REDUCTION OF REDUNDANCY REBATES BILL

HC Deb 07 February 1977 vol 925 cc1126-86

Order for Second Reading read.

7.0 p.m.

The Minister of State, Department of Employment (Mr. Harold Walker)

I beg to move, That the Bill be now read a Second time.

This is a simple Bill with a straightforward purpose. It will reduce rebate paid from the Redundancy Fund to employers who have made payments under the Redundancy Payments Act 1965 to their redundant workers from 50 per cent. to 40 per cent. I hope that I will earn the gratitude of hon. Members who wish to take part in this brief debate by an equally straightforward and brief introductory speech.

I begin by referring hon. Members on both sides to the statement which my right hon. Friend the Chancellor of the Exchequer made on 22nd July 1976. As he made clear at that time, cuts in public expenditure and reductions in the public sector borrowing requirement were essential if the prosperity of the British economy was to be restored and the level of unemployment was to be reduced. He also pointed out that a shift of emphasis towards selective assistance to industry would require certain savings in expenditure, which included a reduction in the employer's rebate from the Redundancy Fund from 50 per cent. to 40 per cent.

Some of this assistance has been given already. For example, the prospects for manufacturing industry have been greatly improved both by the lower taxation resulting from generous stock relief and by the relaxation, especially increased investment relief, recently announced in the Price Code. These improvements have to be paid for, however, and the Bill has a small but not insignificant part to play in the public expenditure programme which is so vital to our economy.

The Explanatory and Financial Memorandum to the Bill quotes a figure of £18 million as the saving to the Redundancy Fund; that assumes a full year's saving for 1977–78. It is impossible, of course, to pin a precise figure to the saving which will be achieved over a full year. Many things can affect the number and the amount of individual payments from the fund over a given period of time. Levels of unemployment are an important factor, but only one.

Many redundancies are caused by other factors, such as the long-term adjustment of industries to changes in demand or rationalisation in the course of changes in the industrial structure. Perhaps the most important factor of all affecting the amount paid from the fund is the level of individual payments, which depends in turn on the age, length of service and earnings of those made redundant.

With all these variables, even although it is possible to draw heavily on previous experience over the life of the Act, it is impossible to do very much more than make rough-and-ready estimates of future demand. I say this without apology to the House. It is intended to be no more than a statement of fact. But I think it important for the House to be made aware of at least some of the factors involved and the reasons why it is impossible in this instance to give a really accurate forecast. Nevertheless, it is fair to say that the figure of £18 million is the most realistic which it has been possible to calculate in the light of previous experience.

Another point to which full consideration has been given is the effect which the proposed measure will have by adding to employers' costs. It would, of course, have been possible to produce savings in a number of ways ranging from a general reduction in the level of redundancy payments to abolishing the rebate to employers altogether. But here I think it may be appropriate to recall the original objectives of the statutory scheme. From the outset it was intended that the statutory payments should be financed partly by employers directly and partly by employers collectively through a Redundancy Fund. At the front of the minds of those of us who helped to take the Redundancy Payments Act through Parliament was the need to secure adequate compensation for workers unfortunate enough to be made redundant.

For us at least, the first course—that of reducing payments—is unthinkable, Before the 1965 Act was introduced, employees could be thrown on the scrap-heap with no compensation for all their years of service. The legislation did a great deal to remedy this patent social injustice, and I do not think that any Member of this House would care to argue a case in public at present in an attempt to justify the abolition or reduction of the statutory scheme.

Whether it is right that employers should benefit by way of rebate—and, if so, to what extent—is open to debate. However, it is clear that, if the cost of a redundancy payment to the individual employer is too high, desirable changes may be inhibited. What we have tried to do is to strike a balance. Admittedly there will be some addition to employers' costs. Taken overall, however, the effect will be small. It represents no more than approximately 0.03 per cent. of the total amount of wages up to £95 a week in respect of which employers are required to pay the secondary class 1 earnings-related contributions; or, to put it another way, approximately 1.8p a week for every £60 of wages on which the earnings contributions are payable.

It is also easy to overestimate the effect which this reduction will have on individual employers. The maximum statutory payment at present is £2,400—that is the entitlement of a man aged between 61 and 64 earning more than £80 a week after 20 years' reckonable service. This gives a maximum rebate of £1,200, which will be reduced by the Bill to £960—in short, an additional cost to the employer of £240, representing three weeks' pay or less. In more general terms, the average current rebate is of the order of £310, which will be reduced by about £62, which is broadly the equivalent of a week's pay in many cases.

We have also sought to strike a balance in the context of the Chancellor's July package. Some saving is necessary, and we have looked to employers for this modest further contribution. It is an integral part of the July package, which was carefully devised so as to do the least damage, bearing in mind the need to preserve social and economic priorities and to ensure a reasonable balance between the different elements whilst encouraging an upturn in the economy.

Given the importance which the Government attach to maintaining a reasonable level of compensation for redundant workers, perhaps I should mention a useful improvement in the coverage of the scheme which took place on 1st February. Until then, only employees working 21 hours or more a week were covered. As from last week, the qualifying hours were reduced from 21 to 16 and, in addition, the cover was extended to employees who have worked continuously for the same employer for at least five years at eight hours a week or more.

This is a useful improvement—I know that right hon. and hon. Gentlemen will recall that we discussed it during the passage of the Employment Protection Act. The part-time employee is a feature of modern industry. Many of those affected are women. Although their earnings may not be as large as those of full-time employees, they are frequently an essential part of the family income, or indeed, in some cases, the only source of income. Redundancy for these part-timers can be as unfortunate in its effect as for the full-time worker. One has only to look at the distress which can be caused by redundancy amongst, say, the part-time textile worker of Yorkshire and Lancashire to appreciate the truth of what I am saying. This is a valuable improvement and one which I am well pleased to be able to draw to the attention of the House.

One special feature of the Bill which will not have gone unnoticed is that it will amend the Northern Ireland legislation. There may be some in the House who may not be familiar with the position. I should explain that Northern Ireland is not covered directly by the Redundancy Payments Act 1965 but is covered by parity legislation contained in the Contracts of Employment and Redundancy Payments Act (Northern Ireland) 1965. In practice, however, the two schemes are operated as a single system, as provided for in Section 58 of the 1965 Act.

In more settled times, it would have been appropriate for Northern Ireland to follow the precedents of the past and seek parity legislation for a reduction in rebate. It could still be done today through the Order in Council procedures, but it was considered that such a process would be relatively tedious and time-consuming and not in the interests of the best use of the time of the House. Accordingly, Clause 2 of the Bill does no more, in effect, than apply the reduction in rebate to the Northern Ireland scheme in exactly the same way as it will apply in Great Britain. This will ensure that the reduction in rebate takes effect both here and in the Province from a common date, thus removing the risk of anomalies.

Mr. John Page (Harrow, West)

Can the hon. Gentleman give us an idea of the redundancy in Northern Ireland as compared with that in the United Kingdom as a whole?

Mr. Walker

I apologise to the hon. Gentleman and to the House. I require notice of that question. No doubt my hon. Friend who will reply to the debate will try to obtain the information in the meantime.

Perhaps some indication of the relationship between the pattern of redundancy and redundancy payments in Northern Ireland and that in the United Kingdom as a whole can be obtained from the Explanatory and Financial Memorandum, which states that there will be a reduction in expenditure of £18 million for Great Britain and that the corresponding reduction in expenditure in 1977–78 in Northern Ireland will be £¼ million.

To conclude, the aim of the Bill is to help to achieve cuts in public expenditure to which this Government are committed. It forms part of a package deliberately constructed so as to spread the burden with the least possible damage. It in no way affects the rights of the redundant employee, nor is it in conflict with the purpose of the statutory redundancy scheme as a whole. I ask for the support of the House for this measure.

7.12 p.m.

Mr. Barney Hayhoe (Brentford and Isleworth)

This is a curious measure. The Minister of State's speech, although it explained the mechanical details of the Bill with clarity and precision, nevertheless left the intention of the legislation in great doubt.

The Redundancy Fund was established in 1965. Its aim was to take the sting out of redundancy in two ways—by giving the person made redundant reasonable compensation by way of financial payment, and by shifting part of the cost of making such payment from the employer of the person being made redundant to a charge on all employers. Both sides of the House then thought it right that the arrangements should be made that the costs of providing the cash payment on redundancy should, at least in part, be a burden on industry as a whole, and that firms which were expanding should take some share of the costs of providing that compensation to individuals who were being hurt by losing their jobs in the country's contracting industries.

I have refreshed my memory by reading the speech which was made by Mr. Gunter, the then Minister of Labour, when he introduced the measure. The fund when instituted was to be self-financing by means of a levy on all employers. The fund, though being collected through the national insurance system, was nevertheless to be kept entirely separate from the National Insurance Fund and separate accounts were to be kept. If the fund was in deficit it would have to pay interest. If it was in credit, it would earn interest. It was a self-contained fund.

That principle has been faithfully adhered to over the 10 years of the existence of the scheme. Over that period about £500 million has been paid out through the fund, which means that about £1,000 million has been paid to individuals who have become redundant.

Now the very basis of the scheme is under attack. It looks very much as though the Treasury—the Minister's speech did not detract from this in any way—is seeking to make a profit out of the Redundancy Fund. If the Minister can give us an absolutely categorical assurance that the levy will be reduced by a similar amount to the rebates, it will mean that at least the Treasury will not be making a profit out of the fund, but if the Minister gives a categorical assurance that the levy will be so reduced, it will make total nonsense of what the Chancellor of the Exchequer said on 22nd July 1976. So whichever way the Government go they will get this wrong. The Chancellor said this: This shift of emphasis towards selective assistance to industry will require savings in expenditure of three kinds. First, Regional Employment Premium"— was reduced. Hon. Members will recall that it was very precipitately withdrawn later in the year. Its withdrawal caused considerable distress to those who were benefiting from it, as we heard in last Thursday's debate. The Chancellor continued: Second, we shall introduce legislation to reduce the employer's rebate from the Redundancy Fund from 50 per cent. to 40 per cent."—[Official Report, 22nd July 1976; Vol. 915, c. 2014.] As the Minister said, this is the measure which is to give legislative effect to what the Chancellor then said. If the Chancellor meant anything by what he said—that the Government were making savings in expenditure—the presumption must be that he hoped that the money which was not to be paid out in rebates would be used elsewhere. If the Chancellor was merely talking of a wholly pernickety, bureaucratic, legalistic interpretation of public expenditure—that in relation to a fund which is a self-contained entity some merit attached to the Government for paying out a little less from the fund because a little less would be paid in and that of itself would affect the economy—clearly the Government were living in cloud-cuckoo-land.

If the Government proposed to reduce the levy on employers generally, to make more funds available for industry, by reducing in effect this payroll tax from about 0.2 per cent. to 0.16 per cent. or 0.17 per cent. while at the same time imposing a payroll tax of 2 per cent. on industry—that was economics gone mad. How absurd if the Government made this minuscule saving and claimed merit for it at the same time as they placed an immense new burden on industry, in the shape of the 2 per cent. payroll tax.

It is necessary to look at this small and relatively insignificant measure in the context of the statement the Chancellor made last July. The House will remember, even if the Chancellor and his advisers and friends would prefer to forget, what the Chancellor then said. The Chancellor said that the measures he had announced—the package, including the change in Redundancy Fund rebates— will enable us to maintain steady and continuous progress towards full employment without refuelling inflation".—[Official Report, 2nd August 1976: Vol. 916, c. 1237.] what splendid words— steady and continuous progress towards full employment without refuelling inflation". The inflation position in prospect has got much worse since the Chancellor was speaking. As for what he said about steady and continuous progress towards full employment", if we look at the seasonally adjusted figures, in July 1976 there were 1,295,000 unemployed in the United Kingdom. After six or seven months of steady and continuous progress towards full employment", in January 1977 there were 1,345,000 unemployed in the United Kingdom. In other words, unemployment has gone up by about 50,000 during that period.

The Chancellor, not for the first time—nor, I fear, for the last—got it utterly and completely wrong when he forecast the results of the measures. When he introduced that package of measures, including this Bill, he could then talk about unemployment coming down to 3 per cent. in 1979, because he told the House that we must achieve these aims if we are to get unemployment down to 3 per cent. in 1979."—[Official Report, 2nd August 1976; Vol. 916, c. 1239.] That 3 per cent. meant about 700,000 in 1979. Yet now we have the Secretary of State for Employment giving credence over the weekend to a figure of 2 million. According to the Daily Telegraph today, the right hon. Gentleman has got into hot water with his Cabinet colleagues for muttering about 2 million. If that leak is right, he should have been speculating about unemployment being 1,700,000, with that being the figure to which unemployment might rise.

