§ '() No sanction provided under section 3 of this Act and imposed under and in consequence of the provisions of that section and purporting to have effect against a specified employer or employers shall be enforceable against him or them unless an opportunity of making representations was given to him or them before such sanction was imposed on him or them'.—[Mrs. Sally Oppenheim.]
§ Brought up, and read the First time.
§ Mr. Speaker
With this clause we may also take Amendment No. 59, in Clause 3, page 3, line 19, at end insert:'(3) (a) A person who is made subject to a sanction under subsection (1) above shall have a right to appeal within 14 days to an Independent (Appeal) Panel set up for this purpose;(b) The Independent Panel shall be set up by the Secretary of State in consultation with the CBI and TUC and shall consist of three members;1674(c) the Panel shall give the applicant and others concerned the opportunity of making representations in relation to the matter to which the sanction relates;(d) the findings of the Panel shall be binding upon the parties concerned'.
§ Mrs. Oppenheim
I hope that the subject matter of the clause and the amendment will be considerably less provocative than the clause we have just finished debating, and that they will command support from both sides of the House.
We consider that Amendment No. 59 is the more important of the two items. The provision of an appeals procedure in this legislation and, in the context of later amendments, under the Price Code itself, is necessary. The situation leading up to the imposition of sanctions under the Price Code or under any reserve Bill powers would be entirely unsatisfactory and could be extremely unfair both to employers and employees. This is chiefly because the Price Code existed originally for the purpose of price restraint and was never intended to be a vehicle of pay restraint.
Although the code is to be amended, it is not to be adapted for the special purpose of pay restraint which it is now to be used for. Therefore, it is rather like trying to deliver the coal in the family car —the vehicle is neither suitable in the first place, nor has it been adapted. Because this adaptation has not taken place the procedural arrangements which will lead up to the possibility of sanctions are highly unsatisfactory.
As employers have been told, they will be unable to get authoritative rulings on the question whether proposed pay settlements are likely to be unintentionally in breach of pay limits, which could result in the imposition of the sanctions of the Price Code itself. In addition to this lack of pre-settlement advice, no guidelines are to be published and, therefore, the right of appeal on both sides becomes all the more important.
One should not think that the disallowance of price increases under the Price Code will itself be a light sanction. For example, what would be the effects of this proposed sanction? Average net margins are at present between 7 per cent. and 12 per cent. I shall take as an average the example of a company whose margins are currently at 10 per cent. with labour costs of about 60 per cent. The 1675 consequence of disallowing a price increase due to a fairly marginal breach of the limits could amount to a disallowance of an extra 5 per cent., which could halve existing margins. This would be a serious consequence with considerable repercussions. It would be unfortunate to say the least if this had been the result of an unintentional breach of the pay limits as described, or as not yet described, in the amendments to the Price Code.
It is this absence of guidelines or advice which highlights the fact that many questions remain to be answered and are likely to remain to be answered even when further amendments to the Price Code have been discussed. I should like to quote just a few of these. What will be the position within certification of pay increases, job grading, incentives, commissions, new employees, productivity, profit sharing schemes and Christmas bonuses, to name but a few? Indeed, what constitutes a pay settlement? Will there be a clearly defined, recognisable bargaining unit? If so, where does the tea lady and the storekeeper fit within these definitions? These are just a few of the examples of anomalies that could arise unintentionally without any bad feeling on either side.
I understand that the Secretary of State for Employment has told employers that a document of guidance will be published, based on questions and answers that arise out of employers' queries to his Department and that such answers will constitute, to a certain degree, qualified precedents—a manoeuvre obviously designed to avoid the formalisation of such procedures so that the Department of Employment is not actually involved in formally ruling on claims which it wants to avoid at all costs but which may prove to be necessary.
Where will these quasi-precedents carry any weight? Will it be with the Price Commission, with a certifying Pay Board, with the Department of Employment, or with the courts? We believe that the ideal place for these precedents to be quoted and examined is in an independent appeals procedure, such as we propose in Amendment No. 59. As things stand the phantom Pay Board is to be the judge, the counsel and the executioner—a situation that cries out for an independent form of arbitration.
