SMALL BUSINESSES (PROTECTION OF EMPLOYMENT) (AMENDMENT) BILL

HC Deb 24 February 1978 vol 944 cc1863-957

Order for Second Reading read.

11.5 a.m.

Mr. John H. Osborn (Sheffield, Hallam)

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

I well remember when Mr. Frank Cousins, the then hon. Member for Nuneaton, first became Minister of Technology. After the first few Committee days on his Industrial Development Bill he approached my hon. Friend the Member for Oswestry (Mr. Biffen) and me and surprisedly thought that we were trying to help the Government. He pointed out that surely the task of the Opposition was to oppose. I replied that although that particular Bill was bad and dealt with the wrong issues at the wrong time, the role of Opposition in 1964 was to ensure as far as possible that the Government did the least damage possible with that measure.

Today, in exercising the privilege of a private Member who has been lucky in the Ballot, I speak at a time of high unemployment. Although the figures this week were better than we expected, last week's economic indicators caused the Prime Minister to refer to "gloom". The scene could be changed if some of the burdens on the vital sinews of industry—small businesses—were lifted.

In recent years there have been many debates and papers on the plight of small businesses. This aspect has been brought home to me not only by the Small Business Bureau of the Conservative Party, of which my hon. Friend the Member for Basingstoke (Mr. Mitchell), who is on the Front Bench today, is chairman, but by the small business section of the CBI, the chambers of commerce and the chambers of trade.

Coming from Sheffield, and being a member of the Council of the Sheffield Chamber of Commerce and closely associated with the local Chamber of Trade, I have had some aspects of the plight of smaller businesses brought home to me. When I drew this fortunate place in the Ballot I was anxious to use the opportunity to help in an area where I thought there was the greatest need. I am trying to do something positive for small businesses.

What do we know about small businesses? The Bolton Committee Report, the last authoritative document on the subject, showed that there were 1,250,000 small businesses or enterprises in the United Kingdom employing 6 million people—25 per cent. of the labour force. In the manufacturing sector, of which most is known, the most recent available census of production showed that 95 per cent. of all firms employed fewer than 200 people. Between them they employed 21 per cent. of the labour force and produced 17 per cent. of the gross output in manufacturing. These businesses have a special relationship with the clearing banks and they have the special characteristics of the owner-manager.

The Bolton Committee reminded us that the vast majority of small business men in manufacturing industry had had an ordinary education. Only 10 per cent. had a degree, 8 per cent. had accounting qualifications and as low as 1 per cent. had any post-school qualifications. Therefore, going into business on their own account is a positive and successful alternative to working in large-scale industry.

I have found that in many walks of life these people get the job done. They are the go-getters. But they must have adequate incentives and not be frustrated by too much red tape. At the moment there is a lack of incentive and they are shackled by red tape.

The chairman of the Bolton Committee, Mr. John Bolton, wrote in The Times on 2nd November that the Government had not begun to consider measures that would relieve small businesses of their problems. At the beginning of his article he wrote: 'For this relief much thanks; 't'is bitter cold, And I am sick at heart.' That about sums up the reaction of the average small business man to the measures announced by the Chancellor in the recent mini Budget. I had hoped that the Chancellor of the Duchy of Lancaster would be here today, but I welcome the fact that there is a Minister on the Government Front Bench who has the interests of small businesses at heart. The CBI has estimated that in 1950 Parliament added to the statute book 1,000 pages of legislation that affected businesses. In recent years this has risen to around the 2,500 to 3,000 mark.

Recent surveys—I have one from the Birmingham Chamber of Trade—on orders, production stocks, cash flows and labour have pointed out that in the last four months 19 per cent., at most 27 per cent., taking monthly figures, had increased their work forces. Those firms keeping work forces constant on the monthly figures vary between 58 per cent., and 66 per cent. Those which have decreased their work forces vary between 15 per cent, and 16 per cent. In Birmingham and the West Midlands there is no optimism for the future.

We have had many debates in the House of Commons on youth employment, but it is by no means a British problem. A report to the Secretary of State for Employment from the Sheffield and District Chamber of Trade states that whereas in Sheffield at this time of year there were 120 boys and 172 girls out of work in 1974, the figure in January this year is 441 boys and 604 girls. The report went on to state that whilst artificial employment is being created for unemployed young people, the Government are not tackling some of the major reasons for youth unemployment.

As a private Member, I have had to decide where the boot was pinching hardest. My hon. Friend the Member for Basingstoke and the Conservative Small Business Bureau might ask me to look at national insurance provisions and their impact on the self-employed, the difficulty of obtaining planning consents, the desire that the Government should get off the backs of people and let small business men get on with their own businesses, the desire to cut back the amount of paperwork and bumph, the need to deal with tax on the small business man, the fact that it is too high on those who run their own businesses and makes it almost impossible for people to start in business. These issues have been looked at.

There have been suggestions relating to income tax—for example, that the top rate should be 60 per cent., that corporation tax should be lower, that there should be better provision for depreciation and replacement rather than historic costs, that there should be simplification of VAT, easier methods of paying rates, less onerous provision of capital transfer tax and a tapered capital gains tax. But these matters are hardly suitable for a Private Member's Bill. I suggest they could be dealt with positively by a future Conservative Government, or the Chancellor will have his opportunity on 11th April. Indeed, perhaps the Chancellor of the Duchy of Lancaster could deal with these matters.

The point that has come home to me is the effect of industrial relations legislation on small businesses and its impact on employment opportunities. My hon. Friend the Member for Manchester, Withington (Mr. Silvester) asked the Secretary of State what research had been undertaken to assess the effect of legislation passed in the last three years on new employment among small firms. The Minister of State replied that the Manpower Services Commission had jointly commissioned a study of the effect of the Trade Union and Labour Relations Acts 1974 and 1976, the Redundancy Payments Act and the Employment Protection Act on companies' employment practice. In January, the Minister of State stated that there was no clear evidence that employment legislation substantially discouraged employers from making more jobs available.

That is backed by a statement by the Secretary of State on 2nd November: We have seen no hard evidence so far to support the allegation that has been made about the adverse effects of employment legislation in the labour market. However, there was an interesting debate on small and medium-sized undertakings in the European Economic Community in Strasbourg on Thursday 16th February. In November last year the Economic and Social Committee carried out a study of small and medium-sized undertakings, and it concluded that a strong and healthy industrial activity by the small and medium sized undertakings—SMUs, as they are called—was essential. They are labour-intensive businesses, and in the Community they employ 30 million citizens.

My hon. Friend the Member for Cheadle (Mr. Normanton) moved an important resolution, which was supported by the Parliament, against the views of Commissioner Davignon, emphasising that small businesses could not be separated from other businesses and must be considered as part of the industrial activity as a whole. That is why the Bill will affect all industry, not only small businesses.

It was interesting that in the debate all parties—Communists as well as Social Democrats—welcomed the initiatives that had been taken by Mr. Notenboom, the rapporteur, or draftsman, at the time. Whilst the debate was taking place, arrangements were being made to publish this Bill which we are debating today. In my speech I said that throughout the Western world social legislation, partilarly legislation creating a fairer deal on the shop floor, was at the same time taking away employment opportunities. Labour spokesmen in the hemicycle acknowledged that was a fair point, although the problem was more acute in Britain than in other countries.

Recently, the Small Business Bureau of the Conservative Party carried out an interesting survey of the factors limiting the number of workers being taken on by small businesses. Its most important conclusions on that aspect were, first, the Employment Protection Act, secondly, the Redundancy Payments Act and, thirdly, the Trade Union and Labour Relations Act. It was further found that the most damaging impact of all this legislation, with survey figures of between 77 per cent. and 87 per cent., was due to the unfair dismissal procedures.

I had the opportunity of studying a National Chamber of Trade Review of March 1977 on unfair dismissals and the smaller business. There was a series of recommendations. They hit on the need to look at the problem created by unfair dismissal law for the small employer. In fact, they were highlighted in the Sheffield Chamber of Trade bulletin only this month. The chamber of trade had to admit that it found some difficulty in defining "small" for these purposes, but they clearly stated this to be so if his business or practice is of such limited size that it will not support a specialist member of staff to deal with personnel matters and industrial relations. The chamber of trade made a number of recommendations, which no doubt the Secretary of State for Employment has had an opportunity of reading, but implied that it would be of value if hopeless cases could be sifted out in advance of a tribunal hearing. It refers to the period of 26 to 52 weeks, with which I shall deal later.

On 21st November there was a most valuable debate in this House, and I listened to part of it. In that debate my right hon. Friend the Member for Crosby (Mr. Page), who, I hope will be here today, stressed the fear of the small business man that he would not be able to get rid of an employee whom he did not like without being dragged before a tribunal. He emphasised the fear among small business men that they would be put to great expense if they concluded that an employee was not worth what he was being paid and wished to get rid of him.

My right hon Friend referred to the Franks Committee and the need for the respondent, the employer, to know beforehand and have set out in a document the main points of the case against him. I very much hope that my right hon. Friend will be here to elaborate those points today. His observations in that debate clarified the area in which a Private Member's Bill could, in accord rather than conflict with the Government, do something to help.

My experience in industry has been with companies at times employing between as few as nearly 1,500 and as many as 4,500 people. They have always had legal advisers and employment officers. But when a small business man becomes involved with an industrial tribunal, he has to face the prospect of paying costs, obtaining witnesses and employing solicitors and barristers.

I visited an industrial tribunal on one occasion when a small business man, employing fewer than 20 people, had his manager and six or seven of his shop floor staff present and had the prospect of paying solicitors and barristers for possibly a three-day hearing. My reaction in that tribunal was that if I were running a small business I could not contemplate continuing to stay in business if this happened too often. Medium and large-sized companies with professional personnel and legal departments have the resources to mount a reasonable rebuttal. I have talked about these matters to many who work in the tribunals and I have been able to read some of the CT1 forms and the CT3 forms what employees and employers have to complete. In one instance the employee merely stated "I was unfairly dismissed" in response to the claim for unfair dismissal. The employer replied "This man was not unfairly dismissed." Presumably the employer had to go before a court, unless another course were taken, to be faced with providing a plethora of witnesses and legal support.

If the piece of business in question appears in any way uncertain—the CBI has undertaken many surveys in this area—and the business in question looks at all uncertain in terms of quantity or duration, he will forgo taking on more people. The information that I have received is that if a potential employee has the right skills and a good background he will be taken on. However, if there are doubts about a potential employee he will not be taken on. I have read letters to that effect.

Smaller firms are especially concerned because each individual employee can be a significant part of the total work force. Small businesses are more likely to be subject to fluctuating trade conditions. That coincides with their ability, in principle, to react quickly to market opportunities. However, as small firms in the main lack specialised personnel or legal departments, there is no doubt that preparing for a tribunal appearance imposes a heavy burden upon them. They have to face all the correspondence and evidence, the sifting of which puts great pressure on small businesses.

It seems that there is an imbalance. By being dogmatic and over zealous about the rights of existing employees, the scales have probably tilted against the employer, and thus against the interests of the potential employee. An even greater problem is that many small employers are now choosing to settle out of court so as not to be involved in two-day or three-day hearings.

The debate on 21st November dealt with the matters, costs and settlements but the Bill deals with the small area where Parliament can do something. Shop floor social legislation in this country and in others is imposing a formality on industrial relations. It was my good fortune some 20 to 25 years ago, but associated with one of the larger groups of companies, to run a small business with three others. We moved to a new factory at which about 70 people were employed.

On looking back, I like to think that I tried to be a good employer; I had been brought up in the right traditions. Compared with the rigidity of private and public large corporate companies, I found a willingness, loyalty, zeal and enthusiasm that have been the true example of the strength of British industry. It is only now that I am fully aware of my good fortune 25 years ago to have been part of that spontaneous relationship which I have seen in farms and other small businesses that I visited. I have had occasion to work on or visit one farm off and on for about 40 years. It was once my second home. That is why with the hon. Member of Wolverhampton, South-East (Mr. Edwards) I have been keen to sponsor co-ownership groups in the House of Commons. Formalism, legalism and bureaucracy must not be allowed to snuff out the small business man.

I turn to the work of the tribunals. We are trying to introduce legislation to alter the practices that have developed under the protection of employment and the trade union and labour relations legislation of recent years. The Industrial Society feels that one way of doing so is to bring about the better training of small business men. I agree. I am certain that my hon. Friend the Member for Basingstoke will elaborate the discussions that we have had with those involved in the tribunals and with the work of their secretaries. On one occasion, with a tribunal secretary, I had the chance of seeing the typical applications that were going forward.

The presidents of the tribunals are aware of the problems, and I am certain that the Minister of State will make reference to that. They are aware of the need to ensure that employers do not go to court unnecessarily. We must welcome these initiatives. However, there is no binding statutory obligation on the chairmen of the tribunals. The Bill seeks to alter the original measures that were imposed on the Minister, namely, an obligation to re-write the regulations. When my right hon. Friend the Member for Crosby is present, I shall ask him to elaborate the reasons for that. If that is not possible, my hon. Friend the Member for Basingstoke will do so.

Clause 3 provides a new set of rules of procedure. Although tribunals have the power to disallow complaints of unfair dismissal where there is no jurisdiction to hear them, it is accepted that industrial tribunals have the power to regulate their own procedures. However, the procedures can vary from tribunal to tribunal. Of necessity they have had to be inserted into Schedule 1 of the 1974 Act.

Instead of being rules under that Act, they would work briefly as follows. The original application would be completed by the employee, the complainant, who would have to establish whether his case could be heard by the tribunal as a matter of jurisdiction. The ground between jurisdiction and merit, and whether there is a case is the whole essence of having a court case.

On the basis of the completed form, the secretary of the tribunal would determine whether the employee had the right to be heard. If he were satisfied that there was no such right, he would serve a notice to that effect on the parties. Unless there were a counter-notice from the employee, it would be assumed that the tribunal had no right to hear the complaint. Naturally, the employee would already have had an opportunity to discuss the matter with a conciliation officer. On the other hand, if the tribunal decided that it had jurisdiction, the complaint for unfair dismissal would be heard in the normal manner.

Clause 4 gives the industrial tribunal an opportunity to consider cases by way of a preliminary hearing on the basis of written particulars without the parties being present, where the tribunal is satisfied that it can come to a decision on the basis of the particulars. The aim is to insert an intermediate sifting phase and to avoid bringing in an employer before it is necessary to do so.

Clauses 5 and 6 are to a certain extent consequential. I shall leave those matters to be dealt with by my colleagues.

It is interesting that in 1976 the total number of applications to industrial tri- bunals had risen more than threefold in three years, from 16,400 to 47,600. The cases heard rose by about threefold, from 6,857 in 1974 to 19,234. It must be borne in mind that 40 per cent. of the unfair dismissal cases are heard but that less than 15 per cent. are found to be valid.

Therefore, there is statistical evidence to prove that employers are being forced into the tribunals much too easily at present. This whole question of the small man being faced with costs for a battery of solicitors and witnesses must be an intolerable pressure on small business. The Bill is aimed at ameliorating the situation.

This Bill deals with the period in which cases for unfair dismissal could be allowed. I have considered raising this from 26 weeks to 52 weeks because of the informality of small businesses themselves. One or two cases to which I have listened have illustrated this. When someone is taken on, perhaps the floor manager is a reasonable person and wants to train him gradually. There is an informal relationship. When a person is invited to join a small business, the hope is that there will be an informal and fair relationship. A period of 26 weeks is not enough time to establish whether a new person fits into a business. From reading the evidence that I have had, I think that it would be wise to go back to a period of 52 weeks, but I do not want the procedure on unfair dismissal tribunals to fall on this meticulous argument of 26 or 52 weeks.

My aim is to ask the Minister of State to consider the Bill objectively and to ask him what we can do in this House to help small businesses. I hope that the House will give the Bill a Second Reading and ensure that the Secretary of State has powers to enforce by law and subsequently by regulation those steps which the chairmen of tribunals are aware should be taken at present.

I hope, therefore, that this modest measure to encourage small businesses will be a step, even if only a small step, in the right direction and will have the full support of the Government and of the House.

11.32 a.m.

Mr. David Weitzman (Hackney, North and Stoke Newington)

I congratulate the hon. Member for Sheffield, Hallam (Mr. Osborn) on his presentation of the Bill. I am afraid that the enthusiasm for this measure is shown by the sparse attendance, on both sides of the House—13 hon. Members on one side, I think, and seven on the other.

I have studied carefully the proposed changes which this Bill seeks to make in the relationship between employer and employee. There are, I think, three main changes. First, there is the proposal to increase the qualifying period before a complaint can be made from 26 weeks to 52 weeks. Secondly, there is the proposal that the Secretary of State may himself reject the application without either party being present. Thirdly, under Clause 4, there is the right of the tribunal to dismiss the claim in the absence of the parties.

As to the first point, the proposal to increase the qualifying period to 52 weeks before an employee can apply to the tribunal, it will be remembered that in the discussion during the Committee stage of the Trade Union and Labour Relations Act 1974 there was an amendment to reduce the period to 12 weeks and that in the result the original period of 52 weeks was reduced to the present 26 weeks.

When an employee is engaged, presumably the employer satisfies himself as to the fitness of the employee for the work. But in any case, in my view 26 weeks is a sufficiently lengthy period in which such fitness can be established. There is, in any case—and I emphasise this—power to alter the period of qualification by statutory order.

What the Bill would do is to make the qualifying period 52 weeks by an Act of Parliament. That period could be altered only by another Act of Parliament. It might mean that the sponsor of the Bill, on some future occasion, realised the folly of the proposed change here and he or some other Member who was lucky in the Ballot, or the Government, would have to go through the cumbersome procedure of introducing another Act of Parliament in order to alter the period when already that power exists by Statutory Instrument of the Secretary of State.

Moreover, it must be remembered that an employer can dismiss the employee because of unfitness and because of mis- conduct and, of course, the employee can be made redundant. The right to end the employee's employment is unimpaired in those cases. It is only if the employer acts unlawfully that there is an unfair dismissal and he is penalised. In my view, the change in the qualifying period is unnecessary and should not be made.