Yet this Bill was brought forward in the context of Government policies which, it was said, would lead to a reduction in unemployment to about 700,000 by 1979. Ministers of the Crown are working a very cruel deception upon the people of this country by pretending that that target has any hope of achievement now. The sooner the Government come clean and realistically tell the House what they see as the likely change in the employment pattern in this country in the next few years the sooner we can begin to tackle these problems constructively.

Mr. Max Madden (Sowerby)

Does the hon. Gentleman agree that for a very long time the right hon. Lady the Leader of the Opposition and the right hon. Member for Leeds, North-East (Sir K. Joseph), who are leading members of an economic institute closely aligned with the Opposition, were saying that unemployment was consistently much less than the official figures would have us believe? What is the lowest figure according to the institute, and what are the institute's projections for unemployment?

Mr. Hayhoe

I am sure that the hon. Member for Sowerby (Mr. Madden) is better informed than I am on this point. We can change the definition of unemployment and get practically any figure we like. I am content to rest on the official figures, even though I know their weaknesses.

Since the hon. Gentleman has raised the question of tampering with figures, perhaps I may comment on someone who has been tampering with them considerably. In last week's debate on the North-West the Minister of State put forward an absurd pretention. After grubbing around somewhere in the mud of statistics in his Department, he produced a figure to try to show that unemployment was higher in 1972 than it is today. The only way in which he could obtain such a figure was by including people who were temporarily out of work because of the miners' strike. Yet the Minister, who is supposed to be concerned about the most serious unemployment that we have known for more than a generation, came out with this absurd figure. If any criticism is to be directed against anyone for mucking around with statistics and trying to use them in a misleading way the medal should be pinned firmly on the chest of the Minister of State. It would be much better if he used whatever inventive and imaginative abilities he may have for devising ways of creating genuine job opportunities rather than producing phoney arithmetical alibis for the present awful level of unemployment.

I sometimes wonder whether this Bill is the result of mistaken figuring by Ministers. Looking at the figures from January to June 1976, for the amount that was left in the Redundancy Fund over that period—

Mr. Harold Walker

The hon. Gentleman really has sought to put the boot in with a vengeance. I am glad to see that my thrust obviously went home as it was intended. The hon. Gentleman ought to be a little fairer to me and acknowledge that I have always pointed out that the 1972 figure was on a different basis of calculation. The point that I made in the debate on the North-West was that, if we had the same basis of calculation now as we had then, the present level of unemployment in the North-West would be less than it was then. The hon. Gentleman has made the point that was made by his right hon. Friend the Member for Sidcup (Mr. Heath)—that the figures were artificially inflated by those who were temporarily on strike. The right hon. Member for Sidcup had to come to the House the following day and apologise for saying that.

Mr. Hayhoe

If the Minister of State looks at the figures in the Department of Employment abstracts, under the heading of "Unemployment" he will see that the figure in 1972 did not go above 1 million. The hon. Gentleman is now providing an excuse, saying that he had some reservations. Yet, in the debate last week, he said: If Conservative Members want the facts and figures they can have them. In 1972 the official figures showed that there were 1½ million unemployed."—[Official Report, 3rd February 1977; Vol. 925, c. 878]. There were no parentheses in the Minister of State's statement and no explanation. I accept that later in the debate he referred to the different way in which the figures were calculated, but his reference to 1½ million, if it means anything at all, and if he is not just playing about with figures, can only mean that he was seeking to show that unemployment in 1972 was a worse problem than it is today. That is utterly wrong.

Mr. Harold Walker

If any hon. Member went to the Library and looked at the Department of Employment Gazette for February and March 1972 he would see that the official total of unemployed in the United Kingdom was approximately 1½ million. It is open to any hon. Member to take a short stroll to the Library to get confirmation of that figure.

Mr. Hayhoe

The more the Minister of State goes on with these explanations the less convincing he becomes.

In 1972 adult students were included in the raw total figure for unemployed, but now, by common consent, we have excluded them because we do not think that their inclusion gives a reasonable measure of unemployment. If the Minister of State wanted to grub around in the mire of statistics to produce a figure which concealed the truth, I accept that he was very successful. That is what I am criticising, for he should have the honesty to accept that unemployment is much worse now than it was in 1972 and he should not seek to hide behind a phoney figure, as he has done.

I now turn to the figuring on which the Bill seems to be based. If we look at the monthly figures from January to June 1976 we see that the fund started in January with a deficit of about £60,000 and that by June it was up to £7.6 million. The figure was for 25th June, which would have been the last figure available when the Chancellor was putting together his package which he announced on 22nd July. By then the figure was £7.595 million—let us say £7,600,000.

If one takes an average one finds that over the five months January through to June there was an increase of £1½ million a month. If one converts that into an annual rate, it appears that the fund was going into deficit at a rate of £18 million a year. How extraordinary that a measure which flows from what the Chancellor said on 22nd July is now intended to change the outgoings from the fund by not £15 million, or perhaps £20 million, but precisely £18 million a year.

Could it be that at that time, looking at the trend in the figures and considering the best information available, those concerned saw the fund going into deficit and asked themselves how they could overcome that and decided that it could be done by putting an extra impost on industry, as has been done in the past, by lowering the amount of money statutorily paid out for redundancy payments, or by changing the level of the rebate?

If they did that, what is so interesting is that the apparent growing deficit, running at an annual rate last July of £18 million, was based upon phoney figures, because when corrections were made later in the year one discovered that, instead of the fund ending the year heavily in deficit, it ended £5.27 million in credit, and it looks as though the fund will stay in credit even after meeting the increased outflow resulting from the insolvency provisions of Sections 63 to 69 of the Employment Protection Act which have been activated. On looking at the figures, which have been made available by the Department in response to Questions from myself and one of my hon. Friends, the impression that one gains is that the fund will probably stay in balance, and perhaps even gain a little, unless there is a rapid change in the number of people becoming redundant.

If unemployment were to rise sharply and many more were made redundant the charges on the fund might be great, and one must ask: What is the logic behind the Bill? Is it that, deep down in the recesses of the Department, it is being decided that it looks as though unemployment will continue to rise and that the charges on the fund will continue to increase because of a rising number of people becoming redundant? If that is so, the Minister of State was singularly reticent in putting the true reasons before the House.

Mr. John Page

I have been listening carefully to my hon. Friend's brilliant indictment of the Government as he has lifted sheet after sheet and found the wormeaten pages underneath. Has he been able to discover whether there is any relationship between every 100,000 workers unemployed and the outgoings of the fund? That kind of graph might help.

Mr. Hayhoe

I think there is little doubt that there is a relationship between the numbers becoming unemployed and the numbers becoming redundant. I have not done the necessary mathematical analysis, but if one looks at the figures one sees that there was a larger outflow from the fund, a larger number of payments to those becoming redundant, in 1975–76 than in 1973–74. The last sharp rise in the number of redundancies in any one year was in 1971. My hon. Friend will remember that there was rising unemployment then, which peaked in about the beginning of 1972.

An inspection of the figures would lead one to believe that there was a relationship between unemployment and redundancy, but I hope that the Minister will be able to get from his Department a more carefully worked out mathematical judgment of this. In dealing with statistics of this kind it is always wise to look at them extremely carefully because sometimes a superficial relationship does not hold up if one looks at the situation over a longer period. At a time when unemployment is rising sharply and when, as a result, firms are losing employees, the numbers coming forward and calling for redundancy pay are likely to be much higher.

From an economic point of view there is no justification for the Bill, because there is a question mark hanging over the figures upon which it is based. The argument is that in some magical way the Bill will affect public expenditure, whereas in fact it is a self-contained fund. The revenues raised by the charge on all employers are more closely tied to the fund than are most moneys that flow through the Government. One could describe them as assigned revenues, because they can be used only for payments made out of the fund—unless, of course, deep within the Government there is the idea that this is a way of reducing their borrowing requirement, of building up a profit out of the Redundancy Fund. Alternatively, they may believe that the outflow from the fund will increase considerably because of increased redundancies. If that is the situation, the Government have been less than frank with the House.

I think that the Bill will have an adverse effect on local authorities throughout the country. No doubt the Minister will have received, as have many hon. Members, representations from the Association of County Councils. It may be that the association reflects a view that is shared by other local authorities. Members of that association have expressed concern about the possible effects of the Bill upon local government finances. They think that it will place additional costs upon local authority employers, to the relief of the Exchequer, and they point to a particular case where they think there will be an extra burden of £4,000 a year on a county council. They regard the whole proposal as particularly unwelcome at a time when Government expenditure restrictions make some redundancies inevitable in local government. The association has, therefore, placed on record its reservations about and opposition to the Bill.

Another argument that has been produced by some commentators is that the Bill may help to save jobs. This is standing logic on its head—but that is no new thing for Ministers to attempt. What is being suggested is that by amending the provisions of the Redundancy Payments Act it will be made less likely that people will become redundant. Even by the Government's standards this is a curious argument, although it may well be that some believe that this scheme, by its nature, has made it more difficult for firms facing cash-flow problems to achieve the redundancies they believe to be desirable. Perhaps firms will maintain their employees and gradually run themselves into insolvency as a result of this Bill.

It is an unjustified, irrelevant, irritating Bill, which, I hope, the Government will withdraw, and I hope they have second thoughts about the whole basis upon which it is built. Why do the Government not hold proper consultations about the vital questions of overmanning, retraining and labour mobility? Let them have consultations with the CBI, the TUC and others concerned. It must be reasonable to ask why no other industrialised country has seen fit to follow our example of a redundancy payments scheme. It is not because other countries are not concerned about the problem of redundancy. It is because, in their judgment, they have found better ways of dealing with the human misery and the dislocation in industry and commerce which can follow redundancies.

Since the Redundancy Payments Act has been in being for over 10 years, I believe it would be sensible to carry out an intensive review to see whether it has achieved its purpose. Kenneth Barnes, now Permanent Secretary at the Department of Employment, is reported as having said of the Act in May 1975 at a PEP conference: It is impossible to say if it has been a success. If that was translated out of Civil Service-speak it might even be accounted as an outright attack on the measure. To say that it is impossible to say whether it has been a success may well be an indication that there are grave doubts within the Department as to the usefulness of this measure. It would be a good idea to have a review of the way in which the Redundancy Payments Act has worked for the past 10 years. Of course it has worked to some extent; all hon. Members will accept that. The preparations for the Act were made by a Conservative Government and the measure was introduced in 1965 by a Labour Government. Over the years it has been changed, generally by agreement.

The time has come to look at the way in which we deal with redundancy. Over £1 billion has been paid out in the past 11 years. It is estimated that between 7 per cent. and 10 per cent. of those who are unemployed have received a redundancy payment, but cash payments are by no means the only way or even the best way of dealing with redundancy. That is the experience of other countries. Job placements and transfer arrangements are of great importance. There should be particular emphasis laid on the older worker who, when he becomes redundandant, often finds it much more difficult to get another job. Although he might get a high cash payment under the scheme it may be that we are not being sufficiently flexible nor taking full account of the increased difficulties facing such a person. Have we got the right balance between the amount paid in cash to the redundant worker and the resources available for retraining? During a recent visit to Sweden I was impressed by the comprehensive action taken there by the local Labour Market Boards to deal with the redundancy situation. It is possible that we could benefit from the experience of Sweden and other countries with which we have close ties.

This Bill threatens the basis of the present Act without putting any constructive alternative in its place. The economic arguments for the Bill on public expenditure grounds are nonsensical. All the evidence points to the fact that the Bill arose from a misconception as to the state of the balances in the Redundancy Fund. If the Minister does not have the good sense to withdraw the Bill, think again and hold proper consultations with all concerned, the Opposition must register their criticisms in principle and in detail of this unnecessary and unwanted little Bill.

7.47 p.m.

Mr. Ian Wrigglesworth (Thornaby)

I was pleased that towards the end of his speech the hon. Member for Brentford and Isleworth (Mr. Hayhoe) made some constructive suggestions. He has made a great deal out of what he has admitted to be a small measure. For a large part of his speech he made much out of nothing. I regret that he seemed to have caught a dose of the disease which might be called "Oppositionitis" whereby Opposition spokesmen feel that they must oppose for opposition's sake. They accuse Ministers of saying and doing things which they themselves have done when in Government and which they would be doing at present if they were the Government now. The country has had enough of that sort of thing.

