HC Deb 05 August 1975 vol 897 cc383-409
Mr. Hayhoe

I beg to move Amendment No. 223, in page 85, line 10, at end insert 'and requiring him to report periodically to Parliament thereon'.

Mr. Deputy Speaker

With this amendment we are to take Amendment No. 224, in page 145, line 7, at end insert 'and shall require the Secretary of State to report thereon every three months to each House of Parliament'. We may also take Government Amendment No. 225.

Mr. Hayhoe

Clause 103 and Schedule 13 deal with the temporary employment subsidy. They involve general enabling powers which are tacked on to the Employment and Training Act 1973. We have become somewhat sceptical about these plans, which have been well trailed before being revealed. First, the Chancellor of the Exchequer made much of them in his Budget speech. Then the Secretary of State said on Second Reading how important they would be, and in Committee on 17th July the Minister of State gave an indication of what was involved in the subsidy. In his statement about unemployment on 24th July the Secretary of State said that the plans would be revealed later. I do not know whether he was unaware that his Minister of State had revealed them in Committee only a few days before, whether new plans were to emerge, or whether the Minister of State had been misleading the Committee, or had been outflanked or outdated. The Prime Minister has often used Question Time to make references to the temporary employment subsidy, and even the Leader of the House has used the subsidy as an argument to get himself out of one of his traditional difficult spots.

As reported at column 1575 of the Official Report of our Committee proceedings on 17th July, the Minister of State said that the subsidy would apply where there was a minimum of 100 redundancies. He outlined its object as being to carry people over, and said that if there were a real chance that the enterprise and the jobs could be kept going under reasonable conditions by help for a short period this would be provided on the basis of a £10-a-week subsidy for three months, with the possibility of an extension for another three months.

The Minister of State indicated in his estimate that probably the number of workers involved would be 13,000. At the going rate of rise in unemployment, that is roughly a week's rise. The latest figures are showing quite startling rises per month in the number of unemployed. The number of people involved, on the basis of what the Minister of State told us, is relatively small, and the gross cost of the scheme would be £3 million to £4 million. It was difficult to estimate the net cost.

On the assumption that the same individuals would otherwise be entitled to unemployment benefit, it may well be that the net cost would be nil, or there might even be a small profit. The Government would be paying out less in temporary employment subsidy than they would be paying in unemployment benefit.

Putting all this together, it seemed right for us to put down Amendment No. 223, which requires the Secretary of State to make periodic reports to Parliament about what is happening with this subsidy. The powers being taken are essentially very arbitrary indeed. The enabling powers will be tacked on to Section 5 of the Employment and Training Act of 1973. It is right that reports should be made to Parliament periodically as to what efforts are being made.

Amendment No. 225, being taken with Amendments Nos. 223 and 224, flows from an undertaking which the Ministers in charge of the Bill gave in Committee that these particular powers—the ability of the Government to use public funds for this temporary employment subsidy—would be for a limited period and could then be extended only by the affirmative order procedure. We welcome Amendment No. 225, which was tabled by the Government to this end.

It may well be that in the interval between mid-July, when the Minister of State revealed how little they are involved in the temporary employment subsidy, with plans for only a limited number of people, there has been re-thinking in the Government and it is now on a much wider basis.

As I said in Committee, albeit that a limited number of people may be involved, it would be highly significant for the individuals who were enabled to stay in work as a result of the temporary employment subsidy and did not therefore suffer unemployment. It would be difficult to overestimate the importance of these proposals to those individuals.

At no time, in thinking of the temporary employment subsidy and matters connected with it, should one overlook what this may mean to men and women and their families and children who will be directly affected.

But, having said that, it seems to us that, with all the excessively heavy trailing and enormous pre-advertising of the temporary employment subsidy, from the Chancellor of the Exchequer's Budget onwards, what has finally emerged—at least in what was revealed to us at the Committee stage—is a very small initiative indeed.

Perhaps the Secretary of State will have wider news for us later, and we shall listen to him with great interest. I know that he will appreciate that the scepticism we have about this is reasonably based, in view of the long history that has preceded our debate this evening.

10.45 p.m.

The Secretary of State for Employment (Mr. Michael Foot)

The hon. Member for Brentford and Isleworth (Mr. Hayhoe) welcomed Amendment No. 225, which the Government are moving, and I presume that he will be prepared to withdraw his amendments. Despite his scepticism, to which I shall refer later, he will agree that the amendment carries out the undertakings given by the Minister of State during the debates in July in Committee. It deals with the parliamentary control aspect of the problem. I hope he feels that that is satisfactory. I trust that the House will accept Amendment No. 225.

In view of the remarks made by the hon. Gentleman and the general interest in this subject, the House will permit me to comment on the scheme which we propose to introduce shortly. I do not wish to enter into any great argument with the hon. Gentleman about how many references to the temporary employment subsidy have previously been made. A reasonable way for us to proceed is to make an announcement in the Budget and to hold discussions with some of the bodies which may be especially interested and come to the House with specific proposals—which is what we are doing today. I am glad to inform the House about our plans to introduce the temporary employment subsidy scheme. This is one of several measures designed to assist in combating the rising unemployment figures. It is by no means the sole measure. That is part of the answer to what the hon. Gentleman said. It is intended to alleviate some of the effects of high unemployment in the worst-hit areas by providing for a short-term subsidy to be offered to firms which are prepared to defer planned redundancies. It is hoped that, at the end of the period of payment of the subsidy, the company's business would have recovered sufficiently to enable the company to retain the workers concerned in employment.