I turn to the second point. I have often in this House complained of the detailed, involved language in enactments. It is almost impossible for a layman to understand, and often difficult enough for an astute lawyer to construe. Examples in the Finance Acts amply illustrate that point. I do not know whether the sponsor of the Bill has drawn upon the language of Finance Acts in this respect. I would only say that the ordinary employee would find the language in Clauses 3 and 4 difficult to understand.

I invite hon. Members to look for a moment at Clause 3 and the new paragraph 21A, sub-paragraph (1) (a) and to read it through. (1)(a) Rules 1, 2 and 10 (but without there being any power to award costs against a respondent) and, so far as applicable, Rule 14 of the Rules of Procedure set out in the Schedules respectively to the 1974 Regulations in respect of hearings in England and Wales and the 1974 Scottish Regulations in respect or hearings in Scotland, and, so far as applicable, the definitions set out in those Regulations shall be applied to these Rules of Procedure as part of these Rules of Procedure. Indeed, the same criticism applies to the other sub-sub-sub-subsections in Clauses 3 and 4.

It is of paramount importance that language should be plain and easily understood by the layman. After all, every person is deemed to know the law. I have tried to construe these clauses. I suppose that, put as simply as it can be, Clause 3 apparently provides that the applicant must first indicate in particulars whether his complaint is well founded in that he is entitled to be heard by the tribunal. It is true that he may seek the assistance of the conciliation officer, but the secretary of the tribunal—not the tribunal—unless there is a counter-notice by the employee, may rule immediately that there is no entitlement. If there is a counter-notice, the tribunal may still decide that there is no entitlement.

In neither case does the employer or the employee attend. There can be no question of the parties presenting their case in person and being examined as to their evidence.

Under Clause 4, the employer receives the original application, and he may serve a notice within 28 days setting out his grounds for rejecting the application made by the employee. If the employee does not serve a counter-notice, the complaint is dismissed. If he does serve a counter-notice, the tribunal may, on the written documents, dismiss the claim. Again, all this is done in the absence of the parties. They cannot attend and gibe evidence, and they cannot be examined in regard to their evidence.

What is the point of this suggested new procedure? The aim of the legislation—which was introduced by a Conservative Government—was surely to allow dismissed employees with a real grievance to put their case in person before an independent tribunal and to secure a fair hearing based upon the evidence produced in person to the tribunal. It is a simple procedure designed to avoid any excessive legalism and one which can be readily understood by the parties.

The procedure suggested in the Bill, if it could be understood, would mean more paper work in the preparation of notices and counter-notices. Hon. Members often talk of bureaucracy and of putting burdens on employers. The Bill would put further burdens on employers.

Although the conciliation officer may be consulted, the parties might have to seek legal advice in the preparation of the claim, the notice and the counter-notice. The object of the original procedure was to avoid undue legalism and to keep the practice simple. That position would be defeated by this measure. Above all it is wrong that the matter should be decided without the parties being present to give evidence and to be examined on it.

I note further that under Clause 3(1) (a) there is no power to award costs against an employer. That is surely wrong. It should be in the discretion of the tribunal to order costs against either party. It is said that changes may be necessary at some time. I agree. But there is power to do this by Statutory Instrument. It is wrong to enact a procedure which can be altered only by another Act of Parliament. It is my strong view that there is no justification for the proposed provisions in Clauses 3 and 4.

No employer can show that he has been adversely affected by present legislation. The employee must be protected because unfair dismissal may mean a loss to his reputation and difficulty in obtaining other employment. The onus of proof that a dismissal is not unfair should remain on the employer. After all, he keeps the records of the work done and he should be able to prove his reasons for saying that a dismissal is justified.

This Bill is another attack on the Government's conduct towards small businesses. In fact, the existing legislation is less stringent than that in other European countries. The record of the Government shows that there have been many measures to assist small firms. Hon. Members will remember that the Chancellor of the Exchequer announced in October last year that there would be further measures. I understand that the Chancellor of the Duchy is, at the request of the Prime Minister, making a special study of the problems of small firms with a view to seeing how they can be helped further. That will not be done by a measure of this kind. It is a retrograde step which should be rejected.

11.43 a.m.

Mr. Paul Dean (Somerset, North)

The hon. and learned Member for Hackney, North and Stoke Newington (Mr. Weitzman) has advanced a number of detailed arguments to support his view that this Bill is unnecessary. I wish to detain the House for a few moments to give some rather broader arguments which point strongly in favour of the Bill.

One of the significant trends that is evident in our country today is the revolt against bigness. First, there is big government, with its ever-growing network of regulations and controls and its army of officials minding everyone else's business at the behest of the State. Secondly, there is big industry, with too many examples, especially in the nationalised sector, of ailing giants with bad records and insatiable appetites for taxpayers' money. Thirdly, there are big trade unions whose powers seem to take precedence over the rights of individuals and the national interest. Too many things have become too big, too remote, too impersonal and too costly. There are too many examples of hardening arteries.

The time has come to redress this balance. We need to create a climate in which individual effort can thrive and provide the driving force to restore Britain's economic health. We need the sturdy independence and pioneering spirit of the small family business and the self-employed. We need the drive and determination of the man who stakes his own savings in his own business. We need the high productivity that is characteristic of British firms, most of which are family businesses. We need the high standards that mark a British professional qualification.

These themes are best illustrated by unemployment. I agree with the proposition of my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) that one of the best ways to create new jobs and to get down unemployment is to encourage existing small firms and to enable new ones to start up. Where are all the new jobs coming from in present day conditions? They are not coming from British Steel or British Leyland. They are not coming from firms—and there are many examples—which are overmanned and underproductive. They are not coming from the Government's job creation schemes, which are at best expensive palliatives; they may be necessary at present but they are not the solution.

In a perceptive leader on 22nd February, The Times summed up this aspect well when, commenting on the temporary employment subsidy and other job creation schemes, it stated: Yet the whole purpose of these programmes is to subsidise industries which cannot compete without Government help and to encourage them to employ more people than they need. As a response to a temporary recession that might make sense; as an industrial and employment policy for the medium term it goes right against the encouragement of high efficiency and high productivity which is the only assurance of jobs. That seems to be a valid comment.

I ask the House to compare two figures. Those workers who are covered by the present job creation schemes number over 300,000. Hon. Members should contrast this with the 800,000 small firms in this country. The 300,000 workers are being helped by fairly expensive schemes. If the 800,000 small firms were encouraged to take on one extra employee each that would have an enormous effect on the employment scene and the present level of unemployment.

I am saying to the Government "You would do more good by creating the right conditions than by imposing solutions." If the conditions are right, small firms will expand of their own volition, but if the conditions are wrong, no amount of Government subsidy will produce an effective driving force.

One of the reasons why the conditions are wrong is that some recent legislation is proving counter-productive. My hon. Friend gave many examples from his own experience which prove that. Legislation designed to protect jobs and to prevent unfair dismissal is making job creation too risky and too burdensome. Indeed, there is some truth in the remark that the Employment Protection Act is becoming, particularly for small firms, the Employment Prevention Act.

I am not suggesting, any more than my hon. Friend was, that we should contemplate repealing all the legislation. There is much in it that is good. But we suggest that we now need to make adjustments in the light of experience where it is clear that the shoe is pinching. I believe that in his Bill my hon. Friend has identified one such area.

I am sure that all of us present today who take an interest in small businesses and the self-employed have talked over recent months to many people who run such businesses and have visited their premises. I have found two overwhelming reactions in making such visits. The first reaction concerns taxation. Time and time again one is told that, particularly for the small family business, it is not worth expanding and making a bigger profit because so much will be taken away in income taxes now or in capital taxes when the business is passed on to the next generation.

The other point that is made time and time again is that the costs of the statutory obligations that go with employing people are too great. We are not talking only about the inevitable overheads that go with employment—the national insurance obligations, the understandable and proper obligations for employee benefits, and the health and safety at work regulations. Much more significant is the difficulty of laying people off if the business declines.

The result is that all too many employers, faced with the present legislation, decide that they will do what they can, produce what they can, with their existing labour force rather than risk expanding their business. This is particularly true of the small employers.

I very much hope, in view of the very helpful remarks made by the Chancellor of the Duchy of Lancaster in response to Questions a little time ago, that we shall have a favourable response to the Bill from the Government. All that my hon. Friend is seeking to do is to relieve the pressure where the employment shoe is pinching most on the small business. I support his Bill on those grounds and hope that the House will give it a Second Reading today.

11.54 a.m.

Mr. Sydney Bidwell (Ealing, Southall)

I, too, congratulate the hon. Member for Sheffield, Hallam (Mr. Osborn) on the clarity with which he presented his Bill. But that is as far as I can go in praise, because I found much that was contradictory in his arguments in support of it.

The House should reflect on the background events that gave rise to the whole idea of dismissed workers being able to go to tribunals which would hear their case that they had been unfairly treated. I recall the amount of time the House gave to the consideration of the Donovan Report, an extremely progressive and widely drawn report pointing a way forward to better industrial relations. I think that that report was the first to include the idea of statutory provisions for workers to plead their case before a tribunal, although the suggestion had been made from time to time in trade union circles. We should not forget the misgivings that many of us on the Labour Benches had about "In Place of Strife".

Then we came to the 1971 Conservative Industrial Relations Act, the IRA, which had a great deal to do with the trade unions putting so much enthusiasm behind the return of a Labour Government in 1974. Therefore, it comes ill from Conservative Members to moan about oppressive legalism in industrial relations. With the Industrial Relations Act we leaped from having the least amount of regulation in our affairs, compared with other Western European countries, to having the most oppressive legalism that it possible to imagine.

The Conservative Government refused to accept any well-considered amendments put forward by Labour Members. It is relevant to recall these events, because we cannot avoid the philosophical content of what is proposed in the Bill and the arguments advanced in support of it. The then Government wanted the TUC to show them how they could amend their legislation. But they had brought about such a hard position that the whole Labour movement was electrified by the thought of repeal.

Nothing that we say in expressing considerable doubt about the wisdom of this Bill means that we wish in any way to knock the small business world fraternity, although sometimes I do not know when a person is a small business man or a big business man, a little tycoon or a big tycoon. There is no fine line that one can draw between the two.

I well understand that the Bill is brought before us in the climate of a campaign to get small businesses to generate business activity, to enable them to employ more workers. I can understand some of the doubts that many small business people have. They are generally very hard working, though not all of them are. They are not all angels. They must be checked, because some of them might be prone to act to an excessive degree. It is a matter of compromise.

As many hon. Members will know, I was once described by my right hon. Friend the Prime Minister as a philosophical revolutionary, I think it was when the Leader of the Opposition questioned some theoretical writing of mine about the advance to a Socialist society.

I and many of my hon. Friends have been brought up to dislike the whole fabric of employer-worker relationships. In fact, the fabric of employer-worker relationships is part and parcel of a capitalist society. It will have to move on to some other form of human relationships. That is what this argument is all about.

Mr. David Mitchell (Basingstoke)

Will the hon. Gentleman comment on the practice which the present law is bringing about by introducing 25-week term contracts at the end of which one is under notice to quit one's job?

Mr. Bidwell

I do not know what pertinence that has to my argument. I want to deploy my case as best I can with regard to the Bill. I do not know what the hon. Gentleman's point specifically has to do with this.

Although I have pointed out the oppressive character of the 1971 Conservative Government Act, we very much welcomed at that time the progressive part of it which for the first time in law—previous Labour Governments were unable to enact this because of time—set up provisions for the unfair dismissal procedures. In the opinion of the trade union movement, that was the only feature of that legislation which was worth hanging on to.

The small business world fraternity should understand that the whole idea of challenging employers, big or small, who sacked workers without recourse to appeals and tribunals, was first inaugurated by the Conservative Government. It is just a question of how best we can have a system of change and flexibility in the pragmatic work-out of the delicate area of industrial relations, whether in regard to small businesses, large businesses, nationalised industries, giant monopoly undertakings or international companies.

I find nothing in this Bill that inspires me. I noted many of the points put forward by the proposer. He used many phrases like "go-getters". Some of my best friends are business men—believe it or not—although I do not rely too much on their votes at election times. Many of them spend too much time on the golf course. I am not saying that good business is never done on the golf course. In fact, discussions about contracts and so on are often arranged in that way. Perhaps it is because many business men have been told by their doctors that their paunches are getting too big. A lot of valuable business discussion also takes place in the club bar.

The hon. Member for Hallam also talked about not having too much red tape. But in many respects the Bill introduces more red tape than exists at present. I do not believe the Bill has very much to do with whether small business men employ young people. If such business men are "go-getters", then by the meaning of that phrase they are expanding their businesses and will have more jobs in consequence. Of course, they will also expand their businesses by efficient measures. But efficiency means that one employs workers in certain aspects of production and distribution. All these factors attend upon the scene.

The Chancellor of the Duchy of Lancaster and other Ministers are charged with exploring and understanding from a Government point of view the difficulties and the problems of the small business world and are doing so on a scale that has not been undertaken hitherto. When we think of the climate in which workers can find themselves, I am not disposed to the Bill, although it contains some flexibility. As my hon. and learned Friend the Member for Hackney, North and Stoke Newington (Mr. Weitzman) pointed out, if this Bill goes through, other legislation will have to be brought in to change it.

I do not want to go over this argument in a mechanical way. The point was ably put by my hon. and learned Friend the Member for Hackney, North and Stoke Newington. But one of his points is worth underscoring. The hon. Member for Hallam said that he did not want to get bogged down in the argument about 26 weeks or 52 weeks. But he must get bogged down in such an argument because that was where the House eventually landed up in the Employment Protection Bill.

One of my hon. Friends actually got an amendment through Committee to reduce the number of weeks to 12. But it was the Government who subsequently fixed it at 26 weeks. That is where it remains. However, there was an assurance by the Secretary of State for Employment at that time that this was not an inflexible matter and that it might move either way. But Conservative Members should understand that we on this side would be very reluctant indeed to support any change, especially with regard to the liberty of the workers. I believe that such a change would also be disliked by the trade union movement generally.

I speak as a trade union Member. When I came to this House I was a member of the National Union of Railway men. I was a former railwayman, although I was never sponsored by that union. I am sponsored by the Transport and General Workers Union. Before that I was a trade union educationist with the NCLC. I was then the first London regional organiser under the new TUC set-up.

I bring to this debate a fair amount of background knowledge about the true spirit of the trade union movement. The true spirit of the trade union movement has never been to protect a bad workman. A bad workman is a threat to the whole trade union fraternity. We find that in the tribunal procedures themselves, although there are sections of vested interest just as there are in the business world.

As a principle that has never been the attitude of the Trade Union Congress, nor is it the attitude of Labour Members who are trade unionists. If one examines the conditions of our service one will discover that all Labour Members are trade unionists. We have a movement of which we are proud.

I mention that because the Bill is set in a climate that suggests that small business men are being grossly and unfairly treated. The existing legislation does not prevent employers from dismissing employees, and that is a position that will always prevail in any employer-employee relationship. But the edge, the strength and the power will always be on the side of the employer, because he is the master. Many masters discharge their responsibilities with fairness, and they have nothing to fear from the existing legislation, which the Bill proposes to amend. The existing legislation is working out reasonably well, although it has to be tested all the time, and tested in the interests of working people. It must be remembered that the bulk of the nation is composed of working people. It is not composed of small business men or large business men, and it is never likely to be, although some working people may aspire to be in business.

All that the existing legislation requires is that employers should be reasonable in carrying out their responsibilities. Most of them are, anyway, But some are not. It has been suggested that reasonable employers should get away with a great deal under the Bill. There is at present power to change the qualifying period by order should the Government ever decide to do so. The Bill makes the present arrangement more flexible by fixing the period in an Act so that it may only be changed by an Act and not by a Statutory Instrument. In certain circumstances, that could add to the amount of paper work required to be done by employers, and I know that small employers dread the prospect of the on-march of even more paper work. I have some sympathy with them.

But there are at present far too many changes in procedural rules for tribunals by Statutory Instrument. This Bill would make the system inflexible by setting down the rules in an Act so that they could only be changed by an Act. I have special thoughts about the Race Relations Act in this regard, and I put forward the parallel thought that we have tied down certain matters by statutes and then we have attached to the statutes more flexible rules. But if a system is tied down by statute, it means that a major campaign must be mounted to change it. If rules are attached to statutes deriving from the wisdom and logic of the statute, it makes for a more flexible position, and certainly we need a much more flexible approach to race relations. The same applies to industrial relations. The two go along very closely together.

I do not want to be too nasty today about anyone. However, the Leader of the Opposition seems to be suggesting that she intends to cause upheaval in race relations and in industrial relations by pressures of this kind, although we are not in that kind of dynamic atmosphere today.

For all those reasons, in my view the House would be ill-advised to accept this Bill.

12.14 p.m.

Mr. John Wakeham (Maldon)

I listened with interest to the hon. Member for Southall (Mr. Bidwell), as I always do. In the course of his remarks, he said that some of his best friends were Conservatives——

Mr. Bidwell

No—small business men.

Mr. Wakeham

I beg the hon. Member's pardon. I was about to say that some of my best friends are Socialists. However, I feel that if everyone shared his sincerity, even though perhaps he is occasionally a little naive, we should not need political parties at all and we could solve all our problems by sitting round a table in a spirit of good will, thereby making everything much simpler than it is in the real world.

I want mainly to refer to the 25-week contract and to try to explain why I think that it is important to consider it in relation to this Bill. However, first, I must congratulate my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) on introducing the Bill with the clarity that he did at a time in our affairs when the broad intentions of what he is trying to achieve would, I should have thought, commend themselves to every hon. Member, even if some of the finer print might need amending in Committee, although I do not think that anyone has made a very strong case for that so far.

It seems to me that the Bill has as its intention the improvement of employment prospects. In the end, it will fall or succeed on its ability in the opinion of the House to improve employment prospects at a time when we have this enormous number of 1.5 million unemployed. This is of grave concern to every decent-thinking person in the country and certainly to right hon. and hon. Members on both sides of the House.