The hon. Member for Brentford and Isleworth tried to make something out of the Secretary of State's comments about the level of unemployment. I know that the unemployed in my area will not be impressed by politicians comparing the records of unemployment of one Government with those of another Government. My constituents are very much aware of the high level of unemployment, as is every hon. Member. We ought not to be looking at past records or ways of gaining a party advantage. Instead, we should be searching for constructive proposals. It was fairly obvious from the hon. Gentleman's comments that he had not heard the statement made today by my right hon. Friend concerning the figure of 2 million unemployed. This was not a figure which my right hon. Friend gave as a forecast but one which was put to him.

I very much agree with my right hon. Friend's remarks that Governments cannot forecast levels of unemployment. No one could have forecast what is happening in the United States at present. The freeze-up there will slow down the economy of the United States, which in turn will have an impact upon prospects in Europe. We cannot forecast the outcome of the economic talks between the Heads of the United States, Japan, Germany and other Western countries later this year. We may be able to get more growth out of the economies of Japan, Germany and the United States, which will bring increased growth to our economy and help reduce unemployment.

Mr. David Mitchell (Basingstoke)

Is the hon. Gentleman saying that the Chancellor of the Exchequer was conning the TUC when he said that unemployment would come down to 3 per cent.?

Mr. Wrigglesworth

I am not saying that at all. I am saying that over many years Governments, whether Conservative or Labour have not made forecasts of unemployment figures. To try to make a party point out of the bogus figure which has been floating around in the Press in the past few days seems to me irrelevant. It is not something that the unemployed in my part of the country will be very much impressed by.

I speak as a Labour and Co-operative Member, sponsored by the co-operative movement, with which I have had a long association. I am sponsored by the North-Eastern Co-operative Society, one of the largest societies in the country, and I was a director for three years of another large co-operative society in South London, the South Suburban Co-operative Society. I have had a great deal of political involvement at both national and local levels in the various co-operative societies in whose areas I have lived. Speaking very much as a co-operator, having talked to people from co-operative societies and heard their views about the Bill, I regret the necessity for the Government to introduce it. I shall be a reluctant supporter of the Bill tonight, but because it flows from the Government's economic strategy it will have my support. However, I should like my hon. Friend the Minister to consider some of the points which co-operators have put to me and to reconsider some aspects of the Bill.

The Redundany Fund is financed from contributions by employers in respect of workers covered by class 1 contributions, at the rate of 0.2 per cent. of their earnings. The costs of collection by the Department of Health and Social Security and other Departments are a charge against the fund income. For the year ended 31st March 1976, collection costs were £1.4 million against an income of £89.6 million. I put down Questions to try to obtain more information about the matter, and it is fairly clear from the answers that the cost of collection has increased markedly over the years. As a percentage of the contributions collected, the costs have risen from 0.6 per cent. in 1970 to 1.6 per cent. in 1976.

The percentage of collection costs each year has increased very erratically. For instance, in 1970 the cost of collection increased by 25 per cent. In 1971 the increase was only 4.5 per cent. In 1974 it increased by 70 per cent., and last year it increased by 63 per cent. There seems to be a wild variation in the cost of collection. Are the collection costs monitored to ensure that they are reasonable? Can they be reduced? Why have they increased in this unsettled way from year to year?

Secondly, I should like to press my hon. Friend on the question of the interest paid by the Government on the fund. When it is in surplus, the fund is invested by the National Debt Commissioners as directed by the Treasury. The fund interest in 1976 was £693,000. Are the best rates of interest being paid by the Government for the use of the fund? How do they compare with commercial rates?

In 1974–75 the interest payable on the invested surplus was 5½ per cent. in Treasury stock, I was told in answer to a Question. Does that mean that 5½ per cent. was paid on the fund, or was the yield higher because the stock was bought for less than the nominal £100?

The Government also said in reply to that Question that in addition there was short-term investment each year in Treasury bills at a rate of interest equivalent to the then current minimum lending rate or in very short-term investment in Ways and Means advances at a rate ½ per cent. below the minimum lending rate. I hope that my hon. Friend can shed light on the matter and assure the House that the best rates are being paid.

Thirdly, I should like to press my hon. Friend on the administrative expenses of the fund, which are paid mainly to the Department of Employment. In 1976 they were just over £3 million, an increase of £935,486 over 1975. Again, I have figures from my hon. Friend in reply to a Question which show that there have been odd increases, and even a decrease, in the cost of administering the fund. Overall there was an increase between 1970 and 1976 from 2.2 per cent. to 3.4 per cent. in administrative costs as a percentage of the fund's total income. But in 1973, for example, the administration charge dropped by 1.6 per cent. Last year it went up by 44.1 per cent. In 1966 it rose by 69.8 per cent. These figures are very difficult to understand.

There is another serious point I should like my hon. Friend to examine, although he may not be able to respond fully tonight. Co-operative societies are reasonably generous about redundancy pay. Several local understandings have been reached with trade unions to give better payments than the Act requires, after taking the rebate into account. When the rebate is reduced—the Bill proposes that it should be brought down to 40 per cent. —generous employers must pay more to implement local understandings. That is obviously an unfair and undesirable state of affairs because it encourages the less generous employer, and both as a co-operator and trade unionist I and many of my hon. Friends would be opposed to that. It seems to me contrary to the whole principle of the scheme. We want to encourage employers to pay as generously as possible. I should like my hon. Friend to give an assurance that he will reconsider the matter and see whether changes can be made to overcome the problem so that generous employers are not penalised.

Will the Minister consult the co-operative movement and other employers and trade unions on this point in order to get their views? There was no consultation about the proposals contained in the Bill, and I think that it would be well received if the Government could consult to see whether this point and the others I have raised could be discussed with the interested parties, together with the whole operation of the fund, in order to see whether it could be improved both in the interests of employers and in the interests of trade unions.

8.0 p.m.

Mr. David Mitchell (Basingstoke)

We are discussing a Bill which aims to reduce the rebates of the Redundancy Fund by increasing the costs of redundancy to the employers.

First, I question whether the system of redundancy payments that we have is the best way to help the worker and to get value for money. Secondly, I want to consider the effect of what is proposed on jobs, particularly those provided by small employers. Thirdly, I want to raise the question of the need for companies to be able to make reserves against their contingent liability to make redundancy payments, which are clearly going to be substantially higher than in the past.

In the 1964 White Paper the whole concept of redundancy payments was spelled out: an active policy to make it easier for workers to change jobs in accordance with the needs of technological progress ". When one looks at the way the fund is operating one wonders whether it is doing that. Redundancy affects everyone differently; the needs and the problems which have to be overcome by each person are different. Redundancy is a human, personal and individual problem, and varies from person to person in its effects.

For example, one person may be lucky. Having been made redundant he may cross the road and get another job in the following week, even, perhaps, at a higher rate of pay. I am not saying that that is likely in the present situation, but it happened many times in that period of prosperity which we enjoyed a few years ago. When it happened, such a person was still entitled to claim quite substantial sums in redundancy payments even though he was better off as a result of changing his job. When, by contrast, a hapless fellow is weeks or months or—and he will be, if this Government continue in office—years out of work, the circumstances are wholly different. If he has young children, for example, the expense and the problems associated with redundancy and unemployment are very much greater. It may mean that he has to move from one part of the country to another. Again, an older man who has savings may get a well-paid job after a few weeks, whereas a younger man with children faces appalling problems in a tumbling standard of living as his unemployment continues.

One sees a major fault in the whole system. The fund pays someone according to how long he has been in a job and not according to the difficulties and problems he faces in moving from one job to another following redundancy. We should be asking ourselves whether it would not be better to roll redundancy payments into wage-related unemployment benefits and retraining. In such ways can we help the individual according to his circumstances and not, as the present system operates, according to how lucky he has been in the length of time he stayed in his previous job.

Quite apart from that, there is the whole question of mobility. When trade picks up we shall need greater mobility of labour. It is certain that when the economy starts to recover it will not be the firms which were on the crest of the wave during the last boom which will be the big uptake of employment; it will be different firms, in different industries, with different products, the growing and expanding firms.

The problem of the present redundancy payments system is that it locks a man into his job. When a man who has been in his job many years moves to another, it involves a risk. He may go to a better job in an expanding firm, and then something goes wrong—for example, the Government change their policy on value added tax—and suddenly what appeared to be a better prospect becomes a period of unemployment. In such circumstances the man who has been only a couple of years in that new job does not get a penny, whereas the man who has stuck to his old job for a long time is paid a substantial sum, even if he then is able to cross the road and get a better job.

This cannot be the right way to help people at the time that they need help, which is when they are unemployed, and not necessarily when they move quickly from one job to another. The way in which the Act is now operating is a prescription for immobility, and will be against the interests of the economy when trade starts to pick up.

Then there is the effect on jobs, particularly in the smaller firms. I want to examine two items—cost and when the cost is incurred. I believe that the Government have got it wrong. I say that with respect to the Minister of State who, I know, has the very best of intentions. Unfortunately, good intentions will not be sufficient. This measure will cost £18 million a year, and one may say that that is a fraction of industry's costs—and so it is; but fractions add up, and that tends to be overlooked. This increase comes on top of the £8½ million in 1968, the £17 million in 1969, the increases in corporation tax, the increase in the "jobs tax"—the 2 per cent. national insurance levy starting in April—and the sudden and unexpected ending of the regional unemployment premium. There is a grave risk that this new increase will be the last straw to break many small business camels' backs.

I say that because of the timing at which the expense is incurred. This payment hits a firm at its worst possible moment. It is staggering under the misfortunes of the economy and the incompetence of the Government. It regretfully has to reduce its labour force—and whatever rude remarks hon. Members opposite like to make about capitalists, no capitalist makes a profit out of not having his factory working or his work force at work. When the employer regretfully decides that he must reduce his labour force, that is the time of acutest economic and financial pressure on the firm. It is then that it has to pay out the money. My fear is that the firm will be driven into bankruptcy by this measure instead of surviving in a slimmed-down form and then taking on more people when the opportunity comes. The liability will be substantial in terms of having to pay for a large proportion of its men, and it may not be able to continue trading.

An example of where this will actually hurt in the next few months is to be found in the building and construction industry where, by deliberate planning or otherwise, the Government seem determined to put the boot into small builders. We have the deliberately announced intention of left-wing members of the Government to extend the direct labour organisation of local councils so that they will get building contracts instead of the established firms in the building industry. The result will be that small building firms will go bust. They will have to make redundancy payments while the men join the army of people working for local council direct labour departments. It is adding injury to insult that in such circumstances the small business man will have to pay up at the worst possible time.

If we want a slogan to illustrate the effect of Government measures, it is "Kick a firm when it is down and it is more likely to go under". I fear that that will happen in many cases because of the way in which this liability will operate.

I turn to my third point. I hope that the Minister will take it on board and will be prepared to make representations to his colleagues in the Treasury. A number of business men have put it to me that they face acute problems because they do not have the cash with which to make redundancy payments. Therefore, they cannot pay off the men whom they cannot afford to carry. That leads them into a continuing decline, to the point at which they go bankrupt. As the Minister will know only too well, bankruptcies among small firms in the past year were higher than at any time during the depression. The level of bankruptcies in the past year was higher than when the Minister was a boy, when unemployment was so desperately high in the 1920s and 1930s. Indeed, bankruptcies are likely to be higher this year than at any time during the depression.

The fact is that firms are getting into further and further trouble because of this contingent liability. It is a liability against which a firm is not allowed to make a reserve. It is a liability that cannot be entered in the accounts, although it is clearly an expenditure that will have to be met at some stage. There is a strong case for the Minister saying to the Government that there should be an allowance in terms of companies providing reserves for this purpose. That could be mixed in with the way in which the Chancellor deals with the system of stock relief, which is offset against profit. I do not propose to enter into the details, only to say that representations should be made to the Treasury.

At the same time the Minister might draw to the Treasury's attention the curious position in which the close company is placed. Many small firms are close companies. They are compelled to pay out, and yet they have this contingent liability for which they should be making cash reserves.