1676 12 midnight
I turn to the specific proposals in Amendment No. 59, which I hope will commend themselves to the whole House. In the proposed appeals procedure, scope is provided for both the CBI and the TUC to be represented on the panel itself, and for both employers and employees to make representations. In many cases both unions and employers will want to make joint representations, because they are, perhaps, being involved in an unintentional breach of the pay limits and will both be subject to the consequences. My experience has long been that very effective representations on behalf of their companies are put by representatives of the trade unions, sometimes singly, and sometimes together with the employers. My experience has been that representations made by representatives of the trade unions have often proved to be the most effective.
Alternatively, such a procedure could be used for either trade union representation or employer representation. They may run counter to each other, but still the procedure would be there and either way it should benefit both sides.
In our amendment we have allowed for a 14-day lapse, so as to avoid any undue delay in reaching a decision. The end result of such a procedure could be that the precedents created in such rules could help to avoid anomalous certification or withholding of certification in the future, and any unfairnesses or any unintentional breach of the pay limits themselves. As all the debates we have had so far have shown, we are in an area of great uncertainty.
Even when we see the precise amendments to the Price Code, I fear there will still be a great deal of confusion and that the possibilities are that in the early stage a very few negative certifications will be made but, as the policy may prove not to be effective, more and more stringent sanctions may be applied through the powers to be brought into the Price Code later by amendments and by Clause 3, with the unfortunate effects that would result from neither employers nor employees having been given adequate criteria as to what is expected of them. Therefore, there would be all the more need for the appeals procedure we propose.
1677 I shall ask the House to divide on new Clause 13, although I wish that it had been possible to divide the House on Amendment No. 59, which meets the case far more adequately. However, this is a question of principle. These are new sanctions and new powers in an inadequate vehicle. We think it absolutely essential that an appeals procedure should be provided.
§ Mr. Graham Page (Crosby)
I support my hon. Friend the Member for Gloucester (Mrs. Oppenheim) in both the new clause and the amendment. In the two matters before us, however, I am not quite sure whether the new clause and the amendment sufficiently distinguish the two parts of Clause 3. They are both amendments or additions, as it were, to Clause 3.
As I understand it, Clause 3 deals with two matters—first, with the changes in the Price Code, which can be made only —if I understand the position correctly —under Section 2 of the 1973 Act, because that provides thatBefore making an order under this section the Treasury"—as it was then, the Treasury made the order—shall consult such representatives consumers"—and so on. There are all these consultations to be undertaken before the order can be made and can take effect, and then it can take effect only after a period of one month after it has been laid before this House. Certain precautions have to be taken by the Secretary of State before introducing an order to change the code. That is the first part of Clause 3.
The second part of the clause, however, is that that order may enable the Secretary of State to say whether the pay limit has been exceeded in any particular case. That is a power which, under the 1973 Act, was given to the Price Commission itself. That was under Section 6 of the Counter-Inflation Act 1973, under which the Price Commission could restrict any prices or wages in any particular case by order or by giving notice, and if it endeavoured to do that it had to allow the person affected the right of written representations.
1678 That means, if I understand Clause 3 correctly, that if the Secretary of State takes over the powers of the Price Commission under Section 6 of the Counter-Inflation Act 1973 the Secretary of State will still have to give the person involved the right at least to written representations. Whether it is the Price Commission or the Secretary of State. I do not know. I do not know how it is intended to amend that section of the 1973 Act. We are left very vague.
The real point is that if the Secretary of State takes over the Price Commission powers under Section 6 of the 1973 Act the protection of the individual concerned is insufficient. There should be an appropriate form of appeal: not merely that, perhaps, he will be given a chance of written representations under Clause 3. There are undoubtedly what are intended to be penal sanctions against a person who the Secretary of State may think has breached the pay limit. Therefore, in respect of those penal sanctions the person concerned should have a proper right to be heard, and not merely a right to written representations under Section 6 of the 1973 Act. That is the real value which the new clause and the amendment would give to the individual concerned.