In practice, the employment protection legislation has produced many difficulties. However, I accept that in those Acts there are many intrinsic merits, and I support much of the legislation. Nevertheless, there have been practical difficulties, many of which have borne heavily on small businesses. One difficulty that all this legislation has produced is the practical job of trying to keep up with it. It is a problem that faces all businesses of all sizes, but it bears especially heavily on smaller businesses which do not have legal departments and access to up-to-date professional advice which is as good as that available to bigger firms.

Secondly, there are the additional costs which fall upon employers as a result of the employment protection legislation. This, too, bears heavily on small businesses, and this Bill is designed to ease the burden on them.

When we have legislation which is especially burdensome and which at least in part works against the practical world in which we live, what always happens is that practical and legal ways to circumvent some of its intentions are produced. At present, it seems to me that a number of employees and employers are suffering as a result of the legislation. Some employers would like to take on more labour but feel that the restrictions under present legislation do not make it worth their while. In addition, there are a number of potential employees who would like to take up the jobs which would be available if employers could be persuaded that the risk was worth the candle. This is the real world, and if the legislation is not practical to deal with that problem it seems to me that legal ways will be found to get round the worst excesses.

Legal ways to get round some of the worst problems of employee protection have been pioneered by the British Steel Corporation, which is much in the news at the moment. I hope that a few words from me will not make its problems any worse. In practice, the Corporation has indicated ways in which small businesses can find ways to get round some of the problems inherent in our present employment protection legislation.

I have a copy of a letter from the British Steel Corporation dated July 1976 which comes from its employment officer at the Ebbw Vale works. It offers the recipient, a prospective employee, a job for a fixed period of 25 weeks, thus avoiding the statutory provisions which operate once a person has been employed for 26 weeks.

The letter makes absolutely clear that the job will end after 25 weeks. It also deals with the provisions which apply once a person has been employed for 13 weeks, saying: You will not be entitled to holiday pay … You will not be entitled to sick pay … You will not be entitled to accrue any retention bonus. I am not in a position to say to what extent these letters have been used, or to what extent they are being used by other nationalised industries or Government Departments. No doubt the Minister's information will be much more up to date than mine on that. However, some small firms, being worried about future labour problems, have, I understand, begun to use that form of fixed term contract of employment to avoid what they see as land mines and booby traps laid by the Employment Protection Act.

What happens is that the small firm wishing to take on labour but wanting to avoid the Employment Protection Act hires the labour on the basis of a fixed term, so that the job ceases and there is no question of redundancy or lay-off. At the end of the fixed term, the employee becomes unemployed for two weeks, he is registered as unemployed, and it is then on the record that he has not been employed.

Indeed, I have heard that as such a person leaves the employment office for the last time he is asked by the employment manager to stick a notice on the notice board saying that in two weeks a job similar to the one he has given up will be available should he like to come back in two weeks.

That sort of thing, I understand, is happening. The period may be varied, at 24 or 25 weeks, and it can be organised so as to end for the summer holidays and Christmas without too much difficulty. As a result, employers are getting round the Employment Protection Act in a perfectly legal way but not doing any good to our long-term employment prospects. They deal with a difficult situation, as they see it, in what I regard as an unsatisfactory way. But I should not be one to attack an employer for so doing. I believe that it is a difficulty inherent in some of the provisions of the Employment Protection Act.

I should like the Bill to have a Second Reading so that we may take the next step forward to try to reduce the problems which give rise to that type of unsatisfactory arrangement. It is unsatisfactory for both employer and employee, but it is the best that many small employers feel they can do in the present situation. I wish to make such fixed-term contracts and other devices not illegal but unnecessary. That is one of many reasons why I support the Bill and hope that it will have a Second Reading today.

12.24 p.m.

Mr. Eris S. Heffer (Liverpool, Walton)

The hon. Member for Maldon (Mr. Wake-ham) has revealed something of great importance. There is an old saying in the Labour movement that the employers do not preach the class struggle they just carry it out. It is interesting to note that when legislation is brought in to protect workers, employers set about finding ways round it. I hope that my right hon. and hon. Friends on the Front Bench will note what the hon. Gentleman has said and take steps to close that loophole at the earliest possible moment.

We shall have to look closely at the fixed-term contract system if it is being used as a way of avoiding employers' responsibilities under the law. Conservative Members and employers are always preaching to us about law and order. Apparently, they are prepared to have law and order only when the law operates to their benefit and not for the benefit of the work force. The hon. Member for Maldon has made a remarkable statement. And, as I say, I hope that our Front Bench has taken note of it.

Mr. Wakeham

I said was that it was a nationalised industry that was pioneering the practice. The only evidence that I have is that it is a nationalised industry which is using the fixed-term contract. I said also that I thought it undesirable but inevitable in the present situation. The reason for it is the lack of possibilities for long-term employment, and workers are taking on these jobs rather than be on the dole. The hon. Gentleman must demonstrate that in a free society we can produce more and better jobs in some other way.

Mr. Heffer

I heard the hon. Gentleman say that it was based upon a procedure being adopted by a particular nationalised industry. I hope that my hon. Friend the Minister of State has taken that on board as well.

The hon. Gentleman went on to say that other employers were looking closely at the matter and that the practice was growing among small employers as a way of getting round the Employment Protection Act. That is what we have to take on board. There is no point in our working here hour after hour, with lengthy debates in the House and in Committee, to carry legislation if we then find that ways and means are being adopted to get round it.

I want to say to the hon. Member for Sheffield, Hallam (Mr. Osborn), who, unfortunately, is not here, that all Members of Parliament must be in favour of helping small businesses to create jobs. If they are not, they are ideologically so biased that they cannot see the importance of small businesses.

We must recognise, as I have for a long time, that small businesses have an important role to play in our economy. Particularly at this moment, the right sort of assistance to small businesses can help to generate employment on a vast scale. To some extent, I accept the Schumacher theory that small—not large—is beautiful. I am increasingly in favour of the idea of developing small businesses, whether privately owned or co-operatively owned. I should like to see, for example, the development of co-operative small businesses on a bigger scale. We ought to consider at the earliest possible moment doing that through the establishment of the co-operative development agency.

Mr. Ivor Clemitson (Luton, East)

My hon. Friend has mentioned Ernst Schumacher. It should be noted in passing that he was one of the great advocates of co-operative and common ownership enterprises.

Mr. Heffer

Yes; that is why I said that I supported his views to some extent.

Will the Bill assist in the creation of employment and the development of small businesses? That is the essence of the argument. The hon. Member for Basingstoke (Mr. Mitchell) is nodding. He believes that it will. I would argue, on the contrary, that is does not affect the development of small businesses.

I had an enjoyable lunch the other day with some of the small businesses representatives of the CBI when we had an informal and interesting discussion about this matter. One of the problems that they thought important was the 26-week provision relating to dismissal of employees, and they said that it was difficult to get rid of people. If, after 26 weeks, an employer does not know that a worker is incompetent or lazy or keeps bad time, there is something wrong with the management rather than the worker. I would know after one week—certainly after a month.

I do not understand the suggestion of increasing the period to 52 weeks in order to protect the employer. A competent manager should know whether a worker is good or bad in 26 weeks. Or does the argument go further? Do those who take this position want workers to have no right to complain of unfair dismissal?

Mr. Tom Litterick (Birmingham, Selly Oak)

Does my hon. Friend agree that the 26 weeks provided for in the main Act is more than enough for an employer to get to know his employee in a small business, where almost invariably they meet daily face to face? It would be a stupid employer who could not make up his mind about an employee in 26 weeks in those circumstances.

Mr. Heffer

I was going to develop that point. I remember a contractor in the construction industry arguing with me that a joiner was incompetent in hanging doors. I said "How long have you employed him?" He replied "Fourteen years". It had taken him 14 years to discover that the man was incompetent. I and anyone else in the industry would have known in an hour. One would just have had to look at the first door he hung.

There must be a much deeper reason for the Bill than we have yet heard. I agree with asssisting small businesses, although I found that the greatest complaint in the CBI document "Enterprise into the Eighties" was about taxation. I have news for the CBI—everybody complains about taxation. But, considering what we get for it, we do very well. For example, many countries that tax high earners less than we do do not have the type of National Health Service that we have.

However, we should concern ourselves with those paying tax at the lower levels. That is why wealth should be redistributed through taxation. There will be improvements, of course. People at the lower end have been overtaxed for some time and I hope that the Budget will put that right.

One vital way of helping small businesses relates to inner city areas. As I have said many times—it still bears repeating—when the bulldozers pushed down many of our city centre slums in the 1960s they also destroyed many small businesses, and nothing was provided to take their place. Those who wanted other premises, even if they could find them on the outskirts of towns, discovered that the price required was exorbitant. That is why I am delighted that, after a number of years—the process started when I was at the Department of Industry—the Government have begun to get to grips with helping small businesses to re-establish themselves in our city centres. Done properly, that should help to generate employment.

One argument about the unfair dismissal provisions is that they make it difficult for some small businesses to compete. That would be true if they applied only to some—but they apply to all. Should not a worker who feels that he has been unfairly dismissed be able to argue his case before a tribunal? To judge by the argument, one would think that workers always won at the tribunals. They do not. As the Minister knows, I have been arguing the case of an agricultural worker who won at the first hearing but lost on appeal and who cannot afford lawyers. I would argue that workers are still disadvantaged at these tribunals particularly when they have no union representation.

Mr. Litterick

Does my hon. Friend agree that the oft-repeated claim of Conservatives that tribunals have become "litiginous" derives from the behaviour of employers who know that most employees are either not represented by a union or that the union does not have sufficient resources to employ lawyers? Virtually all the employees of small businesses are non-unionised and therefore could not employ professional legal help. Therefore, the onus for making these tribunals "litiginous" proceedings lies on the employer—a process that this Bill would seem to reinforce.

Mr. Heffer

I agree with my hon. Friend except that, because he had a university training and I did not, I am not quite certain of the word that he used. Perhaps we could put that more simply, so that I understand the argument. However, I think that he is basically right—if he will explain the word that he used. I do not pretend to know every word in the book. I am always willing to learn more. Perhaps I misunderstood my hon. Friend's Scots accent. The point made by my hon. Friend underlines the case that I was making.

I ask Conservative Members to consider what they are proposing. I cannot understand why they are suggesting that a reduction from 52 weeks to 26 weeks will make any difference to the development of job creation in small businesses. I admit that small businesses have a lot of forms to fill in. A great deal of the time of the owners of such businesses is spent in filling in these forms. We can do something to simplify this. We should help in other ways, perhaps by simplifying the taxation system. It depends how it is to be done. I cannot see for the life of me how this Bill will make any contribution towards job creation. It represents an ideological argument, part of the class struggle which Tory Members consistently conduct in this House against working people who have the right to protection at law.

12.41 p.m.

Mr. Esmond Bulmer (Kidderminster)

At least I am able to welcome in the contribution of the hon. Member for Liverpool, Walton (Mr. Heffer) his recognition of the role of small businesses. I hope that in my remarks I shall be able to meet some of his points.

I begin by congratulating my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) on introducing this Bill and on the cogent and moderate way in which he did so. Some of us are inclined to be less temperate in the language we use as we see unemployment increasing and bankruptcies reaching record levels. I hope that today we can agree that it is right to explore in a dispassionate fashion any proposal that might reduce unemployment, from whichever side it may come.

Those of us who attended the debate on Monday expressed some reservations about the Government's use of subsidies to deal with unemployment. But we recognised that all propositions which might in any way lead to a reduction of unemployment should be discussed. We have the highest January unemployment figures since 1940. There are 1½ million unemployed. Of that total, 30 per cent. have been out of work for more than a year and it seems as though, in some parts of the country, up to 50 per cent. of school leavers will be without a job. No one can argue that this is not a crucial problem. Equally, the task ahead looks daunting.

If we wish to reduce unemployment to 1 million by 1981, we need to find 1,140,000 new jobs. If we wish to reduce unemployment to the level at which it stood when the Conservatives left office, we need to find 1,600,000 new jobs. Where will those jobs come from? The Chancellor of the Duchy, in recent remarks quoted in The Sunday Times, was under no illusions, first about the role of small businesses and, second, about the difficulty of finding more jobs in the public sector. He said: We must be careful that the Employment Protection Act is not turned into an Employment Destruction Act. If something is to be done to the pool of a million and a half unemployed, then small businesses are one of our best hopes. In the last 10 years a million extra people have been taken on by public authorities. I cannot see them taking up a million in the next decade. Nor can we expect much from the nationalised industries, who are suffering from overmanning. And the larger firms in the private sector are also likely to be shedding labour with the introduction of new technology. It is vital that we should help small businesses to expand. We can all say "amen" to that. Those of us who have looked at the reports of the sector working parties can find little justification for the optimistic remarks of the Chancellor of the Exchequer.

I echo the words of my hon. Friend the Member for Somerset. North (Mr. Dean) who pointed to the 800,000 small firms which still exist in this country. If we could increase the number employed by those firms by two, we should have not only done a great deal to solve the unemployment problem but reduced the level—if we could do it by 1981—to 750,000.

The first important point to be made in support of my hon. Friend's Bill is to mention the psychological effect that it will have. I am pleased that we have with us today the Under-Secretary of State who has special responsibility for small businesses. The tone of his recent remarks is somewhat different from that with which he used to regale the House before becoming a Minister. He is now, perhaps, somewhat more aware of the difficulties confronting anyone who wishes to begin his own business.

Before entering the bright uplands of successful free enterprise—and, Heaven knows, the clouds pass frequently enough across them—any would-be business man has to pass through the valley of the shadow. Perhaps the greatest shadows are cast by those mountains of industrial relations law—the Trade Union and Labour Relations Act, the Contracts of Employment Act, the Race Relations Act, the Redundancy Payments Act, the Health and Safety at Work, etc. Act, the Equal Pay Act, the Sex Discrimination Act, and the Employment Protection Act. All of those Acts cast a long shadow and take a great deal of assimilation.

Even when the small business man starts down the straight and narrow course through that valley he is likely to be set upon by the VAT man, the tax man, the rating officer, the weights and measures officer, the public health officer, the fair trading representatives and a whole host of other officers if he takes one step from that straight and narrow course. Even if he remains upon it he has no insurance against being washed totally away if the Government allow rates of interest to rise to 17 per cent. and 20 per cent. as was recently the case.

The Under-Secretary of State for Industry (Mr. Bob Cryer)

I can assure the hon. Gentleman that I have displayed no inconsistency from the time when I first entered Parliament up to the time of my present post. Since the hon. Gentleman is dealing with these grave disabilities which he alleges are presented to small businesses, may I ask him to explain how his comments can be made compatible with an article which appeared in The Guardian on Friday 13th January 1978 which said, of the figures within it, that those in Table 1 indicated a near doubling of the annual rate of new business formations over the period 1963 to 1976? That comprised all of the figures of new companies registered and new business names under the Registration of Business Names Act. Since there is this increase, how does the hon. Gentleman explain his earlier comments?

Mr. Bulmer

I would have thought that this was a direct consequence of the level of unemployment. Naturally, I should like to have the opportunity to study those figures. Today we are concerned with a small stone on this path over which the small business man may trip. I refer to the stone of the disgruntled employee. I do not argue that a lot of recent legislation is not wholly desirable. What has happened is that it has come too fast and employers have not been given the time to absorb it. Nor have they been allowed the resources with which to develop the infrastructure to cope with this legislation.

Mr. Clemitson

Is the hon. Member aware that there has been a development over recent years of small businesses getting together to provide training facilities? This is a wholly desirable trend. Could small businesses not co-operate with one another on other matters, for example, in the personnel area and in hiring people to provide legal advice?

Mr. Bulmer

I think that would be a good idea, and I shall come to it in due course. I believe that the Chancellor of the Duchy of Lancaster has thoughts along those lines.

I return to the fear of small business men of being hauled up before an industrial tribunal. When that happens a disproportionate amount of their time is taken and sometimes things are said that reflect quite unfairly on them in the local community. The Government should recognise that there is a danger of a whole mythology being built up.

This was well expressed at the CBI conference when one speaker cited the case of a park attendant who was foolish enough to put sodium chlorate on the roses. The roses died, and the person responsible for the park thought that the attendant should be dismissed. Instead he was given a warning. He then put sodium chlorate on the herbaceous border. The person in charge thought that he could then get rid of the attendant once and for all. However, the attendant was a Pakistani, and since the instructions on the sodium chlorate can were not in Urdu, he had a legitimate case for making the error. I use that illustration to show how the mythology is built up and how it is not always easy to separate fact from fiction.

There was another case in which a man was dismissed for insulting the chairman of his company. However, it was decided that he had a legitimate defence on the ground that he did not know it was the chairman. In my constituency there was the case of the man who was disciplined for bad behaviour so he went outside into the street and when the supervisor came out he thumped him. That man was taken through the normal procedures and was dismissed. He appealed against unfair dismissal and the case went before the tribunal. The chairman of the tribunal stopped the proceedings and warned the man that if he had thought that he had substantial financial backing he would have been tempted to award a penalty against him.

The second thrust of my hon. Friend's Bill is to try to prevent this sort of thing. It sets out to sift the serious from the frivolous complaint. Sixty-seven per cent. of all complaints made are dismissed. The legitimate assumption behind these figures is that almost certainly there are a number of frivolous complaints that should be sifted beforehand.

The Bill's intention is to save the time of tribunals. In 1976 21.4 per cent. of the cases were dismissed as being outside the scope of the tribunals. We all know that the number of claims has increased dramatically from 5,000 in 1972 to 39,000 in 1976–77—June to June. But it is no part of our purpose to deprive workers of their right to state their case—and I do not think that that can be emphasised enough.

The third purpose of the Bill is a little more contentious. It is to raise the qualifying period from 26 to 52 weeks. I am not sure how contentious the Minister of State will find this. It is well known that the unfair dismissal clause was introduced in the Conservative Industrial Relations Act. When he introduced it originally in another place, Lord Jellicoe put the figure at 104 weeks, promising that it would be reduced as soon as practicable to 52. That was agreed to by the Labour Government when they framed their Trade Union and Labour Relations Bill. The hon. Member for South Ayrshire (Mr. Sillars) carried an amendment to that Bill to reduce the period to 12 weeks, based largely on his experience in the building trade. The Government thought again and came back with 26 weeks.