In his opening remarks the Minister explained that claims were difficult to foresee for various reasons. He said that much depended on the age of the employee, the length of service and rates of pay. That was sleight-of-hand. He omitted the main reason that he is unable to foresee the level of demand. I refer, of course, to the growing level of unemployment under this Administration. The Minister must regret it as much as I do, but the level has doubled since the Government took office. Who knows by how much it will increase? Surely we might have some estimate. Certainly, the Secretary of State has cast some doubts. We have order, counter-order and disorder. We have had the long pause and the uncertain answer about the question of 2 million. We have had the statement in the House today. It seems that we can take our choice.

The certainty is that the Government do not know how much damage their economic policies are doing. We must warn them that they cannot take more and more money out of industry as this little measure—just another straw—is doing. By continuing in this way we are making more certain that the level of unemployment will go still higher.

8.16 p.m.

Mr. Douglas Henderson (Aberdeenshire, East)

When the Minister introduced the Bill he was somewhat diffident about it. He said that it was a simple Bill, but he was somewhat diffident about the effect it would have and the financial and economic implications. I think I am right in saying that he told us that the cost would be 1.8 per cent. of 1 p per week. I am sure that he will correct me if I am wrong. He added that that is not very much as an overall cost. Of course, but it is not the overall cost that matters. The main problem is where the cost has an impact. In fact, it has an impact exactly when redundancies occur. There is a substantial cost at the moment at which this measure applies.

Mr. Harold Walker

In order to clear up any misunderstanding that there may be about the figure I put before the House, I said that it would be 1.8p—that is one penny and eight-tenths of a penny—for every £60 of wages on which earnings contributions are paid.

Mr. Henderson

I am grateful to the Minister for clearing up that point. I should hate to exaggerate anything he said. He is very good at doing that himself. I should never try to emulate him in that respect.

The Minister said that it would be extremely difficult to forecast the economic impact of the Bill although the Explanatory and Financial Memorandum suggests that it will be approximately £18 million per annum. That reminds me of a story of averaging. When dealing with figures we have to be especially careful when referring to averages. I was once told that the average age for contracting a certain disease was 40 years. As I approached that age that sounded somewhat alarming, until I discovered that the average was made up in a peculiar way. The disease was contracted only by babies and people of 80 years and over. It seems that the Minister's figures are somewhat akin to that form of statistic.

Surely the Minister is able to give us some indication of the cost, or, as the Government would put it, the savings of different levels of unemployment based on the implementation of the Bill. Perhaps he will give us the figure for every 100,000 redundancies. Perhaps the Minister will listen for a moment. I shall pause so that he can hear what I am saying. Is the Minister not in a position to give the cost for every 50,000 people made redundant, or every 100,000 or 200,000? Surely his Department has some yardsticks by which it can make such calculations? That must be so if it can arrive at £18 million per annum. That figure must have been calculated on some basis. If it could find a basis for making that calculation, surely it could take the House into its confidence and tell it what effect the Bill will have at varying levels of unemployment.

It is clear that one of the major factors in all this is that we appear to be on a rising redundancy curve. The figures in Scotland which I have obtained from a parliamentary answer show that almost 22,000 people were made redundant in 1976. The last unemployment figures published showed that unemployment in Scotland had increased by 2,000 a week over the past three months. From other parliamentary answers it appears that the figure is likely to run at about 1,500 a week for the next three months. This is a very serious situation. Looking at the Bill, I think that we are entitled to further information about the impact of the economic costs. The Government can provide this information if they can provide the figure of £18 million in the Bill.

As the hon. Member for Basingstoke (Mr. Mitchell) said, the impact of this proposal will be felt when companies are least able to provide the cost. It will happen when people are actually made redundant. Paying for this additional slice of redundancy money could make a considerable difference in the situation.

Another matter to which the Minister may care to apply his mind is that, in many cases, trade unions can negotiate more generous redundancy terms with employers than the bare minima laid down in the Bill. This will make it more likely that employers will be less able to pay these more generous terms, which, in many cases, have been agreed.

Coming as it does on top of everything else—our general unemployment situation, with an unemployment rate of 8.4 per cent. in Scotland, the withdrawal of regional employment premium, which has taken £78 million out of Scottish industry, and the national insurance surcharge which is upon us—this figure of additional costs for redundancy payments will bear down on the situation. These are all cumulative factors. We cannot look at each of them in isolation.

I come, then, to the way in which the legislation has been introduced. When the Bill was published I tabled a Question to the Secretary of State for Employment asking him to list in the Official Report the organisations which his Department had consulted about the Bill. I was informed quite boldly by the Under-Secretary that there had been no consultation by his Department with any organisation—not with the TUC, the STUC, the CBI, nor anyone. There had been no consultation with any organisation. I tried to discover the considered views of the TUC, the STUC and the CBI. I found that very few of them were aware of the impact of the Bill or even that it was to come before this House today.

I also asked the hon. Gentleman to give an estimate of the effect of the Bill on Scottish employment, especially in the small business sector. He replied that the reduction in the rebate might possibly reduce the number of redundancies declared. I hope that we shall get some amplification of that rather illuminating statement. However, he went on to say that its financial effect on both large and small businesses generally would be relatively limited.

If it is really likely to reduce the number of redundancies declared, how can it have a financial effect on large and small businesses in terms of the rebate? Is it the Government's new plan to reduce unemployment by cutting the employer's part of the Redundancy Fund? That is what seems to be implied in the hon. Gentleman's answer. I tend to think that he was, perhaps, answering with the equivalent, on the Treasury Bench, of his tongue in his cheek. I suggest that there was certainly an amount of cheek in his reply, in any event.

Taking into account the fact that the Government's proposal will hit the cash flow of many companies, especially small companies, and that it is another blow at the morale of people in business, I have to apply the test of whether it is likely to help the employment situation in Scotland. On the basis of the Minister's explanation, the answer is a categorical "No", and I shall recommend my hon. Friends to oppose the Bill.

8.25 p.m.

Sir Anthony Meyer (Flint, West)

Any hon. Member speaking from the Opposition Benches has to be extremely careful about criticising any Government measure purporting to cut Government expenditure. However, I think that my hon. Friend the Member for Brentford and Isleworth (Mr. Hayhoe) demolished that argument thoroughly. But just in case it is levelled as an accusation against the Opposition that in opposing this measure they are contradicting their oft-repeated call for cuts in Government expenditure, let me make it plain that if I am challenged and asked "If you will not accept this cut, what are you prepared to accept instead?", my reply will be that in preference to this kind of selective cut I should much prefer to see VAT increased to 10 per cent.

In any event, I choose to distinguish between two different kinds of purported cuts in Government expenditure. There are those cuts which operate a genuine reduction in the level of demand. There are those other purely bogus cuts which do not operate any reduction in the level of overall demand but merely transfer the burden of one section of the community to another in such a way as neither to reduce the overall level of demand nor to increase the nation's productive capacity.

The Bill is a paramount example of a transfer which does not cut the level of demand, which does something to reduce the nation's productive capacity and which contributes not one whit to the reduction of the level of inflation. Therefore, it seems to me a peculiarly inappropriate Bill to bring forward at present.

The Bill is peculiarly inappropriate because it adds to employers' costs at a time when everything else seems to be conspiring to add to those costs and at a time above all when the Government are bringing in their payroll tax, which must surely be their most ludicrous contribution to increasing the total level of unemployment.

At a slightly lower level, perhaps, the measure is objectionable because it is unpredictable and arbitrary. It is an accepted fact on both sides of the House that it is most desirable that Government policy towards industry should have a measure of continuity, should be predictable and should be gradual in its transition. It is better to have bad policies which are consistent and predictable than to have violent alterations between good and bad policies.

No party has been more clamorous than the Labour Party in its demands for continuity. I well remember the violent criticisms directed at the Government constituted by my party when we went over from the system of investment grants to that of investment allowances. The whole burden of the complaint of Labour Members was that it was an arbitrary and sudden change in policy which could only have an upsetting effect on industry. Such criticism lies more than ever against this measure.

The Bill will make its own contribution towards increasing unemployment. I was glad to hear my hon. Friend the Member for Brentford and Isleworth ask for an inquiry into the effect of the Redundancy Payments Act on employment prospects generally. It is not as easy to be certain about the effect of the operation of the Act as it is to be certain about the effect of rent control and security of tenure legislation on the sensational increase in homelessness in the last decade.

There is a very much more respectable argument in favour of a redundancy payments situation particularly in times of full or over-full employment, when it is a valuable means of increasing labour mobility. At the moment, however, it is very difficult to argue against the proposition that the existence of redundancy payments has contributed to the increase in the total level of joblessness, because the number of jobs saved by such payments is vastly outweighed by the number of job opportunities lost.

I am desperately worried about unemployment in my constituency. In certain parts of my area unemployment has now reached the scarifying level of 20 per cent., and each days brings well publicised news of fresh redundancies. There is also the much less well publicised news of the loss of job opportunities, and talk about natural wastage conceals the fact that job opportunities for school leavers are drifting away day by day. This trend will not be reversed until the Government and the trade unions give real priority to curing unemployment and creating new jobs.

The legislation already on the statute book has been extraordinarily ineffective in achieving that aim. Despite the Employment Protection Act and the Redundancy Payments Act, we still get redundancies at Courtaulds, threatened closures at Shotton and a massive loss of employment at Hawker Aviation, the three major employers in my constituency.

This measure, piddling though it is, casts still further doubt on the Government's sincerity when they say that their overriding priority is industrial regeneration and the need for investment in industry. In its small, ignoble way, the Bill will make a contribution to the rising level of unemployment because it will increase the number of bankruptcies, causing more redundancies and cutting the already dismally small number of job vacancies. Without hesitation, I shall vote against it tonight.

8.32 p.m.

Mr. John Page (Harrow, West)

I hesitated to rise initially because I was hoping to get some statistics from the Library to enlighten my speech with new information, but in the words of Sir Spencer Summers, who, I think, once said in Committee on a Bill concerning employment, I am advised, at least I have not been advised, but if I had been I am sure that this is what I would have been advised— [Interruption.]

Mr. Deputy Speaker (Sir Myer Galpern)

Order. Perhaps we should follow the custom of television and have a "commercial" in between until the hon. Member gets his relevant information.

Mr. Page

That is a very good idea, Mr. Deputy Speaker, and it would certainly have an enlivening effect on our debates. Also, it might make the economy of the House of Commons rather better than it is.

I had hoped that the Minister of State would be here for me to remind him of the number of occasions when he and I have taken part on debates on redundancy payments. He is, of course, the longest-serving Minister that the Department of Labour, Department of Employment and Productivity and Department of Employment has had for a long time. His service at St. James's Square is almost as long as the life of the trees in the middle of that square. It is a great compliment to the House that he is so knowledgable, but it must be acutely embarrassing to him to watch the rolling inconsistencies of Government policy over the years.

The saddest part of the Minister of State's speech was when he said that the Bill was part of the efforts of the Chancellor of the Exchequer in seeking to upgrade the recovery of the economy. I suppose that it is part of what is known as the industrial strategy. Frankly, I do not understand what "industrial strategy" means, except that I believe that thosuands of people are engaged in working out statistics and making new plans and policies. One likes to think of industrial strategy as the Chancellor of the Exchequer, like some great field marshal in headquarters operations room, discussing with his commanders new moves which should take place. That, of course, is the situation that he often portrays to the House. His forecasts include such things as unemployment down to 3 per cent. in 1979, as we heard earlier. But when the other generals leave he rushes to the telephone, asks to be put in touch with the commanding officer of B Company and shouts "Attack at once", so that the strategy tends to go by the board.

How can the Bill seek to upgrade the recovery of the economy when it is yet another impost on productive industry? This is a further form of taxation on industry. As far as one can see, it does not fall on the Government or the Department of Employment.

Although there will be a reduction of £18 million in the amount paid out by the Department for the fund, the Explanatory and Financial Memorandum states: No changes in public service manpower are expected to result from this Bill. It seems curious that a saving in expenditure of £18 million cannot result in the saving of even one Government job in the process. That is less difficult to comprehend when one realises that it is not a saving in Government expenditure. It is simply that levies paid in by industry will remain in the fund for a little longer. It is not Government money, because no one has ever suggested that contributions to the Redundancy Fund are taxation. It is supposed to be a self-balancing fund, and, therefore, it is double-talk to suggest that the Bill is providing a saving in Government expenditure.

This again leads us to the reasons for the Bill. My hon. Friend the Member for Brentford and Isleworth (Mr. Hayhoe) and my hon. Friend the Member for Basingstoke (Mr. Mitchell), that proud and successful defender of the small business man, pointed out that the only reason must be that new and greater calls will be expected to be made on the fund.

