HC Deb 17 November 1972 vol 846 cc876-80

4.13 p.m.

Sir Brandon Rhys Williams (Kensington, South)

I welcome this opportunity to draw attention to the problems of salaried employees involved in takeovers, mergers and company reorganisations.

I do not propose to refer to the problems of weekly paid employees who are caught in this way simply because I want to conform to the convention of a short and narrow Adjournment debate. It is not that I do not recognise that weekly paid employees are also likely to suffer acute distress and hardship in circumstances of this kind.

This is a problem which is specially relevant to the Department of Trade and Industry, although it also intimately affects many other Departments. Action could be taken to relieve the problem by other Departments, especially by the Inland Revenue.

Readers of our national Press will have noticed in recent days a spate of very expensive advertisements drawing the attention of shareholders to the advantages and disadvantages of permitting mergers and takeovers of some of our most prominent public companies. I do not comment on the merits or demerits of any proposals before shareholders at the moment. But it is topical to raise the general question of the suitability of some of the mergers which are promoted by financiers and business people; and to look at the problems of redundancy which may arise as a result of the effects of the Industry Act and the reorganisation of public companies following our entry into the EEC.

I am not saying that rationalisation is unnecessary and I would be the last to suggest that enormous benefits are not obtainable through company reorganisation. But every unbiased person must admit that these benefits are frequently obtained at least partly at the expense of the employees. This is a matter which is causing widespread hardship and even more widespread anxiety. We have not only to consider the human problem, but the effect on efficiency, too. Once the self-protective instincts of management are alerted to the danger of a takeover it often moves in the worst direction and acts in a way which does not assist the effective operation of the firms involved.

Some observers of industry, particularly those who have learnt about it out of books, might remark that it is the fault of the employees if they are caught by a takeover because they ought to have been able to see what was coming. But loyalty to one's company ought to be respected. We ought not to work on the assumption that a man should run out on his firm at the first sign of danger. The total unpredictability of some of the mergers that have been announced in recent months must also have taken even the best-informed and most perspicacious employees entirely by surprise.

We have to remember that transferability of pension rights, in spite of Government promises in their manifesto, have not been brought into effect. In addition, specialised skills are frequently not marketable outside a narrow range of concerns. Government action is needed and it is not only by legislation that effective action could be taken.

My first recommendation is that we should act now on our promise to make pension rights in occupational schemes transferable—not ultimately but at once. This has been done for the Civil Service and we should do it now for private industry. It is a matter which lies largely within the discretion of the Government. If the iniquitous mixed benefits rule were not still being applied by the Inland Revenue then de facto transferability of pension rights would have come about already for virtually all enlightened concerns with final salary schemes.

It would be proper, too, to suggest to the appropriate institutes that there should be changes in accounting practice, particularly where large-scale reorganisations have taken place following mergers and take-overs. In those cases shareholders should be notified fully of the implications of any changes in accounting practice which are being introduced. All too often it is said, and we do not know whether it is true, that following a takeover the new management has changed the accounting practice or ways of dealing with the pension fund, ways of evaluating work in progress and so on—and so has achieved a sort of spurious profitability, apparently as a result of the merger, though in fact simply as a result of changing the methods of handling the accounts.

Thirdly, we must work our way to-wards a much more generous level of redundancy compensation or what we could call the payment of gratuities of an altogether more generous order and on a much wider scale than at present. Redundancy compensation should be related to salary and length of service but it should go far beyond what is statutorily imposed at the moment. I suggested some years ago that if a generous pension scheme gives two-thirds pay to an employee leaving after 40 years of service, it would not be inappropriate if one-third pay were given to those leaving after 20 years of service. That may be oversimplifying the formula but I have mentioned it to show the scale of redundancy compensation which I believe to be appropriate in modern circumstances.

It will be said that this proposal would place a heavy burden on employers; but why should the whole burden of the human cost of reorganisation be borne by the employees—or by society—when it is the employers who one would presume make the profits as a result of reorganisation? Moreover, the Army and other parts of the public services introduced a system of this kind long ago. The short service contract in industry must come, just as it has come in the armed services, the police, the fire service and other branches of the public service.

There are two particular reasons why we should increase the level of gratuities or redundancy pensions. The first is that it would help to place an obstacle in the way of unsuitable mergers in the form of an inescapable and substantial cash commitment to the employees. Secondly, the House must recognise the existence of an urgent social problem. Those who make profits by creating redundancy should pay a larger share of the resulting cost to society.

4.21 p.m.

Mr. Emery

By leave of the House, I should like to reply shortly to what my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) said. He gave me notice, for which I thank him, that he would raise this matter if there were time. He will realise that many of his points are not for me or the Secretary of State for Trade and Industry but for a number of other Departments.

I have considerable sympathy with some of my hon. Friend's arguments. Any likely repercussions on employment from mergers are already taken into account by my Department, together with any other relevant factors, in considering whether particular mergers should be referred to the Monopolies Commission. That will definitely continue to be the case.

However, it is correct to emphasise that the long-term position of employees in the companies concerned must receive the utmost consideration when mergers are being considered. The lives and careers of employees should be of prime concern to management at all times and must not be excluded by management when any takeover question is before its board.

Question put and agreed to.

Adjourned accordingly at twenty-three minutes past Four o'clock.