HC Deb 23 July 1968 vol 769 cc355-406

7.20 p.m.

The Under-Secretary of State for Employment and Productivity (Mr. Roy Hattersley)

I beg to move, That the Redundancy Fund (Increase of Contributions) Order 1968, a draft of which was laid before this House on 16th July, be approved.

Mr. Speaker

It seems to me that if the House has no objection we can, with this Order, take the Redundancy Fund (Advances out of the National Load Fund) (No. 2) Order, 1968.

Mr. Hattersley

Yes, Mr. Speaker. Because of the agreement of the House, two Orders are before us simultaneously.

If the House approves the Redundancy Fund (Advance out of National Loan Fund) (No. 2) Order, my right hon. Friend will be empowered to obtain temporary loans for the Redundancy Fund up to a maximum of £20 million. She will be able to exercise this power from 16th August.

Section 35 of the Redundancy Payments Act made provision for borrowing up to a limit of £8 million. The total borrowing limit may be increased up to a maximum of £20 million if both Houses approve Orders authorising the additional amounts. I am, therefore, today asking for approval for the maximum sum specified in the Act. Any additional borrowing would be possible only after amendment to the original Act.

The Redundancy Fund (Increases of Contributions) Order increases the weekly contribution paid by employers to the Redundancy Fund from l0d. to 1s. 3d. for men and from 5d. to 7d. for women. The new payment will apply from 2nd September, 1968. This increase, if approved by the House, will be made under powers given to the First Secretary by Section 27(3) of the Redundancy Payments Act.

The House will know that, during its early life, the Redundancy Fund remained in approximate balance, with receipts and expenditure more or less equal By February, 1967 it was clear that the receipts were no longer adequate, and contributions were increased from 5d. to l0d. for men and from 2d. to 5d. for women.

The then Minister of Labour told the House that his original intention was to increase the contributions to 1s. for men and 6d. for women, but after consultation with the C.B.I, and the T.U.C. he accepted a smaller increase. Of course, the decision to recommend the lower figure to the House is the responsibility of the Government and the Government's alone. However, the decision was taken, after industry—which finances the Fund and to whom the fund belongs in a very real sense—had been properly consulted. In my view, we were absolutely right to agree to operate on what then appeared to be a minimum necessary contribution.

Industry continues to hold the view that we should operate as near to the margin as is prudent. Acceptance of that principle must mean that although we can promise that the contribution is not put up to an unnecessarily high level, there may be times when the tolerances we have allowed ourselves are just not sufficient to cover fluctuations in demands on the fund.

In July, 1967, because expenditure was greater than income, we had to increase the fund's borrowing limits from £8 to £12 million. I told the House then that the increased borrowing limit was a temporary expedient and that my Ministry was considering, with industry, the level of future contributions. In his Budget statement this year, the Chancellor of the Exchequer announced that from 2nd September contributions would increase to 1s. for men and 6d. for women, thus achieving the level we had recommended the year before. In April this year I asked the House for permission to increase the borrowing limit to £15 million to meet the outgoings from the fund until these new contribution levels had increased its income.

Before hon. Gentlemen quote to the House what I then said, let me quote it myself. I told the House that I hoped that the fund would be in surplus within two years, and that these increases should not be taken to imply any pessimism on the Government's part about the future trend in unemployment. I also told the House that the inability of the fund to meet all the demands upon it were neither the result of inadequate forecasting nor of unemployment persisting at a higher level than we had anticipated. I repeat this evening that the additional demands on the fund then and now are neither the result of inadequate forecasting nor of unemployment persisting at a higher level than we had anticipated.

Unfortunately for forecasting, the level of unemployment alone does not determine the outgoings from the fund. Payments vary according to the men and women made redundant—their age, their length of service in their last job and the pay they received. All these factors influence the size of each individual redundancy payment and complicate the task of forecasting outgoings from the fund with any accuracy.

For example, 10 men under 40 with six years' service and average earnings of £20 per week receive from the fund less than one-third of the payments made for 10 older men with 15 years' service and average earnings of £24 per week. To forecast with any accuracy the calls on the fund we would need to predict not only the number of new redundancies, but the ages, service and wages of each man who became redundant. This is clearly an impossible task.

This position has been well exemplified during the first six months of this year. The number of individual payments has slightly decreased. In the three months ending in March there were 63,500; in the three months ending June there were 62,700. Yet outgoings from the fund have continued to rise because the average amount of each payment has increased too sharply. The average payment for the whole financial year ending March 1968 was £155; in the last quarter of that year it was £164; in the first quarter of this financial year it has risen to £173. As a result of this, weekly expenditure, which I reported to the House in April as averaging £800,000 during the previous nine months, has risen to £900,000, although the actual number of redundancy payments has fallen during the same period.

The increased contributions of 1s. and 6d. which were announced in April would have produced an income of £835,000 per week—a figure clearly inadequate: to meet outgoings at the present level. The figure which I now recommend to the House will produce a weekly income of over £1 million. If expenditure remains steady at the £900,000 figure, the deficit will be wiped out in 1971. I emphasise that as no more than a simple arithmetical fact. If expenditure remains steady the deficit will disappear in three years. But whether or not it remains steady depends on the average level of wages over the next three years and the employment record of men and women made redundant.

Because of this sudden and unpredictable deterioration in the finances of the fund, this remedial action which I now commend to the House has had to be taken after less than adequate consultation with either side of the industry. Both the C.B.I, and T.U.C. have been informed, but we would have welcomed the opportunity to discuss the increase with them in greater detail. We have, however, received the views of the C.B.I. It accepts the increase as inevitable, but it reiterates its view that it is important for us to keep the redundancy contribution as near to the operation cost of the fund as possible. It is, in short, opposed to a large surplus being built up in the fund at the expense of industry. We agree with that view, and it is because of our agreement that such a surplus would be undesirable that we have constantly held the contribution level down to a basic minimum. I am sure that we were right to do this, but the House will understand that this has involved the possibility of the fund falling into deficit and contribution increases having to be made to retrieve that position.

Another by-product of that decision is that Ministers, myself among them, have been required to come to the House with boring frequency to confess that the figures have changed during the last few months. I take the view, and if the House agrees to nothing else I am sure it will agree with this, that this is an attempt to operate as near as possible irrespective of the marginal embarrassment caused to my right hon. Friend and to me.

Clearly, this increase is an additional burden on industry and at a time when the Government are urging industry to become increasingly competitive I cannot commend this increase to the House with anything but regret. But I think that it would be wrong were we to overestimate how great is the additional burden involved. The whole Redundancy Fund Contribution represents little more than one quarter of 1 per cent. of labour costs. The increase for which I ask today is less than one-tenth of 1 per cent.

In addition, and perhaps more important, I believe that the contribution that industry makes to the fund is a real contribution towards industrial efficiency. An examination of the payment pattern from the fund shows very clearly that there is no very large permanent pool of unemployed. Were the men who are unemployed this month the same as those who were unemployed two or three months ago we would be making far fewer redundancy payments than we are now. The continuing size of the redundancy payments, together with the fall in the numbers of unemployed, makes it clear that there is both a movement on to and away from the register of unemployed. This movement—this policy of redeployment—is carried on with infinitely less friction than would be the case were there no redundancy payment to soften the blow of temporary unemployment.

This argument, in my view, applies as much to a man who loses one job and immediately finds another as it does to a man who has a period of unemployment between his old job and his new job. An unconditional redundancy payment encourages the individual to accept the difficulties and adjustments involved in changing jobs with less resentment than he would do otherwise. It is the compensation for the loss of a job, for the loss of security and for all the risks involved in leaving one job and moving to another and it has come about as a result of the scheme. The fund is well worth paying for in practical hard commercial terms.

In a recent small sample survey my Ministry found no single cases where it could be said that payment had been made where no redundancy existed. Of course, in any scheme as complicated and as involved as this, covering as it does so many workers and so many companies, there may be people who have abused the scheme, but they are few in number—infinitely fewer than the critics sometimes suggest. They are certainly far too few to make a significant difference to the level of payment from the fund. The overwhelming majority of payments are made to men who have genuinely lost their jobs and who genuinely seek other employment. Because of this the scheme works, humanely and compassionately, but it also helps to alter employment patterns without friction and without conflict.

That, in itself, justifies the scheme and the extent of the scheme. It is in that spirit, in the spirit of the need to continue the scheme solvently and successfully that I commend these Orders to the House.

7.34 p.m.

Mr. Nicholas Scott (Paddington, South)

When the right hon. Lady the Secretary of State for Employment and Productivity invited the hon. Member for Poplar (Mr. Mikardo) to attend a party to celebrate the passing of the Prices and Incomes Act, he replied that his suit of sackcloth and ashes was at the cleaners. I wondered whether the Joint Parliamentary Secretary might have managed to borrow it for this evening's proceedings.

He has come so frequently to the House having so firmly forecast that the powers he was taking either for the level of contribution or for borrowing were going to be adequate to keep the fund solvent and he has now had to come back to us for yet another massive increase in both. He has had to do so while having to confess that this decision again has been taken without any proper consultation with those to whom he so frequently tells us the fund is supposed to belong.

I make quite clear that we on this side of the House accept the need for some scheme for economic and social reasons to cope with redundancy. We shall not oppose the Order because we accept that the fund must remain solvent, but I am sure it would be wrong for us to pass these Orders without questioning both the past history and the future prospects of the Fund to which these Orders relate. After all, we have been here several times before, as the hon. Gentleman confessed.

When the contributions were included in the Act, they were at the levels of 5d. and 2d. In November, 1966 they were increased to 10d. and 5d. for men and women respectively. In the Budget we were promised, an increase to 1s. and 6d. Now, before those increases have been implemented, we have a further increase to 1s. 3d. for men and 7d. for women. The story about the borrowing powers is very similar. In the Act, although the upper limit was £20 million, the Government were empowered to borrow up to only £8 million. In July, 1967 that rose to £12 million. In April, 1968 it rose to £15 million and now it has been raised to the limit empowered by the Act of £20 million.

It is a sad story of bad forecasting and escalating costs trying desperately to maintain the solvency of the Fund. Of course, it is small beer compared with the additional contributions in terms of taxation and additional debts which the Government have heaped on to the country, but in its field it is important.

The first point I come to is the accuracy of the forecasts the Government make about this fund and their hopes for keeping it solvent. When we go back to the Second Reading of the original Bill, we remember that the then Minister of Labour, of blessed memory, said of the 5d. and 2d. levels that the total cost would depend on a variety of factors. He said: In the light of this, we have proposed a level of surcharge which should, we think, ensure that the Redundancy Fund is self-financing over a substantial period."— [OFFICIAL REPORT, 26th April, 1965: Vol. 711, c. 44.] This was three years ago and we were talking about a level one-third of that in the Orders we are debating.