The Secretary of State made an embarrassed broadcast which I heard while I was driving up to the House of Commons today. In it he refused to say that he did not predict 2 million unemployed, but he refused to say the opposite. He simply said that the figure had been mentioned. and he passed by on the other side.

This must be one of the few examples —almost the only example—of sensible forward provision by the Government. They have realised that over the next year or so unemployment will increase disastrously and unnecessarily, and as it increases their demands on the fund will increase correspondingly. Therefore, in order not to increase the percentage of the levy, the Government are reducing the amount to leave a slightly larger quantity in the kitty which can be drawn upon when these further redundancies take place.

If this small Bill is reported in the Press, the news will be yet another log thrown on to the fires of exhaustion and frustration of management. It is all very well for the hon. Member for Sowerby (Mr. Madden) to laugh. I apologise for my method of speaking, but I do not apologise for the sentiment. The point that I seriously advocate is that there is a great sense of frustration in middle management, which is constantly exhorted by the Government to do better. It is told by the Chancellor, by the Prime Minister and by all Ministers at one time or another that management will be supported by the Government in helping the economy to recover, yet all that hapdens is that management is given no new incentives. Differentials in management wage scales are constantly being compressed. Managements' efforts to manage its businesses are continually interrupted by Bills such as this.

If the Government are asking for a year for Britain, they should first get rid of the Chancellor of the Exchequer. Then they get rid of many of their policies and try to support those in private industry who are really making an effort to achieve more productivity and to earn money for the country.

8.42 p.m.

Mr. Nicholas Scott (Chelsea)

The Bill has been called ignoble, mean, small and little. Apart from the Minister, not a single Labour Member has risen to advocate the Bill. The hon. Member for Thornaby (Mr. Wrigglesworth) made a brave effort, but he said that he would go into the Lobby reluctantly. I am astonished that the Treasury Bench has been unable to persuade a single one of the distinguished occupants of the Labour Benches to advocate the Bill with the same strength as the Minister.

The principal reason for supporting the Bill given by the hon. Member for Thornaby was that it flowed from the Government's economic strategy. I suppose that is as good a reason as any, but, having watched the Government's economic strategy in operation over the last two and a half years, I should have thought that that would be a reason for not supporting the Bill rather than for supporting it. The fact that we have to have the Bill is, in part, a measure of the failure of the Government's economic strategy.

It is right that the people of this country who are presently unemployed should be reminded that their fate was settled during the early days of the Labour Government. On that party's return to office in March 1974 it abandoned the restraints on public expenditure that had been introduced by the previous Tory Government, and all attempts at wage restraint. We wasted 14 months in a total free-for-all while the fate of those who are presently unemployed was sealed by the abdication of responsibility by those who were then, and are now, responsible for our economic affairs.

I appreciate the difficulties faced by the Secretary of State for Employment in forecasting the future level of unemployment and in forecasting how the figures are likely to move in the medium term, but I wish that the Minister would be rather more forthcoming. Some commentators claim to have perceived an unemployment pattern that is a new phenomenon, to have seen a new pattern emerging. They say that much of the unemployment which has been created in the past two and a half years may not go away when the economy begins to expand; that there is an underlying structural element that may mean that young people and those with few skills will find themselves unemployed for very much longer than has been the case in the past; and that the pool of unemployment may not be mopped up as it has been in previous expansion periods of the economy.

This has relevance to the provision that we make for unemployment, redundancy and retraining. We should not look at the redundancy payments scheme in isolation from the general provision for those who are unemployed.

My hon. Friend the Member for Harrow, West (Mr. Page) said that the Minister of State was the longest-serving Minister at the Department of Employment. I must be the shortest-serving Minister, having been appointed in January 1974 and finding that events quickly caught up with me and took me not only out of the Department, but out of the House. Despite my great admiration for the Minister of State I was disappointed when he slipped into his speech a reference to employers getting the benefit of redundancy rebates. This is not just a semantic argument; this sort of thing happens far too often. The whole concept of the redundancy payments scheme was that payments to people who became redundant would be made by a partnership of employers and the Government. If the Government are now turning this round and saying that the rebate is a benefit, they are indulging in the same sort of double talk that they use when equating mortgage interest relief with housing subsidies in the public sector.

The Bill is yet another burden on industry. It may be a small burden, but it is another straw closer to the breaking of the camel's back, and it comes at a time when companies are least able to afford the extra burden of redundancy payments. I once worked for a company which had to declare a number of people redundant, and the cost of financing the operation was a tremendous worry to those who were responsible for the orderly management of the company's affairs. The Bill can only make such a situation worse.

I support the argument of my hon. Friend the Member for Brentford and Isleworth (Mr. Hayhoe) that it is time for a full-scale review of the workings of the redundancy payments scheme, although, since that criticism was being made from these Benches before 1970, it is a pity that there was not such a review during the period of the last Conservative Government. We know that there are abuses of the scheme; many may be against the spirit rather than the letter, but everyone in industry knows about them.

My main complaint, however, is that the scheme is an extremely blunt instrument for carrying out the task that it it supposed to do. The way in which payments are calculated takes no account of the social and human cost to the people being made redundant. The scheme does not pretend to be an efficient mobility allowance. It is an extremely crude instrument. While the hon. Member for Thornaby claimed to support the Bill he drew attention to the increases in administrative expenses and collection costs and to the deficiencies in the investment policy of the fund.

These matters should be examined together in a full-scale review of the scheme. At present, there are a variety of measures designed to help those who lose their jobs—for example, flat-rate unemployment benefit, earnings-related benefit, mobility allowance, retraining allowance, and redundancy payments. Since unemployment has doubled under this Government—and we hear noises that it will go still higher—surely the time is ripe to review the whole package of provisions for those who lose their jobs, and to see that they are as sophisticated and as finely tuned as possible.

8.51 p.m.

Mr. Fred Silvester (Manchester, Withington)

We do not suggest that the Bill creates a new redundancy situation; but it provides the opportunity to examine the problem of redundancy and to see whether the Bill moves in the right direction. I conclude that it does not move in the right direction, for a number of reasons.

The large sums of money which are now devoted to redundancy payments compare in size to those which are devoted to other forms of industrial support. We debated the North-West Region a few days ago. North-West hon. Members know that there is a crying need for all types of assistance in that area, through either the private or public mechanism, to stimulate declining industries, particularly on Merseyside. All parties have been involved in providing substantial sums of money for industry. The method has varied from pumping the money into industry, to easing the pain of redundancy through the redundancy payment scheme. When that scheme started 70 per cent. of the money was provided by the State and 30 per cent. by the employer. The State's contribution dropped to 50 per cent. and today it is down to 40 per cent.

The effect of that is to take away some of the original purpose of the scheme. The original scheme was intended to provide a type of insurance scheme for people faced with redundancy. Payments were made even if the companies concerned could not afford them. It seems right that the employer should pay a fair share, but the scheme should not be considered to be a form of taxation upon the employer. It was intended to be a partnership between the Government and the employer. However, the burden of the partnership is swinging more towards the employer.

We must consider whether that continuous trend is having a bad effect upon the employment situation. The Department of Employment undertook a study in 1975. It involved a sample of 10 per cent. of those who were benefiting from redundancy payments. It was a matter of some interest to me that the weight of those payments was going to the South-East. That strikes me as an odd conclusion to reach if one is concerned with the effect of these payments upon people suffering unemployment. It is not the sort of area to which one would expect to find the weight going. Also, one then says to oneself that these sums of money—I am not sure of the current figure, but it has been running at £200 million a year or more—are very large indeed for assisting unemployed people.

On Thursday we were discussing all sorts of other schemes which would involve lesser sums, and we were scrabbling around to find the money with which we might do other jobs. We were proposing another scheme on the lines of the job release scheme. We are all the time looking for ways of finding money to alleviate the situation of people faced with the dramatic event of unemployment suddenly coming into their lives. Therefore, it is reasonable to ask whether this is the right way for us to do it, or whether we should have a thorough look at the whole scheme.

My hon. Friend the Member for Basingstoke (Mr. Mitchell) always makes the plea for small businesses, and quite rightly, too, but there is an aspect of the whole matter of the burden upon small businesses and on companies in respect of redundancy payments that we should recognise. The Employment Protection Act, in addition to the payment, provides for prior notification of redundancies on a larger scale than was done previously. It also provides for time off to find work, and so on. All those things are admirable, and I am not saying that they are not the way in which we should be moving. However, if one adds them all together, one finds that more and more burdens are being placed upon the company that seeks to take on additional labour. I emphasise that it is not a question of saying that all these things are undesirable and that we should return to the dark ages. What we have to ask ourselves is whether these additional burdens, these hesitations at present, are having a bad effect on employment prospects.

I do not think that it is an accident that the problems of youth employment are particularly acute. If one looks at youth data over the last two years and compares the number of school leavers out of work in January with, say, the number out of work in the preceding August, one finds that for years past the number unemployed used to be between 10 per cent. and 15 per cent., but it is now runinng at 25 per cent. or more. That is not something—although I am subject to correction if someone has done a detailed study—that has happened in previous recessions.

Therefore, we must ask ourselves whether on this occasion something different has happened from what has happened in previous recessions in regard to the unemployment of young people. We can all put forward different things that we thing may have happened, but one thing that I suggest is a high probability is that it is easier to keep on people whom one might otherwise suggest be moved off to a different job, particularly if they have been in a company for some years and, therefore, the redundancy payments would be higher, than it is to take on young people, particularly as every time one takes on a young person nowadays one is taking on more and more obligations.

I say that not because I do not think that that is a way that the employment policies of this country will develop or should develop; there is very much to be said for that; but it is important in the interests of those people seeking a job, who have also to be considered, as well as those people who are trying to hold on to a job or are in a job, that we consider whether these policies are having a negative effect. I should have thought that at least a prima facie case had been made that these burdens are having a bad effect, particularly on smaller businesses, and that we should take a closer look at them.

I do not think that this Bill will have an earth-shattering effect. It is just another small contribution to the gradually deteriorating situation. Therefore, it would be right for this House to take stock of the way in which redundancy is operating and to say to ourselves "Well, this time we shall say 'No'—till we have had a good and thorough look at the whole operation".

9.0 p.m.

Mr. J. Enoch Powell (Down, South)

I apologise for participating in the debate after being prevented by service on one of the Committees of the House from being present for the opening speeches, although I am not sure that anything was said in the opening speeches which was relevant to the single point I shall make.

I notice that there is not present at the moment on the Treasury Bench a representative of the Northern Ireland Office. I suspect that that may have been the case throughout the debate. Measured by lines, however, more of the Bill is concerned with Northern Ireland than with the rest of the United Kingdom.

You often have been present, Mr. Deputy Speaker, in the late hours of the night or the small hours of the morning when the House has considered Orders in Council under the Northern Ireland Act 1974 which apply the legislation of the United Kingdom to Northern Ireland. It will be recalled that frequently on those occasions my colleagues and I have complained about that procedure. We have argued that there is no possible reason why the House should not legislate at one and the same time for all parts of the Kingdom instead of the legislation for Great Britain having to be clumsily dittoed in the form of an Order in Council for Northern Ireland under the 1974 Act. It is my delight to observe that that is exactly what is being done in this Bill. Although it requires more words to do it for Northern Ireland than for Great Britain, the Government have apparently found no difficulty whatsoever in including Northern Ireland and the appropriate application to Northern Ireland in a United Kingdom Bill.

When my hon. Friends and I have made that objection, Ministers have sung a repeated song. They have said "Yes, it is perfectly true that we could have included the content of this Order in Council in a United Kingdom Bill, but it is our anxiety to maintain the statute book of Northern Ireland intact, complete and inviolate so that if and when devolution returns again to Northern Ireland we can simply hand over the statute book and they can go on from there". Well, the enthusiasm for a Northern Ireland statute book seems at any rate not to have got as far as redundancy payments.

The whole argument is a nonsense and a prevarication. Although the Northern Ireland Parliament, which passed the 1965 Act, which Clause 2 of this Bill amends, had extensive powers of taxation and had powers to legislate quite differently, if at all, from this House, on the subject, for instance, of redundancy, it barely used those powers during the 50 years of its existence.