I have a, certain sympathy with the hon. and learned Member for Hackney, North and Stoke Newington (Mr. Weitzman) in his plea for flexibilty, and on this side of the House we feel that the qualifying period is an appropriate matter for debate in Committee. The Secretary of State in winding up the debate on 21st November appeared to recognise that there was a case to answer. He said: I wish to turn to the question of small firms, for which this is said to be a particular problem. I readily appreciate that people who run small firms have a considerable task in familiarising themselves with all the provisions and legislation that have come about in this House in 15 years particularly the Employment Protection Act, which has brought new rights to light. It is with that in mind that I am loking carefully at the point put to me by organisations representing small firms to see whether we can improve the procedures of tribunals to ease their difficulties. I shall also consider any suggestions that are made in today's debate."—[Official Report, 21st November 1977; Vol. 939, c. 1133–4.] The first two propositions that I put to the Minister of State would appear to be acceptable in principle to the Secretary of State. Of course, he was much less certain about the case for extending the period from 26 to 52 weeks. However, I hope that he will look at it again and consider certain other aspects. Although we are discussing small firms, this provision would also apply to large firms. I am afraid that there are ways now in which particularly disadvantaged groups may be adversely affected.

If the Minister of State recalls the figures for the employment of those of overseas origin in some of our large cities he will recognise that there is a great deal of prejudice to be overcome. We have to accept that employers in many cases are extremely reluctant to take on people who may not be particularly articulate in the language.

The Manpower Services Commission in a recent Training Services Agency publication entitled "Selecting and Training Coloured Workers" suggested that there was evidence that coloured trainees took longer to learn some tasks, were confused by jargon, were shy to admit that they did not understand an instruction and had difficulty in interpreting pictorial and diagramatic and visual aids. The suggestion is that they need time.

The purpose of this Bill is to give them time. Mr. David Smith in a pamphlet entitled "Racial Disadvantage in Employment" makes the same case. Also Mr. E. J. B. Rose, in a report on British race relations entitled "Colour and Citizenship" stressed that a lack of facility in English was often cited as a bar to employment of coloured workers, particularly Indians and Pakistanis. The general impression was that in many cases they could speak no English. There are language problems and sometimes a cultural problem and the employer who wants to give the employee the benefit of the doubt may be frustrated in doing so.

I hope that the Government will look again at the effect of the 26-week qualifying provision on the recruitment of particularly high-spirited youngsters. We all know how quickly their characters change. The 26-week qualification could act as a disincentive to giving them a second chance.

It is difficult, too, to assess certain types of individuals who many be potential high flyers. The hon. Member for Walton talked about seeing whether someone could hang a door. That may be easy to determine. However, there are many areas in business where it is not easy to assess a person's potential over six months. If an employer feels that a man will not grow with the job, it is possible that after 26 weeks he will feel that he should dismiss that man. That is a matter that the Minister of State might wish to examine.

I believe that we have made out an argument in support of the Bill that requires to be answered. I hope that the Minister of State will deal with some of the other disadvantages which arise from the legislation as it is now.

My hon. Friend the Member for Maldon (Mr. Wakeham) referred to the 25-week contract which the British Steel Corporation is now introducing. The effect of legislation has been to harden employers' attitudes. That is most unfortunate. In the larger companies there is now almost a standing instruction that any kind of disciplinary problem must be played by the book and that there should be no question of discretion.

Employers in cyclical businesses are extremely reluctant to take on more people. Rather than do that, they will push overtime to the limit. That, of course, accords with the wishes of many employees. Employers will go to outside agencies or even demand that the people who work for them become self-employed.

For all these reasons, I believe that this part of the Employment Protection Act should be reviewed. My hon. Friend the Member for Hallam has done the House a service by introducing the Bill.

1.2 p.m.

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

I join those who have congratulated the hon. Member for Sheffield, Hallam (Mr. Osborn) both on his good fortune in the Ballot for Private Members' Bills and on the reasonable way in which he introduced the Bill.

Inevitably, the debate has gone much wider than the terms of the Bill. I make no complaint about that. This is, after all, a Second Reading debate. The hon. Member for Hallam made a courteous reference to my hon. Friend the Member for Keighley (Mr. Cryer), the Under-Secretary of State for Industry with responsibility for small firms. My hon. Friend may seek to catch your eye, Mr. Deputy Speaker, to intervene in the debate to deal with some of the issues that fall outside my responsibilities and the scope of the Bill.

I have doubts about a Bill the title of which has only the flimsiest connection with its subject matter. The title of the Bill leads easily to assumptions that it is about small businesses. It is not. It is mainly about industrial tribunal procedures, as my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) rightly reminded us.

The Long Title is also misleading. It is difficult to see how the Bill will lead to the creation of even one job in any small business in this country. It may assist in creating jobs in the Civil Service or in increasing the number of tribunal chairmen and members. However, that is another matter.

As might have been expected, in the debate there have been ritual attacks, as they have become now, on the Employment Protection Act. Reference was made to the CBI survey—I must correct that: I must not attribute to the CBI a survey carried out by the Small Business Bureau of the Conservative Party. That survey is supposed to reflect complaints about the Employment Protection Act.

The hon. Member for Kidderminster (Mr. Bulmer) reminded us of the origins of the unfair dismissal provisions and the original 52-week employment qualification on which access to a tribunal for submitting a case of unfair dismissal hinged. I hope that the House will forgive me if I go into the genealogy of the unfair dismissal provisions, because I think that my memory goes back just a little further than others. It will be useful to put on record the root of this matter.

It is right that the unfair dismissal provisions were introduced in the Indus- trial Relations Act 1971 and became effective in 1972. However, they were conceived before that and embodied in a Bill that was introduced to the House in 1970—before the election of that year—by my right hon. Friend the Member for Blackburn (Mrs. Castle), who was then Secretary of State for Employment and Productivity. With some minor changes, those provisions were sensibly carried forward into the Industrial Relations Act and equally sensibly retained by this Government when they repealed most of that Act.

I mention this matter because I personally was involved in the preparation of the Industrial Relations Bill introduced by the Labour Government of 1966–70. The 52-week qualification was deliberately chosen as a starting point. It was recognised from the outset that that would be a sensible period from which subsequently to regress in the light of experience and of the case load. It was envisaged from the beginning as a starting point from which there would be a progressive reduction.

The unfair dismissal provisions were introduced not by the Employment Protection Act or the Trade Union and Labour Relations Act 1974 but, for all practical purposes, by the Industrial Relations Act 1971. That is why I find it extraordinary that criticisms about the unfair dismissal provisions and some of the tribunal decisions should be laid at the door of the Employment Protection Act.

The Employment Protection Act is not the only legislation to have come under fire today. The hon. Member for Kidderminster referred to six major Acts which were listed in the Small Business Bureau's questionnaire that was sent out to small firms. The bureau provided figures, based on the first 500 returns, which showed varying degrees of responsibility attributed by small employers to the limitation on the number of workers that they might otherwise have taken on. It starts with the Employment Protection Act and then refers to the Trade Union and Labour Relations Act, which was essentially a repeal measure. Next comes the Health and Safety at Work etc. Act. As the Minister primarily responsible for the passage of that Act, I have had to live with the jibe that I took through a measure, basically prepared by the Conservative Party, which I inherited on taking office in 1974.

Then comes the Sex Discrimination Act and the Equal Pay Act. The Equal Pay Act had all-party support when it was introduced in 1970. I acknowledge some responsibility for helping that legislation to go through Parliament. One of the repeated criticisms by the Opposition, when that measure was in Committee, was that we would not accept their amendments that sought to introduce a barrier to sex discrimination.

Mr. Paul Dean

Will the Minister of State address himself to the issue that has been raised throughout the debate, that, in the light of experience of the working of these Acts, some elements in them are proving unduly burdensome and counter-productive, especially for the small employer? That is the essence of our argument.

Mr. Walker

If the hon. Gentleman will be patient, I shall come to that matter. I was about to come to the last of the six Acts which the Small Business Bureau trailed before the 500 firms which were surveyed and invited to say had limited the number of workers that they might otherwise have employed. The last is the Redundancy Payments Act.

In sharing responsibility, if that is the right word, among the various Acts, may I say that the biggest single barrier is seen as the Employment Protection Act? The second is not the Trade Union and Labour Relations Act, the Sex Discrimination Act or the Race Relations Act but the Redundancy Payments Act.

We have had 12 years or 13 years' experience of the Redundancy Payments Act. However, 53 per cent. of the firms that were surveyed said that it has been a major obstacle to taking on new and additional workers. Does any hon. Member really believe that the Redundancy Payments Act, in the light of all the experience that we have had of it, the undoubted beneficial influence it has had on industrial relations and the justice that it has meted out to those seeking compensation, should be significantly amended?

Mr. David Mitchell

Amended yes, as debated recently.

Mr. Walker

I am not sure whether the hon. Gentleman is saying that he would significantly amend or repeal. I look forward to his telling me how the Act and other measures should be amended to reduce the burden on small businesses, bearing in mind that the Conservative Government had the opportunity to change the Act. However, they did not do so. Apparently, they did not think that appropriate.

I turn to the specific provisions of the Bill. As for Clauses 1 and 2, I share the criticism that has been clearly expressed by my hon. and learned Friend the Member for Hackney, North and Stoke Newington (Mr. Weitzman) and my hon. Friend the Member for Walton. The period of employment in relation to unfair dismissal was thrashed out in the House. It was fully debated. The House made a decision as recently as 1974. It is extraordinary to think that in such a short period compelling new arguments could emerge to prompt us to move in a different direction.

Mr. Bulmer

Surely the argument is that of the huge increase in unemployment.

Mr. Walker

I did not want to be tempted by the hon. Gentleman's remarks about unemployment to depart from expressing the Government's view on the Bill. However, none of us should overlook the figures from mid-June 1972 to mid-June 1977. I take that period because it is the most recent span of five years with which I am familiar. I refer to the employment figures and not unemployment. During those five years employment in Great Britain rose by nearly half a million. In mid-June 1977 there were nearly half a million more people in jobs than in mid-June 1972. That should not be overlooked. The hon. Gentleman will find it difficult to reconcile the argument that he has just made with those figures and the reality of them.

It is true that in the same period the labour force increased by 981,000. That means that we have had to find nearly 1 million new jobs so as to stand still in terms of the 1972 figure. The problems to which the hon. Gentleman has alluded—we all recognise that they are serious—cannot be significantly attributed to the effects of the legislation in question.

As my hon. Friend the Member for Walton said, surely it should be possible for an employer to decide within six months whether an employee will make the grade. It has been argued with some conviction that small employers are in much closer contact with the work force and know its strengths and weaknesses better than the ICIs of this world.

If that is so, the small employer should be in a much better position to decide early in a person's engagement whether he is suitable for the job. Is it being argued that large employers, who are inevitably and of necessity forced further away from the work force, are in a better position to judge the truth than small employers, who of all people should be better able to make up their minds in six months if only because they are much more likely to be in day-to-day contact with the work force?

Unlike some foreign legislation, we do not oblige an employer to retain a man once he has employed him. Even after 26 weeks it is still legitimate to dismiss an employee who does not measure up to the job, or for reasons of conduct or redundancy. Our legislation requires that the employer should behave reasonably in fairly carrying out that course of action.

When the hon. Member for Kidderminster referred to small business men being hauled before the industrial tribunal, I could not help wondering whether he had allowed himself to overlook that it is the dismissal of an employee and the loss of his livelihood that require an employer to contemplate going before the tribunal. So far the debate has been lacking, from the Opposition Benches, in sympathy for the person being dismissed. All the sympathy expressed from the Opposition has been for the employer having to face the tribunal because he may have unfairly dismissed an employee.

Clauses 3, 4 and 7 attempt to make rules of procedure for tribunals to be embodied in the main legislation. My hon. and learned Friend the Member for Hackney, North and Stoke Newington said that Clause 7 enables the Secretary of State to tamper with the rules at the edges. They strike me as an odd set of provisions. On the one hand, they attempt to ossify the tribunals' rules by setting them down in an Act, which would mean that changes could be made only by the Act and not by Statutory Instrument. The Bill seeks to give power to tinker around with the rules. My right hon. Friend the Secretary of State would find it difficult to exercise so ill-defined a power. In any event, before my right hon. Friend makes rules for the tribunals he is obliged by statute to consult the Council on Tribunals. If there had been some similar obligation upon the hon. Member for Hallam and his sponsors, they might have benefited from the advice of the Council.

Mr. John Cope (Gloucestershire, South)

I am one of the sponsors to whom the Minister of State referred. I intervene to make an offer to him. The hon. Gentleman has referred to the question of ossifying the rules, which I fully understand, by building them into law. If he will undertake that the Secretary of State will introduce a Statutory Instrument—that is something that cannot be done by my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn), or any other Back Bencher—that will introduce the necessary regulations to amend the regulations for the tribunals in the way that is proposed in the Bill, I shall intervene to ask my hon. Friend to withdraw the Bill and to rely on the Statutory Instrument.

Mr. Walker

If the hon. Gentleman will allow me to proceed, I think that he will find that I am not without a crumb of comfort for him, although he may think that it is a small crumb.

I turn to Clause 3, which is wholly unnecessary. I shall explain why. Under the present rules of procedure, if it is considered that a case is not within the jurisdiction of the tribunal, the secretary to the tribunal writes to the applicant telling him just that. More than 3,000 such letters are written each year. Usually only about 300 of the recipients are not content with that explanation. Those 300 wish to maintain their right to go before the tribunal, and they can do so.

It is a standard practice for the tribunal to hold a preliminary hearing solely on the issue whether it has jurisdiction. The respondent is advised that there is to be a preliminary hearing on the sole issue whether there is jurisdiction. If the respondent thinks it appropriate, he does not need to attend.

If the tribunal finds that it has jurisdiction, both parties will be invited to the hearing so that the tribunal may explore the merits of the case. The tribunals are already doing in practice what the clause is seeking to achieve. Surely it is unnecessary to replace the present informal system with a rigid and legalistic procedure that would inevitably be more costly to run. In any event, the 300 applicants who pursue their applications now would appeal under the proposed system and nothing would be gained.

Mr. John H. Osborn

The Minister has spoken of the informal system now followed by the tribunals. They have no statutory obligation to follow that system. The tribunals have worked out the system themselves and some are following it while others are not.

Mr. Walker

I am not sure what the hon. Gentleman means.

Mr. Osborn

I am talking about the whole question of preliminary hearings before the two parties are brought in together afterwards.

Mr. Walker

I am sure that the procedure that I have just outlined is that which is normal and general practice. Perhaps the hon. Gentleman and I are getting two rather different matters crossed. Perhaps he will reflect upon my words. I undertake to look at his words, and if there is any shadow of doubt left about the extent to which what I have outlined as the general practice that is normally followed, I shall certainly let the hon. Gentleman know.

Mr. David Mitchell

Perhaps I could help the Minister about what is going on in his Department. Last year there were over 1,000 cases that were outside the jurisdiction when further investigated.

Mr. Walker

I am not sure what the hon. Gentleman means by the words "further investigated." I said that, on average, 3,000 letters are sent out to applicants from the secretaries to tribunals telling them that their case is not within the jurisdiction, and usually about 300 of them insist on pursuing their case. The remainder, 2,700 or thereabouts, are normally content to accept the letter from the secretary of the tribunal that their case is outside jurisdiction.

The hon. Gentleman also referred to my Department. It is, of course, a matter for the industrial tribunals, and very much for the Council on Tribunals.

It is now standard practice for the tribunal to hold a preliminary hearing solely on the point of whether there is jurisdiction. The tribunal gives the applicant the option of attending should he wish to do so.

Mr. Clemitson

I am sure that the hon. Member for Basingstoke (Mr. Mitchell) was referring to 1976 and not 1977. In that case, as I understand it, if the new procedures had been adopted over the past year, at least on a very wide basis, the figure of 1,032, to which I think the hon. Member is referring, which relates to 1976, would not be particularly relevant evidence.

Mr. Walker

No doubt the hon. Member for Basingstoke (Mr. Mitchell) will be seeking shortly to catch your eye, Mr. Speaker, and he may well respond to that point then.

I was referring to the clause itself, which provides that notice that an application is out of scope should be served on both applicant and respondent. I cannot help wondering why the respondent. I thought that one of the things Opposition Members wanted to do was to save employers work and not give them more.

As I have said, under the present procedure, the secretary of the tribunal does not have to notify respondents, partly because it seems pointless to trouble them at too early a stage in the judicial process, but also because the Council on Tribunals has requested them not to do so. I wonder whether Opposition Members have sought the advice of the Council on Tribunals on this point.

The question of jurisdiction is not always clear. I doubt whether it is realistic to expect any sifting procedure, either the procedure I have outlined or the legalistic procedure proposed in the Bill, to get rid of all the cases that may be out of scope. However, we are satisfied that the present system does the job at least as well as that which is proposed and with a lot less fuss all round.

Because of the new duties and obligations that the Bill seeks to impose on the secretaries of tribunals, I must point out that the secretaries of tribunals are not legally qualified people. They are not lawyers.

With regard to the point which arises on page 3 of the Bill, which proposes that the application form should contain a list of the provisions of the Act from which the jurisdiction of tribunals is excluded, I must say that legislation is not needed for that, either. The tribunals secretariat is at present revising the application form, and no doubt what has been said on the subject in the context of the Bill will be borne very much in mind.

Whatever else Clause 4 may do, it raises the basic question of justice. The clause says that after a certain amount of to-ing and fro-ing of the documents between the applicant and the respondent, the tribunal can hold a hearing on the papers without either the applicant or the respondent being there and that it can at that stage decide that the dismissal is fair. Apparently, there is to be no appeal—except, perhaps, on a point of law to the Employment Appeals Tribunal.

The question has been posed—and I pose it again—whether anyone can describe that as justice or fairness. Of course it is not justice or fairness.

Mr. John H. Osborn

I know that the Minister will be confused by his lawyers as I have been confused by mine. However, the intention is that there should be an appeal, and an appeal to the High Court, and that is not taken away in the Bill.