On 24th July, 1967 the Joint Parliamentary Secretary came back to the House for increased borrowing powers. He said: I emphasise again that any problems of tiding over difficulties are in a sense hypothetical. Certainly they are hypothetical in terms of a £12 million ceiling. My right hon. Friend believes that the £12 million ceiling will never be reached. It is certainly possible that the existing ceiling of £8 million may prove adequate, but I am sure that the House will agree that prudent management of the Fund requires us to make sure that sums are available to bolster and buttress the Fund to keep it out of deficit."—[OFFICIAL REPORT, 24th July, 1967; Vol. 751, c. 275.] To adapt a famous phrase, some hypothesis, some deficit!

On 4th April this year we had Orders further to increase the borrowing powers. One would have thought that by this time the fact that so many fore- casts had proved inadequate the hon. Gentleman would have learned some of the prudence he was proclaiming on the previous occasion yet even then he was making firm forecasts which have since proved completely inadequate. He said: how can the House accept my assurance that no further sums will be needed? The answer is this: even during the period of maximum outgoings the average over the past six or eight months has been £799,000 a week. By 2nd September, when the increased contributions are due, the weekly income will be £830,000 per week. Even if outgoings persist at their present level, which I am sure the House will agree is an unlikely eventuality, there will be a weekly surplus on the fund. What I am suggesting to the House it that by offering the knowledge that the contribution is to increase, I am offering the certainty that the borrowing powers at present asked for will pay the bill until that time. My hon. Friend the Member for Harrow, West (Mr. John Page), who wound up for the Opposition, asked: Was the hon. Gentleman sincere in what he said tonight and does not he think that the Fund will be knocking on the door of £15 million within another eight months? I do not see why there should be a dramatic change in pattern ". The Parliamentary Secretary returned to the point and reasserted: The £15 million ceiling will preserve that solvency. The new rate of contribution in September will make solvency permanent. I hope we all agree that our intention to maintain solvency with minimum borrowing powers is the right step to take."—[OFFICIAL REPORT, 4th April, 1968; Vol. 762, c. 707–23.] All these forecasts successively have been proved to be nonsensical. Have the Government managed to study the redundancy patterns so that the forecasts which they are making about the future claims upon the fund are better than those which have gone before? Today we are debating yet another increase in contributions and in borrowing powers. It is right that we should ask why.

The hon. Gentleman was clear and strong on the fact that the anomalies and abuses do not add up to any significant impact on the Fund. Will he quantify this later, because this was a very flat assertion? We all read about all sorts of abuses that occur.The Guardian for 5th March of this year said: Three men in Peterborough were awarded more than £400 between them, although they had never left their job. The firm they worked for was a wholly-owned subsidiary which was changed into an active company. A clerk who was declared redundant by a company and collected £160 from the fund was taken back a month later to do a similar job. A union district secretary has cited cases of collusion between employer and employees to make the worker eligible for payment. Then there are the stories about firms where, when an employee is getting near to retiring age and is not available for any substantial pension, he is declared redundant and takes a substantial handout from the fund. It may be right that he should get some sort of handout, but it is quite another question whether it should be from the fund and whether the fund should be used in this way.

Perhaps the most blatant example of abuse of the fund was the change over in the television companies. I quote fromThe Times of 23rd March: Technicians have all been guaranteed jobs with the new London weekend Thames Television, the Welsh Harlech and the Yorkshire Television groups, but as well as continuity of employment and full pension rights they have also received payments believed to total up to £250,000. I think that the hon. Gentleman has a duty to justify his flat assertion that the anomalies and abuses make no significant impact upon the state of the fund. It would certainly appear that, if these cases are at all widespread, the fund is being abused; and its administration and, without getting out of order, perhaps even the Act itself need tightening up.

Have the Government made any more accurate estimate than, again, the rather flat assertion that the hon. Gentleman made about the link between the level of unemployment and demands on the fund? The hon. Gentleman rightly said that there is no absolute link, that the demands on the fund depend upon the number of men made redundant, upon their length of service, upon the pay that they are receiving, and upon their age.

The very fact that the total level of unemployment is rising means almost certainly that the numbers who are making claims upon the fund will rise; so there must be some link somewhere. I should be surprised if the high and, indeed, rising level of unemployment was not having a significant impact on the present state of the fund. One thing that they both have in common is that the accuracy of the forecasts by right hon. and hon. Members opposite have been miserably inadequate. I do not want to stray out of order, but forecasts have been made about the state of the fund and about the level of unemployment. Both have been proved wrong. I believe that there is a link between the two.

After all, we have very firm forecasts about the state of unemployment in the late summer and autumn of this year. To go to the fountain head, as it were, the Prime Minister said this on 22nd November last year: Certainly I do, and can tell him, on the best estimates available to us before devaluation, that unemployment next autumn looked like being well within that 1½ to 2 per cent. bracket, as a result of what was already going forward … it is right to tell the House that the problem which we shall be facing in a year's time is far more likely to be not deflation and unemployment, but expansion to a scale which might lead to labour shortage in many areas."—[OFFICIAL REPORT. 22nd November, 1967; Vol. 754, c. 1334.] In fact, as we know, the performance has not lived up to that promise.

The Parliamentary Secretary said that there is no permanent pool of unemployed, but within the figures of unemployment the precentage of those who are long-term unemployed has been rising steadily. In January of this year 50 per cent. of those who were unemployed had been unemployed for eight weeks or less. In June the figure was down to 32 per cent. Long-term unemployment seems to be on the increase. Unemployment in total rose again this month. The figure for this month, seasonally adjusted, is 581,000 or 2.5 per cent. This is the highest figure since seasonally adjusted figures have been kept. It is even in excess of the much vaunted and much discussed February, 1963 figure. I repeat that the seasonally adjusted figures today are the highest for any month since figures have been published. I am sure that this has an impact upon the level of demand on the fund.

My penultimate question is this. The hon. Gentleman is asking for contributions to go up to three times the level envisaged in the original Act and for substantial additional borrowing powers, right up to the limit envisaged in the original Act. We have a continuing high level of unemployment and, indeed, a rising level of unemployment. On 2nd September, the Selective Employment Tax will be increased by 50 per cent. We know that this tax was supposed to be one of the weapons to bring about, in the Prime Minister's immortal phrase, the more purposive use of labour". The Parliamentary Secretary once said that he did not know what that phrase meant. I do not know whether the Prime Minister has yet told him what it means.

We can argue about the effects of the Selective Employment Tax. The Government say that the tax means redeployment and it means people losing their jobs; it means people moving to other jobs. If this is so, it surely means additional claims upon the fund. Yesterday's summary inThe Times of the London and Cambridge Economic Bulletin showed that productivity is rising very fast. If productivity is to rise at 6 per cent. or 7 per cent. a year and the economy is to expand at only 3 per cent. or 4 per cent. a year approximately—one would doubt that—unemployment itself must rise. This will mean still more claims upon the Fund.

We are absolutely at the limit of the borrowing powers. One wonders whether the Government ought not to be thinking about foreshadowing a new Act in the Gracious Speech for next Session, because it seems that the powers under the existing Act have been exhausted.

Both the C.B.I. and the hon. Gentleman's Department are looking at the working of the scheme, but, in the light of the continued inadequancy of Government forecasting, I wonder whether some more detailed and more public examination, perhaps by the Public Accounts Committee or by the Estimates Committee, is now necessary. I have no doubt that we need the redundancy payments scheme. As I have said, for both economic and social reasons, something of the sort is necessary, but, in view of the record of Government forecasting and their management of the scheme, I hope that we shall, before approving these Orders, have satisfactory answers to the questions which I have raised.

7.50 p.m.

Mr. A. G. F. Hall-Davis (Morecambe and Lonsdale)

I echo the suggestion of my hon. Friend the Member for Padding-ton, South (Mr. Scott) that this might well be a suitable subject for study by one of the Select Committees. Nothing but benefit could result.

The objective of the Redundancy Payments Act is well worth expenditure, and substantial expenditure at that. As I have not previously addressed the House on this subject, I make clear my general attitude to the Act at the outset. None the less, when Orders involving expenditure on the present scale come before us, it is right to ask whether that level of expenditure can be justified by certain knowledge that it is wisely applied and used to the maximum effect.

It is worth restating in every debate we have on this and allied quesions that the purpose of the expenditure is well worth while. First, it reduces the sense of personal insecurity, which is of great importance in the contribution which we can make to the total sum of human happiness. Second, it helps to make industrial change more tolerable for the individual. In those two ways, the expenditure makes it less likely that firms will shrink from or be diverted from action which is economically desirable. Thus, the scheme helps to bring about a willingness to achieve the reorientation of production and organisation in industry which we all agree is so much needed.

First, on the general background, it is well to remember that to talk about change is one thing but to be on the receiving end of industrial change is quite another. The right hon. Lady the First Secretary of State, when discussing the claims of the Liverpool busmen, I think it was, used a memorable phrase in speaking of the stress and strain of the work which entered into consideration. I do not believe that we fully appreciate the stress and strain which industrial change and restructuring puts on the individual. When we are considering whether expenditure under the scheme is justified, it is right always to bear in mind the human considerations as well as the purely statistical or economic factors.

The redundancy payments scheme, though an effective measure, is an extremely crude one. We deceive ourselves if we do not recognise that without reservation. A crude or roughly shaped weapon involving expenditure may be acceptable when the expenditure is not unduly large, but, as the expenditure steadily rises, the question is whether the instrument itself could be refined and directed to better purpose. Its very crudeness may make it unacceptably expensive.

The Under-Secretary of State spoke of the difficulty of forecasting what the expenditure was likely to be. I do not know whether he has them in his Department, but there are such people as actuaries, who spend a substantial part of their time assessing what contributions are necessary for pension funds. Although to give an exact forecast of the contributions required an actuary needs exact details of the age and service structure in the undertaking to which he is applying his mind, he is prepared to give a theoretical forecast based on a cross-section of industry, and can do so quite accurately.

The only element in the redundancy payments scheme which does not arise in forecasting the cost of a pensions fund is that, as well as length of service and salary level on retirement—which both enter into the final pension fund calculation—there is the factor of age as well. That is the only factor present in the redundancy fund calculation which is not present in the other.

I hope, therefore, that the Department will set about this question and cease making a margin of error of 350 per cent. We are now asked to approve contributions at 350 per cent. of the original level. If an actuary made a forecast of a pension fund contribution, saying that 15 per cent. would cover the outgoings of the fund, and then, after less than three years, he had to tell his client that he was sorry but 52½ per cent. was required, he would have to do more than make general remarks of the sort which the hon. Gentleman has just uttered about uncertainties and factors which are hard to forecast. It is not good enough. The hon. Gentleman would do better to "come clean" and admit that his Department was not up to the job of forecasting and assure the House that he will do better in future.