The Secretary of State may well think that the person concerned is guilty of a terrible crime in increasing prices above the limit, but it is not really unlawful to do that. It is an unacceptable act which will be visited by sanctions, but it is very near a crime which will be punished by a fine, so the person who is accused should have a proper right of appeal. Here we provide an independent tribunal to hear his appeal.
§ Mr. Giles Shaw (Pudsey)
I support in particular Amendment No. 59, which seeks clearly to establish an appeals procedure and an independent panel to which persons subject to sanction—they are companies, within the meaning of the measure—can seek redress if they believe that the wage claim is wrongly judged to be disallowed.
There is no question but that in Clause 3 and in the substance of the new clause and the amendment, we are dealing with the harsh realities of a statutory policy. Whatever the CBI may claim about its support for the Government's action, the application of sanc- 1679 tions can hardly be counted as a matter that is voluntarily accepted by those who, knowing of the Government's policy, may inadvertently have contravened it.
The remarks of my right hon. Friend the Member for Crosby (Mr. Page) are indicative of the fact that in this way the Price Code is being used to masquerade for the defunct Pay Board, and is therefore involved in making judgments over a much wider range of activity than hitherto. So there must be room for intelligent discussion before action is taken which may force a company to lay off employees or go bankrupt, or possibly both. This is the burden of new Clause 13.
Those of us who served for many weeks on the Committee considering the Industry Bill—and I am glad to see my hon. Friend the Member for Henley (Mr. Heseltine) here—will recall that we had a great discussion about an appeals procedure, and eventually it was agreed that an independent appeals procedure should be established to adjudicate on the Minister's right to force the disclosure of information. It seems to me that in this area, where the anxieties about interpreting the Government's pay policy are involved, the Secretary of State—whether the Secretary of State for Employment under Clause 1(5) or the Secretary of State for Prices and Consumer Protection under Clause 3—has the right to decide.
It is our view that the individual Secretary of State's interpretation should be open to appeal. Under the Counter-Inflation Act 1972 a great deal of case law was required to be established under the Pay Board to enable the proper interpretation of pay policy. As the Government abolished the Pay Board under the Prices Act 1974 it seems to me to be highly desirable that if they wish the Department of Prices and Consumer Protection to carry out this policy they should allow a similar mechanism to regulate pay and avoid the complexities of interpretations. It is not just a matter of interpreting the£6 pay limit at the flat rate; it is very much a matter of what constitutes remuneration.
Benefits, improved conditions and pensions require fine judgment. Yesterday, the trustee of a pension telephoned me to discover whether it was true that the formula under which that fund operated 1680 would be discounted as part of the£6 wage claim for his employees. In this case the pension fund was based upon a pension income which was a percentage below that basic rate of pay which he paid his employees. The deduction was based on the single rate old-age pension.
That complicated formula meant a period of pay restraint such as we are now undergoing, whereas the basic rate pension formula would continue to increase as the national pension increased, and the amount of deduction would clearly increase against a much lower level of actual income. In this way any adjustment of the pension formula was, according to the advice of the Department of Employment, regarded as a deduction against the£6 wage limit.
Matters of that kind suggest to me that the procedures with which we are involved are far more complicated than the Secretary of State for Prices and Consumer Protection suggested early last Friday. That is the first reason why we think that this appeals procedure is important. This is a complicated area, and case law must clearly be established.
The second reason is the fact that if a company incurs sanctions the welfare of the employees must be involved. The employees have a perfect right to equal consultation in negotiations on the question whether a wage increase which has been agreed should suddenly be removed. The employees cannot be dissociated from the employer in this instance. That is why we regard it as important that employees should have the right under Amendment No. 59 to be represented before the independent tribunal.