In other cases, however, the period of subsidy might be used to facilitate the redeployment of the workers—for example, through retraining—into other jobs, whether within the company or elsewhere. Accordingly, the subsidy would normally be made available where there were reasonable prospects that, with its assistance, the workers concerned would be kept in employment for the period of the subsidy and either retained in the firm or redeployed more effectively thereafter.

The temporary employment subsidy, for which powers are being taken under Clause 103 and Schedule 13 of the Bill, is a temporary measure to meet exceptional circumstances. We intend to review the need for it in the spring and we do not envisage it continuing beyond one year at most: that is to say, applications would have to be received within 12 months of the date of introduction.

The scheme is discretionary and indeed, being untried, to a large extent experimental; the detailed provisions will be reviewed in the light of operational experience. Employers' participation will be voluntary; they must judge in the light of their individual circumstances and in consultation with the unions concerned whether the scheme is likely to be beneficial in their case.

I have given careful consideration to the areas in which the subsidy should be available and to the size of qualifying redundancy, and have decided, after consulting the TUC, the CBI and the Manpower Services Commission, and in the light of comments made in Standing Committee, that the scheme should apply to redundancies affecting 50 or more workers in an establishment in an assisted area. This definition of scope will, I hope, help significantly to limit additions to unemployment in these particularly hard-hit areas. For instance in the period 1970 to 1971, the last period of high and rising unemployment, redundancies affecting 50 or more workers accounted for 77 per cent. of all redundancies of 10 or more.

All employment in the private sector of industry and commerce in assisted areas will be covered, provided that the workers affected work on average not less than 21 hours per week. The amount of subsidy for each deferred redundancy of a full-time worker will be £10 per week. The subsidy will be payable in each case for a period of three months and may be extended for a further and final three months if the qualifying conditions continue to be satisfied.

One of these conditions is that there are reasonable prospects that, with the assistance of the subsidy, the workers concerned will be kept in employment for the period of the subsidy and then either retained in the firm or redeployed more effectively elsewhere. Another condition is that the employer must provide evidence of good faith in the decision to declare the impending redundancy. Support for the application from the unions concerned is required. To qualify for the subsidy firms will have to give an undertaking to the effect that they are not in- solvent or near to insolvency. The scheme is intended to encourage the retention of workers in employment but not to enable companies to continue trading when otherwise they would be unable to do so. Finally, as announced in the White Paper, "The Attack on Inflation", the subsidy will not be available to any firms which breach the pay limit.

It is my belief that this scheme will contribute significantly to limiting additions to unemployment in the particularly hard-hit areas by helping employers to get over temporary difficulties and to maintain their labour force and by enabling work people either to avoid the upheaval of redundancy or to gain time for retraining or redeployment.

The number of jobs the scheme will temporarily safeguard will depend on the incidence of redundancies affecting at least 50 workers, and the proportion of these cases where employers in consultation with their unions decide to apply for the subsidy. If, for the sake of illustration, 25 per cent. of eligible firms applied for and received the subsidy it is estimated that between some 30,000 and 40,000 workers might benefit and that the gross cost to the Exchequer would be of about £8 million to £9 million. On the other hand, if the take-up approached 50 per cent., 60,000 to 80,000 redundancies might be deferred at a gross cost to the Exchequer of about £16 million to £18 million. The net cost to public funds would, of course, be very much less as most of the workers would otherwise have been in receipt of unemployment benefit.

The Government promised in the White Paper to introduce the temporary employment subsidy scheme as soon as possible. The serious level of unemployment underlines the need for early action and I am, therefore, arranging that the scheme will come into force from Monday 18th August.

Mr. Hayhoe

In Committee the Minister of State, in talking of a scheme which had a minimum figure of 100 instead of 50, said that it would cover 60 per cent. of all redundancies—as opposed to the 77 per cent. which the Secretary of State now says will be covered as a result of reducing the minimum figure to 50—which on the 25 per cent. eligibility ratio would cover 13,000 workers. Either that figure or the figure just quoted by the right hon. Gentleman must be wrong. As far as I can judge, it is impossible to line up the figure of 30,000 or 40,000 given by the Secretary of State with the 13,000 given by the Minister of State in Committee. Will the right hon. Gentleman say a little more about that?

Mr. Foot

I do not think that there is any such conflict between the figures. If there is, I shall be eager to sort it out.

The illustrative figures I have given of the 25 per cent. which would lead to 30,000 to 40,000 benefiting if the minimum figure of 50 were taken are perfectly accurate. That is why the 50 per cent. and above figure would be between 60,000 and 80,000. I believe that the figures are accurate, although all these figures are estimates of the take-up and no one knows for certain what will be the take-up of the scheme.

The scheme is experimental and that is why we should proceed in the way we are proceeding and decide how the scheme should be applied on the basis of what happens in experience. As a scheme in this form has not been applied in any other country it is right that we should proceed in this way. I believe that it can make a significant contribution. We do not pretend for one moment that the scheme will deal with the major increase in unemployment which has occurred.

Mr. Dennis Skinner (Bolsover)

Will this sort of scheme apply to Norton Villiers?

Mr. Foot

No. It would not apply to Norton Villiers unless it was a case of Norton Villiers claiming, with the assistance of its work force, that, if given a temporary subsidy, it would be able to overcome its difficulties and was not in danger of insolvency altogether. Moreover, in the case of Norton Villiers, it would depend partly on where the industries were situated because the scheme deals with the development and intermediate areas.