If hon. Members will compare the introduction to Clause 1 with the introduction to Clause 2 and in particular the words in brackets, which describe the effect of the respective parts of Great Britain and Northern Ireland legislation which is being amended, they will find that they are as like as two peas in the same pod. In the same year—1965—in which this House introduced for Great Britain the provisions of the Redundancy Payments Act, the Parliament of Northern Ireland did exactly ditto by an Act of Parliament of Northern Ireland.

In this Bill, the House and the Government are behaving in an entirely sensible way, a way which is consistent with good legislation. They are using the same Bill in order to amend, uniformly, law which is already uniform in all parts of the United Kingdom. By doing that, they are enabling hon. Members from all parts of the kingdom, if they like, to avail themselves of the opportunity to participate in all stages of legislation, whereas, in the procedure of which I am complaining, Northern Ireland Members are expected to apply themselves to legislation in the form of an Order in Council when that legislation, in proper legislative form, has already gone through all its stages in both Houses.

I therefore want to thank the Government for having legislated in what my colleagues and I regard as the proper way for Northern Ireland in this respect. Irrespective of the merits of what they are doing, they have done it in a proper way. I wish to place upon record the fact that this shows that there is no substance in the continued arguments in favour of legislation late at night by Order in Council on matters in which the law in Northern Ireland is intended to be brought into or kept in perfect unison, as it should be, with the law in the rest of the United Kingdom.

This House has been concerned for many days in the recent past with the question of legislative devolution to other parts of the kingdom—to Scotland and Wales. Of course, I have no intention of trespassing upon that already well-trodden ground. I simply draw attention, on the basis of Clauses 1 and 2 of this Bill, to the fact that Northern Ireland in that whole debate is, in the words of my hon. Friend the Member for Antrim, South (Mr. Molyneaux), the exception that proves the rule and that legislative powers of an extensive character were conferred upon the Parliament of Northern Ireland but that the Parliament of Northern Ireland did not use those powers to give itself different law from the rest of the United Kingdom, because it understood perfectly well that the effect of using those powers would be that it would gradually grow away from the rest of the United Kingdom, which was the one result that it was determined to prevent.

The converse is, of course, that if we confer those powers upon parts of the kingdom which, on the Government's own admission, are to be regarded as nations we cannot expect the same result. On the contrary, we must expect the law in those parts of the kingdom will become rapidly and increasingly diverse from the law of the rest of the country so that, whether we like it or not, a move towards separate status is implicit in that legislation.

I recognise, Mr. Deputy Speaker, that I must already be trying your patience and I desist from that line of argument, patent though the facts are upon the face of this Bill.

I end by expressing the hope that in the future the Government, when amending the law in both parts of the kingdom—Great Britain and Northern Ireland—will, wherever possible and much more often than in the past, use the method adopted in this Bill and not the procedure by way of Order in Council to which not only my hon. Friends and I but those whom we represent so strongly object.

9.8 p.m.

Mr. Ronald Brown (Hackney, South and Shoreditch)

I am concerned about the way in which the 1965 Act is being implemented. Some Opposition Members have been nit-picking over this issue. I am greatly worried about the ease with which some employers turn to the Redundancy Payments Act to ease their problems.

The intention behind the 1965 Act was that where, through a change in technology or other overriding conditions within an industry, a man's job came to an end through no fault of his own, he should be recompensed financially for the loyalty he had shown to the firm over, perhaps, many years and for the fact that he had fallen on hard times until he could find another job. The object was to give him time to use his skill or to obtain fresh skills to enable him to obtain other work. Therefore, instead of driving him out of his job, it was an attempt to help him.

That scheme operated fairly well for a number of years, but from my knowledge of the furniture industry I find that employers are using this as a first resort. I recently learned of and informed the Minister, about a frightening example of a firm in the furniture industry which decided to anticipate the Chancellor's Budget in December. The employer thought it was possible—according to what he had read in the Financial Times and from other financial pundits—that VAT on the goods that his company was producing would be increased from 10 per cent. to 25 per cent. He judged that if this happened his business would be in financial trouble, so he decided to have a pre-emptive strike by issuing 90-day notices to his employees before the Budget. He anticipated that, if VAT went up in that way, he would already be half-way down the field and would not have to start the 90-day period from the date of the Budget.

That does not sound too bad until we remember that the employer was playing with men's lives and that it happened just before Christmas. It was a grossly unreasonable use of a mechanism which was designed for a different purpose. When I remonstrated with the employer, he said "We are free to do what we like. In any event, we share it with the Government. So what?"

I am not sure that reducing the proportion which an employer may claim will be a solution. Employers should not use this mechanism too quickly. I am not prepared to argue that it is the wrong principle to raise the proportion which must be paid by employers as against the proportion that the Government are paying, but I do not believe that the problems of people who have been put out of work have been properly understood.

I have a list of payments made to a number of people who have been declared redundant. It is interesting to compare these payments with those which furniture workers receive when they are declared redundant. Dr. Weiser, of Bunzl Pulp and Paper, was made redundant and got £129,000; Mr. Dowson, of the Rank Organisation, received £150,000; and Mr. Walsh, of Bexhill Urban District Council, did not do badly with ratepayers' money, because he got a little nest egg of £80,000.

Mr. Hayhoe

What about the tax?

Mr. Brown

In the hon. Gentleman's absence, one of his hon. Friends said that we should not mix up this problem with questions of mortgage repayments, rents, and the like, but now the hon. Member for Brentford and Isleworth (Mr. Hayhoe) is mixing up the problem with taxation.

Returning to the large redundancy payments that have been made to some people, it seems that in these circumstances it helps employers of that order to give that sort of help to selected members of their staff. Yet these employers are complaining to Opposition Members that their businesses will go into the ground, if they are forced to pay an extra percentage in redundancy payments.

I support the Bill, but I hope that there will be an inquiry into the operation of redundancy payments and the latest trend in these payments. There are powerful reasons for such an examination not only in the furniture industry but in other industries. For example, one thing that I find in my constituency is that banks are foreclosing rather sharply on firms. Firms appear prima facie to be satisfactory. They have good orders on their books, the personnel employed in an enterprise are working quite happily and with a will, and the firm is apparently making a profit. One Friday morning the men arrive at work at 7.30 and work happily all day until 4.30, when someone walks into the factory and says "I have been put in by the bank as a receiver. I am going to give you your P60s, and you do not have to come back again."

That is the first indication the men receive that something is wrong, yet it means that they have lost their jobs, and from that moment there is continuing discussion about whether their redundancy payment will be available or whether the Government will have to pay it all out of the fund and recoup the money from the employer. There is a great deal of to-ing and fro-ing, and nobody knows what is what. The employer says "I cannot tell you what is happening", and one goes to the bank and is told "Do not talk to us. You will have to talk to our chaps on the floor. It is the regional men who know all about these things."

This is a means of interfering in industry which ought to be investigated. Is it reasonable that, suddenly and without notice, workers should find themselves out of a job when a few days ago they were employed in an industry that was apparently thriving?

Mr. John Page

Does the hon. Gentleman think that a firm is continuing to trade apparently up to the last moment that it can legally do so under the solvency rules because, first, it wishes to keep its employees going and, secondly, because it is too afraid to create redundancies because of the additional cost of cash flow that that will immediately introduce? That is a possibility.

Mr. Brown

Yes. That is why I am asking for an inquiry. One needs to consider some of these aspects. We have had a fair amount of experience of the working of the Act. Twelve years is a long time.

The Government having brought in the Bill, it is not too soon for them to readjust the arrangement between themselves and employers. The Minister should investigate the broad issues to see whether, after 12 years, we need other information or other forms of help for the employer or the employee to ensure that an enterprise can be kept in business rather than be put out of business merely to provide redundancy pay.

9.19 p.m.

Mr. Tony Newton (Braintree)

I must first apologise for not having been present earlier for a substantial part of the debate. It follows that I shall not attempt to go in any detail into the precise provisions of the Bill because I have no doubt that my right hon. and hon. Friends have made a number of comments about the specific provisions of this measure. I should like to take this opportunity to say something about the broader issues raised by the Bill and other aspects of Government policy that relates to this measure.

I have some sympathy with some of the remarks of the hon. Member for Hackney, South and Shoreditch (Mr. Brown), and in particular his suggestion that there is a need for a proper inquiry into the whole working of the redundancy payment scheme. However, it seems to me that the hon. Gentleman undermines his case in that, whereas he criticises the way in which some firms behave, and some aspects of what happens when some firms are driven out of business, he has given the House a graphic description of the chronic difficulties facing British firms, and especially smaller firms, in the economic circumstances that have been created by Government policies over the past few years.

A large number of firms, especially small firms, are desperately trying to keep themselves afloat in the interests of their workers. Simply to preserve confidence they are anxious to disguise their difficulties till the last minute. We are talking about a situation that exists throughout British industry and the economy generally, and that has given rise to these problems. No doubt it would be out of order for me to go that wide into the Government's industrial and economic policies. However, this Bill and its proposals cannot be divorced from the wider issues which have come up time and again in the past few years.

This Bill and other proposals that we have seen recently are very much part of last year's public expenditure cuts. Along with the national insurance surcharge and the Social Security (Miscellaneous Provisions) Bill, this measure is one of the ways in which the Government, after profligate public spending, are trying to claw back a little here and there by whatever means come to hand. How much is saving of public expenditure in a form which simply passes the burden on to private industry? We have seen this happen throughout, with the public expenditure cuts. They are presented as public expenditure cuts and will appear as such in the national accounts, but the burden falls upon private industry and the jobs there. Although it is a small part of that story this Bill is nevertheless an important item in it. It has to be seen together with the other parts and, above all, with the national insurance surcharge—that £1,000 million which is being clawed back mainly out of private industry.

If Ministers start saying how terrible it is that unemployment should be so high, if they say that something must be done, and try to pretend that it is not the result of Government policy but rather is something that has emerged as a result of world trading conditions or whatever, they are not entitled to a hearing. Of course conditions are difficult. What Ministers have to do is explain why so many of their policies—including the proposals in this Bill—might almost have been calculated to add to our difficulties and increase unemployment. We have seen this repeatedly since the Government came into office.

One of the major problems currently facing firms, and much more important than the proposals we are dealing with here, is the chronic uncertainty about the future of stock relief. Why do we have this uncertainty? It is due to the way the Government have tried to wriggle their way out of the damage they did earlier to British industry by increases in corporation tax payments. They wriggled out of this in a backdoor way. Now industry is faced with this uncertainty. That is the classic case which illustrates the manner in which the Government have mishandled industry in the past few years.

Whenever one talks to small-business men, or farmers, one finds the point being made about the effect that capital transfer tax has had on the ability to run the business, to find capital and motivate those involved to build up the business. There is also the problem of what ought to be described as the infamous national insurance surcharge, which is nothing whatever to do with national insurance. It is simply a convenient device for levying a huge payroll tax on British industry; it will increase unemployment and throw greater burdens on to the private sector.

I come to the specific question of unemployment and the effects of the Government's legislation. I have no doubt that Ministers are only just beginning to realise, if they have yet begun to do so, how much their legislation has done to damage employment over the past two years. I am sometimes tempted to think that the main armament of the Government in political debate is the boomerang. They have flung their rent legislation out and now it is returning to hit them and they must do something about it. They have flung out their tax legislation and that, too, is returning to hit them by way of its effects on industry. Above all, they have flung out their employment protection legislation, which is now rebounding upon them and all the people who want jobs.

I do not know whether Ministers are yet ready to acknowledge this, but if, as I hope, they are at all in contact with the people who run firms, perhaps especially the smaller firms, they must know that this kind of legislation, the national insurance surcharge and the Employment Protection Act, are militating against increased employment. No employer will take on an additional man if he can avoid it. That is why we have growing figures of overtime at the same time as we have very high levels of unemployment. Any employer who takes on an additional man is taking on the burden imposed by the Bill and a whole range of other commitments which will be costs on his business, costs he cannot escape. He fears that the Government will add to them, and the logical conclusion to which he comes, when the economic position is so uncertain and he never knows what the Government will hit him with next, is that it is not worth the trouble of taking on an extra man, that it is too big a risk. Instead, he gives out more overtime. That is fine for those with jobs—just as the security of tenure legislation was fine for those with furnished accommodation; but it makes it much more difficult for people to obtain jobs, or furnished fiats or rooms.