Are we getting value for the money? There is little or no attempt to adjust the provision to the individual's prospects of re-employment at a similar wage or salary. The three elements in the formula to which I have just referred, length of service, age and pay, come into considera- tion here. Age has a bearing on the prospect of re-employment, and so has length of service, though, in my view, only insofar as it is a reflection of age. But employment prospects in the individual's locality do not enter into the calculation at all. The cost is the same right across the board. Nor do the skills or qualifications for alternative employment which the individual has.

We pay out of the fund—and we are asked to approve these Orders in the knowledge that we are so doing—the same amount to a man possessing a skill for which there is a known unsatisfied demand in industry and who may well be working in one of the prosperous regions where work is readily available as we do to a man possessing a skill for which the only demand in the locality came from the employer who has just declared him redundant.

As a recognition of past service, the formula has merit, but I do not feel that we are being asked to pay out these large sums as a recognition of past service. That is not the purpose of the Redundancy Payments Act. Now that we are talking of sums of £50 million a year it would be as well if we consider what we are trying to achieve with the payments. The first thing we should be bound to conclude is that the payments are only very loosely related to the degree of personal hardship redundancy has brought to the individual. This is fundamental, and when I say "very loosely" that is exactly what I mean. One can almost say that they are not related at all.

Other aspects will come more into focus as the payments continue. First, an individual facing redundancy for a second time has little hope of any substantial entitlement. It is very largely a once-and-for-all exercise for the individual. In effect, he has exhausted his entitlement on his first redundancy. The longer the Act is in operation, and the more often we discuss payments from the fund, the more material it becomes that an increasing number of people in industry will enjoy comparatively little protection from the Act and will receive comparatively small payments from the fund, even though they may be at an age where they will find alternative employment much more difficult to obtain.

The other point is that while the Act no doubt facilitates restructuring and rationalisation in major reorganisations, in the case of the individual it is a very real hindrance to mobility, because when a man moves from one job to another he writes off his expectation of redundancy pay in the future. This may not be generally appreciated, but it will become more and more appreciated that the man with 20 years' service with one firm who has the opportunity of another job, with perhaps slightly more responsibility and better pay, with another firm down the road will ask himself whether he is wise to move; if by chance his industry is subject to change and he stays with the firm he will receive several hundreds of pounds but if he is made redundant by his new employer he will receive very little.

Therefore, the fact that a man writes off his redundancy eligibility when he changes jobs is a real barrier to individual mobility, and from that point of view we are not helping industrial change by making these very large contributions to the fund.

What conclusions should we draw at this stage? We should examine the possibility of reducing the entitlement of men with long service who are still in the prime of life in exchange for a quicker build up of entitlement in early years of employment, particularly a quicker build up in early years of employment in a new occupation for men of 50, 55, or above I believe that the curve on the table is wrong, that it is too unimaginative and regular in its progression. The table might well be altered without doing any grave disservice to anybody.

I call in evidence for my claim that there is something a little strange about the payments we are making the fact that men aged 45 with nine years' service receive 11 weeks' pay when made redundant, while men with nine years' service, aged 59, many of whom are well over the top as regards obtaining new employment, receive 13½ weeks' pay. That does not seem to reflect the realities of life. Now that the figures are so large I hope that at some opportunity we shall consider making the table more closely reflect the true realities of life, and the fact that as people move their entitlement is very much reduced.

Would not it be more in the individual's interest and more economical if part of the present expenditure from the fund which is now made directly to the employee were made to a new employer in the form of a training grant, where it can be shown that retraining is necessary before the individual can fill a job vacancy? I hope that you will feel. Mr. Deputy Speaker, that this suggestion falls within the scope of the Orders and the question of getting value for the money, and that it will strike a chord in the Parliamentary Secretary's heart.

At present, substantial training grants are available to firms in development areas, and substantial payments are made to firms expanding in them. Under the Industrial Training Act industry is being encouraged to undertake substantial expenditure on those already in a firm's employment. But it might well be in the national interest if some of that effort and expenditure were diverted to retraining those out of work.

I know that much is being done in Government training centres. The Government have succeeded in continuing the expansion in industrial training centres, but there are great difficulties in getting men of mature age with family commitments to attend them. My experience of difficulties of which constituents have told me is that they will hold on perhaps to the last minute rather than go some distance away, so that they see their families only at weekends and have their whole pattern of life changed.

I believe that an imbalance is developing between expenditure on training people in employment and expenditure directed to helping those out of work to regain employment and increase the value of the contribution they can make to the national economy. It may well be that some Industrial Training Act expenditure could be used to deal with the sort of problem the Redundancy Fund is designed to overcome.

The figures involved have now become very substantial. In a former debate the Under-Secretary said that they were industry's expenditure and not the Government's. But they are a pre-emption of the the economy's resources. We must remember that earnings-related benefits have been introduced since the scheme was first devised, and it would be surprising if a scheme that was apt and suitable in the absence of earnings-related benefits was still the most suitable vehicle now that they have been introduced. It may well be that we can find ways of helping those who have been made redundant to get a better job, and at the same time to benefit themselves and the country whilst reducing the cost of the scheme's operation.

Redundancy is rightly an emotive word. As I said at the beginning, this is expenditure on something very worth while that touches some of the deepest feelings of the people of this country. But that is no reason for allowing a situation which has been shown to be increasingly illogical to continue, and no reason for failing to examine whether we can get better value for the money, and possibly at the same time spend considerably less than £1 million a week, which is what we are talking about this evening.

8.10 p.m.

Mr. John Pardoe (Cornwall, North)

This Order is yet another entry in the catalogue of woe which many of us have been involved in for some time. The history of the Redundancy Payments Fund is an infamous example of the fallibility of government. I do not mean any particular Government, but government in general. I have no quarrel with the principles of the Act. Liberals have long advocated that a man has certain rights in his job and that, when he loses it through no fault of his own, he should be entitled to compensation,

On the Second Reading of the Redundancy Payments Act, my hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) said: The Liberal Party supports the general principle of the Bill, but I have some reservations to make."—[OFFICIAL REPORT, 15th April, 1965; Vol. 711, c. 113.] I, too, have some reservations to make and one of them is this Order. Let us look at the record.

The Act came into force in December, 1965. The contributions then were 5d. for a man and 2d. for a woman. The average weekly income was then estimated to bring in £350,000 a week. The right hon. Member for Southwark (Mr. Gunter), the then Minister of Labour, said on Second Reading: The total cost of redundancy payments will depend on the number of redundancies, the age and service composition of the workers made redundant, and future changes in earnings since the payments will be based on earnings. None of these factors can be forecast with any precision. We have had to take into account a range of possibilities, using the best information available to my Department. In the light of this, we have proposed a level of surcharge which should, we think, ensure that the Redundancy Fund is self-financing over a substantial period."— [OFFICIAL REPORT, 26th April, 1965; Vol. 711, c. 44.] Those words "substantial period" ring rather hollow in the light of experience since.

To cover some of these uncertainties the right hon. Gentleman took the power to borrow up to £8 million and a further £20 million, if necessary, with parliamentary approval. The Account for the Redundancy Fund for 1966–67 says that on 1st April, 1966, when the fund had been running a very short time, there was a balance of £2.5 million. But the Account foreword says: During May there was a substantial increase in the amounts of rebates and other payments and from that time until October the average weekly excess of expenditure over income was about £170,000 with the result that further investment … was no longer possible. By October, 1966, the fund's resources were so exhausted that the first borrowing from the Consolidated Fund took place in November, 1966. Also, in October, 1966, the right hon. Gentleman laid an Order before the House to increase contributions from 5d. to 10d. for men and from 2d. to 5d. for women, an increase of 100 per cent. for the former and 150 per cent. for the latter. On 15th November, 1966, moving approval of the Order, he said: Unfortunately, pioneering produces its own problems". It does indeed. 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 an adjustment was needed."—[OFFICIAL REPORT, 15th November, 1966; Vol. 736, c. 371.] Once, yes, but surely not twice and not three times.

The right hon. Gentleman went on to say that redundancies since April, 1966 had been running at a rate of about 125,000 a year compared with an estimate originally of 105,000. That was a fairly substantial increase in the estimate, even then. He explained that a higher proportion than estimated of those people being made redundant were over 40, which was increasing theper capita size of the payment. Compared with an estimated averageper capita payment of £130, the average was then running at £180,000. All this meant that the fund had been running at a loss of nearly £100,000 a week on average since mid-April.

The Account published last February refers to the deficit during the same period of £170,000 a week. It is possible that there is one month's difference in the period to which the two refer. But the right hon. Gentleman referred to £100,000 a week on average since mid-April and the Account refers to £170,000. It may be that the month of April constitutes the difference, but it is a rather large difference. What is the reason for these two figures being so far apart?

The right hon. Gentleman forecast that, by February, 1967, when the contributions would be increased, the deficit would have reached £4½ million, which was slightly more than half the borrowing powers. He forecast, too, that the average weekly expenditure between mid-October, 1966, and mid-April, 1967, would have reached £650,000 and he hoped that it would fall to £430,000 during the period mid-April, 1967, to mid-October, 1967. He also said that, since there would be a gradual fall-off over these two six-month periods, the average for the whole 12 months would be £600,000 and that it would return— and this is significant—to what he called "a more normal level" of expenditure, perhaps from the spring of 1968.

We have just passed spring, 1968. I do not know what the right hon. Gentleman's figure was for a more normal level of expenditure, but the Under-Secretary of State has given a figure of £900,000 a week, which is slightly more than twice what the right hon. Gentleman forecast for the six-month period mid-April to mid-October, 1967. In my own speech on 15th November, 1966 I challenged the whole insurance principle of the scheme and said that, in a field where calcula- tions were so notoriously difficult, it was wrong to try and balance the books from year to year and even, indeed, from six-month period to six-month period.

I objected, also, to a flat rate contribution financing an earnings-related benefit and said that this was the wrong way to redistribute income. I proposed that the increases should be related to the experience of the mis-use of manpower in particular industries, and I cited the American example of a no-claim bonus —a fairly common principle in insurance that we should introduce. This advice was not taken and things have not worked out at all according to the forecast we were given on that occasion, which is not very long ago.

On 13th July, 1967 an Order was laid to increase the borrowing limits. The Under-Secretary of State admitted that weekly outgoings since February, 1967, had averaged over £700,000 instead of £600,000 as forecast. The borrowing had risen from £4.5 million in February to £5.3 million in July. Asking the House to raise the borrowing powers from £8 million to £12 million, the hon. Gentleman optimistically thought that that would be the total which he would require and he said: My right hon. Friend believes that that £12 million ceiling will never be reached … What I am asking for tonight is permission to provide for a contingency … The hon. Gentleman ended his speech with words which I then took at their face value. He said: I emphasise to the House that it is our intention to examine the nature of the Fund, the nature of the contributions, and to report to the House where the contribution level stands and what are the best long term interests of the Fund and how its solvency can and should be preserved."—[OFFICIAL REPORT, 13th July, 1967; Vol. 751, c. 275–6.] I took that promise of an inquiry to mean, not that he would come back 12 months later for another increase, but that there would be a fundamental, thoroughgoing examination of what was wrong with the scheme and not just with the fund.