Mr. Walker

It is not in the Bill.

Mr. Osborn

This is where the Minister and I are in difficulty. This is not a consolidating measure. It is a measure to alter the original Act. There is no intention to alter the whole question of an appeal and an appeal to the High Court. I am assured by the lawyers who have been advising me that there is no alteration of that fact, so I hope that the Minister will withdraw that criticism of the Bill.

Mr. Walker

First, I have to get clear whether that is what the hon. Gentleman intends, as distinct from what the Bill says. Those who are better qualified in the law than myself understand that the Bill does what it has been said from the Government side of the House that it does—that is, to provide clearly that there should be a power for the tribunal to make a decision on the dismissal, whether it is fair or unfair, in the absence of either the applicant or the respondent. That is what the Bill says.

If the hon. Gentleman says "Ah, yes, but I intend that there should still be a right of appeal", presumably what he is saying is that the decision can be made by the tribunal in the applicant's absence and that if the applicant then wants to appeal against it he has to appeal to the High Court—or to the Employment Appeal Tribunal, which is where the appeals lie at present. But at present appeals lie only on a point of law to the Employment Appeal Tribunal.

The merits of the issue, therefore, will be decided by the tribunal in the absence of the applicant, without any right of appeal on the part of the applicant to have the merits decided in a higher court or the Employment Appeal Tribunal. I can deal with the Bill only as it is before the House. If the hon. Gentleman says that what is in the Bill, or our interpretation of the Bill, is not his wish, it is for him to make that clear and say what amendments he would propose to make the Bill accord more with the view that he has expressed.

Mr. David Mitchell

Perhaps I could help the Minister. What the Bill actually provides is that only such cases in which the whole tribunal is of the view that they can be decided in writing on their merits are dealt with in writing. If there is any hesitation or doubt at all, the case goes through to the normal hearing of the tribunal in the normal way.

Mr. Walker

If there is any doubt on whose part? On the part of the tribunal? The hon. Gentleman has only confirmed our understanding of the Bill. He is saying that it will lie within the power of the tribunal to make a decision that a dismissal was fair in the absence of the applicant and without the applicant being given the opportunity to present his case orally, purely on the strength of the written word that is submitted to the tribunal.

The hon. Member for Kidderminster talked of the problems that overseas workers sometimes face through lack of education or lack of literacy, or lack of understanding of our ways. But these will be the people who have to put the case on paper. Then, when the matter appears to the tribunal, in its view, to be beyond any doubt, it tells the person "No way, chum. Go back". There is no right of appeal as the Bill stands at present, except perhaps on a point of law to the Employment Appeal Tribunal.

Mr. John H. Osborn

I assure the Minister that there is every intention that the rights of appeal that exist in previous legislation should continue. The exchanges that the Minister and I have had are a precise illustration of how a poor man running a business with six or 12 people will be horrified. We are supposed to understand these things. The poor man running a small business will find the exchanges terrifying.

Mr. Walker

If any person is horrified that the Government should be saying that it is contrary to natural justice for a man to be heard in his own defence, that seems to me to be marking a new departure from what I thought was a basic understanding about the fundamentals of justice in this country. If anyone reacts with horror to the exchanges between the hon. Gentleman and myself, I am sure that it will be the representatives of working people who will understand that it is the view of the Conservative Party that on something as important as livelihood a decision to terminate that livelihood can be made in the man' absence and without his having the opportunity to speak in his own defence.

Mr. Weitzman

What possible ground could there be for an appeal to a court on a point of law?

Mr. Walker

I am not sure whether my hon. and learned Friend is posing that question to me or to the sponsor of the Bill. I understand that if there is any appeal at all it can be only on a point of law to the Employment Appeal Tribunal.

Mr. John H. Osborn

I assure the Minister that my intention is that this matter should be covered in the Bill. It is not a consolidation measure. One of the difficulties is that we are dealing with two Acts, particularly the 1974 Act under which there are regulations. This is the nightmare that lawyers experience when acting for the Minister or for myself and it is a complexity of the problem. The will is there and if any legal representations are put to me to table amendments to make the matter clear, I know that my colleagues will back me to the hilt.

Mr. Walker

I understand the position that exists between the hon. Member for Hallam and myself. I am saying that, as I understand it, the Bill empowers the tribunal to reach a decision on an unfair dismissal application without the presence of the applicant. The Bill provides no appeal against that, not even to the Employment Appeal Tribunal.

The hon. Member says that that is not his intention. He says that the intention is that the existing right of appeal should be preserved. I say that that appeal can be only on a point of law to the Employment Appeal Tribunal. The hon. Member has accepted that. He is saying that he wants to preserve any existing right of appeal and that if his Bill does not do that, he will write it in.

That still means that the tribunal will be able to reach a decision—as Conservative Members would put it—without putting the applicant and respondent to the trouble of having to go to the tribunal, thus saving time. If that is not the case, that part of the Bill becomes meaningless. It still leaves my fundamental objection untouched: it will represent a denial of natural justice.

I shall dispense with some of my speech. We had a debate on industrial tribunals on 21st November. Since then the interest in tribunals has been maintained. To read some commentators one would think that the tribunals were latter-day Star Chambers. They are no such thing. I have seen tribunals in action at first hand. I sat in at a tribunal as a member of the public and listened to the way in which it conducted itself. They are perhaps more democratically constituted than much of the rest of our legal machinery. They have lay members from both sides of industry.

My hon. Friend the Member for Walton referred to the number of cases that have been found in favour of the employer. In the overwhelming majority of cases—about 96 per cent.—the tribunals have been unanimous. In about two-thirds of unfair dismissal cases the finding has been in favour of the employer and against the applicant. This suggests that tribunals are hardly the anti-employer institutions that some people make them out to be.

The chances of a small employer having to face a tribunal hearing for unfair dismissal must be pretty small. There are about 13,500 such hearings a year—about one for every 1,600 people in employment. I understand the problems of employers in recent years because of the amount of legislation. Small employers have familiarisation problems. We are hoping to produce a booklet about the legislation directed specifically to small employers. Something that we thought might be helpful was the Employment Protection (Consolidation) Bill. It was introduced last Session but failed to complete all its stages. We are hoping to introduce that consolidation Bill shortly.

At the request of the Department, ACAS has approached a number of organisations representing employers, particularly small employers, and have offered to let them have copies of the disciplinary code of practice for distribution to their members. We hope that this will be useful.

I think that I have spoken for long enough. I believe that the Bill is bad. It is bad on many counts. On many counts it is unnecessary. First, it seeks to legalise and rigidify informal procedures that are working well at present. Secondly, it seeks to achieve by primary legislation objectives for which that legislation is not well suited. I understand why Opposition Members want to proceed in this way, but I cannot accept that it would be right to do so.

Thirdly, it would deprive some people of their existing rights which have been given to them only recently by Parliament. Fourthly, and most important, the provision that we have just discussed would be inconsistent with the whole history of British justice. It would enable a case to be thrown out without a nearing and without any effective right of appeal. Even if it were modified in the way suggested appeal would be limited to the Employment Appeal Tribunal on a point of law. That tribunal would not be able to investigate the facts. I cannot believe that it is right to proceed along these lines.

For all the reasons that I have given, I cannot advise the House to support the Bill.

1.30 p.m.

Mr. David Mitchell (Basingstoke)

I begin by congratulating my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) not only on having been lucky in the Ballot but on choosing to introduce a Bill that assists small businesses. First, it provides for a device to siphon off from all the procedures of the tribunals, with all that they involve, a large number of cases that would have been found to be open and shut if they had ever come before a tribunal.

That device would siphon off cases which are outside the tribunal's jurisdiction and cases with little merit where the tribunal can make a decision on the basis of written evidence. It was interesting that the Minister of State said that 96 per cent. of tribunal hearings, where there are representatives of trade unions and employers, with an impartial chairman, were decided unanimously. This greatly strengthens my hon. Friend's argument that many cases could be settled without the full proceedings having to take place. The Bill also lengthens from six months to 12 months the employment period before an unfair dismissal procedure can come into operation.

The Bill is introduced against the background of the appalling unemployment figures. Under this Government unemployment has gone up by no fewer than 900,000—not to 900,000 but by 900,000. The number of school leavers out of work has risen from 2,000 to 57,400.

I am well aware that the Minister is worried about the position. As he has sat in his Department recording the figures month by month he must have begun to question why they were rising. Therefore, I found it extraordinary that he spoke as he did of being satisfied about this, that and the other in the procedures that he now operates.

We shall not deal with the appalling unemployment figures through large businesses. Most large businesses will not need to take on labour, because they have appallingly low productivity and can increase production substantially as trade turns up, taking on only a few key workers here and there. Increased employment will not come in the public sector. We have absorbed 1 million people who are being carried by the rest of the economy and we can absorb no more there, even if we wish to do so.

Mr. Clemitson

What does the hon. Gentleman mean by "carried"?

Mr. Mitchell

They are being carried by those who are producing in the country's economy, who are paying taxes to provide for the services of those in the public sector looking after the various activities that they look after. At the current rate of progress we shall have more people being looked after and paid for than are producing.

Mr. Clemitson

rose—

Mr. Mitchell

I hope that the hon. Gentleman will allow me to continue. I may give him the opportunity to intervene later.

There is no answer in large business or the public sector. Certainly, the Government do not believe that there is an answer in the public sector. So part of the answer must come from the birth of new businesses and the growth of existing small businesses. My hon. Friend the Member for Kidderminster (Mr. Bulmer) was right to draw attention to that.

Mr. Weitzman

How does the hon. Gentleman, with all this talk, think that the Bill will help in any practical way?

Mr. Mitchell

I am about to develop the argument to show why the Bill will help. If the birth of new businesses and the growth of existing small businesses are the source of new jobs, anything that is a barrier to their birth and expansion is a barrier to the creation of jobs.

The hon. and learned Gentleman shares the misunderstanding of Ministers. He believes that we can have employment without employers. Ministers believe that we can have investment without investors, provided they are not British, anyway, and that we can have a dynamic economy without incentives.

Mr. Weitzman

Rubbish.

Mr. Mitchell

It is rubbish to think that those things are possible. They are not. That is the problem that the Govern- ment face in trying to pursue policies that are irreconcilable.

The Bill is a modest, moderate attempt by my hon. Friend the Member for Hallam to remove some of the barriers to enterprise. I hope that the Minister of State will recognise that the Opposition are not attempting to torpedo a reasonable system of appeal against unfair dismissal. Indeed, we appreciate that before the 1971 Industrial Relations Act, when a man was sacked his mates often felt that there was no way in which they could secure justice for him other than by going on strike.

To prevent that, the 1971 Act provided for a civilised procedure whereby a man who thought that he had been unfairly dismissed had the opportunity to appeal to a tribunal, without there being forced on his workmates the necessity to strike to get him justice. But what was introduced as a civilised procedure has turned into a nightmare for many businesses, particularly many small businesses. Hon. Members may laugh. I shall give them reason to laugh on the other side of their face, because jobs are being destroyed in their constituencies and mine, in all our constituencies, as result of the present legislation.

I say that the procedure has turned into a nightmare for the following reasons. First, there is encouragement to claim unfair dismissal when the person dismissed knows perfectly well that he has not been unfairly dismissed. Secondly, there is a gross waste of time and money for small business men, and they are caused a great deal of worry by the operations of the Employment Protection Act. Thirdly, the legislation has led to a substantial number of cases of blackmail. That was not intended by Parliament. I am sure that the hon. and learned Member for Hackney, North and Stoke Newington (Mr. Weitzman) would not sustain the idea of blackmail, but it is happening, as I shall show.

Next, the legislation prevents jobs from being made available where they could be offered to people who are now unemployed. It holds back wealth-creation by small businesses and leads to legalised evasion of the procedures, as was well illustrated by my hon. Friend the Member for Maldon (Mr. Wake-ham), who drew attention to the steel industry. That industry is issuing 25-week term contracts, dismissing workers at the end of them and, I understand, putting them on unemployment benefit for four weeks and then taking them back again. In other words, the unemployment benefit pays the workers' holiday money, and it is tax-free, in the middle of their term of employment. That that is happening under the existing system illustrates the need for change.

I should like to look in more detail at the encouragement to a worker to make a claim even though he knows that he has been fairly dismissed. A man goes to the employment exchange to register the fact that he is unemployed and to seek unemployment benefit. The clerk promptly asks him "Were you fairly dismissed? If you have lost your job through your own fault, for six weeks you are not entitled to unemployment benefit". Therefore, the man automatically says that he was unfairly dismissed, whereupon he is handed the papers by the clerk, who tells him "This is how you claim for unfair dismissal". The man discovers that it will cost him nothing to have a go. Indeed, in some places it is known as having a go on the industrial tribunal fruit machine, rather like a one-armed bandit. One may suddenly cash in.

Mr. Cryer

The hon. Gentleman is trying to get newspaper headlines.

Mr. Mitchell

The Under-Secretary says—

Mr. Cryer

Instead of coming out with all this nonsense, as he does so often, making claims of this sort, will the hon. Gentleman say how many occasions he is talking about? Is it one, two or 2,340? How many? Can the hon. Gentleman quantify these assertions? I suspect not.

Mr. Mitchell

If the hon. Gentleman will allow me, I shall proceed not only to quantify it, but I shall do so in great detail. Since he has accused me of "trying to catch the newspapers" I would say that it is not my phrase but that of the Secretary of State for Employment. The right hon. Gentleman was quoted as saying: There are very few cases where that can happen, usually where a rare jackpot of circumstances have come up on the industrial relations fruit machine."—[Official Report, 21st November 1977; Vol. 939, c. 1114.] That was the Secretary of State's description, not mine. It is a fruit machine with a difference. One does not have to put in any money. One pulls the handle without and one may hit the jackpot.

Mr. Weitzman

The hon. Gentleman has made a definite allegation and has been challenged to prove that allegation.

Mr. Mitchell

If the hon. and learned Gentleman wishes to have it proved, he will find that it appears in column 1114 of Hansard of 21st November last. I hope that will make him happy.

Mr. Weitzman

Prove the allegation.

Mr. Mitchell

The National Chamber of Trade has shown that a man can win up to £11,760 by pulling the lever. Apparently, that is not all. He is now eligible for a 25 per cent. increase as a result of recent measures introduced by the Government. There is an enormous psychological pressure to have a go. It does not cost anything and one may hit the jackpot. Last year 39,000 people actually did have a go.

Mr. Bulmer

Will my hon. Friend confirm that employers have calculated that the average cost of meeting these claims is £1,000, a cost which includes their own employees' time and legal advice which they take? They are usually advised to make settlements beforehand.

Mr. Mitchell

Yes. I can certainly confirm that point. It is of major importance.

During the past year I have consulted the Smaller Businesses Association, the Union of Independent Businesses, the CBI Small Firms Council, the Federation of Master Builders, the National Chamber of Trade and the Small Business Bureau. All of them have said that the employment protection legislation that we are debating today is one of the major reasons why employers are not taking on more workers.

I have been around the country. I also know that the Minister of State and the Department of Industry has been listening to what employers are saying. Time and time again they have told me, "This is the reason why we will not take on more employees."

Mr. Harold Walker

I wanted to challenge the hon. Gentleman earlier and I am sorry that I did not do so. He referred to a document which stated that the maximum compensation which could be claimed was more than £11,000. Can he say whether such a claim has ever been achieved? During the currency of the unfair dismissal provisions, only about 50 cases have resulted in the maximum combination of compensation and basic awards amounting to £5,200. That was far from implicit in what the hon. Gentleman said.

Mr. Mitchell

We have not hit the treble orange yet. But the point is—this is what the Minister apparently fails to recognise—that it could be as high as that. Of course, the majority of settlements are substantially below that figure. But the fear of employers is that the amount could be as high as £11,000. As a result, many employers are wary about taking on more employees. If the Minister does not know that, I can only urge him to go out and talk to small business men up and down the country. He will find time and time again that they will say, "I could take on more people. I would take on more people. But I do not, because I am afraid of what will happen if I do."

Mr. Harold Walker

For the benefit of those who may be listening to this debate, or who will subsequently read it, the hon. Gentleman should not hold out this horrifying prospect which may unreasonably and needlessly cause anxiety. Only in the most extremely unlikely combination of circumstances, which are quite predictable, would anything like that figure be reached. The respondent would know in advance whether that unlikely combination of circumstances would apply in his case.

Mr. Mitchell

I am glad that I have given the Minister the opportunity of giving that assurance. But even if that rather exceptional case has not yet been reached, one thinks of the enormous sums that can more often be reached. What worries employers is not the fact that many of them have suffered that cost, but a fear that they will suffer it. If the Minister does not realise that, I urge him to talk to small business men.

The hon. Member for Liverpool, Walton (Mr. Heffer) asked whether my hon. Friends could give an example of someone who could actually have a job if this Bill had been in operation. I have talked to a boat builder in South Devon who told me, "I have a berth and I am building a boat. The berth next to mine became vacant. I could get a contract to build another boat, but I know that if I did I would have to take people on. I have no certainty of getting another contract at the end of that one and I would then be lumbered with people whom I did not want as well as with the expense and the problems that flow from that." The hon. Member for Walton may shake his head and say that it is not like that. I can only tell him that that is how employers react in the current circumstances.

Mr. Heffer

I do not disagree that that is precisely how employers think. There is a sort of mythology about this matter. They are wrong. It is the duty of the hon. Gentleman to explain to them that they are wrong. If they have to dismiss workers at the end of the contract because there is no more work, it is not a question of unfair dismissal. It has nothing whatever to do with that. The hon. Gentleman has a big responsibility if he does not explain to small business men that they are wrong in their belief and that it is only a piece of mythology on their part.

Mr. Mitchell

It is a piece of mythology with which we are seeking to deal in this Bill. My hon. Friend's proposals would have a significant effect in that regard. The Minister kindly and helpfully explained that he had examined the survey carried out by the Small Business Bureau. He said the bureau had done a survey of 500 people. In order to help him, I would point out that this was an analysis of the first 500 people in a survey covering many thousands.

