REDUNDANCY PAYMENTS (Hansard, 30 July 1974)

§ The Under-Secretary of State for Employment (Mr. John Fraser)
I beg to move, That the Calculation of Redundancy Payments Order 1974, a draft of which was laid before this House on 24th July, be approved. I will move this motion as briefly as I can. The purpose of the order is to double the amount of weekly pay which qualifies for redundancy payments. It involves increasing the limit of pay from £40 a week to £80 a week. This follows naturally the increase in average earnings since the Redundancy Payments Act was passed in 1965. It is a sensible and proper measure to bring the rate of redundancy payment up to date.

§ Mr. David Madel (Bedfordshire, South)
First, may we know whether employers will have to pay an increased contribution to the fund? The fund has had a rather erratic history since 1969. At one stage it was £17 million in the red, then it moved into the black by £7 million, and then it went back into the 742 red. These fluctuations appear to be entirely dependent on the rate of unemployment in the country, and, in view of the hints which have been dropped by the Chancellor of the Exchequer on the matter, there is anxiety in industry as to how the fund will develop in the next few months.
Second, may we know what the relationship is with the Social Security Act 1973 and the different contributions which will be paid from April 1975?
Finally, what consultations did the Government have with industry before bringing in this order?

§ Mr. Graham Page (Crosby)
When answering those questions, perhaps the Minister will acknowledge that the Statutory Instruments Committee found a flaw in the first edition of the order. I commend the Department for correcting that flaw and producing a new instrument. I intervene only to point out that the Statutory Instruments Committee does at least some good at times.

§ Mr. John Fraser
May I have the leave of the House to speak again?
We were grateful to the Statutory Instruments Committee for drawing our attention to a defect in the first instrument which was laid. We were sincerely grateful also for the understanding and co-operation of the right hon. Member for Crosby (Mr. Page) in helping us to get a further statutory instrument approved by his Committee at very short notice. It was an excellent example of co-operation between a Department and that Committee, to the benefit of the good working of the Department and of the House. I am sincerely grateful for the assistance which we had.
I come now to the questions raised by the hon. Member for Bedfordshire, South (Mr. Madel). First, consultation. There has been no consultation about the making of this order. I say that with no suggestion of arrogance, and I shall explain why we proceeded in that way. The purpose of the order is to bring up to date the amount of earnings which would qualify for determination of redundancy payments. Earnings have roughly doubled since 1965, and we thought it proper, and not before time, that we 743 should double the range of earnings which could qualify.
The second reason why there was no consultation is that this is a sensitive matter We were anxious to introduce the order as soon as we could. We did not want to have long-drawn-out consultations which might have meant that men were made redundant before the order came into effect because an employer wanted to pay out less redundancy pay than would otherwise apply.
Next, the question of employers' contributions. At present the fund is in surplus to the extent of about £18.5 million. There will be some extra expense on employers and on the fund where someone is made redundant and his earnings are between £40 and £80 a week. We believe that the fund is able to afford that. We believe that it is right and just to do it for people on fairly high earnings, skilled workers, perhaps, whose employment is important for the country's future.
The present contribution is 6.3p per week for men and 2.9p per week for women. It was the proposal of the last Government, I think, that the basis of contribution for redundancy payments should in any event be changed when the national insurance contribution went on to a sliding scale. We have adopted the same scale as was proposed by our predecessors, namely, a contribution by employers of 0.2 per cent. of earnings for which national insurance contribution would be made. That comes into effect in April 1975. I understand that the range of contribution is likely to be between at the lower limit 8p per week and at the higher limit 69p per week. To give one example, for a man earning £50 a week the employer's contribution will be 10p per week on the sliding scale as against an existing contribution of 6.3p, although at the lower end of the scale the employer will pay slightly less and at the higher end slightly more. The burden on employers will be negligible and should not impose any undue burden.