Today, we have a further proposal to raise contributions from 10d. to 1s. 3d. for men and from 5d. to 7d. for women and to raise the borrowing power from £12 million to £20 million, which is the maximum allowed under the Bill. We ought to know exactly why these increased payments have been made necessary, because they have not been occasioned merely by the level of unemployment, as the hon. Gentleman has said.

In another place, on 1st May, Lord Drumalbyn asked how many payments had been made since the Act came into force in December, 1965, and he was told by the Postmaster-General that in the period 5th December, 1965, to 31st March, 1968, 447,700 payments had been made, and I calculate that at 2⅓ years to be 192,000 payments a year compared with the original forecast on Second Reading of 105,000. The Under-Secretary has told us today that the expenditure is £900,000 a week, which compares with £700,000 a week in July, 1967.

So far, I have not mentioned abuses. I accept that abuses of the scheme in the sense of dishonesty are probably very few, but I suspect that by the use of the word "abuse" many of us do not denote dishonesty but draw attention to the way in which the scheme can be used, perfectly legally and even perfectly honestly, as with the television companies, to extract considerable sums, and I do not believe that that was ever the intention or the purpose of the Act.

Unfortunately, the Government seem to know very little about this kind of abuse. In that same Question, Lord Drumalbyn asked how many of the 448,000 redundancy payments were made to persons who also received a cash payment from their employers' private pension scheme, which I would not necessarily consider to be an abuse, and, secondly, how many had obtained new employment without any intervening period of unemployment, which I would consider to be an abuse, though not illegal under the Act. In view of the promise which the Under-Secretary made when he asked last time for an increase in borrowing powers to conduct an inquiry into the workings of the Act, this is an abuse to which he should give his attention and for which he should provide amending legislation.

In 2⅓ years, contributions have gone up by 200 per cent. for men and 250 per cent. for women. I accept that these figures are extremely difficult to forecast, but errors of this kind are ridiculous. It is fortunate that we are dealing with comparatively small costs, but if errors of this magnitude can be made in small things, they can also be made in large, and it would be monstrous if the House were to let pass a scandalous example of the rottenness of our machinery of government. We cannot pretend to preside over the nation's affairs if we are to base our decisions on errors of this magnitude. The Undersecretary would have been better advised to have come to us with a bingo barrel than the forecast which he has given tonight.

8.25 p.m.

Mr. Kenneth Lewis (Rutland and Stamford)

I am sure that the Undersecretary must feel rather like Santa Claus, because he is the only Minister who keeps coming to the House, after intervals of not many months, to ask for a bonanza, although it is not a bonanza from which he gains any advantage. It is only a month or two ago since we debated this very subject. We had many quotations from the hon. Member for Cornwall, North (Mr. Pardoe), but I shall make only two. I shall be fair to the Under-Secretary, because I shall quote something which he said in our last debate and something which I said.

The hon. Gentleman said: At worst, we are in the position of a man going to the bank manager and saying 'We always knew or always feared, or were always prepared '"— he covered himself in every direction— 'and we told you we were prepared to ask for £20 million. We were prepared for it because we were a prudent customer of this bank. However, we are not asking for that full sum but for something appreciably short of that maximum.' The hon. Gentleman said that after listening to what I had to say. I had said: It is my guess that if this goes on"— that is, constantly asking the House for more money to meet the expenditure involved in the scheme— The hon. Gentleman will have to come back to the House and have the sum increased from £15 million to £20 million."— [OFFICIAL REPORT, 4th April, 1968; Vol. 762, c. 713–8.] We are now just preparing to go into the Summer Recess and the hon. Gentleman is asking for an increase of £5 million, which is 25 per cent. of the total voted in the Act. Come October or November, when we return, presumably, if this money has run out, the Government will have to bring in another Bill.

A deplorable facet of this constant miscalculation, which has been one blunder after another, is that the redundancy fund does not cover anything like all the workers in the country. Most of the nationalised industries are out of it. The firms with their own fund are excluded. The dockers, I think, are out of it. It does not cover a very large number of people.

In the last debate the Minister was talking in terms of a peak claim on the fund in any one week of £850,000 with an average of about £650,000. The figure he gave today is £900,000 in a week—and this is pay-out. If it is £900,000 pay-out in a week now, and we are to accept what the Chancellor had said, that it is not expected that unemployment will go down, clearly unemployment will either go up or, at any rate, if some of the present unemployed get jobs, new unemployed will come into the market, this figure of £900,000 will rise to, not a peak but an average, of over £1 million. These figures show that during the Recess the Government and the Minister will have to look at the working of the fund.

It is generally agreed that redundancy payments to those who are really redundant is desirable. We are now in a position where almost everyone is looking for a golden handshake. They are organising their affairs so that they made sure that eventually they get one. Both union and management in industry are working together on this. If this continues, although the Minister has always said that the fund is paid for by industry, it will become so insolvent that the Government will have to pay up in order to pay the deficit.

Mr. Hattersleyindicated dissent.

Mr. Lewis

The Minister shakes his head, but if the deficit gets too high, will he put up contributions again, not by 200 per cent. but by 300 per cent. or 400 per cent.? Where does he stop on putting up contributions? He must realise that there are only two options, either the employer and employee increasingly pays more for it, on the stamp, year by year, or else the Government have to bail out the fund at the end of the day. During the Recess the Government have to consider whether there ought not to be some change in the present set-up.

The Minister has constantly said that the present high redundancy payment has nothing to do with high unemployment but it must have something to do with it. This is clearly indicated by the fact that, as the unemployment figures have risen, so the pressure and the claims on the fund have increased. We are adding to unemployment. The fund bites on the 50 to 58 age group and is a direct incentive for individuals to seek to make themselves unemployed, and for firms to assist. If they are made redundant in this age group they get the maximum out of the fund.

If the Minister analyses the figures he will find that the total sum, or the largest percentage of this sum, is made up of payments to those put on the labour market at the age of 50 or over. This is not desirable from a national point of view. Those whom we should be making redundant, in order to get mobility of labour, are those in the 30 to 40 age group. The man over 50 is disinclined to want to be retrained, in many cases is incapable of being retrained, and in most cases will not move away from his home at that age to another place of employment, which is the only justification for him being retrained. When a man in his fifties is made redundant, he gets another job in the same capacity in the same area and the Government have paid out money which is not assisting in any way the Ministry's main endeavour to secure mobility and retraining.

In many cases, the fund is being used to provide an increased payment in advance of pension. If a man is to receive in a year or two a modest pension, it is a good thing if he is given £1,000 or more to set him off. This is something which has never happened before and which people are naturally inclined to clutch at. No one on either side of the House would want to suggest that they should not seek to get it if they can. But plainly Governments must concern themselves with the cost. If they must come to the House every four months and ask for another £5 million to pay the bill, sooner or later there will be a very heavy clamp down on the pay out.

If the Government get themselves into a situation in which they have to climb down and to cut the payment to £500, many people will have got away with a very high payment and those who come afterwards, once the clamp down takes effect, will find that they are treated less well than others. It is the Government's responsibility to ensure that they run their affairs in such a way that an Act authorising redundancy payments runs smoothly for a long time rather than that they should constantly have to ask the House for authorisation to amend the regulations or for more money to keep the Act going.

One of the main proposals put forward when we were debating the original Bill was that it would bring about the dispersal of labour throughout the country. It is interesting to note that the Ministry of Housing and Local Government is going contrary to these Orders. It is suggested that there should be a build up of housing in areas which need it most where there is less unemployment and where industry is most busy—in Birmingham, the Midlands and London. These areas are to get an extra £20 million—

Mr. Deputy Speaker (Sir Eric Fletcher)

Order. It would be a mistake to pursue that subject on this Order.

Mr. Lewis

I accept what you say, Mr. Deputy Speaker. I was simply suggesting that the amount of money being paid by the Government to keep people in particular areas is going contrary to the payment of money by means of these Orders. The purpose of the Orders is to get people to leave their areas and to disperse to other parts.

The right hon. Lady the First Secretary of State is making speech after speech in the country in favour of increased productivity. How far is this expenditure of £20 million helping to increase productivity? If we get rid of people in their fifties and they are not redeployable, clearly this does not help the firm which wants to obtain highly skilled labour. New jobs are not being created if there is redundancy at the wrong age level and if there are redundancies among people who are disinclined to retrain.

The last time when such Orders were debated, the Minister admitted that it was necessary to increase the training facilities made available by the Government. Those facilities are still totally inadequate. Those who are being trained are not in every case acceptable. The Donovan Report, which was issued a few weeks ago and which we debated last week, makes it clear from the evidence that the trade unions do not yet accept those who come out of the training centres as being sufficiently acceptable for the highest skills that are available.

The Minister must, therefore, do two things. He has to get the right people into the training centres. Certainly, the fund is not succeeding in that respect. Once the Minister has got the people into the centres, he has to make sure that they are put where they are needed, where productivity in the newer industries is vital to the country.

We have been told many times that the fund is paid for by industry. I have indicated that if it continues to have such high claims made against it, sooner or later the Government must bail it out. It is not even true to say that the fund is paid for by industry. Governments tend to load upon industry tax after tax. payment after payment. Not only has industry to pay the Corporation Tax, but it had the Selective Employment Tax increased in the last Budget, the cost of insurance stamps goes up and now we have—

Mr. Deputy Speaker

Order. We cannot go into all those wide subjects on this Order about the Redundancy Fund.

Mr. Lewis

I accept that, Mr. Deputy Speaker. We now have the situation, however, that the Minister has to increase the payments imposed upon industry for the redundancy scheme. My point is that this increased payment which is imposed upon industry is on top of everything else.

The Minister has on many occasions said that this is something for which industry pays because industry derives the benefit. Some industries get the benefit while others pay. I hope that the Minister recognises that the firms which are best organised and best managed, which have their labour force right, have a minimum of redundancy. Therefore, they are not the firms which make claims upon the Fund. They still have to pay the piper. They still have to meet the cost. They still have to pay for the mismanagement of the Government when they increase the charges or when they come to Parliament and ask for an extra £5 million. Therefore, the Government are imposing on the better-organised and better-managed firms impositions which result from their own mismanagement.

Mr. Pardoe

Would the hon. Member follow that line of argument by accepting my suggestion that we should follow the American example and institute a no-claim bonus, thereby ensuring that those people did not pay for the sins of others?

Mr. Lewis

I accept that that would be a reasonable suggestion. I am certain that the hon. Member is correct to the extent that if the fund continues with the same pressure upon it, and with the demand upon industry and upon the Government's loan fund, there will be an outcry from the companies which derive no advantage but which constantly have to pay the bill.