He proceeded to list the very high percentage of people who said that they have limited the number of workers in their business. Those people who spoke are not necessarily Conservatives but small business men. They are people who could be providing jobs.

What were they saying? A total of 79.6 per cent. mentioned the employment protection legislation as one of the reasons why they are not taking on more workers. As my hon. Friend the Member for Hallam pointed out, if small businesses each employed only one more employee, we should not have the problem of unemployment that we have today.

I turn, then, to the waste of time and money and the worry which the existing legislation causes.

Mr. Heffer

The hon. Member just said—and I agree with him—that if every small business took on one additional worker that would help tremendously to ease the present employment position. Will he give the House the assurance that, if this Bill is passed, there will be a guarantee that that will happen? Will he get that in writing from every small business man?

Mr. Mitchell

The hon. Member has never understood incentives and the effect of destroying them. If the Bill is passed, I can assure him that a large number of small business men—I cannot quantify the number—would see at least a way through the barriers to expanding their businesses, and that would be an encouragement to job creation. I hope, therefore, that the hon. Member for Walton will join the Opposition Members in the Division Lobby at the conclusion of this debate.

I was about to refer to the waste of time and money and the worry that the existing legislation causes small businesses. This Bill helps by requiring the secretary of a tribunal to examine a case to see whether it is within its jurisdiction and also by requiring the provision of more information from the employee to enable a proper decision to be taken about whether the case is within jurisdiction.

The Minister of State said that tribunals were now doing this and that only 300 were allowed through which were outside jurisdiction. I have to tell him that the 300 relate to 3,000 cases which were considered on jurisdictional grounds and that 10 per cent. of the applicants insisted on going ahead even though they were outside jurisdiction. But what the Minister has not taken on board is that there were more than 1,000 cases which, when they were examined further by the tribunals, the employers' time had been wasted and all the proceedings had been gone through, were found to be outside jurisdiction. This problem could have been resolved on the basis of written examination by the secretaries to the tribunals, who would thereby have been able to discover that they were outside jurisdiction.

A very large number of cases are at present being settled outside tribunals by employers paying out cash to prevent claims being heard. I cannot prove the figures exactly, but I can get very close to them. A total approaching 10,000 payments every year are being made by employers to employees to "get lost" and save them the expense and trouble of a hearing before a tribunal. That is nothing more nor less than blackmail. I have an example before me of a firm in Black-pool which said that it had been through the procedures. The employer wrote saying: My conclusion to this is quite simple. It is cheaper to be blackmailed even when you are right. That is the position which unfortunately exists in all too many cases. A lot of the blackmail could be cut out if provision were made for a proper pre-hearing on jurisdiction.

Then there is the argument, made so forcefully by my hon. Friend the Member for Hallam, that it should be possible to siphon off cases which have no merit. I sat, as apparently the Minister did in another hearing, and listened to a hearing quite recently. It concerned a firm with 32 employees. Seven of them were there as witnesses. They included the managing director, the sales director, the company secretary, the works foreman, the shop steward and two other workers, all of them giving evidence against the employee. However, that employee's time keeping during the preceding year had been so appalling that any tribunal given written evidence to that effect, together with photocopies of clock time sheets, would have accepted that it was a perfectly reasonable case. I offer that to the House as an example where the total disorganisation of a factory and all the time, money and worry involved could have been avoided if my hon. Friend's Bill had been in operation.

I give a second example. It concerns a man who was convicted of stealing. In that case, I was horrified to hear the tribunal actually ask the employer whether he had warned his employees that they might not steal. That sort of case gives wide cause for alarm amongst small employers and leads to the acceptance of blackmail as a means of settling a claim out of tribunal.

The third proposal in my hon. Friend's Bill is that which takes the 26 weeks up to one year. My hon. Friend has been asked what good that will do. Of course, there are many technical skills which take more than six months to acquire, and I regret to say that there are some employees who, knowing how the present legislation operates, behave superbly during their first six months and, on the day that the 26 weeks is over, saddle their employers with hell on their workshop floors. It concerns a minority, of course, but it happens.

Quite apart from that, there are a large number of areas where contracting is going on and where contracts do not take more than a year to complete. I should have thought that the hon. Member for Walton would welcome this aspect of my hon. Friend's Bill. It means that at least 51-week contracts will be offered to people instead of the present 25-week period offered by the Steel Corporation and other nationalised industries.

I was fascinated to hear the hon. Member for Walton claim that the introduction of a 25-week contract was an extension of class warfare. It is done by the nationalised industries. I thought that nationalisation was introduced to end class warfare. Perhaps the hon. Member will cogitate upon the logical consequences of his argument.

In deploying the case against this proposal, the Minister of State said that he was satisfied with the present system. He may be satisfied with it. The country is not satisfied with it or with the number of jobless that it has created. The Opposition are not satisfied with it. Small business men are not satisfied with it, and nor are the people who want jobs.

Mr. Heffer

rose—

Mr. Mitchell

No. I shall not give way. I have given way three times to the hon. Member. If he wishes to put forward an argument, he will doubtless seek to address the House.

It has been argued against the Bill that it introduces an element of bureacracy since it will require written procedures to be gone through. My reply to that is simple. It would take only half an hour for an employer to write a suitable letter explaining why he had sought to dismiss anyone.

It has also been argued against the Bill that the Government have power to make orders and that it is not necessary to have further legislation. If only the Government would make the orders, we should not need the Bill. But the Government do not and will not make the orders to ease the position.

I am delighted to see that a second Minister is present on the Treasury Bench. We are very glad to see the Minister responsible for small businesses. If he is to intervene again, I hope that he will do better than he did in his earlier intervention when he said that there had been an increase in the number of companies registered in the past two or three years. Of course there has. The reason is obvious. Inflation under this Government has driven sole traders and partnerships into turning themselves into companies so that, instead of paying tax at 98 per cent. on the money that they plough back into their businesses, they pay only 42 per cent. That is the reason why the figure has been increasing.

Mr. Cryer

I am grateful to the hon. Member for giving way since he does not appear to be willing to do so to my hon. Friend the Member for Liverpool, Walton (Mr. Heffer). Will he comment on the number of new business names which may not be and almost certainly will not be incorporated? The increased registration of new business names is also significant. What is more, I do not make the claim. Indeed, The Guardian did so on Friday 13th January. Since The Guardian is the only newspaper to run a small business column, I am surprised that the hon. Member for Basingstoke (Mr. Mitchell), who claims to have an interest in these matters, has not followed its articles.

Mr. Mitchell

If the Minister is now sheltering behind The Guardian newspaper, so be it. I understood that he was seeking to claim credit for the increase. Now he is divorcing himself from it. However, that is a much wider subject which I hope we may have the opportunity to debate on another occasion. It is outside the scope of the Bill.

My hon. Friend does not claim that the Bill is perfect in every detail, but the purposes which it seeks to achieve will do much to ease the problem of the jobless. They will do much to insert a device to make the employment protection legislation workable from the small business man's point of view, without an enormous loss of time and worry. They will substantially reduce the numbers of blackmail cases which now exist. On that basis, I hope that the House will give the Bill a Second Reading and send it to Committee where we can examine it further.

2.11 p.m.

Mr. William Hamilton (Fife, Central)

If there is a problem in this area, the hon. Member for Basingstoke (Mr. Mitchell) can be relied upon to exaggerate it. I listened to some of the adjectives that he used. He used some extremely extravagant language, but his speech was pretty thin in substantiation of the charges that he made.

The hon. Gentleman talked about the country being up in arms about these matters. I have not had a single letter. There are hundreds of small firms in my constituency, and particularly in the new town of Glenrothes, and not one of those firms has written to me about the case that the hon. Gentleman has expounded.

I suspect that the Bill is not designed particularly to help small firms, and still less to help to resolve the seemingly intractable problem of unemployment, but it is a peg on which to attack the Government's policies in a negative kind of way, without putting forward the Conservative Party's policies on how to deal realistically with unemployment and inflation. The Tory Party simply has no policies on the macro-economics of the United Kingdom.

The Conservative Opposition repeatedly use these occasions—whether on Private Members' Bills or on Private Members motions—to get at the Government. That is perfectly legitimate, and we all understand it. But let us be clear what it is all about.

The hon. Gentleman talks about the blackmail that is occurring. He talks about the waste of time and money and the worry involved, and quotes cases—whether one or 100 I do not know—and I wonder whether all this information has been fed into the Department. I hope that my hon. Friend the Under-Secretary of State for Industry will say whether any or all of this information that has been put about in the House and outside has been sent in. I understand that there is a study being made of the effect of employment protection legislation on companies. It was announced last May that such an investigation was to take place, jointly commissioned by the Department of Employment and the Manpower Services Commission, and the results of that investigation were to be made available by the middle of this year.

If the Conservative Party is serious, the obvious first step is to feed in to that interdepartmental investigation all the information that it says it has from small firms.

Mr. Clemitson

Does my hon. Friend agree that when information is being sought, for example, by means of a questionnaire, it is important that the questions should be put in a neutral and not loaded fashion? I seek his opinion about the questionnaire put out by the Small Business Bureau of 32 Smith Square, London S.W.1, to which reference has already been made. That questionnaire starts: The provisions of the Employment Protection Act have been mentioned as an important reason why small firms do not take on more workers. Please tell us how significant it is to your business in terms of jobs now and your plans for the next couple of years. We need to know which parts of the Employment Protection Act it is which are actively reducing job prospects in your firm. To help, listed below are the main sections of the Act which may affect your business. Does my hon. Friend think that that is the kind of neutral questionnaire which would elicit genuine information on which policy might be based, or that it might be just a little loaded?

Mr. Hamilton

My hon. Friend knows that I shall give him an objective answer. Anyone who seeks to obtain a particular answer to a questionnaire can phrase the questions accordingly. Of course, the questionnaire emanated from Tory Central Office. It wanted to have a particular set of answers, and it therefore slanted the questions with that end in mind. It is not surprising that it is receiving the answers that it wants.

No doubt, we in Transport House, on the other side of Smith Square, in the Labour Party office, could send out a questionnaire asking "What do you think the Tories are up to with small businesses? Do you think that if the new Bill is passed there will be an additional worker for every small business?".

I do not believe that the passing of the Bill—if it is ever passed—will result in the employment of one extra worker. Workers are employed by small and big firms for reasons quite outside the scope of this Bill.

Having said that, let me say at once that the Labour Party agrees that small businesses—which are never clearly, nor can they be, accurately defined—have an important part to play in the economy and to that extent help to solve the formidable problem of unemployment which plagues the whole of the industrial Western world. It is not a problem peculiar to this country.

I took out the figures for average unemployment as a percentage of the total work force in the nine countries of the EEC, or the Six before 1973. Between 1970 and 1974, when we had a Tory Government, our record was worse than that of six of the Nine. Since then we have been moving up. Our relative position has improved despite the fact that in the meantime there has been a world economic crisis, fuelled by the oil crisis and the rest. Our record compared with that of our competitors in Western Europe and the Western industrialised world is good in relation to the period between 1970 and 1974.

Having received the answer first from Europe, I have tabled a Question in order to get those facts on the record. Our record in Europe is comparatively good compared with that of the previous Tory Government between 1970 and 1974.

Mr. Clemitson

Does my hon. Friend agree that on the employment side, as opposed to the unemployment side, our record has certainly been much better that that, for example, of Western Germany? Employment in this country now is at a level similar to what it was in 1970, whereas in West Germany em- ployment has dropped by well over 1½ million jobs.

Mr. Hamilton

I do not think that West Germany is involved in the Bill. Unemployment, and its counterpart, employment, are a very important element in our consideration of the Bill. Demographically we face an extremely serious problem in that more people are coming on to the labour market at the younger end of the scale than are leaving at the other end. The Bill does not even pretend to solve that problem. It is stupid to assert that it will make even a minor contribution to solving the problem.

The Government well know the contribution that small firms can make to the well-being of the economy. That is why they have held eight conferences about small firms in inner cities. The problem does not apply only there, but the economic problems of inner cities are very important, as my hon. Friend the Member for Liverpool. Walton (Mr. Heffer) knows very well. Those conferences have been attended by over 1,000 representatives of small firms and local authorities. One was held in Manchester only last week, addressed by the Chancellor of the Duchy of Lancaster, who is the Minister primarily responsible for these matters.

According to the Department of Trade Journal, he said that the latest CBI survey of industrial trends showed that, among the biggest manufacturing industries, only 7 per cent. expected their work force to increase this year. On the other hand, among the small companies—firms with fewer than 200 workers—22 per cent. expected their work force to increase and only 8 per cent. expected their work force to decline. It is interesting that more than one-fifth of small firms with fewer than 200 workers have declared their intention to increase their work force, despite the legislation that has been passed. That runs counter to the consistent Tory argument. Despite this pernicious and worrying legislation, one small firm in every five expects to increase its work force this year.

That is not to say that nothing further is needed, both at national and at local level. It is axiomatic, is it not, that big firms are better equipped to handle the complexities of taxation, of legislation such as that with which we are dealing today and of administrative problems? They have their specialised staff to do so. But small firms have neither the staff nor the cash required.

A vast number of local and central government controls are inevitable on firms of any size. A worker's health and safety need to be protected in the small factory as well as in the large. Health and safety and employment protection regulations apply to the factory with 50 workers as to the factory with 5,000.

The present Government's record in helping small firms is one to be proud of, and nothing to apologise for. One of the biggest burdens on small firms is the abomination of value added tax—which was imposed by a Tory Government, not by Labour. I get more complaints about VAT and its effects on small firms than about anything to do with employment protection. The complaints usually concern the amount of paperwork which has to be handled—often by the wife in the back kitchen in her spare time.

This Government have sought to lighten that burden in almost every Finance Act since we came to power. In 1975, revisions were made by the Customs and Excise to the simplified schemes for small shopkeepers and a special system of interest to small retailers was introduced.

In 1976, the needs of small business men, including retailers, were taken into account by a reduction in the high rate of VAT, which applied mainly to larger purchases, from 25 per cent. to 12½ per cent.—a reduction of exactly half. In 1977, the level of annual turnover at which firms are required to register for VAT was raised from £5,000 to £7,500.

After a comprehensive review of the special schemes for retailers, the Customs and Excise announced changes, effective from 1st January this year, aimed at widening the scope of existing schemes and thereby increasing the retailer's choice of scheme.

Those examples show that successive Finance Acts of this Government have helped small firms in much more important ways than the provisions of this Bill.

There are other examples. In regard to capital gains tax, the Finance Act of 1974 increased the retirement relief from £10,000 to £20,000, advantageously affect- ing large numbers of small firms. Further reliefs were given in 1975, 1976 and 1977.

In 1976 also, the ceiling for the reduced rate of corporation tax, then 42 per cent., was raised from £25,000 to £30,000 and the level at which the full tax rate of 52 per cent. became payable was increased from £40,000 to £50,000. In the next year, the 1977 Finance Act further raised the ceiling for the reduced rate of corporation tax from £30,000 to £40,00 and allowed marginal relief on profits of between £40,000 and £60,000.

No one could have done more, particularly fiscally, to help small firms in the last three years than this Government have done. So no one should be under any illusion about this. I have gone through the steps that this Government have taken to relieve the burdens of VAT, capital gains tax and corporation tax on small firms. Every Finance Act since 1974 has provided in some way to mitigate the effects of those taxes.

I could quote many other examples. The Tory case, however, in this debate, has not dealt with those matters. It has been almost exclusively that small firms are not taking on labour because of fear of the existing Employment Protection Act of 1974. Despite the protestations coming from the Tories, there has been little concrete evidence to substantiate that case. I hope that everyone on the Labour Benches agrees that the worker has been deprived of protection from unfair dismissal for too long.

Just a few years ago, before this protective legislation was introduced, my election agent in Fife was working for an American firm. One hour before he went away on his annual holidays he was told to take his cards. He was one of the most conscientious workers anyone could ever meet. He was thrown aside. I would not turn a dog out as that American firm turned out my election agent. The sooner we understand that workers have rights as well as employers, the better. Workers' rights are as important as those of the employers. There has never been a Bill introduced to protect employers against unfair dismissal. I sometimes wish that we could get legislation to provide for the dismissal of employers.

Many of our problems arise from grossly inefficient and incompetent management. Yet they continue. We are now being told that all of the virtues of the British economy reside in the small business. I have often said on platforms over the years that I have never understood why, while we all accept that the political democratic process is fine—we vote once every five years or whatever—we do not extend democracy any further. As soon as a worker crosses the factory gates, democracy stops and there is a dictatorship in the factory where, for far too long, an employer has had the ability to fire at will and the worker has had no redress. I am glad to say that in the past few years my Government have been trying to redress the balance. We have to go further. Unfair dismissal legislation will, I hope, be succeeded in due course by measures to democratise the process of industrial decision-making in the factory, perhaps not along the lines laid down by Bullock but by something of that kind.

Good employers need have no fear of legislation designed to protect the worker. The only employers who are worried by such legislation are bad employers. The employer still has the ability to dismiss a worker. If he has good grounds for doing so, he need have no fear. Moreover, employers can insure against the risk of an action for unfair dismissal. I gather than insurance companies require a premium of about £8 per year per employee. The hard-headed business men who run the insurance world—and I see one of them on the Tory Benches—know very well that if they can give a policy for a premium of £8 a year, the risk does not appear to be very high.

The suggestion seems to be made in the Bill that tribunals are not impartial. This was a point answered by the Minister of State. The tribunals consist of a good cross-section of the industrial world. There are employers and trade union representatives. The tribunals are a damn sight more democratic and fair than most of our law courts in that respect. The Minister of State quoted figures to show how the tribunals bent over backwards to protect the employer rather than the employee. The criticism made from the Labour Benches is that far too often the worker does not get a fair deal. If there is any bias, it is against the worker rather than the employer.

The hon. Member for Basingstoke quoted figures, which were refuted, about the number of bankruptcies among small firms. Small firms come and go for all kinds of reasons. Generally speaking, the Tory Party represents big business. If we look at the Register of Members' Interests, it will be seen that generally Tory Members are directors and managing directors of big firms. Often the loss of the small corner shop or the small factory is the result of a take-over with the big swallowing the small. This is one of the problems of our modern society. The big supermarket has swallowed up the small shop. Equally, the multinational companies have swallowed national independent firms of one kind or another. These facts are more important than this Bill.

