller man. Whether there is a Conservative or Labour Minister of Labour, the instrument at his hand for consultation is the C.B.I., and we shall have to use it.

I am always open to an approach by anyone, as long as they do not come too often, and if the small men want to be represented I do not mind listening to them. At present, this is the instrument that we have to use. If we can collate any evidence concerning anomalies, I shall be happy to look at it. It is, however, a bit too early at this time to know whether the acts of collusion which are alleged are in earnest. I will be prepared to consider that later.

My hon. Friend the Member for West Lothian (Mr. Dalyell) asked whether the Redundancy Fund could be used for the purposes of training. The Act spells out precisely the purposes to which contributions to the fund can be applied. Its sole purpose is to provide assistance to individual employers towards the cost of redundancy payments by spreading part of the cost over the whole of industry.

As hon. Members opposite will know, the case for a central fund was put strongly by the Confederation of British Industry and was accepted by the Trades Union Congress before it was adopted by the Government. It would, therefore, be a breach of faith to divert any part of the fund from this purpose, even if it were possible without legislation to do so. I could not offer my hon. Friend any hope about that.

The need for providing adequate retraining facilities, especially for redundant workers, is fully appreciated, but the problem here is not one of finance alone. We have no doubt that the great bulk of training required will, as always, be at the semi-skilled level. This type of training is best undertaken in industry itself by the new employer since the training is usually best geared to his own production lines and processes. As my hon. Friend knows, we are in consultation with the Industrial Training Boards to see what more might be done concerning retraining. At present, however, I have nothing further to add to my state-meat on the subject of 24th October.

I have taken note of the points which have been raised. The views of industry have been put to me with equal force to the views which have been put to me tonight about the absolute necessity for not imposing any burden which can possibly be avoided. I am glad of the cooperation that I have been given. I said in the latter part of my speech in introducing the Order that if, in the event, the fund should recover more quickly than expected—this was one of the points raised by the hon. Member for Bath (Sir E. Brown), who is no longer present—and if a satisfactory reserve is built up in a comparatively short period, I shall be prepared at that stage to review the contributions which I now ask the House to approve. I promise the House that I would certainly come to the House again with a report on the state of the fund.

Mr. Ridley

The Minister has not dealt with the point made by many of my hon. Friends that at this time, as the right hon. Gentleman is still very short of information, he should let the fund go into deficit up to the £8 million or £20 million until we see where we are and we know much more about the whole question.

Mr. Gunter

I am sorry, I should have answered that.

We gave the matter serious consideration, and the point was put to us by the C.B.I., but on balance we came to the view that it was better to do this now rather than wait until the deficit was so great that the contribution would have been very much greater. In such a matter, it is extremely difficult to make an assessment for the future. If somebody asks whether, in three or four months' time, we will have the necessary information, I do not know. I doubt very much whether we would have the necessary information because of the nature of this unexplored field.

My opinion, therefore, was that we should do it at this stage, on the undertaking—it may be proved that we have either underestimated or overestimated—that if we can do it we can review the position, rather than let the deficit build up and, in the end, have to make the increase much greater than it is now.

Question put and agreed to.


That the Redundancy Fund Contributions Order, 1966, a draft of which was laid before this House on 24th October, be approved.