I notice that when the Government come to the House for this kind of money it is always at that period when we are near the Recess—it was so the last time —when we are all very tired, when we have had enough, and when they think that they therefore can easily get away with £5 million. But I hope that the Government will bear in mind that, in so far as this scheme is paying out money, it is also providing the Government with increased income in the form of taxes. I see the Under-Secretary looking at me inquiringly; but if he is insistent that industry must pay for this, if he is intending to ask the House again for this money, and if the Government are not prepared to provide any subsidy for the fund whatsoever, will he bear in mind that everybody who receives a redundancy payment receives it less tax? Perhaps he will add up the amount paid out in redundancy payments and take off the amount which goes to the Chancellor of the Exchequer, because the recipients of redundancy payments do not get them tax free; they do not get them net, and the Government, in charging industry for the whole of this, are in fact making a profit out of their imposition.

There are two points I want to mention about the cost of running this scheme. We have a system of tribunals. Will the Minister look at what those tribunals cost? We have not been told, and I should like to know what they cost. Anyone can apply to a tribunal. I understand that anyone coming to a tribunal in London, or wherever it may be, can get travelling and subsistence allowances, and if he has to be away from work to attend the tribunal he can get the pay he loses for that day made up. At any rate, this must be a quite expensive operation, and the Government cannot refuse to allow to appear before a tribunal anyone who claims that he should have had redundancy payment.

Finally, on the guaranteeing of payments. If a firm is unable to meet its share of redundancy payment the Government make it up. This is correct. There would be a great disservice done to individuals if a firm failed to make its redundancy payments. The individuals would suffer, and so the Government make them up. How much is this costing? How many firms have been unable to meet their obligations to make redundancy payments? If the cost goes up there will be many more firms in that category.

I believe that this is the last time when we should be asked to vote a sum of money of this kind, when the Minister is reviewing the whole operation of the Act, because I do not think we can go on constantly increasing the charges to industry and to employees and at the same time loading the Government's Loans Fund with further sums of this order.

8.45 p.m.

Mr. Edward M. Taylor (Glasgow, Cathcart)

I must apologise to you, Mr. Deputy Speaker, to the Undersecretary of State, and to my hon. Friend the Member for Paddington, South (Mr. Scott) for not being present at the beginning of this debate. I was involved in a meeting just outside the House with some people from Glasgow, and at that meeting the issue of redundancy was very much discussed.

I came into the House to hear the debate on this very important Order, and I was truly astonished to find that I would have an opportunity of getting off my chest some of the things I wanted to say about it. I honestly thought that there would be a large number of Members wanting to take part in the debate. In these circumstances, it is a great and unexpected pleasure for me to make a speech on this Order. I hope that the Under-Secretary will forgive me if I mention some points with which he may already have dealt.

It is felt that this Order does not matter very much, since we are talking of sums of 10d. and 1s. 3d. This is a 50 per cent. increase, but when we are accustomed to talking of millions and tens of millions—I was astonished to learn, through a Question raised by the hon. Member for West Ham, North (Mr. Arthur Lewis) of an error of £133 million in a Budget memorandum a few months ago—people wonder whether this Order matters. But, in stark reality, when one considers that the redundancy payments scheme involves £76 million over two years, it is clear that we are talking of a very significant sum.

I hope that it will not be thought that I think that the scheme is a mistake, but hon. Members will realise that we have created something which could be frightening and alarming and could commit us to substantial expenditure, which might get out of control—not through deliberate Government policy, but simply because the scheme could gather momentum and involve a great deal of extra money.

A speech was made some time ago about sacred cows, and it was suggested that, with devaluation, there must be no sacred cows. I am afraid that this scheme is a sacred cow which has come home to roost with a vengeance and a great bang—

Mr. Anthony Stodart (Edinburgh, West)

A cow has never been known to roost.

Mr. Taylor

I thought that my hon. Friend was about to suggest that sacred cows should get the £12 subsidy for the upland areas, and I am glad that he did not, because the economy could not stand it. But I am grateful for his interest in my speech. He always listens to speeches with great interest and speaks with the profundity which one expects of him.

I was saying that there was a danger that the redundancy payments scheme might get out of control and cost us sums which were not anticipated when it was introduced. This Order is yet another indication that the sums involved will be greatly in excess of the amounts envisaged at the time.

Some of the criticisms of the scheme are mistaken and somewhat false, but one of the advantages of an Order like this —as with the Measures on the borrowing powers of the Nationalised industries— is that it gives us one of our rare opportunities to review a scheme and to make some suggestions for improvement. It is a sad fact that periodic reviews are all too rare in the House. I know that, in agriculture, for instance, in which my hon. Friend the Member for Edinburgh, West (Mr. Stodart) takes such a great interest, there are the Annual Price Reviews, on which we can discuss the progress of agriculture and what changes should be made. Although agriculture is not a main employer in my constituency—there is not one farm there—these debates are, I think, of a high standard and allow us to review general policy in that sphere. In that way, this debate gives us an opportunity to review the Redundancy Payments Scheme and see what changes might be made.

Some of the criticisms which have been made about the Scheme are somewhat unfounded. It has been suggested, for example, that the cost of the Scheme will hold back progress in that employers who might otherwise dispense with their employees and instal labour-saving machinery might, because of these provisions, not change over to machinery but hold on to their employees. This criticism cannot be treated seriously because I calculate—not having been a member of the Standing Committee I may be wrong; I hope that the Minister will correct me—that even for an employee who has served his employer continuously for 20 years, the payment to be made by the employer for that man will be only seven weeks' wages. The total amount paid to the man will be much greater, but the larger part comes from the fund.

If the amount to be paid by the employer is more—perhaps nine or 11 weeks' wages—I still do not believe that it will prevent him from dispensing with his employees and going over to labour-saving machinery. Some industrialists have said that the existence of the Scheme prevents them from dispensing with employees and installing labour-saving machinery. I feel confident that if the machinery in question is of real value, the existence of the fund will not act as a deterrent.

The scheme has also been criticised because, it is said, it discourages the mobility of labour. The most obvious example given is that of firms which wish to take advantage of the redeployment going on in Scotland. For example, a firm in Glasgow might decide to relocate itself in one of our exciting new towns at, say, Cumbernauld or East Kilbride. The firm's employees might be offered jobs in the new town, but since that might involve some of them in uprooting their homes, moving their children to new schools and so on, they might consider it an unreasonable offer and wish to take redundancy payments instead. To that small degree, the existence of the scheme might have a limited marginal effect on mobility.

However, that is nothing compared with the freedom of action which is given to an employee who is made redundant after giving years of service to an employer. Such an employee has a lump sum with which he can perhaps buy another house in another area and spend a little time finding suitable employment. Thus, weighing the advantages and disadvantages of the scheme, I conclude that its existence does not hold back mobility.

It has been said that the tribunals are too expensive. The increased contribution, from l0d. to 1s. 3d., is important in this context because many people would like to know what proportion of the 1s. 3d. will pay for the cost of administering and operating these tribunals.

There have been criticisms, but very often criticisms come from those who have not had the opportunity of appearing before a tribunal. I have had the opportunity of appearing before a redundancy tribunal on behalf of a constituent, and I was impressed by the completely impartial way in which they considered the facts, and the trouble which they took to go into the details of the case. The tribunals have a record to be proud of.

While saying that, I think the Minister will accept that the scheme could be improved in one or two small matters of administration. There have been alarming stories about the travelling expenses of those who appear before a tribunal. It may be that some of the stories have no validity, but it is obvious that the scheme allows for abuse.

If, for example, I wanted to bring an entirely bogus claim against an employer in Inverness, Wick or Orkney, no matter how hopeless and invalid my case, I would be entitled to receive my travelling expenses. If one were thinking of having a home holiday this year, under the scheme it would be possible for abuses of this sort to take place.

Mr. Hattersley

I suggest to the hon. Gentleman that for the abuse which he had in mind to operate he would have to be a man who was employed by an employer in Wick and who lived in London. Such persons could hardly be sufficient in numbers to make a large contribution to the cost of the scheme.

Mr. Taylor

I am grateful to the hon. Gentleman. I was being helpful and trying to abolish the general arguments made against the administration. It is fair to say that there could be bogus cases in which substantial claims for travelling expenses would be involved. For instance, a person might come from Wick to London to see the lie of the land and then decide to go back to Wick. The easiest way of getting his fare paid would be to bring a claim, however bogus, against his previous employer.

In the event of a person coming from Glasgow to London and not liking what he found in London, and perhaps not finding the people of London so congenial as the people of Glasgow, is it or is it not the case that he could get back to Glasgow at the State's expense by bringing an action under the Redundancy Payments Scheme against his previous employer?

I do not join those who make a blanket condemnation of the administration of the Redundancy Payments Scheme; far from it. I have been doing my best to praise it, but may I draw attention to an anomaly? I have received a personal complaint from a major building employer in Scotland with an excellent record. The firm is concerned that some of their employees of long standing are approaching foremen and asking to be included in the next redundancy. These are men of perhaps 60, 61 or 62 years of age who know that if they stayed in the employment of the firm until the retirement age of 65, and then retired, they would get nothing, but if they could be included in a redundancy they could receive a substantial amount of money in view of their long service.

Having in mind the increased amount of money involved in the Order, the Minister should ask himself whether any of that increase can be accounted for by that kind of abuse. Perhaps to call it an abuse is wrong. Rather, it is an anomaly that can arise from the detailed application of a measure which brings many benefits as well as anomalies. I understand that the case of this building firm has been brought to the Ministry's attention and that the Minister has already given it careful consideration, but can he see any solution of the problem without destroying the whole basis of what is a good scheme?

The Minister should tell us whether this sudden increase in the global expenditure will accelerate in the future. All the indications lead me to believe that the amount involved will accelerate very substantially, bearing in mind the present state of the economy and the changes in trends of economic development. We all know that unemployment will increase substantially over the next few months. That is inevitable in our present economic circumstances, and that event will result in more substantial payments from the fund. That may be one of the reasons why the Order is now before us.

Unemployment involves a sum that we can assess, and is under some degree of control. Therefore, while increased unemployment will result in larger claims on the fund, it will be a once-for-all amount and one that can be estimated and reasonably controlled. I know that the Minister does not like the prospect of increased unemployment but we know that it is ahead. Whether it will be as a result of the Government's economic policies we cannot now discuss.

I can think of five different factors which will in themselves result is escalating claims on the fund—not the once-for-all increase that unemployment can bring about, but something that will gather pace. The first and obvious, of which the Minister will be well aware, is the factor of structural change in industry mentioned by Lord Beveridge in his famous Report at the end of the war. I know that I need not explain this to my hon. Friend the Member for Dumfries (Mr. Monro) who has a case in his constituency. He has been fiercely defending one of his own constituents in just such a matter No one has fought harder than he for his own people. Whether or not the particular mine about which we are talking—

Mr. Deputy Speaker

Order. The hon. Member cannot pursue this line of argument on this Order.