The third reason concerns special cases. The Secretary of State in May 1975 amended the Price Code and instituted paragraph 83, which had regard to special cases where there might be a shortage or a threatened shortage of supplies in the domestic market, or a serious threat thereof, and to any significant adverse effect upon the United Kingdom balance of payments or a serious threat thereof. There might be a complication over a wage settlement which could threaten the distribution of supplies, such as disruption at the docks. It is desirable that there should be a process by which this can be examined before the inadvertent effect of removing a special 1681 condition of wage or employment results in a dispute leading to a threatened shortage.
Companies in the first and second categories which are used to dealing with the Price Code and which have the expertise to handle affairs of this kind, may fully understand what is required of them. However, there are 17,000, mainly smaller, third category companies which are not used to handling the Price Code and which have no regular contact with the sponsoring Minister, but which merely keep records. How are they to interpret properly the regulations on pay which are laid down? The third category companies do not make the price regulations. Last Friday the Secretary of State, in answer to a Question, said that if a price application were not made the powers of Clause 3 could not be established.
What is the position of category 3 companies in relation to trying to observe the pay limits, and how are they to be checked? There is a need here for an expertise, for an appeals procedure, for an examination of the complexity involved in this pay policy. I would prefer an appeals procedure to the rather limited reference to representations under the clause, but I shall gladly settle just for representation rather than for confusion poured upon British industry in interpreting the Government's policy.
§ 12.15 a.m.
§ The Under-Secretary of State for Prices and Consumer Protection (Mr. Robert Maclennan)
The debate has covered some ground that we went over in Committee, but I make no objection to that, because the matters raised are of considerable importance and merit the most careful consideration.
The hon. Member for Gloucester (Mrs. Oppenheim) and other hon. Members followed a progress which is not uncommon in debates of this kind, when the proceedings are somewhat protracted, whereby the examination of a particular difficulty which might arise under the provisions of legislation overrides the general case. The hon. Member for Gloucester and her hon. Friends, though rightly drawing attention to possible difficulties, exaggerate by implication the problems that are likely to arise in inter- 1682 preting the pay limits set out in the White Paper.
I conceded freely in Committee that there will be some cases of difficulty, scme cases of the kind referred to by the hon. Member for Pudsey (Mr. Shaw). But the hon. Member for Pudsey answered himself by saying that the Department of Employment, in the case to which he drew attention, had given him guidance on the way in which to interpret the point at issue. That is the nub of the matter. The procedures set out in the consultative document allow the fullest consultation between the firm which is embarking upon a pay settlement and the Department, in order to clarify any areas of difficulty before that settlement has been concluded. This is so that the firm which seeks to implement the pay limits—and it is reasonable to assume that will be the intention and wish of most firms—can satisfy itself beyond peradventure that what it has in mind conforms with the pay limits.
§ Mr. Norman Buchan (Renfrewshire, West)
I understand that the question of representation applies to employers. But the clause is not directed at employers and prices; it is directed at employees by dealing with employers. One problem which we should be considering—I regret that the Conservatives have not raised it in the amendment; if they had I might have considered speaking on their behalf —is the question of representation by employees to say that the case made out to restrict prices has been wrongly founded because, for example, of a wrong analysis of the pay position. That is what we should be calling attention to.
§ Mr. Maclennan
If my hon. Friend is saying that in pay negotiations there are two sides and that both employers and employees have an interest in the settlement being in conformity with the limits, I fully agree with him. Both sides in the negotiation would have an interest in ensuring that if there are areas of difficulty they can be put by the firm to the Secretary of State for Employment and removed.
During her remarks on Clause 13 the hon. Member for Gloucester emphasised that she did not attach so much importance to the provisions on representation as she did to the provisions on appeals procedure. I think that that marks a 1683 development from our last debate, in that it now appears to be accepted that there is full opportunity for representations to be made at every stage of the procedure; not only in respect of the initial proposals for a settlement but in terms of the settlement itself, and in terms of the operation of the sanction during the 14-days' period after the Price Commission has issued a notice or order.