We do not claim that this is a scheme to deal with all the problems. We do say that it, along with the other schemes, is the way in which we can assist in dealing with the unemployment problem. What we have to do is take a whole series of measures in different ways to deal with the different problems which arise in different parts of the country. Partly we are going to deal with those problems through the great expansion of the training services; partly by the special measures which will have to be taken for school leavers—another development which will come later; but also we have to take other measures. Beyond this there are measures under the Industry Act, which are different again.

But I do not believe that it would be right for hon. Members and the country to think that one can deal with an unemployment problem of this scale by any single measure. We have to take a whole series of measures and, of course, in the main, the method of overcoming the unemployment problem depends on the success of our measures for dealing with the economy as a whole. That is the major way of dealing with the problem.

Mr. Tom King (Bridgwater)

The right hon. Gentleman said that this scheme had not been tried in any other country. A scheme of this kind was implemented in Japan. Are there any lessons to be drawn from the Japanese experience?

Mr. Foot

I do not think that the Japanese scheme bore any relation to ours, but certainly if their experience in applying their method was useful or relevant to this country, we would look at it. But I do not think that the Japanese scheme is like ours. I am not boasting about it. What we are trying to do is to devise a scheme which can be of special assistance in this year ahead. I am not making any exaggerated claims for what we are proposing, and we have not at any stage done so.

I believe that this scheme, along with the others, is a sign of the determination of the Government to take steps to try to deal with the special dangers of the unemployment problem, but I recognise that it is a problem of tragic proportions and that we have to take a whole series of measures to deal with it.

Mr. Leslie Spriggs (St. Helens)

Will my right hon. Friend direct his attention to what I was told in an Adjournment debate, when the Minister referred to all these schemes as they were going through the pipeline of the parliamentary system? In St. Helens, a glass factory which produces television tubes is about to close down, and 750 men face redundancy. Would the temporary employment subsidy apply to that case?

Mr. Foot

It depends on the circumstances of each case. I have set out some of the conditions in my statement. One of the conditions is that the firm could not be a firm which was facing insolvency. I am not passing any comment about the firm—Pilkington's—in my hon. Friend's constituency or about its economic condition, because that would not be right. I am saying in general terms that one of the conditions is that the firm is not facing insolvency.

This is not a scheme for dealing with so-called "lame ducks". It is not that kind of provision. It is a scheme for cases where redundancies can be made avoidable, where the firm can be tided over its awkward period and would be able to keep its workers permanently afterwards, or would have a better opportunity of providing them with a chance for retraining and moving elsewhere.

11.0 p.m.

Once the scheme is announced—the full anouncement is being made in this statement today and will be in the newspapers tomorrow—employers and trade unions will be able to see the conditions to be applied. We expect to get a considerable number of applications over the next week or two which will have to be sorted out. As I said, the applications must be made by the employers in consultation with the trade unions concerned. Trade unions can also take the initiative with their own employers to see that an application is made if they think that the conditions are satisfied.

Mr. Kenneth Baker (St. Marylebone)

The House is indeed grateful to the Secretary of State for spelling out the details of the temporary employment subsidy tonight.

I should like to express some misgivings about the effectiveness of the subsidy. I do so with some diffidence and difficulty because any measure introduced by any Government to mitigate the effect of unemployment must be welcomed by the House and the country. I hope that I shall be acquitted of any feeling of sentiment in welcoming any rise in unemployment or of the belief that unemployment is some mysterious weapon to be used to impose imagined discipline upon our economy. I am not of that school or sentiment at all.

My first misgiving—this is not a debating point, but it is fair to make it—is that on 15th April the Chancellor announced the concept of this subsidy. We expected something in the Finance Act, but it did not come. We expected some detail in this Bill, and we have had no detail. We have had general enabling powers which have been specified tonight by the Secretary of State.

This is not the right way to legislate. If a subsidy of this kind is to be introduced and to be justified, the Government, of whatever complexion, owe a duty to the House at a fairly early stage to specify the details so that they may be discussed and debated.

In effect, we are giving the Secretary of State enabling powers, and he has specified what they are. I understand that the subsidy will be payable for three months for redundancies involving 50 people and that the gross cost will be between £8 million and £18 million.

I do not think that the subsidy deals with the root cause of the troubles of our economy or with the problem of rising unemployment. I believe that it was conceived earlier this year when different themes were running through the Government's economic policy. I suspect that attitudes have changed.

Mr. Michael Foot indicated dissent.

Mr. Baker

The Secretary of State shakes his head. However, recent statements by the Secretary of State for Industry indicate that the Government emphasis has shifted. I do not want to make a political or a debating point, but it is a matter of fact that the emphasis has shifted. The hon. Member for Bolsover (Mr. Skinner) posed a pertinent question on this matter. We must ask ourselves: what is the purpose of this subsidy? I believe that it is essentially cosmetic rather than curative.

I believe that this subsidy was devised earlier this year, when the Government thought that unemployment would not rise at the rate at which it has risen, to help companies to keep people on their payrolls and therefore reduce the number of unemployed. But events have moved on. The Secretary of State disagrees, but he must accept the facts. The Government have powers to help companies in the difficulties which the right hon. Gentleman has already outlined. They have powers under the Industry Act 1972. If a company is in difficulties and has cash flow problems, it can apply to the Secretary of State for Industry and ask for financial support. That is provided in Sections 7 and 8 of the Industry Act 1972.