Mr. Taylor

I would not think of it, Mr. Deputy Speaker. I was merely making a passing reference.

Mr. Deputy Speaker

The hon. Member really ought not to make a lot of passing references to matters that are out of order.

Mr. Taylor

I was taken away by the sight of my hon. Friend sitting there on the Front Bench—

Mr. Deputy Speaker

It is more important that the hon. Gentleman should obey the instructions of the Chair.

Mr. Taylor

Then I will come back to the detail of the Order.

The application is to increase the contribution in respect of the average male employee from l0d. to 1s. 3d., and I should like to know the extent of the structural change in industry that accounts for this increase. What period has the Minister in mind? Is it one year, two years or three years? Is he keeping in mind the very substantial escalation of structural change in industries like ship building and coal mining which will inevitably take place?

When considering this Order and the increase in this sum, the Minister has an obligation to tell us to what extent he has taken structural change into account and the kind of time-scale he has in mind. Probably he thinks the Order enough to keep the fund going for 12 months, but to what extent has he taken this factor into account? There is a 50 per cent. increase in the amount of money the Government hope to raise. To what extent have they taken into account the factor of automation and all the changes in the pattern of industrial development? Every new move in automation can create redundancies, and many redundancies make calls on the fund.

The policies of the Government themselves obviously will cause a substantial increase. That probably is one of the reasons for this Order. We have seen small increases in national production and a declining manufacturing labour force. This is a substantial change. If new wage patterns in the engineering industry are to be negotiated on Friday in London—and I hope they will be successful—we shall see a further step forward in productivity. In bringing this Order to the House and making the calculations, to what extent has the Minister taken account of the Government's policies for productivity?

Can the Minister explain in relation to the Order what calculations he made and on what calculations he justifies the figure in the Order? To what extent did he take account of the changes which will take place as a result of new trading arrangements by this country? I am thinking of new arrangements such as N.A.F.T.A.S.

One of the greatest and most significant factors which I fear the Minister may not have taken into account is the changing attitude on the part of individual employers, who pay the 1s. 3d. under the Order, to what I might call lame ducks of industry, men who have served a firm well, who have given so much and asked for so little from their firms. Many employers have had a serious practice of regarding it as their responsibility to look after a particular employee who will be covered by the Order and by the scheme. Would those employers not be doing a greater service if they were to say to such men, "We have no job for you. We shall put you out at 62 or 63, but you might find yourself with a payment of £800 or £1,000." Would it not be better for them to do that than to give them a handshake or a pat on the back?

There is a change in the attitude of some employers in this respect. I wonder if the Minister has taken account of the fact that more and more employers who might have kept redundant employees because of their long and loyal service may consider that it is in the interests of those employees of relatively advanced years who have no great contribution to make to their firm to say that the best they can do for them is to show them the door, however regretfully and sadly.

I hope that these remarks have not appeared to be destructive, because they were not so intended. I would not want anyone to infer from my few brief remarks that I am opposed to the scheme or that I think that it is a bad one. It is very valuable. We always want to improve something which we regard as valuable.

Therefore, I want to make one or two suggestions about the kind of changes which I hope that the Minister will be able to tell us he is considering in relation to the figures he has presented. The hon. Member for Cornwall, North (Mr. Pardoe) suggested that there should be a no claims bonus scheme. It was encouraging to hear a constructive comment from a Liberal Member. Such a scheme would be of great value. I mentioned the case to the Minister— he showed great interest in it—of a Scottish building firm. We could help by having a no claims bonus scheme.

Mention has been made of people who are put out at 63 or 64 because they know full well that if they stay on until they are 65, they will get nothing. We must make some provision for this. One of the sad things about our whole Welfare State, a question which we can discuss on the Order, is that it encourages people—

Mr. Deputy Speaker

We cannot discuss the whole Welfare State on the Order.

Mr. Taylor

I am sorry, Mr. Deputy Speaker. I am trying very hard to keep strictly to the rules of order. I was hoping to make only one or two brief points. I will come directly to them.

Mr. Deputy Speaker

The hon. Gentleman must not only keep to order. He must also avoid tedious repetition.

Mr. Taylor

Mr. Deputy Speaker, I greatly respect your opinion. I do not think that I have repeated anything at all.

Mr. Deputy Speaker

Order. I said that it is important to avoid tedious repetition.

Mr. Taylor

I am very grateful Mr. Deputy Speaker. I was thinking that in some way you were suggesting that I was committing tedious repetition. I am very grateful indeed for that assurance, because, as you know, Mr. Deputy Speaker, there is no person in the Chair whom I admire or respect more for his judgment than yourself; and I certainly would not like to annoy or displease you in any way at all. On the other hand, I think from what you have said that you were almost suggesting that I had gone on for too long. Having looked at the clock, I am alarmed to see for how long I have spoken.

As I said at the beginning, I feel very strongly on this issue. I have not had an opportunity of speaking about it in any way before. I will try to bring my remarks quickly to a conclusion. I was saying that the hon. Member for Cornwall, North suggested a no claims bonus scheme. Was the amount fixed at 1s. 3d. as opposed to 1s. 5d. or 1s. 6d.—although I would not wish to add to the costs on industry, I think that 1s. 6d. could be justified on the basis of the figures which have been put before us of the escalation in the claims on the fund—because the Government are thinking of the introduction of a no claims bonus scheme or of arrangements for contracting out? I hope that the Minister will be able to give us an assurance along these lines.

As previous speakers have said, we are considering not one Order, but two Orders. One Order suggests one means of providing finance, namely, by the stamp, through the amount paid to the Fund in respect of each employee. The other Order considers a second way of providing finance, by drawings on the National Loans Fund. We see the frightening suggestion that, in place of the £8 million which has been the position up to now, there is to be the very substantial amount of £20 million.

Can the Minister give us some indication of whether this is the last Order of this sort which will be presented? Will he commit himself to saying that all the financing of the scheme as from the time of this Order will be done by Orders of the type of the Increase of Contributions Order and not by means of the National Loan Funds (No. 2) Order? When one starts borrowing money, as is proposed under the second Order, to keep the fund going and solvent, there is a terrible danger that that kind of thing can gather pace so that we find ourselves before long with a scheme financed more and more by Government borrowings and, therefore, becoming basically more insolvent.

The Minister should take his courage in his hands, face the world, and say, "We have a good scheme, a good scheme which should be self-supporting, a scheme from which we shall try to take away the minor abuses to which reference has been made, a scheme from which we shall try to take away the little injustices, a scheme from which we shall try to take away excessive costs of administration. It is a worthwhile scheme, a scheme which will wash its own face".

That is the situation which I should like to see, and I hope that the Minister will at least give an assurance that that is what he is aiming at, that he wants to wash his own face in the context of this scheme. Although, in the present difficult economic climate, it may be necessary to increase the borrowings which we make through the National Loans Fund to £20 million, and we can accept that as a temporary measure which might be justified in present circumstances, will he give a cast-iron undertaking that his long-term intention is not to keep the scheme going by added borrowings from the National Loans Fund but to have the scheme self-supporting and self-financing in its own right? I am convinced that, if they have a scheme, arrangement or plan which is pleasing to them, which they think is socially just, equitable and desirable, the people of this country will be prepared to make the contributions to make it work.

I have tried to go through my points as quickly as possible, but I have not got through a third of what I had hoped to say. The rest will have to remain unsaid, since I realise that many of my hon. Friends and hon. Members opposite wish to contribute to the debate. I shall, therefore, disregard the other part of my speech which I had hoped to make— [HON. MEMBERS: "NO, go on."] I am always tempted by these encouraging comments from my hon. Friends, who are always generous in such matters, but I feel that I have a duty to hon. Members who wish to take part.

I hope that the Minister will accept what I have said as constructive and helpful in some small measure. I hope that we can look forward to the time when the scheme is entirely self-financing and that the various little anomalies will be removed. I hope that the hon. Gentleman will say that, but let him not be ashamed of these Orders. Let him not be ashamed of the scheme and the fund. It is a good scheme which was well-intentioned; it has serious problems of escalating costs, but I am sure that, with good will on both sides, with good sense and with sound economy, we shall overcome those problems. Let us hope that we can achieve all these aims and look forward not to having more of these Orders but to having a proud self-financing scheme which will be a credit to the country, a help to our economy, and a real help to people in need, to those who find a scheme of this kind of great value to them in their personal problems.

In the circumstances, while we have concern, while we have worry, and while we have alarm, we think that the scheme is in itself basically sound and basically socially desirable.

9.23 p.m.

Mr. Robert Carr (Mitcham)

I hope that I shall not disappoint my hon. Friend the Member for Glasgow, Cath-cart (Mr. Edward M. Taylor). I am not sure that I shall do any face-washing, either my own or the Minister's. If I run true to what I am told is my form, I shall be at a rather more gloomy task. The last time I spoke in the House, I was accused by one of the national newspapers—the Tory Press, by the way—of speaking and looking like an undertaker. However, I hope that I am safe at least tonight, seeing that the Gallery whence these comments come is almost empty.

No one could accuse the Undersecretary of State of speaking in the House like an undertaker. No slow, solemn step or long countenance for him. He always dashes at his subjects with great buoyancy and enthusiasm, including, as we have noted tonight, the task of estimating or forecasting the level of contributions needed to keep the Redundancy Fund solvent.

This has been a very useful debate. It is right that a scheme of this kind should be debated not only when we have to find more money, although that is, unfortunately, the occasion which gives us an opportunity for the debate. It is right that it should be examined. I find it both disappointing and extraordinary that not a single hon. Member opposite, other than the Minister, has seen fit to speak in the debate, which the old traditions of the Labour Party—certainly its traditions and practice when I first came to the House—would have brought forward many speakers, whether the party was in power or opposition.

As my hon. Friend the Member for Paddington, South (Mr. Scott) made clear, we have no wish to oppose the Order. We support both the social and economic intentions of the Act. Like my hon. Friend the Member for Cath-cart, I agree that it has eased mobility and has, therefore, served the economic purpose which we had in mind, doing so in a way which has eased human problems at the same time.

We believe, particularly in the light of our experience on this Order and previous increases, that the time is coming nearer and nearer when we should not only examine more thoroughly the working of the scheme, but should also consider more effective ways of achieving the same economic and social purpose which it was introduced to serve. But it is the scheme that we have at present, and we should not dream of doing anything but support the Order and make sure that the fund is made to remain solvent until a better alternative can be put forward.

I shall not repeat all the detailed questions that have been put to the Minister, but we should not let the Order go through without calling the Government to task over their forecasting. We cannot allow the Minister to get away with his statement that it was really impossible to forecast, that the extra increase had nothing to do with inadequate forecasting. If it was impossible to forecast—and we can all see how difficult it must be—it was at least obvious that it would be impossible to forecast when the Act was first introduced or when each successive increase was made. The sudden impossibility to forecast contrasts very strangely with the certainty which the hon. Gentleman and other Ministers expressed over the past few years about the forecast income and expenditure of the scheme.