In so far as small businesses continue to exist ad thrive, let us not pretend that small is necessarily beautiful. On the contrary, small can often be squalid and tyrannical. Some of the most tyrannical firms in this country and throughout the world are small firms. My hon. Friend the Member for Chester-le-Street (Mr. Radice) asked a Question of my right hon. Friend the Secretary of State for Employment on 22nd February. He asked my right hon. Friend to provide a comprehensive list of all wages council agreements at national or company level covering more than 5,000 workers, giving the approximate number of workers covered and the aproximate number of companies or establishments, where appropriate."—[Official Report, 22nd February 1978; volume 944, c. 698.] My hon. Friend was provided with a list of 30 organisations, with the remuneration laid down by the wages councils, covering 5,000 or more workers. Generally speaking, these wages councils cover small firms, some of them very small. The rates of pay applied to the lowest grade of adult worker for a 40-hour week except for retail news agencies in Scotland where a 42-hour week is standard.

Let me give some examples. This is the kind of business the Opposition have in mind when putting forward this Bill. According to my right hon. Friend's answer there were 33,989 hairdressing establishments employing 135,000 workers. That is about four workers per establishment. The statutory minimum wage is £27.85 a week. In the fur trade there are 7,000 workers in 650 establishments—an average of 10 workers per establishment. The minimum pay is £27.50 a week.

The retail bread and flour confectionery industry in Scotland employs 9,000 workers in 2,037 establishments—four workers per establishment. The minimum pay is £31 per week. The shirt-making industry has 25,000 workers in 618 establishments and the average minimum weekly wage is £34.40. In retail bespoke tailoring there are 7,500 workers in 1,326 establishments earning a minimum of £32.23 a week. In road haulage there are 210,000 workers in 25,015 establishments earning £33.36 a week. The laundry industry has 1,297 establishments employing 65,000 workers on an average minimum wage of £30.40 a week.

I put these figures on the record lest we become too dewy-eyed about small firms. These are not the kind of organisation that we sometimes pretend they are.

To show how fair I am I shall put the other side of the picture. I mentioned earlier the new town of Glenrothes in my constituency. That new town has a population of 35,000, and about 160 firms. There are only six firms that have a work force of more than 300. I have visited nearly all of these firms in the time that I have been a Member of this House. Glenrothes is a marvellous reflection of the regional policies of successive Governments. The area was almost exclusively coal mining and when that industry declined the new town—which has been in existence for about 30 years—and the surrounding towns of Kirkcaldy and Dunfermline were developed. We now have a most amazing diversification of industry and this is very largely in the form of the small firms that we are discussing.

Without any fear of contradiction I can say that there are intimate personal relationships between the workers and their bosses. We have industrial relations par excellence. I do not believe that any community in Western Europe can compare with the industrial relations that we have in our area. The number of working days lost through strikes is minimal. I cannot think of a single major strike of any significance in the whole of the 30 years that I have watched the new town grow. I hope that no one in the House or outside will accuse me or my hon. Friends of being opposed to the interests and welfare of small firms. We all know what an enormous contribution they make, and will make in the future, to the well being and welfare of our economy.

I suspect that this Bill is a lot of humbug from the Opposition. Their objective is to flay the Government in every respect without feeling the need to lay down alternative policies to deal with our problems. Moreover, it is always ironical to have the argument repeated by Conservatives that we are suffering from a surfeit of legislation of one kind or another. We inflict so much legislation on our people that they do not know what it is all about, and in many cases hon. Members do not know either.

Yet here we have extremely flexible legislation on the statute book already. The Minister can by order alter most of the provisions that the Bill is seeking to alter. He can amend them if there is sufficient evidence to suggest that something might be remedied by introducing an order. He can do that under existing legislation. Yet here is a Conservative Back Bencher putting forward a Bill of this kind which will increase the legislative output of the House and increase the inflexibility of procedure where flexibility is wanted above all else. It will also increase formality at a time when we want to maximise informality in our approach to these problems.

For all these reasons this is extremely bad legislation. It is highly undesirable, and is biased against the worker. I have had one or two examples of cases where workers have shrunk from the idea of going before a tribunal because they have had to put down their cases in writing. That might seem a very simple exercise to us, but even with our marvellous education system I have had to help individuals to do just that. This Bill is saying that if a fellow cannot do it, a tribunal can decide in his absence that he has not got a case.

It is not just a case of immigrants. There are British people whose command of English is not very good. They are just not able to put their case adequately in a letter. To say that their case should not be heard by the tribunal simply because there is difficulty in writing it down is a travesty of justice.

I do not think that this Bill is an adequate contribution to the solution of our problems. Before I leave this House I want to see far greater advances in the protection of the employee, whether it is in the case of dismissal or in the broader fields of decision-making in the factory or work place. I want to see much more progress, and for that reason I believe that this Bill is extremely regressive and reactionary.

2.50 p.m.

Mr. Stephen Ross (Isle of Wight)

I have listened for about three-quarters of an hour to the hon. Member for Fife, Central (Mr. Hamilton). I think that the hon. Gentleman rather over-dramatised the contents of the Bill. I do not see them causing such problems as he forecasts.

The hon. Gentleman gave some interesting statistics. He mentioned a large number of industries and firms in which there are still very low wages. That is another argument for a national minimum wage, to which we must come in the end if we are to deal with low wages in laundries and other occupations throughout the country.

I agree that the Government have gone some way to meet the needs of small business men. However, much more is required. We look to the Chancellor of the Duchy of Lancaster and the Minister responsible for small businesses to take further action. We welcome—and, in fact, we mooted—the appointment of the Chancellor of the Duchy as the Minister responsible for small businesses, because more needs to be done to stimulate small businesses.

I agree with the hon. Member for Fife, Central that we should move more quickly towards industrial democracy. I am in favour of co-ownership, co-operation and profit sharing. I want people in industry to take more responsibility. But I suggest to the hon. Member for Ealing, Southall (Mr. Bidwell) that we must face the world as it is and businesses as they are today. There is a long way to go. It will take time and a great deal of persuasion. Unfortunately, we have to face the fact that too few people in our community are prepared to take responsibility or to use their own initiative. Too many have already opted out from taking the responsibility for running their own businesses.

It was a joy to watch and listen to Freddie Laker on television late last night. He said that he would like a British aircraft, the BAC311, to be the next one produced. We are too easily handing over to our Japanese and American counterparts. It is the small business men to whom we have to look for the future salvation of this country.

Mr. Litterick

Is the hon. Gentleman suggesting that small businesses will make the 311?

Mr. Ross

No. I was merely pointing out that it required initiative on the British side that we should not hand over all our productive enterprises to the Americans, the Japanese, or the Continentals. I was highlighting how nice it was to hear an entrepreneur, Freddie Laker, say that he wants to persuade this country not to throw in its hand on the building of the next 200-seater aircraft. Freddie Laker started with a small business.

I was going on to say that we should look to small businesses for the future salvation of this country. We must also reconsider our attitude to the service industries if we are to deal with unemployment in this country.

The Post Office is busily mechanising its sorting operations and doing away with a large number of jobs. The Carter Report makes interesting reading on this subject. I think that the Post Office should think twice before doing away with all those jobs. Japan's experience is interesting. It has taken up a great deal of unemployment within the service industries.

I agree with the hon. and learned Member for Hackney, North and Stoke Newington (Mr. Weitzman) that EEC legislation is generally more stringent in this area and that redundancy payments are more severe. That is not always appreciated in this country. However, it is appreciated in my constituency, because it has led to the downfall of Fairey Aviation through having to face huge redundancy payments of about £16 million in Belgium. That company has been put into receivership. Britten Norman is now in its second receivership, although it has an extremely saleable aircraft. It has sold 800 worldwide. It is in difficulties because of the size and scale of redundancy payments and also bad management. However, we should understand that, while we are in the EEC, we have to face these problems.

I congratulate the hon. Member for Sheffield, Hallam (Mr. Osborn) on his success in the Ballot. I apologise to the Minister of State, part of whose speech I did not hear, and to the hon. Member for Basingstoke (Mr. Mitchell), all of whose speech I missed. I was trying to establish a small business; I had to meet someone in the Lobby.

I think that the protection of employment legislation is in need of revision in the light of recent experience. The Liberal Party takes the view that this should be done comprehensively by the Government. Unfortunately, that is unlikely to happen. However, I gather that the Minister of State said that we are to have an updated guide.

We must therefore judge each Bill on its merits. I think that there is merit in this Bill. There is a good argument for extending the six-month rule. As the law stands, employers are extremely wary of taking on new staff. Often they do so only when they are 100 per cent. sure about the suitability of an applicant.

Mr. Litterick

Does the hon. Gentleman agree that that is as it should be? The casual recruitment of people leads inevitably to the equally casual dismissal of people, and that it irresponsible.

Mr. Ross

I accept that point. I wish to go on a little further. What happens is that aspirants who interview badly—some people do interview badly—or show lack of confidence do not get opportunities to prove themselves. That is an argument the other way. I welcome the fact that employers are able to pick and choose the people they take on. But they will normally take on only those who they feel certain will be able to do the jobs required of them. Others fall through the net because they are shy or perhaps do not interview well. Employers play safe. They will not take risks. Many excellent candidates are turned away and become completely dispirited. I am sure we all have knowledge of such people who come to our surgeries.

The extension to 12 months would create more of a breathing space. It would work to the advantage of both sides. I can quote only from personal experience of people who write to me. A local business man recently wrote to me saying: Small business men are now extremely hesitant at hiring new persons because of the liabilities attaching to them if dismissal becomes necessary after the period of 26 weeks. Add to this the financial penalties of attending time-consuming Industrial Tribunals and expensive legal defence, and the prospect becomes all too dismal. I am a member of the National Farmers' Union. I do not farm any longer. I gave up farming about two years ago. However, I had a leaflet from the NFU setting out what a prudent employer should do. It lists five paragraphs: First, obtain a complete set of all the Department of Employment booklets on the various Acts and Codes of Practice and keep-them readily accessible in the farm office. There are about 25 of them … Second, familiarise yourself with their main provisions … Third, make sure that all things that the Acts require in writing are done. These would include such things as written statements for each worker under the Contracts of Employment Act; written grievance and disciplinary procedures under the Code of Practice, etc. … Fourth, always keep a complete record of all warnings given to workers and always ensure that at least the final warning is in writing. I can just see Farmer Giles in the cowshed at half-past six in the morning perhaps ticking off a chap for being late, and then having to go back to his office, take off his dirty old clothes, wash his hands and settle down to making a record of what had happened.

We believe, of course, that the employee should receive fair treatment from his boss. No doubt there are cases in which small business men have been extremely unfair. I am bound to say that some of the cases that have been brought to my notice in recent months—I am sure that other hon. Members have similar experience—have been quite bewildering in their complexity. There have been examples of small-mindedness and belligerence. If a determined barrack room lawyer wants to go through the whole procedure, he can take a small employer to the cleaners. There was the recent case of an area health authority being taken almost to the cleaners by a former employee. She spun out the process very well over 15 months.

People have become far too sue-minded-The lawyers and the courts cannot cope. Anything that can be done to lessen the headlong rush into litigation should be tried.

Some of the clauses are extremely complicated. I read them three or four times last night, and at the end I was still not sure whether I had it right. They are too complicated and they would have to be changed. Consideration would have to be given to making them less complicated. Even if the Bill does not receive a Second Reading—I shall support its Second Reading—it is right that these issues should be aired. Action must be taken. Something has to be done to improve the situation, which is becoming incomprehensible to most small business men.

3.0 p.m.

Mr. Norman Miscampbell (Blackpool, North)

In the brief time that I wish to detain the House, I begin by saying that I agreed with the Minister of State when in putting forward the Government's view he said that appeal provisions would have to be made if the Bill were to be satisfactory. As the Bill stands, I do not think that it would be possible for it to go forward without such provisions. I take the Minister's point and I consider that it is well made. Appeal provisions would have to be written in the Bill.

I turn briefly to what the Bill's proposer, my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn), said when he introduced the Bill so ably earlier today. He said that we are dealing with owner-management and with those who are capable of doing a certain job and getting something done. That is especially true as it applies to the first generation of a private business.

The constituency that I represent, and the whole of the Fylde coast, is dependent entirely on small businesses. The area does not have a large business in the terms in which such businesses are talked about nationally. Such a business does not exist from one end of the town to the other. Blackpool is full of small businesses.

When we consider what is happening in the Fylde and in Lancashire generally, we can only ask "Where else are we to look for future employment?" In Blackpool we have some of the highest levels of unemployment in Lancashire. Any prospect of amelioration of the present appalling situation can come only through small businesses. There is no other sector from which it can come.

What is happening in the rest of Lancashire? When large industries change their technology it is almost inevitable that a substantial reduction of the work force will take place. I shall briefly make a point that I appreciate is not within the competence of those who now sit on the Government Front Bench to answer. I make it because it comes within the ambit of the discussion on the Bill. I take a broader point than has been taken so far about the prospect for small businesses.

Why is it that Britain does not have the same proportion of small businesses as the Americans? It is not that we are not enterprising, or that we do not have new ideas. In fact, we are more fertile of new ideas than almost any other country in the world. However, for some reason the climate in which we operate does not seem to allow small businesses to flourish for very long.

Why is that happening? I shall outline the typical progress of a small business in the area that I represent. Such a business is set up and it prospers. It starts to supply a specific need and supplies it well. We have an astonishing variety of products in Blackpool. We produce motor cars, highly sophisticated specialist security and police equipment, forms of entertainment equipment and supplies for the entertainment business. We have a number of specialist engineering firms employing people who, if not employed in those undertakings, would have the greatest difficulty in getting a job elsewhere within a reasonable distance of their homes in terms of travelling to their work daily.

It is vital that such businesses continue in business and grow. They prosper in the early stages, but more often than not they are taken over. Later I shall consider why they are taken over. When talking to the trade unionists in the town and to many others it becomes clear, especially over the past two or three years, that a number of businesses are branch businesses of larger undertakings, they have been taken over and started in the town.

What has been the history? They are taken over. The larger business runs them successfully for a number of years, but it may be that it has to retrench a little, and the Blackpool branch does not get the investment that it needs. Then, when it comes to real difficulties, it is decided that this is the place to be closed down. One therefore finds constant complaint from trade unionists and workers in the town that we are simply being used as the place where large businesses can save by closing their branches.

However, what has happened? Over the years since the war, why have so many of our small private businesses moved out of the hands of the entrepreneurs who run them and into larger businesses? It is not just because larger businesses run them out of business, because so often the small business is dealing with a specialist product and is able to provide a remarkable product at very efficient prices.

One of the difficulties—I can clearly see that this is a dilemma for the Government Benches, and that it is one that we must face, too—is that in the progress of any small business today, there comes a moment when it is actually better for the family running it, unfortunately, to sell it rather than keep it. This raises taxation problems. This subject was raised by the hon. Member for Liverpool, Walton (Mr. Heffer), who faced this fact. However, if taking a doctrinaire attitude to taxation means that our small businesses become at a certain stage liable to be stifled, the problem must be faced.

The difficulty is that at a certain stage in the business, the remuneration that can be got out for the controlling family, at high rates of taxation, simply does not bear comparison with what would be got out of it for them it they could sell it, take their capital and use their capital to augment their standard of living for the rest of their lives. Unfortunately, therefore, they decide to sell. The family having decided to sell, one more small business goes.

Until we get this aspect of the matter right, all the valuable tinkering—it is tinkering—that we are proposing today, and in so many other ways, will not achieve what is necessary. We must get right the climate in which these businesses can survive. Thereafter we can look at the details.

Although I support my hon. Friend's Bill with enthusiasm, I believe that there are more fundamental problems that have to be tackled. It may well mean that there have to be changes in attitude to-wards what is to be allowed to those who are prepared to take risks. Without that, I fear that we shall not get the kind of growth in small businesses that one sees so frequently in the United States.

3.7 p.m.

The Under-Secretary of State for Industry (Mr. Bob Cryer)

I intervene very briefly, as the responsibility in this matter is, in a sense, divided—first, with the Department of Employment, specifically on the ground of the Bill, but also, because the Title of the Bill mentions small businesses, with the Department of Industry. As my hon. Friend the Minister of State, Department of Employment pointed out, however, it would apply to businesses right across the board.

However, it is perfectly proper that these sorts of issues should be raised. It is an indication that the House is concerned with small businesses, and it is only reasonable that we should examine the problems that are accompanying them today.

Some of the exaggeration of the hon. Member for Basingstoke (Mr. Mitchell) does not help our discussions and tends to give a very distorted picture. He claimed, for example, that a number of firms preferred to make a payment rather than to go through the procedures. He claimed that 10,000 such payments would be made, although he cited the case of only one person from Blackpool. If such claims are to be made, I believe that they should be accompanied by some substantial evidence on the matter.

Mr. David Mitchell

I am sorry to interrupt the Minister so early in his remarks, but he asked for some more substantial evidence. Perhaps I may tell him that on 4th August 1976, as reported in column 817 of Hansard, the Minister of State, Department of Employment, indicated that there have been 4,706 cases of alleged unfair dismissal involving payments, settlements out of tribunal, of £100 or less. I suggest to the Under-Secretary that now that the machinery is better known it is being used much more and that the figure is substantially higher. If the Question to which I have referred had asked for information on a figure higher than £100, it would have been a much bigger figure still. Therefore, I think that it will get very close to 10,000.

Mr. Cryer

That is an opinion but not fact.