Basically we are dealing with the short-term cash flow problems of companies. It is short term because the Secretary of State has said it will last for only three months. That is the unreality of the subsidy. The right hon. Gentleman is saying that companies can suddenly say that they have a three-month problem. Which companies can say that? The right hon. Gentleman suggests that they will then say "We shall therefore apply for the subsidy". I believe that to be unrealistic.

Mr. Tom King

To obtain the subsidy, not only will companies have to make that declaration but they will have to declare that they will have to make many of their employees redundant although they wish to retain them. It seems psychologically damaging for employers to have to go to the brink and to declare that many people will have to be made redundant—many of those people may have worked for one company for a long time—before being granted the subsidy. That is hardly the way to improve relations in the companies concerned.

Mr. Baker

My hon. Friend brings me to my second misgiving. If a company has reached the stage of having to make 50 or 100 people redundant it will probably be eligible for the subsidy for three months, but will the right hon. Gentleman reflect upon the attitude that will be taken by the other 400, 500 or 1,000 people employed by the company when they know that 50 or 100 people are being kept on the books with no productive work for them? The psychological effect could be very damaging.

My third and final point is that this proposal is entirely negative. It is cosmetic. It is trying to dress up the fact that certain people will not be laid off when perhaps economic reality determines that that should happen. It is negative because the Government will be faced in the next six or nine months with an avalanche of redundancies. That is a regrettable fact, but I believe it is more sensible to face it at an early stage. I know that on this point I shall not have with me Labour Members below the Gangway. However, we must face the real ties of the situation. I shall not trespass upon a future debate, but the classic case is the motor cycle industry—

Mr. Norman Atkinson (Tottenham)

The hon. Gentleman is dealing with the economic realities as he sees them.

Mr. Baker

Yes, I am. I would not expect to express the realities of the hon. Member for Tottenham (Mr. Atkinson). I believe that the preservation of jobs in the short term at all costs is against the creation of job opportunities in the long term. That can be seen in the case of the motor cycle industry. If reality had been faced at an earlier stage in that industry I am sure that more people in a year's time would be employed in the British motor cycle industry than will now be the case. The subsidy is a postponement of reality.

I express my misgivings as someone who deeply regrets the unemployment we shall see in the next six or nine months. This measure will not do very much to relieve that unemployment. Whether it will come in September, October or November I do not know, but we are waiting to hear some positive proposals for job creation from the Government. It will be known that I put forward this argument in Committee when the Minister of State made his speech about the subsidy. However, we have heard tonight about a defensive, negative subsidy.

The country wants some leadership from the Government and from the Secretary of State. We want some indication of the proposals that the right hon. Gentleman has in mind for providing job opportunities for the tens of thousands and hundreds of thousands of young people who today do not have jobs and who will not have jobs by Christmas. Indeed many of them will not have jobs by Easter. Where is the Government's creative thinking? Such thinking does not lie in the subsidy. We await other measures. The Secretary of State has had five months to think about these matters. I end by asking "Where are the Government's creative ideas?" So far all we have had is cosmetics.

Mr. Skinner

We are now witnessing a further strategy of the Government in the public sector, and indeed also in the private sector, to the extent that jobs are being lost almost as a direct result of Government action.

I find it strange that my right hon. Friend the Secretary of State for Employment, at this late hour, can present a scheme to the House in the way in which he has outlined it, and yet at the same time can support the idea advanced by my right hon. Friend the Secretary of State for Industry in respect of Norton Villiers Triumph. That was a firm in the private sector, with cash flow problems, which would have qualified for some kind of subsidy had it not been for the announcement made last week. Since some of the factories are not in intermediate development areas, they would not have qualified for assistance. However, some of the industries affected are in areas with an even worse unemployment record than that reflected in some of the intermediate areas—and this applies to the period of time when Labour was last in office and also to a period of Conservative Government.

I am concerned about this cosmetic operation. I want to know what will happen following the giving of the £10 per week subsidy. Quite apart from cashflow problems, it is bound to increase an industry's profitability. The additional money will be used to ensure an extra degree of efficiency to provide additional liquidity for a firm.

I am led to inquire what will happen as a result. Just as with the £6 limit, here we have a Socialist Government applying this cosmetic handing over of money to the private sector, but there are no controls being imposed as to where that extra money will go.

If a firm is to be given £10 a week for its workers, the total sum eventually involved may amount to £25,000 or even £50,000 for the firm concerned, and there will be no guarantee that that additional money will be used for investment purposes. We as Socialists should insist on a degree of planning to ensure that any money destined for the private sector from funds provided by income tax should result in the alleviation of the unemployment problems and also should assist, if only marginally, in ensuring that the problem will not recur to the same degree. That has not been mentioned by my right hon. Friend.

11.15 p.m.

Where is the social justice in this proposal, bearing in mind that we shall be allowing the public sector to have sackings and redundancies of the kind likely to be announced in respect of the 6,000 cut-back in the steel industry very shortly, perhaps some time later this week? Where is the social justice in sacking 6,000 steel workers in the public sector when at the same time another Government Department is trying by this series of measures to pick up a few of the crumbs in the private sector?