So much of the Government's legislation has not only failed to achieve its objectives but has, after all the warnings, done exactly the opposite. Now the words are being eaten in housing. They have been eaten over public expenditure, and they will be eaten in the Budget on taxation. It is high time a few Department of Employment Ministers ate a few words. Till they do we shall not begin to tackle the problem of the worst unemployment this country has had for more than a generation. I hope that the Chancellor of the Exchequer will succeed in his Budget in doing enough to reduce taxation to help to deal with at least one of the problems underlying the Bill, though I doubt it. Somebody will have to do it before industry can recover.

The real lesson of the Bill and all the policies that go with it is that Ministers must not only keep talking about their so-called industrial strategy and the need to encourage private industry but must face up to what it means in terms of their policies. I am sick and tired, just as all business men and farmers to whom I talk are, of hearing from the Government how important it is that British industry should invest, that we should expand food production, that we should counter imports and provide more jobs. They are being lectured year in and year out. Then they find that taxation is increased and they have less money for investment. More and more burdens, administrative and other burdens are heaped on them, making it more difficult for them to run their businesses. Increased administrative overheads divert effort and attention. When firms are successful the Government think of new ways of penalising them.

It is possible to exaggerate this, and it may be that many people in British industry do exaggerate it, but that is the mood, We are a long way from the Government's securing the confidence of those in British industry that they must have if we are to achieve the Government's objectives. Till business men, looking at Ministers whose activities affect them say "There are men who understand our problems; even if they cannot solve them all and cannot do everything we should like, at least they will stop hitting us over the head and show signs that they want us to do a good job", we shall not have the industrial recovery that Ministers want.

9.29 p.m.

Mr. David Madel (Bedfordshire, South)

We have had a very useful debate. The theme throughout the speeches from the Opposition Benches and the two speeches from the Labour Benches is that the Government should take the Bill away and have widespread consultation with industry, with management and unions, and let us know their conclusions. It is a pity that not more hon. Members opposite were not here to listen to the speeches, not only by my hon. Friends but by two of their own colleagues who echoed our plea for further consultation before proceeding with the Bill.

The debate takes place against a difficult economic background of rising unemployment—including the new phenomenon of structural unemployment, which particularly applies to young people with few if any qualifications—and with fear of a new bout of increased inflation following phase 2 of the incomes policy. Added to that, employers are naturally worried about the 2 per cent. surcharge to be put on them in April, and they have suffered high interest rates in the past 10 months and the continued Price Code. There is also the possibility of sharp increases in commodity prices if, as seems likely, there is a pick up in the United States economy.

The Government constantly say that they want manufacturing industry and exports to expand. We must, therefore, ask ourselves whether the Bill will help industry and firms both big and small. The real worry for the Government is that employers will not be able to maintain their present labour forces, and will add to the unemployment if they have to make people redundant.

Equally, as the many training schemes get under way—and they have a long way to go—the Government hope for an increase in take-up by people who will benefit from them. Therefore, the Government have to strike a balance. If they increase and improve the training schemes, that ought to make it less risky for employers to make people redundant, and make employers less anxious of making them redundant, because then, it is hoped, they will go on to retraining. On the other hand, if there is a slow take-up in the training schemes and the Government persist with this sort of measure, the danger is that employers will have on their books too many people whom they cannot economically sustain, and that the training schemes will not be taken up, so that the whole aim of having a retrained labour force to take advantage of expansion when it comes will be nullified.

The employers' position does not get enough attention from this House. It is a pity that not more hon. Members opposite were here to speak about it. Employers have been making their position known throughout the country. That position has fluctuated wildly with the changes in taxation which have taken place. The Government talk about getting the employers' co-operation and bringing unemployment down by expansion and taking advantage of an increase in world trade. But then they produce this Bill. In such circumstances, we have to ask ourselves whether the Government are serious in their efforts.

My hon. Friend the Member for Basingstoke (Mr. Mitchell) asked a precise point about contingency reserves in balance sheets and burdens which small businesses have to bear in relation to the Redundancy Fund. That question has been asked by small businesses through the country, and I hope that the Minister can give my hon. Friend a detailed answer.

The anxiety of employers over the Bill has been heightened by the figures they have seen over the past two years. For instance, in 1975, over £178 million was received by 340,215 employees in redundancy payments. From 1st January 1976 to 30th November 1976 the number of employees who received redundancy payments was 295,284. One is missing out from those figures the month of December, but when they examine the position of the average payments employers are naturally anxious about what will happen under the Bill.

Mr. John Page

Would my hon. Friend be surprised to learn—perhaps he would be absolutely staggered—that if we add the quarterly unemployment increases over the past two years we reach a total of 653,000 and if we add the number of payments made over the same period the total is 647,000—namely, a 1 per cent. difference between payments made and increases in unemployment? I do not know what it means, but I am sure that it is important.

Mr. Madel

My hon. Friend has made a helpful intervention. It underlines the number of people who have become unemployed in the past months and employers' worries about the cost that they have to maintain under the Redundancy Payments Act 1965.

Mr. David Mitchell

If the comment made by my hon. Friend the Member for Harrow, West (Mr. Page) is correct, does it not suggest that the Government are expecting a substantial increase in unemployment, an increase far above the figure that they have admitted in public as likely to take place within the next few months?

Mr. Madel

I am certain that the Government are worried that such an increase is likely. I hope that the Minister—I shall give him plenty of time to reply—will be able to say something more about the likely increase in unemployment.

The Government will recall that the amount of pay taken into consideration for computing payments under the Redundancy Payments Act was increased from £40 to £80 in 1974. That was one of the factors that caused weekly expenditure to rise from about £500,000 in mid-1974 to over £2 million in mid-1975. Therefore, employers are wondering whether the figure for which the computation is used is likely to be increased again.

We have been debating the whole future of redundancy payments. We have been asking whether there should be a thorough inquiry into the system now that it has been working for over 10 years. I ask the Government to share their thinking with us on redundancy provision. Do they feel that the Act has led to reduced collective resistance to changes entailing redundancy? Is there any evidence to suggest that lump sum payments have helped employees to find better jobs by enabling them to look around at leisure and to make a considered choice when selecting a new job? Is there any evidence that the payments have led to unnecessarily prolonged periods of unemployment? The payments are no more nor less than financial compensation for loss of job, which is only tenuously and indirectly linked to the cost of redundancy. The Government should give us their views on that score. Do the Government think that an increase in weekly benefits for unemployment would be a more equitable form of financial compensation for loss of job and more likely to contribute to more relaxed and rational job seeking?

Now that the Act has been working for 10 years, and given the experience that exists in other countries, and the different ways in which they handle these matters, it is surely time that the Government consider in depth the questions that I have raised. What can the Government do to assist job mobility? Should they not consider the constraints, the difficulties and the obstacles which are faced by those who seek to move around? Are the Government satisfied with the co-operation between local housing authorities? I suggest that that co-operation is nothing like good enough. Even the GLC, which has been merrily overspilling into Bedfordshire and Hertfordshire for 20 years, cannot claim that the necessary contact and consultation exists between the housing authorities in our areas when people are considering transferring jobs.

The Government have announced a review of the Rent Acts. That is welcome. Surely they must admit that private sector rented accommodation has an important part to play when people are moving around the country and changing their jobs. Are the Government satisfied that there is sufficient knowledge about removal costs and grants which can be given to people when making a change of job?

Are the Government satisfied that the time off that is allowed to look for work under the Employment Protection Act has been widely enough publicised? Unless it is, that part of the Act will come to nothing.

What, therefore, are we calling for from the Opposition Benches? First, we want the Government to have more consultation with employers. The hon. Member for Aberdeenshire, East (Mr. Henderson) elicited from a parliamentary answer that the Government had no consultations with industry before bringing forward this measure. We would like the Government to consult the Association of County Councils, for example, My hon. Friend the Member for Brentford and Isleworth (Mr. Hayhoe) referred to the document sent round by this organisation. The Government must pay attention to the fact that the non-metropolitan counties this year face an alteration in the rate support grant which is bound to make it very difficult, if not impossible, for them to sustain present staff levels.

Applications for temporary employment subsidy will be accepted up to and including 30th April 1977. What happens after that? The effect of the subsidy on employment is bound to be reflected in any redundancy payments legislation.

Are the Government satisfied that there is sufficient co-operation between the Department of Education and Science, the Department of Employment and the Manpower Services Commission? I suggest that there is not sufficient consultation and co-operation. I do not think that we have begun to think through where the boundary of education ends and the boundary of training for industry begins.

What, therefore, should Ministers do? No one can say that Ministers in the Department of Employment have been inactive in the past three years. They raced through the Trade Union and Labour Relations Act and the Health and Safety at Work Act. In 1975, they rushed through the Employment Protection Act. In 1976, they raced through the Dock Work Regulation Act, although fortunately it blew up on the finishing line. Nevertheless, Ministers can claim that their time and energy have been spent pushing through major pieces of legislation. No such condition exists in 1977. The Government would do themselves a power of good if they took away this Bill and consulted management, industry, unions and the other organisations which have been mentioned and then came back again either with a measure or with some White Paper on this matter.

In my view, it never does any Government harm to say "We are thinking again in view of what this House has said." I invite the Government to do that in respect of this Bill.

9.42 p.m.

The Under-Secretary of State for Employment (Mr. John Golding)

I suspect that this debate has been prolonged by the failure of Opposition Members to be available in sufficient numbers to vote upon the Bill. Looking at the activities of Whips and former Whips on the Opposition Benches, it has been my experience that they have failed to mount anything but a campaign directed by Whips.

I was extremely disappointed by the brevity of the contribution of the hon. Member for Harrow, West (Mr. Page). There was a time when he could have taken this debate single-handed to the winding-up, as Opposition Whips wanted, and I was extremely disappointed that he had to inconvenience other hon. Members tonight.

The contribution from my hon. Friend the Member for Thornaby (Mr. Wrigglesworth), speaking very much as a sponsored Labour and Co-operative Member, was a very thoughtful one. I appreciate that he regrets the necessity for this measure. However, the need to cut public expenditure, to reduce the public borrowing requirement and to give more selective assistance to industry is the basis of the measure.

My hon. Friend asked me a number of questions, and I shall try to answer them as briefly as possible. First, he asked about the costs of collection. The reason for the marked increase in collecting costs in 1973–74 was that the total amount collected by the Department of Health and Social Security dropped with the abolition of the selective employment tax, leaving roughly the same collection costs to be apportioned between four instead of five beneficiaries. The Redundancy Fund pays only its true share of the total collection costs. I hope my hon. Friend will tell our friends in the Co-op that it is the result of the abolition of SET, and then they may take a different view of it.

Administrative costs have been remarkably stable. This is demonstrated if one looks at the approximate cost per case from 1973 onwards, without taking any account of inflation. In 1973 the cost was about £8 per case, in 1974 it rose to £9.50, in 1975 it dropped to £7, and in 1976 it went back to £9. My hon. Friend also speaks very strongly in support of civil servants, and I think he will agree that these figures show the efficiency of the Service.

On my hon. Friend's question of interest rates—that is, whether the best rates are obtained for the Redundancy Fund surplus—the answer is "Yes"—within the limits laid down by Parliament in Section 26 of the Redundancy Payments Act. My hon. Friend also asked about the question of generous employers. That is a point which we will take away and look at again. I shall not give any commitment, but I assure him that we shall look at it in the light of speeches on the Bill.

The speech of the hon. Member for Brentford and Isleworth (Mr. Hayhoe) was disappointing. Speaking for the Opposition, he asked whether there could be consultations between the CBI and TUC on manning and training. Has he not heard of the Manpower Services Commission? That body was established by the Conservatives to perform that very task. In fact, it is its daily task to bring the CBI, the TUC, local authorities and education interests together to discuss manpower.

With the exception of one brief reference, the hon. Member for Bedfordshire, South (Mr. Madel), in a more moderate speech, also failed to realise the importance of the Manpower Services Commission. Are the Opposition suggesting that we should scrap the Redundancy Payments Act? In a pussyfooting sort of way, that is what they seem to be saying in one speech after another.

I was deeply disturbed to hear the hon. member for Brentford and Isleworth quoting out of context the words of the present Permanent Secretary to the Department of Employment. The hon. Member should consider very carefully whether, from the Opposition Front Bench, he should try to involve civil servants in matters of public political controversy in this way. I say no more about it, but I believe that the hon. Member should not have said what he did.

The hon. Member for Brentford and Isleworth said that he wanted a review because cash payments were not the only way of ensuring mobility. When the Redundancy Payments Act was introduced, the speeches from the Opposition Benches were, in a sense, the same as those we have heard tonight. They are discussing unemployment benefit rather than redundancy payments, and from that Front Bench they have made that the purpose of the Bill. They have created one straw man after another and have then knocked them down.