The failure of the forecasting is not small. The margin is enormous, and there must be an explanation for it. With the record the scheme now has, we should hope that our Public Accounts Committee will take a look at it and give us all the information on it that it is possible to find. My hon. Friend the Member for Paddington, South gave quotations to show the certainty and assuredness about forecasting that we had in the past. Now we are suddenly told that it really is impossible to forecast. We find this difficult to believe. It may have proved more difficult than expected, but it cannot be as impossible as it now seems to be.

The other reason—or rather non-reason—we were given was that the need for the increases had nothing to do with unemployment persisting at a higher level than expected. The Government can never lose on a statement of that kind because, when one asks them, as we frequently do from both sides of the House, to tell us what sort of level of unemployment they are estimating for, they become extremely coy.

It is only the Prime Minister who sometimes gets carried away by his usual optimistic ebullience and talks at least in general terms, and as my hon. Friend the Member for Paddington, South pointed out, is once again proved wrong in these general forecasts. But when the Under-Secretary of State tells us that the reason for these increases is not because unemployment has been persisting at a higher level than expected, this, of course, means nothing whatever unless he will also tell us what the level of unemployment was that had been estimated by the Government.

As we have pointed out on a number of occasions, while we realise that it would not be wise for the Government to try to forecast precisely or even to give figures to their estimates, some indication of their estimate of trends could do a lot at times to improve confidence or to remove fear—either to give hope that the unemployment situation would improve in absolute terms or at least to damp down what might be exaggerated fears about the extent to which it is going to increase.

The hon. Gentleman cannot get away with the suggestion that the increases in redundancy fund payments have nothing to do with the unemployment figure. They must have something to do with it because, by definition—although, of course, the linkage is indirect—there must be some linkage between rising unemployment, and, therefore, people losing their jobs, and the payments from this fund. We should have from him a closer and convincing analysis of what that linkage is.

At one time, the hon. Gentleman seemed to be arguing almost in a different direction. He said that at least the success of this fund was proving that people were going in and out of the labour market and were staying there only a short time. This indicated that the cost of unemployment would be increasing calls on the fund. But that is not the story told by the unemployment figures as published. We cannot get away from the fact, mentioned by my hon. Friend, that, in January, the proportion of unemployed who had been out of work for over 8 weeks was 50 per cent. and that, six months later, in June, it had risen to 68 per cent.

This has been the case over the last year or two. The figures seem to be showing that long-term unemployment is rising and this does not correspond with the picture the hon. Gentleman was painting that the calls on the fund show a lot of people moving in and out of employment, redeploying themselves in a purposeful sort of way.

I was rather shocked by the hon. Gentleman's attitude to costs. He said that one quarter of 1 per cent. of labour costs was the overall cost of the redundancy scheme. The hon. Gentleman said that this increase represented 1/10th per cent. of labour costs. However, as my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis) and others have pointed out, all these little percentages might seem insignificant on their own, if they were on their own, but they are not. They are accompanied, if not at precisely the same time, by increases in S.E.T. and other increases in taxation of one kind and another and all these quarters of one per cent. add up to a substantial extra cost on industry which in the end is reflected either in the price of goods in the shops, or, to some extent, in less new investment to build up future industrial efficiency.

This extra increase represents another £8,500,000 on industry's bill in a year. Coupled with the increase in the Budget, which at Budget time was said to be enough to see us through without any further increase in the short term, I estimate it to add an extra cost to industry of some £14 million or £15 million a year. Therefore, lack of estimation and the extra costs for industry are serious matters.

I hope that the Under-Secretary will not only go deeply into all those questions but will give us a greater assurance that the scheme and its working will be considered in depth. He referred to some small sample survey. I hoped, and I thought that I had understood from reports I had read, that something more substantial was going on. I hope that he will confirm that and give us some idea of what that is and that he will say that the payment will also be considered, because it is a flat rate payment, a poll tax.

When we started at 5d. for men and 2d. for women, the amount per person was sufficiently small to make any idea of graduated contributions and graduated payments seem unnecessary, but now that it is 1s. 3d. for men and 7d. for women we are beginning to reach the level of contributions when the pros and cons of converting it from a flat rate poll tax into a graduated contribution related to the wage level of the person concerned should be considered.

A review is also needed to make sure that there is no abuse. I agree that there is probably much more smoke than fire in all the talk about abuse of the scheme, but it is probably also true that where there is smoke, there is fire, even though the fire is small, and we have to admit that the possibilities for abuse are enormous, and we can all think of one or two things. There is no doubt that abuse occurs and that people ask their employers to make them redundant. I have personal experience of this. One hopes that employers will not connive in it, but it is also true that because employers get back such a large percentage of payment from the fund, it is very easy not to contest a case and certainly easy not to fight a case which goes before a tribunal. Why incur all the odium as well as the trouble of fighting a case if the net cost is so small? There is, therefore, a case for seeing whether this balance of direct contribution reclaimed from the fund is right.

There are many other possibilities of abuse. An inquiry into these should be carried out seriously. Abuse of this kind in social services can bring the success of a scheme into disrepute and lose it public support out of all measure to the actual scale of abuse. As my hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis) pointed out, any review ought to consider whether the application of this fund is right. He made a number of suggestions relating to the age scale, which showed the sort of need which ought to be met, and which is not being properly met.

From this sort of review we ought to move on to the question which I raised earlier, whether, in the long run, this is the best sort of scheme to give the most help to those who most need it. There is evidence that there is a possibility that much money is being spent on the scheme and is not always going to those in greatest need. I hope that as well as answering these specific questions, the Minister will be able to give us some assurance about a searching review, which in the last resort will lead to the discussion as to whether this is the best scheme for the long-term future. The Minister must not expect to come in the future, if there should be need for legislation to raise the borrowing powers under this scheme, without being able to lay before the House a report on a detailed inquiry showing whether this is the best method of dealing with the problem.

9.42 p.m.

Mr. Hattersley

The hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) began by apologising to his hon. Friend the Member for Paddington, South (Mr. Scott) for missing his speech. He then went on to congratulate him upon it. My judgment upon his speech is clouded by having heard it. Notwithstanding that, I thought that it was admirable. I even enjoyed those small passages of it which did not consist of quotations from speeches that I had previously made on the subject. The hon. Member had hard things to say about Government forecasting. I am not surprised and I do not begrudge him them.

Certainly, estimates that I have given to the House, and that my right hon. Friend has given, have proved wrong. The hon. Gentleman listed them and I did so before him. I must tell him that all our estimates, inaccurate though they have proved, have been more accurate than anyone else's. When the scheme was originally advocated in the House we were told by the Opposition that the original levy of 5d. and 2d. was almost certainly too high. As I told the House two hours ago, when we suggested a year ago that the increased contribution should be 1s. and 6d. both sides of industry, the C.B.I. and the T.U.C. thought that we were being pessimistic about demands on the fund.

I do not believe that we have been over-pessimistic or optimistic. We have tried to be as realistic as we can be, and at the same time obey the principle and belief that we should not charge industry any more than seemed necessary to maintain the fund in viable and continual existence. I must tell hon. Members opposite how difficult the problems of forecasting outgoings from this fund are. Changes in the level of unemployment from one month to the next are not directly correlated to outgoings from the fund. I would remind the House of the examples I gave in my initial speech. The real level of unemployment—and it will be realised that it is not the seasonally-adjusted unemployed who get redundancy pay—falls during the spring. Yet the number of redundancy payments has also fallen, and those two things seem to be arithmetically absolutely consistent. Despite the fall in those two figures, the outgoings from the fund have increased—because perhaps the new unemployed are older, because perhaps they have longer service, because perhaps they are more highly paid. For all these varliable reasons, the problem of calculation becomes difficult to the point of impossibility.

While I sympathise with hon. Members who say, "Is not this a task for actuaries? Is not this what actuaries are about?", I remind them that actuaries are likely to base their calculations on experience and precedent and that we have only a few years' experience of this scheme. There is certainly no scheme in which the precedents are comparable, in which the variables are so many and in which, in addition to the existing variables, there is the additional alteration which may come about in the level of industrial activity.

I concede that the number of new unemployed is one of the figures which have an effect on the number of payments, but it is only one of the figures; it is no more than that. It may not even be the most significant figure. We always knew that it was difficult to make this sort of calculation. That is why, in the Order, we allowed for borrowing powers to tide us over difficult times when our contribution level proved inadequate. That is why we have constantly understood the necessity to keep the situation under review. I shall return to the review situation before the end of my speech.

Before doing that, I wish to deal with the oft-repeated claim that part of the difficulty in which the fund now finds itself stems from abuse. I think that confusion continues about what abuse amounts to. There are, I suppose, two sorts of abuse—at least, we have heard of two sorts tonight. One is literal abuse, and the other is abuse only in the minds of the critics. The first is literal dishonesty. The accusation usually takes the form of the suggestion that there has been positive collusion—that a company and a company's employee have agreed to pretend that there was redundancy when there was not. Invariably, on examination and analysis, that sort of accusation proves to be groundless.

The hon. Member for Paddington, South drew attention to a newspaper report about alleged collusion in Peterborough. The collusion consisted of two firms which were related, with a man being declared bogusly redundant from the first and receiving a redundancy payment and then being re-employed immediately in the second in the knowledge of the first company. On investigation, that claim proved to be totally false, and the newspaper published a correction and apology. This is perhaps typical of the sort of accusations which have been made about that sort of literal legal abuse.

Certainly, we have mounted many investigations as a result of allegations of that sort, but none of our investigations has led to prosecution because, on our experience and on examining the accusations made to us, our conclusion has been that while there is the opportunity for abuse, as there must be in a scheme as large and complicated as this, the actual incidence of abuse is negligible.

The second sort of abuse—and I emphasise that it is abuse in my view, only in the minds of the people who claim it to be so—concerns an employer who knows that a percentage of his work force is likely to be made redundant and offers his work force the opportunity to opt for redundancy if a portion of it chooses to do so. For example, the company with, say, 500 employees which says that 50 must be paid off on the first of next month and is prepared to take 50 volunteers.

Clearly, the 50 volunteers are likely to be men who say, "Regretful as I am of the prospect of redundancy, the blow is softened by redundancy pay and I will volunteer for redundancy because, by my circumstances, by my age, by my service, by my wages, I am likely to receive a substantial sum"; and the more substantial the sum, the more likely they are to volunteer for redundancy.

This does not seem to me to be an abuse of the scheme. Indeed, it seems to be a way in which redundancy can be carried out without friction, with the minimum of hardship and with a positive contribution to industrial relations rather than the industrial relations of the firm deteriorating.