I do not understand why there is no central strategy being developed by the Government not merely to resolve these immediate short-term unemployment problems in certain industries but to devise an overall economic strategy to see that we solve unemployment wherever it occurs. This is one of the weaknesses of the measures my right hon. Friend has announced.

Facing this situation of chronic unemployment, we are all bound to accept suggestions of the kind that my right hon. Friend has made. But I am trying to impress upon him, first, that we want control of the use to which that money will be put, and, secondly, that we need to be told why we are assisting marginally some firms in the private sector and at the same time, as a result of public expenditure cuts to be announced by the Government, possibly after the Labour Party conference in October, we are to increase unemployment in the public sector. It does not make sense to me. It contradicts all that we stand for, and that is the real problem with which my right hon. Friend has to wrestle not only in the long term but in the short term if we are to avoid these massive unemployment totals that we seem likely to face in the near future.

Mr. Douglas Henderson (Aberdeenshire, East)

We welcome any method used to try to redress the problem of unemployment. But we have to ask ourselves whether this method will be effective and fair.

I think it is a pity that a statement of this importance should be made at 11 o'clock at night when it has been known for some time that it was coming. It ought to have been made at the proper time when Government statements are made, with copies to the other parties beforehand for scrutiny, so that a proper period of questioning could take place. I absolve the Secretary of State from that criticism, because I know of his courtesy to all right hon. and hon. Members. But there are others who are guilty, and it is a very serious matter.

The Secretary of State says that this will make a significant contribution and that it will form part of a package of other measures. I think that he must be a bit more honest with us about what he means by "a significant contribution", and tell us how many people he is talking about and what these "other measures" are.

How many jobs does the right hon. Gentleman reckon this subsidy will save in Scotland? How many jobs are budgeted for, because clearly he would not have come before the House tonight without having a clear assessment of the effect of this subsidy? How many jobs in Scotland will this save over the next three months? What special procedures will his Department set up to deal with claims? What does he intend to do to publicise this facility? Will he have a special organisation to deal with these matters? How will he decide between one case and another? The marginal cases and the grey areas will be enormous. If he is to spend some money—and I am unclear about how much, especially about how much will go to Scotland—would not it be more effective for that sum to be voted to the Scottish Development Agency for the creation of new jobs? Has the right hon. Gentleman evaluated this as an alternative possibility for the spending of Government money, or is it, as the hon. Member for St. Marylebone (Mr. Baker) said, purely a cosmetic exercise?

Mr. Clemitson

I take it that the temporary employment subsidy is not intended to preserve jobs at all costs, to prop up uneconomic enterprises or to further uneconomic uses of labour, but that the purpose is to get over a hump firms which are genuinely economic and to keep together groups of workers—par- ticularly skilled workers—who otherwise would be dissipated, to the detriment of our total economic welfare.

I take it also that the net cost of the operation will be low—perhaps nil—or that there will even be a net saving on unemployment or redundancy payments. If I am right on those matters, there seems no case for confining the subsidy to development or intermediate areas.

Unemployment is traditionally low in my constituency, but it is rising. As my hon. Friend the Member for Bolsover (Mr. Skinner) said, in areas such as mine it is reaching the same levels as in intermediate areas and could even exceed them.

A constituency such as mine depends heavily on one industry and one employer. A sudden reduction in the level of employment—if, for example the dominant employer took certain decisions or the bottom fell out of the market on which my constituency depends—could bring about high unemployment. Consideration should be given to extending the scheme to areas outside the assisted areas.

Mr. Teddy Taylor (Glasgow Cathcart)

Most hon. Members so far have considered only whether the subsidy is a good or bad thing. But my experience of the Secretary of State's schemes is that the most we can hope for is to discover what we are doing. Only this morning I was having discussions with some of the office bearers at my local church to see whether it was possible to pay a minister more than the £6 limit and how the pay discipline would apply to the Free Church of Scotland. This is a difficult problem, on which I have written to the Secretary of State. So it would help if we tried to find out some of the practical difficulties under the scheme.

The subsidy might create jobs among those who set themselves up as experts on new schemes and give advice to firms. In almost every subsidy created by the Government there is a provision that anyone providing misleading information in making an application will be subject to a penalty. Will such a condition apply to the temporary employment subsidy? What will be the position of an employer who makes an application for subsidy and says he will have to lay off 500 men unless it is approved? If that application is rejected and the men are not laid off, that employer will find himself in a very strange moral, if not legal, position.

In confining the subsidy to development and intermediate areas, the Government might increase unemployment in those areas. The Secretary of State must know that many of the firms now considering redundancies are groups or holding companies with a number of factories throughout the country. Has he considered the possibility that a firm might say that if it is to shed labour, it would be sensible to do so in its operations in a development or intermediate area because of the substantial sums of money it might then receive? Firms might prefer that alternative to closing down a factory outside assisted areas and getting nothing.

Will the subsidy apply to firms for which nationalisation proposals have been brought forward? The shipbuilding industry, in which I worked before coming here and in which I have an interest, is going through appalling times because of the scandalous uncertainty caused by the Government's proposals. The figures of Robb Caledon Ltd. will be published in tomorrow's Press and will show that a successful firm making smallish ships appears to be in a desperate financial plight. It has been baled out by a £2 million loan or guarantee from the Post Office—which has its own financial problems. It may seem unusual, but this kind of thing happens a good deal these days. Many shipbuilding firms are afraid to take on new orders because of the Bill produced by the Government and the substantial penalties that can be imposed for breaches of the rules laid down in the White Paper or the Bill. Many shipbuilding firms will be facing the possibility of lay-offs shortly because it is impossible for those threatened with nationalisation to take on difficult orders. The directors may be liable to penalties under the Bill if the yards are nationalised. The same situation applies in the aircraft industry where the dangers and potential losses on orders are even greater.