I have read the Second Reading speeches on the Redundancy Payments Act. At the time the then Minister, Mr. Gunter said: We have now moved on to another stage, and the Bill gives reality to the idea that, as The Times said in a recent leader commenting on the Bill, 'a man has some rights in his job just as an employer holds rights in his property, and his rights gain in value with the years.' I would say to the House that if a man is deprived of those rights by economic circumstances outside his control, he ought to be compensated. Industry has long recognised the justice of this for higher management and I believe the House would agree that it is high time to extend it to all workers."—[Official Report, 26th April 1965; Vol. 711, c. 35.] My hon. Friend the Member for Hackney, South and Shoreditch (Mr. Brown gave us figures of compensation tonight which have been given to leading industrialists, employers and highly-paid administrative workers. We on this side do not think that the principle established in 1965 is any less true now.

Mr. Scott

If that is the principle, and if that is the task of the Redundancy Payments Scheme, why is that right, which is built up over the years, extinguished once a person reaches the age of 64?

Mr. Golding

If the hon. Gentleman reads the later part of Mr. Gunter's speech, he will find that matter well dealt with.

We are not debating the principle of whether we should have redundancy payments. The basis of the Opposition's attack tonight is that they still confuse redundancy payments with unemployment benefit. We strongly believe that redundancy payments should remain. The hon. Member for Brentford and Isle-worth made up his own interpretation of the Chancellor's speech. It is clear from re-reading the Chancellor's statement that the importance of this measure is that it is one contribution towards shifting the emphasis towards selective assistance.

I share the concern expressed for the small firm and for any who are declared redundant. That is why I regard the temporary employment subsidy as having made such a great contribution in the last 12 months to helping small employers and to helping to avoid redundancy.

We heard the hon. Member for Brentford and Isleworth put forward a supposition about the figures, but I must tell him that the figure of £18 million is not and cannot be precise. It does not depend entirely upon the calculated future level of unemployment. We are not talking about unemployment benefit. Redundancy payments will be paid whether or not individuals are unemployed. It is compensation for loss of office.

At a time of high investment, there can be a substantial increase in the number of redundancies without any increase in unemployment. Conservative Members must get this clear. They opposed the Redundancy Payments Bill in 1965 on the basis that they would have preferred first to see wage-related benefits.

If less money is taken from the fund, more is available for lending to the Government, and that would reduce public expenditure. But borrowing from the fund does not take money permanently out of the fund. That is the answer to the hon. Member for Brentford and Isleworth.

Mr. Newton

I think I am following the Minister's argument, but I wonder whether he recalls that during the debate on the national insurance contributions the argument was used the other way round—that the Government were only borrowing the money from the fund and that that was what justified it. Now the Minister says that to borrow the money would not be enough. Can he tell us which Government Department is arguing what?

Mr. Golding

I do not mind giving way to hon. Members who have understood the argument, but not to those who have just been wheeled in from the Smoking Room to fill in time, as was the hon. Member for Braintree (Mr. Newton). I have said clearly that the Bill makes it possible for a loan to be taken from the fund without loss to the fund itself.

The hon. Member for Aberdeenshire, East (Mr. Henderson) wanted to know whether it would be more difficult to keep workers and what the effect on unemployment would be. We cannot be precise about this. I have listened to the arguments put by the Conservative spokesman that if the redundancy rebate payment is reduced it will be more difficult for employers and they will be less inclined to lay workers off in consequence. If the Conservatives were right about that, and if the fact that employers would have to contribute a bigger lump sum would deter them, the effect would be marginal. There would be some savings in jobs, but that is the greatest weight that I would give to that argument. If the Conservatives are right, job savings would follow, but I do not think that that is necessarily true.

The hon. Member for Harrow, West asked for precise figures. I regret that they are not available, but the Northern Ireland estimate indicates a redundancy rate in 1977–78 of 31,000 and of approximately 33,000 in 1976–77. I shall try to let the hon. Member have more precise figures.

I return once more to the questions put by the hon. Member for Aberdeenshire, East. It is true that there were no consultations, but the hon. Member would have been fairer had he indicated to the House that in a previous Question he had asked me how many representations had been made. He really should have quoted those figures as well. The number of representations was extremely low.

I shall not give way again because it is 9.59 p.m., and if I were not on my feet when the Division was called the

Whip would knock my head off. I commend the Bill to the House.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 129, Noes 130.

Division No. 58.]	AYES	[9.59 p.m.
Allaun, Frank	Hamilton, James (Bothwell)	Pavitt, Laurie
Armstrong, Ernest	Harper, Joseph	Richardson, Miss Jo
Ashton, Joe	Harrison, Walter (Wakefield)	Roberts, Albert (Normanton)
Atkinson, Norman	Heffer, Eric S.	Robinson, Geoffrey
Bates, Alf	Hooley, Frank	Rodgers, George (Chorley)
Bean, R. E.	Hoyle, Doug (Nelson)	Rodgers, Rt Hon William
Bennett, Andrew (Stockport N)	Hunter, Adam	Rooker, J. W.
Bishop, E. S.	Irvine, Rt Hon Sir A. (Edge Hill)	Rose, Paul B.
Blenkinsop, Arthur	Jackson, Colin (Brighouse)	Ross, Rt Hon W. (Kilmarnock)
Booth, Rt Hon Albert	Jackson, Miss Margaret (Lincoln)	Ryman, John
Bray, Dr Jeremy	Jay, Rt Hon Douglas	Sedgemore, Brian
Brown, Hugh D. (Provan)	John, Brynmor	Shore, Rt Hon Peter
Brown, Ronald (Hackney S)	Johnson, James (Hull West)	Sillars, James
Buchan, Norman	Jones, Barry (East Flint)	Skinner, Dennis
Callaghan, Jim (Middleton & P)	Judd, Frank	Small, William
Canavan, Dennis	Kerr, Russell	Smith, John (N Lanarkshire)
Carmichael, Neil	Kilroy-Silk, Robert	Spearing, Nigel
Carter-Jones, Lewis	Lamond, James	Spriggs, Leslie
Cartwright, John	Leadbitter, Ted	Stallard, A. W.
Clemitson, Ivor	Lestor, Miss Joan (Eton & Slough)	Stewart, Rt Hon M. (Fulham)
Cocks, Rt Hon Michael	Lewis, Ron (Carlisle)	Strang, Gavin
Cohen, Stanley	Loyden, Eddie	Summerskill, Hon Dr Shirley
Corbett, Robin	McCartney, Hugh	Taylor, Mrs Ann (Bolton W)
Cowans, Harry	McDonald, Dr Oonagh	Thomas, Ron (Bristol NW)
Cox, Thomas (Tooting)	McElhone, Frank	Tinn, James
Crawshaw, Richard	MacFarquhar, Roderick	Tuck, Raphael
Cryer, Bob	McGuire, Michael (Ince)	Wainwright, Edwin (Dearne V)
Cunningham, Dr J. (Whiteh)	MacKenzie, Gregor	Walker, Harold (Doncaster)
Davidson, Arthur	Maclennan, Robert	Walker, Terry (Kingswood)
Davis, Clinton (Hackney C)	McNamara, Kevin	Ward, Michael
Doig, Peter	Madden, Max	White, Frank R. (Bury)
Dormand, J. D.	Magee, Bryan	Whitehead, Phillip
Douglas-Mann, Bruce	Marks, Kenneth	Whitlock, William
Ellis, John (Brigg & Scun)	Marshall, Dr Edmund (Goole)	Williams, Alan (Swansea W)
Ennals, David	Maynard, Miss Joan	Wilson, Alexander (Hamilton)
Evans, loan (Aberdare)	Mikardo, Ian	Wise, Mrs Audrey
Flannery, Martin	Millan, Rt Hon Bruce	Woodall, Alec
Fletcher, Ted (Darlington)	Miller, Dr M. S. (E Kilbride)	Woof, Robert
Fowler, Gerald (The Wrekin)	Morris, Charles R. (Openshaw)	Wrigglesworth, Ian
Fraser, John (Lambeth, N'w'd)	Murray, Rt Hon Ronald King
George, Bruce	Noble, Mike	TELLERS FOR THE AYES:
Golding, John	Orme, Rt Hon Stanley	Mr. David Stoddart and
Graham, Ted	Ovenden, John	Mr. Donald Coleman.
Grant, George (Morpeth)	Palmer, Arthur
Grant, John (Islington C)	Parker, John
NOES
Aitken, Jonathan	Cooke, Robert (Bristol W)	Hall, Sir John
Arnold, Tom	Cope, John	Hannam, John
Atkins, Rt Hon H. (Spelthorne)	Corrie, John	Hayhoe, Barney
Bain, Mrs Margaret	Costain, A. P.	Henderson, Douglas
Banks, Robert	Crawford, Douglas	Hicks, Robert
Beith, A. J.	Dean, Paul (N Somerset)	Hodgson, Robin
Benyon, W.	Dodsworth, Geoffrey	Holland, Philip
Berry, Hon Anthony	Douglas-Hamilton, Lord James	Hunt, David (Wirral)
Biffen, John	Drayson, Burnaby	Hunt, John (Bromley)
Boscawen, Hon Robert	Eden, Rt Hn Sir John	Hutchison, Michael Clark
Bottomley, Peter	Ewing, Mrs Winifred (Moray)	James, David
Boyson, Dr Rhodes (Brent)	Eyre, Reginald	Johnson Smith, G. (E Grinstead)
Brocklebank-Fowler, C.	Fairgrieve, Russell	King, Evelyn (South Dorset)
Brotherton, Michael	Fisher, Sir Nigel	Knight, Mrs Jill
Buck, Antony	Fookes, Miss Janet	Knox, David
Bulmer, Esmond	Fowler, Norman (Sutton C'f'd)	Langford-Holt, Sir John
Butler, Adam (Bosworth)	Glyn, Dr Alan	Latham, Michael (Melton)
Carlisle, Mark	Godber, Rt Hon Joseph	Lawrence, Ivan
Chalker, Mrs Lynda	Goodhew, Victor	Lawson, Nigel
Clark, Alan (Plymouth, Sutton)	Gorst, John	Le Merchant, Spencer
Clark, William (Croydon S)	Gow, Ian (Eastbourne)	Luce, Richard
Clegg, Walter	Gray, Hamish	McAdden, Sir Stephen
Cockcroft, John	Grist, Ian	MacCormick, Iain
McCrindle, Robert	Page, Richard (Workington)	Stewart, Rt Hon Donald
Madel, David	Penhaligon, David	Stewart, Ian (Hitchin)
Marten, Neil	Percival, Ian	Stradling Thomas, J.
Mates, Michael	Prior, Rt Hon James	Tapsell, Peter
Mather, Carol	Rathbone, Tim	Tebbit, Norman
Maudling, Rt Hon Reginald	Rees-Davies, W. R.	Thompson, George
Mawby, Ray	Renton, Rt Hon Sir D. (Hunts)	Townsend, Cyril D.
Maxwell-Hyslop, Robin	Rippon, Rt Hon Geoffrey	Vaughan, Dr Gerard
Mayhew, Patrick	Roberts, Michael (Cardiff NW)	Walder, David (Clitheroe)
Meyer, Sir Anthony	Roberts, Wyn (Conway)	Walker, Rt Hon P. (Worcester)
Miller, Hal (Bromsgrove)	Ross, Stephen (Isle of Wight)	Wall, Patrick
Mills, Peter	Scott, Nicholas	Walters, Dennis
Mitchell, David (Basingstoke)	Shaw, Giles (Pudsey)	Watt, Hamish
Moate, Roger	Shelton, William (Streatham)	Weatherill, Bernard
Moore, John (Croydon C)	Shepherd, Colin	Welsh, Andrew
More, Jasper (Ludlow)	Silvester, Fred	Wigley, Dafydd
Morrison, Charles (Devizes)	Sinclair, Sir George	Winterton, Nicholas
Morrison, Hon Peter (Chester)	Skeet, T. H. H.
Nelson, Anthony	Spence, John	TELLERS FOR THE NOES:
Neubert, Michael	Spicer, Michael (S Worcester)	Mr. Jim Lester and
Page, John (Harrow West)	Stainton, Keith	Sir George Young.
Page, Rt Hon R. Graham (Crosby)	Stanbrook, Ivor

Question accordingly negatived