I understand that the hon. Lady thought it right to concentrate not so much on the requirement of representation as upon the provision of a substantive appeal. I must tell her that if we were to go down that avenue I fear that we would be importing into the procedure some of the worst features of the bureaucratic complications of the Pay Board structure. It is clear as I think we have all come to recognise that the structure had real limitations.
The right hon. Member for Crosby (Mr. Page) and the hon. Member for Pudsey both seemed to think it desirable that there should be erected a whole caucus of quasi-precedents to be cited before the panel to which the appeal would be brought. I believe that the hon. Member for Pudsey said that case law should be established. It is my opinion that that would be to move in precisely the wrong direction. What is wanted is not a legalistic procedure, which would be brought in aid by a company involved in negotiating a wage settlement, but direct contact with the Department of Employment to determine whether a proposed settlement lies within the framework of the pay limit. It would be wrong to seek to erect the sort of apparatus that the hon. Gentleman has in mind.
§ Mr. Giles Shaw
What happens when companies do not apply for price increases—companies which employ many thousands of people—and are involved in inadvertently trespassing on the Government's pay norm? Will the Minister say how they can obtain redress, if not by an appeals procedure?
§ Mr. Maclennan
That is a most unlikely situation. If the hon. Gentleman is speaking of the position of Category 3 companies, which he has raised specifically, that procedure is handled by means of the spot check which now operates. If there is any question of difficulty I can 1684 only offer counsel that companies should seek to protect themselves by consulting the Department of Employment, which is ready and willing to give advice. Questions of this kind are being put to the Department already. I believe that about 500 inquiries a day are being made. I also believe that they are being dealt with satisfactorily. Indeed, from my experience today, a company called at my Department having received a positive assurance from the Department of Employment on its proposed settlement. The company wished to consider certain of the consequences of the settlement from the Price Code point of view. In practice, I believe that some of the difficulties which some hon. Members have raised are not likely to arise.
One point made by the right hon. Member for Crosby was the reiteration of an error. It should not be allowed to go unchallenged. He spoke of the sanctions flowing from the amendment of the Price Code as "penal", but I must point out that they are no more penal than were the sanctions operative under Section 17 of the Counter-Inflation Act. They are the same, and no amendment is proposed to strengthen or render them heavier.
The hon. Member for Gloucester seemed to be dealing not so much with the weight of the sanctions as with their effectiveness, but so far as those sanctions are effective and will encourage firms making settlements to conform with the pay limits, I welcome them.
I do not think the hon. Member for Gloucester seeks to give companies a way out to operate against the limits. What she is trying to do, understandably, is to ensure that by inadvertence or error the rules are not breached.
§ Mr. Graham Page
The Minister referred to Section 17 of the Counter-Inflation Act 1973. That is the provision that creates offences. Clause 3 lays down that it is at the discretion of the Secretary of State to apply sanctions. Is the Minister saying that it all comes under Section 17 and that there is no discretion on the Secretary of State to create sanctions under Clause 3?
§ Mr. Maclennan
That is what I am telling the right hon. Gentleman—namely, that the penalties described in Section 17 of the Counter-Inflation Act remain un- 1685 changed. These are criminal penalties. The amendments to the Price Code envisaged in Section 3 do not import new criminal penalties but embrace new financial sanctions, which is quite a different matter.
§ Mr. Norman Lamont (Kingston-upon-Thames)
Since the Under-Secretary of State for Prices and Consumer Protection was so unconvincing and unpersuasive, it will not be necessary to detain the House long before the matter can be put to a vote.
The purpose of the amendment is to provide the means for an independent appeals body. It is needed because of the many areas of ambiguity and uncertainty about the administration of pay policy. I shall not go through the various examples; they have come from both sides of the House. If the matter were simple, it would not be necessary to spend£800,000 a year and to employ staff to check who was in excess of the limits. We have been told what happens when the Department of Employment is telephoned on these matters, as to the uncertainty that exists, and how one cannot obtain clear-cut answers. I am reluctant to be drawn into details of the ways in which the code will operate, because it implies accepting the assumptions on which the policy operates. One could get sucked into a whole maze of controls which the Government wish to create.