Unless we get the facts straight, this scheme could create confusions. For instance, when the Secretary of State referred to employers making an appli- cation having to consult with unions, does this mean that employers must discuss with workers the precise areas in which redundancies will occur? I am genuinely scared that if an employer enters into a common agreement with trade unions or their representatives that certain of his workers will have to be made redundant—men over 50 years of age, or men in certain shops will be made redundant—if such a scheme goes forward and the application is turned down, or even if it accepted, it could poison relations in the establishment for a long time.

Lastly, will the Minister say whether the temporary employment subsidy can under any circumstances apply to workers' co-operatives? He will know precisely the one I have in mind.

11.30 p.m.

Mr. Bulmer

Will the Minister tell us to what level unemployment will have to rise in an area not covered by these proposals before he will sympathetically consider including it within their terms? Will he say whether he will rule out an application from a company which wishes to keep together a skilled team—whether it is a research and development team, or any other—which happens at the moment to be in a company which is outside the permitted area? I think the Minister understands now, even if the hon. Member for Bolsover (Mr. Skinner) does not, that we have to pay our way in the world, and that it is essential to keep these teams together.

It may be that, as my hon. Friend the Member for St. Marylebone (Mr. Baker) has indicated, there are other ways in which this help will be forthcoming, but most hon. Members on the Opposition side of the House feel that these proposals are tinkering with the problem and that we shall not get investment and long-term stability in employment until different criteria apply. We believe that business must have stability and incentive before we shall see any resurgence of confidence, leading to fuller employment.

Mr. Fred Silvester (Manchester, Withington)

I shall intervene only briefly. Unlike the hon. Member for Luton, East (Mr. Clemitson), I want to say something on behalf of some areas which will be affected by this offer of help. I particularly concern myself with the amendment of which we are speaking, which provides that the Minister shall, if required, report to the House. The Minister already has powers under the Bill to provide temporary employment.

The Minister has a good deal of experience in terms of the Employment and Training Act in respect of which he could tell us of the extent to which the provision has already been used. This is particularly important to areas such as the North-West, which now has the dubious honour of being the second worst area in the country in terms of employment. There is a danger that the provision could be harmful to unemployment in the long term.

Hon. Members have rightly said that the possibility is that the provision could reduce the call on public expenditure. It does not mean that there is not a cost; there is the cost of maintaining these jobs—a cost borne partly by the State and partly by the enterprises concerned.

In paragraph 2(b) of Schedule 13 there is a general provision which gives the Minister power to give assistance in securing a temporary continuation of employment for persons…who in his opinion would otherwise be likely to be dismissed by reason of redundancy. The Minister has elaborated on that this evening, but none of that elaboration is in the Bill. He is therefore entering a valley of temptation. Although he may enter on this procedure with the best will in the world he is, at the moment, offering it to specific areas of high unemployment in three months' time, or six months' time, when the sort of structural problems that we have in the North-West and the problems in the country at large will not have diminished. We will be faced with them on an equal or perhaps even greater scale. The temptation will be there for him to shade the criteria which he will apply to the firms which are seeking his assistance. He will, perhaps, say that a firm is more viable in six months' time than he would today, applying the looser criterion than now. He will tend to accept that more firms are eligible for this form of assistance.

I strongly and vehemently believe that if such a policy were pursued for any length of time it would make worse the deep structural problems of unemployment in the developing areas. The last thing we want is any form of assistance which appears to be kind and generous but which will make the situation worse by retaining a great deal of effort, time and money in the sort of industries and companies which should be diminishing. Rather, it should be diverted into industries which will be of greater benefit to us in the longer term and in particular to the training of young people who can be used properly when the economy is faced with an up-turn again.

Mr. Prior

I agree with the hon. Member for Aberdeenshire, East (Mr. Henderson) that it is a pity that this debate is taking place at this time of night and that the Secretary of State did not use another opportunity to make a statement to the House. I do not want to criticise the right hon. Gentleman too much on that because he has done little more tonight than repeat what was available to us in Committee on 17th July when his hon. Friend the Minister of State made a statement.

What arouses fears and doubts by Conservative Members and probably by Labour Members is that the Government appear not to have given the scheme a great deal of thought. The scheme was announced by the Chancellor as long ago as 15th April. We heard very little about it until 17th July in Committee. Since that time we have heard a good deal about it from the Chancellor of the Exchequer in his speech on the White Paper, from the Prime Minister and from the Secretary of State. Even since 17th July, when the Minister of State announced it in Committee, the scheme has been considerably changed. Governments just do not go around changing schemes in the space of 14 days if they have thought them out properly beforehand. I was amazed to read in an article in the News of the World—which, of course, I take every Sunday—that Though the employers are strongly affected, the CBI claim that Mr. Foot has never discussed this plan with them. Three weeks ago they were sent a confidential draft of the scheme. Last week the CBI sent back its comments, expressing its serious reservations. It took from 15th April, when the Chancellor of the Exchequer announced the scheme, until three weeks ago for any discussions to begin with the CBI on the effectiveness of the scheme. This does not suggest to me that the Government have thought the scheme through carefully, nor have they prepared it with the care that one expects from a Government Department.