It is important to understand that some of the objects of the scheme can be achieved only if management and men operate the scheme to their maximum mutual advantage. By my calculations, that does not amount to abuse. I would not, however, like it to be thought that my right hon. friend and the Government are complacent about the operations of the scheme.

We have heard a great deal tonight about the necessity for inquiries into the scheme. The Public Accounts Committee examined the schemes for 1965–66. Notwithstanding that examination and the Committee's conclusions, my right hon. Friend agrees that she has an obligation, and that there is a necessity, to keep the operation of the scheme under continuous review. As the hon. Member for Paddington, South said, the C.B.I. is examining the workings of the scheme. I am sure that it will read with interest many of the constructive suggestions which have been made tonight. Certainly, as we examine the scheme as part of our continued review, we will look with great interest at some of the more creative suggestions which have been made tonight.

Two things, however, should be said. I say them without wishing to prejudice the outcome of any review which we, the C.B.I. or anybody else might make. The first deals with a man who finds a job at once before he has been unemployed. Suppose that a man is given, say, a month's notice. He has no idea of his prospects at the time that notice is given. He has no idea of what the demand for his services in the community is likely to be before he is given notice.

That man registers at an employment exchange and gets a job. It is available to him within two or three weeks and he is able, although he has been genuinely redundant, with all the uncertainty that that implies, to start on the Monday after finishing his previous job on the Friday. Would it be right to expect him to lose his redundancy payment? He certainly loses benefits even it he goes straight into another job; he loses seniority and all that that implies in the last-in, first-out principle. He may be less well paid. He may have to make personal adjustments, such as changing his home and his children's school. If that sort of man is to be denied the benefits of redundancy payment, he will certainly be less willing to change his job despite the fact that moving from job A to job B did not include a period of positive unemployment.

The second situation is that of a man who does not have a new job ready for him when he is redundant, and cannot immediately be re-employed. Two questions arise about his position if he knows that he has to wait in idleness and unemployment for two or three months before he can benefit from the redundancy payment scheme. The first question is what he should do if he is offered a job within a few days of qualifying for redundancy payments. Secondly, do we hold back the payment until the two or three months has elapsed? To do that would be likely to produce all the industrial frictions, difficulties and problems that the scheme was intended to avoid.

I simply offer these as ideas, but as ideas which my right hon. Friend must bear in mind as she considers, as part of her continuous review, what form the scheme should take in future months and years.

I have been asked some specific questions which, I hope I can answer to the satisfaction of the House.

Mr. David Steel (Roxburgh, Selkirk and Peebles)

Before the hon. Gentleman leaves—

Mr Hattersley

I have only five minutes. Although I am sure that the hon. Member has an important contribution to make, he has arrived to make it rather late in the debate and I am sure that he would expect me to try to answer the questions which I was asked earlier.

The first question asked by the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) was the cost of industrial tribunals. Industrial tribunals in general—that is, tribunals dealing with other matters besides redundancy payments—cost something like £350,000 a year. When, however, one considers that the redundancy payments scheme alone has had outgoings of £900,000 in one week, it will be understood that that is a small proportion of the cost, and a necessary one, to make sure that appeals can be properly managed.

I must also tell him that industrial tribunals have the right to disallow expenses if they believe them to be claimed frivolously or maliciously. Certainly, on occasions, they have the right to impose the costs of one party on another. Therefore, his hypothetical man on a free trip

between London and Thurso will have to buy his own railway ticket.

Secondly, I was asked about bankruptcies which might result from the imposition of this levy. I am sorry that the right hon. Member for Mitcham (Mr. R. Carr) thought that I had been less than regretful about the additional costs that this imposes on industry. In my original speech I specified my regret in having to ask industry to make this additional payment. At this time when we hope for a reduction in industrial costs it is obviously a matter of regret to me and to the Government that it is necessary.

As I said then, and as I say again, although the increase is a matter of regret there are substantial benefits which we believe can be obtained from the scheme. They are benefits in terms of industrial peace, they are benefits in terms of the greater efficiency which stems from that industrial peace, not only for firms immediately involved but for firms on which they are dependent for spare parts and components, and firms which cannot operate without other firms which are themselves subject to strikes and stoppages.

We believe that this scheme will work partly because of self-interests and partly because it is an economic necessity and makes a contribution to the economic health of the nation. While we regret the increase in costs, it is obviously necessary if the scheme is to continue, and I am gratified to know that the House in its entirety believes that it is necessary and should continue, and that it does not intend to oppose either of these Orders.

Question put:

The House divided: Ayes 189, Noes 7.

Division No. 285.] AYES [9.58 p.m.
Alldritt, Walter Boardman, H. (Leigh) Davidson, Arthur (Accrington)
Allen, Scholefield Booth, Albert Davies, Ednyfed Hudson (Conway)
Anderson, Donald Boston, Terence Davies, G. Elfed (Rhondda, E.)
Archer, Peter Bottomley, Rt. Hn. Arthur Davies, Dr. Ernest (Stretford)
Armstrong, Ernest Boyden, James Davies, Harold (Leek)
Atkins, Ronald (Preston, N.) Braddock, Mrs. E. M. Davies, S. O. (Merthyr)
Atkinson, Norman (Tottenham) Bray, Dr. Jeremy Dempsey, James
Bagier, Gordon A. T. Brooks, Edwin Diamond, Rt. Hn. John
Barnett, Joel Brown, Bob (N'c'tle-upon-Tyne, W.) Dobson, Ray
Baxter, William Brown, R. W. (Shoreditch & F'bury) Doig, Peter
Beaney, Alan Buchan, Norman Driberg, Tom
Bence, Cyril Butler, Herbert (Hackney, C.) Dunnett, Jack
Benn, Rt. Hn. Anthony Wedgwood Carmichael, Neil Eadie, Alex
Bidwell, Sydney Carter-Jones, Lewis Edwards, William (Merioneth)
Binns, John Coe, Denis Ellis, John
Bishop, E. S. Coleman, Donald Ensor, David
Blackburn, F. Cullen, Mrs. Alice Evans, loan L. (Birm'h'm, Yardley)
Blenkinsop, Arthur Dalyell, Tarn Faulds, Andrew
Fernyhough, E. Lawson, George Pavitt, Laurence
Fitch, Alan (Wigan) Leadbitter, Ted Pearson, Arthur (Pontypridd)
Fletcher, Ted (Darlington) Ledger, Ron Pentland, Norman
Foot, Michael (Ebbw Vale) Lee, Rt. Hn. Frederick(Newton) Price, Thomas (Westhoughton)
Ford, Ben Lee, John (Reading) Probert, Arthur
Forrester, John Lestor, Miss Joan Rees, Merlyn
Fowler, Gerry Lewis, Arthur (W. Ham, N.) Robinson, W. O. J. (Walth'stow, E.)
Fraser, John (Norwood) Lomas, Kenneth Rodgers, William (Stockton)
Freeson, Reginald Loughlin, Charles Ross, Rt. Hn. William
Galpern, Sir Myer Luard, Evan Shaw, Arnold (Ilford, S.)
Cray, Dr. Hugh (Yarmouth) Lyon, Alexander W. (York) Sheldon, Robert
Gregory, Arnold McBride, Neil Short,Rt.Hn.Edward(N'c'tle-u-Tyne)
Grey, Charles (Durham) McCann, John Silkin, Rt. Hn. John (Deptford)
Griffiths, David (Rother Valley) Macdonald, A. H. Silkin, Hn. S. C. (Dulwich)
Griffiths, Eddie (Brightside) McGuire, Michael Silverman, Julius
Griffiths, Rt. Hn. James (Llanelly) Mackenzie, Gregor (Rutherglen) Slater, Joseph
Hamilton, James (Bothwell) Mackie, John Small, William
Hannan, William Mackintosh, John P. Snow, Julian
Harper, Joseph Maclennan, Robert Spriggs, Leslie
Harrison, Walter (Wakefield) McNamara, J. Kevin Steele, Thomas (Dunbartonshire, W.)
Hattersley, Roy Mahon, Peter (Preston, S.) Summerskill, Hn. Dr. Shirley
Hazell, Bert Mallalieu, J.P.W.(Huddersfield, E.) Swain, Thomas
Heffer, Eric S. Manuel, Archie Swingler, Stephen
Henig, Stanley Marks, Kenneth Symonds, J. B.
Herbison, Rt. Hn. Margaret Mason, Rt. Hn. Roy Taverne, Dick
Hilton, W. S. Mellish, Rt. Hn. Robert Thomson, Rt. Hn. George
Hooley, Frank Mendelson, J. J. Thornton, Ernest
Houghton, Rt. Hn. Douglas Millan, Bruce Urwin, T. W.
Howarth, Robert (Bolton, E.) Milne, Edward (Blyth) Varley, Eric G.
Howell, Denis (Small Heath) Mitchell, R. C. (S'th'pton, Test) Wainwright, Edwin (Dearne Valley)
Howie, W. Molloy, William
Hoy, James Morgan, Elystan (Cardiganshire) Walker, Harold (Doncaster)
Huckfield, Leslie Morris, Charles R. (Openshaw) Watkins, David (Consett)
Hughes, Rt. Hn. Cledwyn (Anglesey) Morris, John (Aberavon) White, Mrs. Eirene
Hunter, Adam Murray, Albert Wilkins, W. A.
Irvine, Sir Arthur (Edge Hill) Newens, Stan Willey, Rt. Hn. Frederick
Jackson, Colin (B'h'se & Spenb'gh) Norwood, Christopher Williams, Clifford (Abertillery)
Jay, Rt. Hn. Douglas Ogden, Eric Williams, Mrs. Shirley (Hitchin)
Jeger, Mrs.Lena(H'b'n&St.P'cras,S.) O'Malley, Brian Willis, Rt. Hn. George
Johnson, Carol (Lewisham, S.) Oram, Albert E. Winnick, David
Johnson, James (K'ston-on-Hull, W.) Orbach, Maurice Woodburn, Rt. Hn. A.
Jones, Dan (Burnley) Oswald, Thomas Yates, Victor
Jones, J. Idwal (Wrexham) Owen, Dr. David (Plymouth, S'tn)
Judd, Frank Page, Derek (King's Lynn) TELLERS FOR THE AYES:
Kenyon, Clifford Palmer, Arthur Mr. J. D. Concannon and
Kerr, Dr. David (W'worth, Central) Park, Trevor Mr. Ernest G. Perry.
Kerr, Russell (Feltham) Parkyn, Brian (Bedford)
Bessell, Peter Thorpe, Rt. Hn. Jeremy
Grimond, Rt. Hn. J. Wainwright, Richard (Colne Valley) TELLERS FOR THE NOES:
Lubbock, Eric Winstanley, Dr. M. P. Mr. John Pardoe and
Mackenzie, Alasdair(Ross&Crom'ty) Mr. David Steel.