Over and over again in these debates points have been raised about profit sharing, about the definition of a settlement, about the man on the margin of£8,500, and about London allowances. All these problems create great uncertainty, and it is not enough for the Minister to say that we are exaggerating the difficulties. If he thinks that just a few people will find difficulty, that just a few companies will be in trouble because of the sanctions, is he saying that fairness and justice should not be applied to those companies? Is it really sufficient for the Minister to say that simply because his Department is there to provide advice there will be no need for anybody which his Department will be able to to be able to appeal against the sentence pass on that company?
1686 Perhaps the most astonishing assertion in the Minister's speech was when he tried to compare the fines levied under the previous Government's counter-inflation policy with those which might be applied under this policy. The point about the sanctions is not the money that may be levied by somebody at court. The sanctions imposed under this policy could drive a company bankrupt, cost people their jobs, and cost a company its existence. That is the real difference between the sanctions. It does not do for the Minister to say that the sanctions are no more severe than those imposed before. They are very different and very much more severe, and therefore one ought to have an appeals procedure.
Nor is it enough for the Under-Secretary of State to say, as he did the other day—and repeated today—that one can appeal to the Price Commission. Why should the Price Commission, which decides what happens to a company's application for a price increase, act as prosecutor, judge, jury and jailer in its own case? We want an independent body which can look at these many difficult areas.
I say to the hon. Member for Renfrew-shire, West (Mr. Buchan) that of course we are not talking about applications that may be made by management. One can think of many situations where employees or trade unions may wish to appeal against the sanction that is invoked by the Department, because it is their jobs that will be at stake and it will be they who will suffer from these very savage sanctions.
§ Mr. Buchan
The hon. Member has got it completely wrong. Both the new clause and the amendment are quite specific, referring to the employer. The gravamen of my argument on Friday morning was to the effect that the sanctions placed on the employer were in order to clobber the employee, because that is the way the compulsory sanction operates. But here the new clause mentionsa specified employer or employers".It has nothing to do with employees, either in the sense that the sanction relates to them or that they can bring evidence.
§ Mr. Lamont
It also says that others can havean opportunity of making representations1687 and I assure the hon. Gentleman that it is certainly the intention of the amendment. It stands to reason that employees, just as much as employers, should have the right to appeal against something which could very much affect their livelihood and their earnings. I suspect that the real reason that we do not have a proper appeals procedure in the code comes back to the argument we had the other day about the way in which the code is now being used for a purpose for which it was never intended. The Secretary of State herself described it the other day as a guidance document. It was once a guidance document. It is no longer a guidance document. It is a punitive document for imposing sanctions in support of an incomes policy.
The confusion is also compounded by an absence of knowledge whether one appeals to the Price Commission or to the Department of Employment. The other day the Secretary of State for Employment said that the Price Commission would have nothing whatever to do with pay; that was the business of the Department of Employment, and nothing to do with the Price Commission. Yet one has to appeal to the Price Commission in a case where an Act is thought to have been unfairly applied.
We dislike the bureaucratic web that this legislation is wrapping around industry. We already have a highly administered economy—one which is becoming more and more hidebound by regulation and bureaucracy. We have a bureaucrats' economy. We do not want bureaucrats' justice in dealing with them.
§ Question put, That the Clause be read a Second time:—
§ The House divided: Ayes 216, Noes 254.
§ [For DIVISION LIST 310 SEE cc 1789–84]
§ Question accordingly negatived.
§ Mr. Deputy Speaker (Mr. George Thomas)
Mr. Speaker has asked me to tell the House that the provisional selection of amendments list has been changed. Amendments Nos. 50, 9, 43 and 29 will not now be called.