When my hon. Friend the Member for Bridgwater (Mr. King) intervened to ask the Minister whether he had knowledge of the Japanese scheme, he did not even appear to have heard of it. I confess that I had not heard of the Japanese scheme, but I do not happen to be the Minister. We expect Ministers to come to this House with a proper scheme. I have all the suspicions that, as my hon. Friend the Member for St. Marylebone (Mr. Baker) said at the beginning of this week, this is not a scheme that has been thought out properly and is cosmetic in its effect rather than anything else.

I shall give an illustration of this. When the scheme was announced on 17th July in Committee the Minister of State said that the minimum of 100 redundancies covers 60 per cent. of all redundancies affecting over 10 workers. The Secretary of State has today said that the minimum of 50 redundancies covers 77 per cent. of all redundancies affecting over 10 workers. The Minister of State said that 25 per cent. of all eligible redundancies would cover 13,000 workers. The Secretary of State now says that that percentage, under his scheme, would cover 30,000–40,000 workers. My arithmetic is not all that hot, but I believe that that arithmetical variation between the figures on 17th July and the figures announced today and on 3rd August suggests that the scheme has been cooked up in a great hurry, and not thought through properly.

The situation is far too serious for schemes of this kind which have not been properly discussed with industry as a whole, which have not been thought out properly, and of which the House has been given two different versions within a fortnight, and which the Prime Minister, the Chancellor of the Exchequer and the Secretary of State have all said can make a contribution, in some cases a considerable contribution, to solving our problems. That is not good enough for the House and the people who will believe that they will receive help under the scheme and will probaly be disappointed.

My hon. Friend the Member for St. Marylebone summed the matter up pretty well when he said that the preservation of jobs in the short term could be inimical to saving jobs in the long run. That is our worry about the scheme. It is to last for three months, which can be extended to six months. If it starts fairly soon that will take us into a pretty difficult time. I do not think that we shall get over the hump of difficulties in three months to six months. Employers will keep skilled workers on, and it is the unskilled or the semi-skilled who will suffer in the three months' or six months' period. In any case, I do not think that it would be long enough help for the skilled workers either.

The hon. Member for Luton, East (Mr. Clemitson) mentioned firms outside assisted areas and the difficulties that the scheme could create for them. My hon. Friend the Member for Bedfordshire, South (Mr. Madel) dealt with that point in Committee.

The scheme has not been thought through enough. In all probability the money would be better spent on retraining, on job creation or on new industries, particularly for young people.

The scheme is designed to last a year. The Secretary of State said tonight that he intended that it should last a year at most. Yet his amendment enables him to extend it for a further period not exceeding 12 months. What is the point of saying that it will last for only a year if he is moving such an amendment?

I am not impressed by the way in which the Government have introduced the scheme. We believe that there are many better ways of helping to deal with what is a very serious problem. We do not believe that jobs can be satisfactorily preserved in the short run by such methods. All the experience of what the Government tried to do in their first 18 months, with Norton Villiers Triumph and in other cases, shows that it does not help employees to tell them that their jobs are secure and to put in Government money if the Government cannot see the matter through.

For all these reasons, we are sceptical. We do not regard the scheme as one which will make any great impact. We are sorry that the Secretary of State has allowed it to be introduced in such a bodged-up manner.

11.45 p.m.

The scheme needs thinking through far more carefully than it has been so far.

We shall withdraw our amendment because we think that the right hon. Gentleman's amendment will give the House a better chance of discussing these things in the future, but I hope that before this is done we shall have the opportunity to hear the Secretary of State answer the debate.

Mr. Foot

I shall try to reply as briefly as I can, without seeking to diminish the importance of the questions. My intervention has stirred up the controversy when many hon. Members were hoping that we should finish at a reasonably early hour, and I apologise on that account. But I do not apologise entirely for having made this statement during the course of the Report stage, because it seemed to me that, particularly as the matter had been raised during the course of this Bill, the proper time for me to make the statement was during the course of the Bill. If the statement had been made on a separate occasion I might have been criticised on that account.

I do not believe that is the most important aspect. The most important aspect is whether the scheme will assist in dealing with unemployment. I believe that it will provide one measure that will assist us, and I think the House would be unwise to treat the proposition in the way in which the right hon. Gentleman has treated it—as a matter of no importance, as he appeared to say, or as a proposal which has been ill-prepared.

We have built on the original proposals which we had, and we have expanded the scheme from the original idea. As to the right hon. Gentleman's arithmetic compared with mine, the increase in the numbers covered is smaller than expected, because most of those affected by redundancy are found in the larger firms. That is why the second figures are of the nature that I have already described. If the right hon. Gentleman applies his reason he may find it is better than his arithmetic, and he will be able to solve the matter in that way.

With regard to the specific questions raised, the hon. Member for Aberdeenshire. East (Mr. Henderson) asked whether I can say how many jobs in Scotland will be protected or sustained by the proposal. I cannot tell him the exact numbers in Scotland, but Scotland will benefit proportionately perhaps more than any other part of the country precisely because Scotland is more widely covered by special development area status. The whole of Scotland will have a special advantage because of its special area status. The right hon. Gentleman, too, will understand and, I am sure, appreciate that fact.

It is rather interesting that some questions should be put to me by my hon. Friends which are more pertinent than those of the people who are not seeking to take advantage of this scheme. My hon. Friends are asking that the advantages of this scheme should be extended beyond the intermediate areas, and I appreciate how this scheme may assist. But a difficulty is that we should be applying the whole principle of regional policy, changing the areas of regional policy and changing the definitions of regional policy for this particular scheme.

If we are to change the areas where a special development system applies, or an intermediate system, we shall have to do that generally for the whole country rather than applying it to this particular scheme. But I understand, of course, why my hon. Friends pressed that a scheme such as this should be applied in their areas, if possible, and if the scheme works as successfully as some of us hope it will, I have no doubt that the pressures will be sustained in that respect. We shall have to consider them, too.

References were made to the way in which protection could be provided against abuse of the scheme, and to ensure that the scheme was not stretched and that misleading and false applications or claims were not made. We do not claim that the scheme is cast-iron in that sense. If people thought that such a scheme could be cast-iron proof against abuse there would be no scheme. Reliance must be placed on the signed declarations by employers. Great care will be taken to make the visits to employers. Local inquiries will be made to check every application both initially and at the three-month review stage. Special attention will be made in those inquiries to establishing the genuineness of the redundancies.

There is a further aspect of the way in which checks can be made. Applications will be made with the assistance of the trade unions involved. A great deal will be known about the firms making the applications and why they are making them, and the validity of the claims. We need not create such obstacles in advance. We do not say that it can be known altogether in advance how the scheme will operate, in spite of what happened in Japan or the fact that this has not been applied in other countries.

We believe that the right and sensible way for us to proceed is to apply the scheme with a sense of experiment. Many thousands of workers' jobs will be sustained by this process. Far from approaching the matter in the critical and often churlish spirit displayed by the Opposition, many people will be eager to see the scheme succeed.

Replying to the point made by my hon. Friend the Member for Bolsover (Mr. Skinner), we do not claim that this is a major scheme for dealing with unemployment. The schemes needed to deal with unemployment on the present scale cover the whole range of economic policy. If we are to overcome employment on this scale we must take a series of measures. Some of those measures are of the nature which my hon. Friend described—planning agreements, the operations of the National Enterprise Board, the possibilities of fresh investment in industry. Those are the most important measures. I do not dispute that with my hon. Friend.

We believe that long-term investment, or urgent investment, in the major industries is the most important aspect of the problem. However, that does not absolve us from taking many other important steps in the meantime. The Government have already taken much more important steps than any previous Government to provide places for training on a far bigger scale than has been attempted before, by means of the £50 million provided in the Budget and the subsequent £10 million. That process will be assisted by subsequent measures which the Government will develop for the purpose.

This scheme will also make an important contribution, especially during this coming winter, to sustain firms and jobs which would otherwise go out of existence.

The trade unions are the chief people who have urged us to carry this scheme through. We had consultations with the general council of the TUC.

Mr. Prior

Not with the CBI.

Mr. Foot

It is wrong for the right hon. Gentleman to say that we did not have consultations with the CBI. We consulted the CBI, which, although critical of many aspects of the scheme, did not oppose it. We shall see whether firms facing these problems will make applications. We shall see who is right. Within months we shall know from the applications coming in whether the scheme is making a valuable—I do not say major—contribution to dealing with the unemployment problem.

Opposition Members are churlish to pick theoretical holes in the scheme. They do not like any scheme of Government intervention to help primarily the private sector of the economy. But the people who would otherwise be thrown out of jobs will be eager to see the scheme sustained, and trade unionists who would otherwise be threatened will be eager to see the scheme in full operation. I urge the House to give it a fair wind and a good chance to be put into operation. On that basis, I hope that the hon. Member for Brentford and Isleworth (Mr. Hayhoe) will be willing to withdraw the amendment and allow Amendment No. 225 to be carried.

Mr. Prior

I cannot allow the right hon. Gentleman to get away with suggesting that I said that there had been no consultations with the CBI. I said that there had been no consultations with the CBI until three weeks ago. The scheme was announced on 15th April. For the Government to leave those consultations until three weeks ago shows that they do not give high priority to getting the scheme right. We are far from being churlish in trying to reduce unemployment. It is just that we are a little sceptical about the scheme.

Mr. Foot

I did not detect a note of welcome in the right hon. Gentleman's voice when he spoke earlier. If he is coming round to supporting the scheme, I welcome his intervention.

Mr. Baker

Before the Secretary of State sits down, will he meet the argument put forward from the Opposition benches that the scheme is negative and defensive, and that it will not save, though it may sustain for a short time, a certain number of jobs. When shall we hear from the Government their positive proposals for job creation and training opportunities for young people?

Mr. Hayhoe

It is a pity that the Secretary of State did not answer the perfectly proper question posed by my hon. Friend the Member for St. Marylebone (Mr. Baker) in his initial speech and in his second intervention. Having grossly misrepresented what my right hon. Friend the Member for Lowestoft (Mr. Prior) said about consultation with the CBI, the Secretary of State has not even the grace—perhaps typically—to withdraw the misrepresentation he made.

The Secretary of State has put before us the scheme which, when I moved the amendment, I said we regarded with some scepticism. Everything he has said tonight has added to that scepticism and made clear that the scheme is ill-considered. The scheme has been oversold by the Secretary of State and his right hon. Friends. His attitude has been characteristic in that he is pleased if he can get the words right. He does not worry about the reality of the figures. His attitude and that approach deepen our scepticism about the measure. Nevertheless, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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