Of course settling out of a tribunal is not necessarily blackmail, which is what the hon. Member for Basingstoke claimed. The hon. Member for the Isle of Wight (Mr. Ross) claimed that employers were taken to the cleaners. That is an exaggeration. I emphasise the words of the Secretary of State for Employment when we had a discussion about this earlier. I am glad that the hon. Member for Brentford and Isle-worth (Mr. Hayhoe) is in the Chamber because the Secretary of State said: The hon. Member for Brentford and Isle-worth (Mr. Hayhoe) knows that he grossly misrepresents my position when he suggests that I have said that I regard the industrial tribunal system as being an industrial relations fruit machine. If the hon. Gentleman had gone on to read a further sentence of my speech, he could then have gone on to make clear to the House that I was referring to the number of cases in which large awards came about. It went on to say that: 'The median award for unfair dismissal is currently £355'. That is precisely the point that the hon. Gentleman made. What I said is made clear right from the beginning of the sentence. I quote: 'There are a very few cases where that can happen' That is the truth. I continued: 'usually where a rare jackpot of circumstances has come up on the industrial relations fruit machine'. I said that there were very few cases. No one can fairly represent that as suggesting that I expressed the view that the industrial tribunal system was a fruit machine—far from it. I have a great deal of respect for the system and for those who work it".—[Official Report, 21st November 1977; Vol. 939, c. 1125–6]. I emphasise that the median award quoted by the Secretary of State is £355.

Mr. Barney Hayhoe (Brentford and Isleworth)

The Minister has mentioned me. Is it not a fact that the fruit machines on which he plays—or on which other people play—produce a jackpot only on rare occassions? According to an official Press handout, the Secretary of State went as far as to include those words in the Department of Employment Gazette. I was quoting accurately what the Secretary of State said. It is monstrous that the Secretary of State should refer to this machinery as sometimes producing a very high award like an industrial fruit machine.

Mr. Cryer

I am grateful to the hon. Member for making the position clear—that this machinery does not produce high awards. That was the point that the Secretary of State was also making and that is what I am saying in refutation of the claims made by several Opposition Members that small firms have been taken to the cleaners.

As I said earlier, the debate is useful, relevant and important, but we have to put matters in their proper context.

Mr. Stephen Ross

I said that a Department barrack room lawyer could possibly take the small business man to the cleaners. I did not say that it was happening.

Mr. Cryer

I am grateful for that correction. I shall place the matter more firmly in context. If it is so onerous, it raises the question how private enterprise organisations can provide cover for the sort of risks which have been mentioned for what I think is a modest sum. I imagine the premium is based on an actuarial assessment of the risks involved.

In a document produced by Lloyds of London, a private enterprise organisation, firms are told that their premium will buy: Cover against Compensation awards. Cover for the cost of legal representation. Complete administrative back-up whenever a Claim arises—and representation at conciliation proceedings or Tribunal Hearings. Personal Consultancy Service whenever you require it. Comprehensive cover against the Health and Safety at Work Act. Considerable savings in managerial time and effort. Increased management confidence to recruit, promote, or dismiss as the situation demands. Financial security through knowing the full extent of your liabilities for the year which improves budgeting and pricing policies. That sort of comprehensive cover is nowhere near the cost to a small firm of comprehensive cover for running a van or a small car. The price quoted for the annual premium varies between 0.25 per cent. and 0.05 per cent. of annual wage roll, or £8 per head for employers with fewer than 10 employees, with discounts for the size of the company.

I am not making a plug for this organization. Incidentally, it is not the only one. What staggers me is that Conservative Members, largely representing the private enterprise sector, have failed to put that point of view in making their representations in Parliament. They have not said "There are risks, but our system, which we stand by, has produced comprehensive cover at what we regard as very modest rates". For those, such as the hon. Member for Basingstoke, who go in for exaggeration, advancing that argument would tend to diminish the dramatic terms in which they make their claims.

The hon. Member for Somerset, North (Mr. Dean) made a very useful contribution in which he said that if conditions were right, small firms would expand. In an intervention I raised the question of the general background and said that the Government were trying to provide an encouraging atmosphere. People may be critical, but we have some positive achievements. I should like to list them, because I do not take the view that the Bill is necessary in order to provide that encouraging framework.

I have mentioned an article in The Guardian of 13th January, which said that the number of companies registered in 1976 had increased over 1975 from 45,000 to 56,000, and that the number of new business names registered had increased from 97,000 to 108,000. It said that in 1977 no fewer than 220,000 new business names were registered. The Guardian then made this projection—figure is even more remarkable: Add to this huge figure an estimated 54,000 new company registrations in 1977 (based on actual figures for January through October) and we end up with more than 270,000 new business formations registered during last year. This represents a birth rate almost twice that of 1976 and nearly four times the 1963 rate.

Mr. Graham Page (Crosby)

The hon. Gentleman will have read today's Financial Times, in which it is said that 450 fewer companies were registered this January than last January.

Mr. Cryer

Figures taken over a whole year are a more accurate reflection of the position. Certainly between 1975 and 1977 there was an increase of about 10,000 in new company registrations.

I am not saying that all these figures, the diminution in the number of bankruptcies given in Trade and Industry for 3rd February or the slight diminution in the number of company liquidations, show that the situation has improved immeasurably. Of course that is not so. I am trying simply to put the debate, in a proper context, to show that the position is not necessarily as onerous as the Opposition have tried to make out today.

The hon. Member for Somerset, North also mentioned taxation. The Government have taken serious account of representations on the matter. On 26th October last year my right hon. Friend the Chancellor of the Exchequer altered capital transfer tax by increasing the valuation for CTT purposes from 30 per cent. to 50 per cent. as a deliberate gesture to assist small firms.

There is a preferential rate for small companies. That has recently been improved. We have introduced a market entry guarantee scheme to try to assist exporters, particularly small exporters, in gaining new markets. Through a loan, we can cover up to 50 per cent. of the relevant costs.

The small firms information centres work extremely well—incidentally, with about the same number of staff as they had when they were introduced. There has been a very great increase in the productivity of the civil servants staffing them. That should also be recognised. They deal with about 50,000 inquiries a year, not all of them by any means concerned with the legislation.

We have introduced a counselling service, first, in the South-West on an experimental basis, which was extended to the Northern Region and was recently opened in the North-West Region. This year it will be spreading throughout the rest of the country. The West Midlands and Yorkshire and Humberside are, I hope, the next in line.

The small firms information centres and the counselling service guide small businesses through the complexities of legislation which undoubtedly exist. We would claim that they are part of the generally encouraging atmosphere created by this Government.

It is also worth pointing out that, although we are attacked for doing nothing for small firms—completely unjustifiably—it was the Labour Government in 1969 who established the Bolton Committee on Small Firms to find out what that sector was doing. As a result of its report, the consequential institutions to help small firms were set up by the Labour Government.

We can assist in some matters, but in a private enterprise capitalist system we cannot easily stop big firms from taking over small firms. The hon. and learned Member for Blackpool, North (Mr. Miscampbell) drew attention to this circumstance aptly and well. It is a matter of some concern.

Over the past 25 years or so the proportion of manufacturing output from big firms has increased from 20 per cent. to more than 50 per cent. That is why we cannot easily persuade big firms to offer better terms of trade or better credit facilities to small firms. This is equally as much a matter of concern to small firms as the Employment Protection Act. Going around small firms as I do—I visited more than 50 in 1977—that was something which repeatedly cropped up, the question of the terms of trade from large firms and the fact that the terms of trade are too frequently altered without consultation or adequate notice.

All we can do as a Government, where strong representations are made, is to try to persuade those large firms to alter their view and to encourage small firms. It is interesting that a recent Sunday newspaper carried an article about some large firms encouraging small firms. But at approximately the same time we received representations that a small firm was being badly dealt with because of a worsening in the terms of trade from one of the large firms involved.

We cannot easily halt, for example, the decision of a large firm to take over a small one and to close it down. That is where there has been a loss of jobs. I refer the House to the situation concerning Moderna—in the constituency of my hon. Friend the Member for Sowerby (Mr. Madden)—where an old family firm had been taken over. That firm made blankets and had a reputation second to none in this country. As I understand it, the new firm came along with two £1 issued shares, closed down the firm and sacked 300 workers. A delegation of managers and workers came to the Department of Industry to discuss the prospect of forming some sort of co-operative venture and suggested that the Government should be able to buy either the shares or the plant. All we could tell them was that we could not do anything, because we did not have such powers of intervention.

Where individual private enterprise firms make decisions which too often affect small branches, for example, in the constituencies of some of my hon. Friends, we do not have the power to say to that firm "You must change your commercial judgment". If Conservative Members want us to have greater powers of intervention, I am sure that my hon. Friends would welcome that change of heart.

Mr. David Mitchell

Is not the Minister aware that countless hundreds, if not thousands, of times the situation he describes takes place where a small family business sells out to a bigger company which later contracts or closes down that family business? Does he realise that it is capital transfer tax and capital gains tax which are causing such family businesses to sell out?

Mr. Cryer

I refute that entirely. We have made alterations to the CTT. It is a fairer tax than the old estate duty. It is true that no one can die conveniently and avoid payment. I know that the Opposition find that annoying. In Committee on the Finance Bill the hon. Member for Cirencester and Tewkesbuy (Mr. Ridley) made that point graphically. But it is a fairer tax. It does not apply, as the old estate duty did, immediately on the death of a spouse with the tax having to be paid. Therefore, there is inbuilt into the CTT a better facility for a family firm to continue.

But we have also to recognise that often there are difficulties for a family firm continuing. All of us have a great deal of regard for family firms. Many of them provide an excellent service. But sometimes family firms come to an end because the family comes to an end or because there is a quarrel between members of the family, and in those circumstances again jobs can disappear. It is by no means always due, as the hon. Member for Basingstoke suggests, to the tax position.

Mr. Bidwell

What is so sad about the state of British capitalism at present is the activities of the conglomerates where financial speculators, knowing very little of the day-to-day running of manufacturing concerns, make takeover bids.

Mr. Cryer

I endorse that view entirely, and I can tell my hon. Friend that I have met at least one delegation led by a Conservative Member of Parliament and accompanied by trade unionists making representations about a firm in his constituency. It was a perfectly good firm employing about 400 people, and it had a very sound order book. It had been sucked into one of these financial conglomerates to which my hon. Friend referred which was dragging down that perfectly sound firm. This happens.

In such circumstances the powers of the Government to intervene are very limited. My hon. Friend will recognise that, in this context and in the general context of the relationship of big-time firms to small firms, the Labour Government' policy of planning agreements would in many instances give a more certain future to small firms. It is a matter for regret that that policy has not been as successful as it should have been.

Despite the difficulties faced by small firms, largely because of the difficulties facing the economy as a whole—we cannot insulate small firms totally, however much we might like to, from the effects of the most difficult recession since the 1930s—we feel that we are trying and succeeding in some part to provide an encouraging atmosphere for small firms and, therefore, that this Bill is inappropriate.

One reason why it is inappropriate is the view which I get from small firms up and down the country during the course of my visits. All too often they say to me "our firm is a team. I know the people whom I employ. I know when they are in difficulties, and they come to me to talk about them" They say "We are a team." If that is really the case, it seems to me that both sides of the team should be encouraged. We are trying to encourage the owners of small businesses in the ways that I have outlined, but surely the employee should also be encouraged by the knowledge that not only is he being treated well by his employer but that he is being treated fairly by the law.

I ask hon. Members not to forget that a small business man who is perfectly proper, encouraging and fair can be replaced, as many hon. Members know only too well. His firm may be taken over by someone who says, for example, "We do not want anyone aged 63 in the firm. Get rid of him" That is not a universal attitude, but it exists. The old employer says "Bill is a splendid worker", and the new one says "He is too old. We must get rid of him" In those circumstances there should be some legal provision whereby the employee can say "This gives me a reasonable crack of the whip and a fair deal, in the same way that my employer has a fair crack of the whip" It seems to me that the Employment Protection Act is at least struggling to achieve that.

Against the background that has been outlined by my hon. Friend, that the operation of the Act is being examined jointly by the Department of Employment and the Manpower Services Commission, in my view, the Bill is unnecessary and would prove inappropriate.

3.31 p.m.

Mr. John Cope (Gloucestershire, South)

I shall not take up the time of the House for more than a few minutes because I know that many of us, at least, want to bring the debate to a conclusion.

I congratulate my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) on using the opportunity which offered itself to propose this practical step to help small businesses. The hon. Member for Fife, Central (Mr. Hamilton) said that, in his view, small was quite often not beautiful. I would not say that that was a summary of his speech, which was very long, but it was clear that he did not have the advantage of hearing the speech of his hon. Friend the Member for Liverpool, Walton (Mr. Heffer) earlier.

Mr. William Hamilton

I heard it all.

Mr. Cope

The hon. Member corrects me, but the burden of his hon. Friend's speech was that small is beautiful. Personally, I would go along with that much more.

The hon. Member for Walton also pointed out, quite correctly, that what we proposed was only one thing which might be done for small businesses. In passing, I strongly support what he said about the inner cities and inner city premises for small businesses, and his comment about the weight of forms. I hope that the Minister with special responsibility for small businesses will take that on board as well.

That puts the Bill into context. Some Labour Members, including the Minister of State, seemed to think that the Bill could be justified only if the Opposition positively demonstrated that the Employment Protection Act was killing jobs. That is not part of our contention. We are putting forward the lesser argument, that it is inhibiting the creation of jobs. We are not arguing against the existence of the Employment Protection Act as a whole. All we are suggesting in the Bill are some small and modest modifications to improve the set-up and to alter a little the centre of gravity, as it were, of the way the Act functions.

Mr. Robert Rhodes James (Cambridge)

Will my hon. Friend emphasise that none of us has any objection to the principle of the Employment Protection Act? Our concern has been that the pendulum has swung too far and that this has affected the problems of small businesses in particular.

Mr. Cope

My hon. Friend puts it better than I do, which is quite normal. I entirely agree with what he says. The issue today is whether the House should take this admittedly small but important step to improve the position under the Employment Protection Act. We believe—certainly, the talks that I have had with many small business men throughout the country in the past few months and years lead me to believe—that the existence of the Act in its present form is one of the factors, though only one, making it less likely that small business men will take a chance from time to time, as they need to do, in taking people on and expanding their businesses.

I made a point in an intervention which I should like to develop. It was said by several hon. Members on the Government side that we were seeking to put into an Act some things that were better left to regulation and that the Secretary of State already had the necessary power under the parent Act. I should be happy if regulations were used to make these alterations, but no Back Bencher can put forward such regulations. All he can do is suggest alterations in a Bill like this.

Mr. Clemitson

In dealing with the sieving of cases which are outside the jurisdiction of industrial tribunals in unfair dismissal cases, the Minister of State said that new procedures had been adopted by the tribunals. Would the hon. Gentleman comment on that? My hon. Friend's arugment was that that part of the Bill was not needed now because that kind of procedure was in practice being followed.

Mr. Cope

Yes, but as my hon. Friends have made clear—perhaps the Minister of State has more information: he should have—we understand that it is operating satisfactorily in some but not all tribunals. As was said, the figure of 1,000 cases which went to a hearing in 1976 and were then dismissed as being without the scope of the Act shows the size of the problem. I know of no more up-to-date figures.

I also wanted to know what had happened to the crumb of comfort that the Minister of State promised when I intervened in his speech—the suggestion that the Government might go a little of the way towards taking up the points that we have been making. But that crumb of comfort now seems even less than my lunch—which was none—except for the information that a new guide will be produced. We shall wait and see whether that is useful.

Apart from my hon and learned Friend the Member for Blackpool, North (Mr. Miscampbell), I do not think that any lawyers have spoken in this debate, which makes a nice change, with respect to my legal colleagues. However, there are clearly some things that the lawyers need to clear up. Some points should be cleared up in Committee, but I believe that a clear case has been made for the Bill to go through the House today so as to allow us to deal with these small but important matters.

3.39 p.m.

Mr. Roger Moate (Faversham)

I shall be brief, but I want to express my disappointment at the likely outcome of this debate—due to the Government's opposition to a sensible, moderate and helpful measure. Significantly, in many of the speeches, from both sides, there has been a genuine recognition of the vital importance of small businesses in trying to restimulate wealth creation. This is a small opportunity to improve the atmosphere and morale of small businesses.

Essentially, the damage that has been done to business life does not derive from specific examples of legislation. What I refer to is the destruction of the atmosphere of confidence in which businesses can perform and succeed. What the Government have failed to understand, certainly the Government spokesmen we have heard today, is how deep-rooted is this fear among small business men that the Employment Protection Act specifically—there are others—will jeopardise their situation if they take on extra employees.

It is hard to produce evidence that people have not taken on extra staff because of the provisions of the Act. Essentially, we are saying not that it has destroyed jobs but that it has created an atmosphere in which the 800,000 small businesses we are talking about will not take on new employees. Time after time business men have come to me, and I am sure to other hon. Members, and expressed this fear. Others have said that, because of their fears concerning the Employment Protection Act, they are not taking on new employees to replace those who have retired or left.

It has been said that the unfair dismissal procedures were put on the statute book by a Conservative Government. We are not quarrelling with the principle. What I say is that we need to raise the threshold of bureaucracy beneath which small businesses can flourish. We are talking about raising the threshold of VAT. Let us try to raise the threshold of bureaucracy so that small businesses do not suffer as many of them are now suffering. I referred earlier to the Government spokesmen we have heard today. I did so because the Chancellor of the Duchy would no doubt have said something totally different today. It was not a Conservative spokesman but the Chan- cellor of the Duchy who went into print in The Sunday Times of 27th November saying: We must be careful that the Employment Protection Act is not turned into an Employment Destruction Act. The Chancellor of the Duchy recognises what is happening. He is on record as having said the same sort of thing elsewhere. He recognises the fear of business men. This fear is founded not on a myth but on experience.

I have a case where an award of £6,000 was made even though the dismissal was felt to be right but the formalities of the warning notice had been ignored. I do not believe that the difference between justice and injustice in these informal small businesses depends on one formal letter. Those cases receive publicity and create fear and concern in the business community. The Government have missed an opportunity to restore an atmosphere of confidence in small businesses. That is a matter of great disappointment to me. I hope that, despite that, we shall be successful in carrying this Bill through its Second Reading, which it thoroughly deserves. If it needs improvement in Committee, so be it. I believe that it is a Bill which ought to go on to receive the Royal Assent.

3.44 p.m.

Mr. Ivor Clemitson (Luton, East)

Almost all the speakers in this debate have congratulated the hon. Member for Sheffield, Hallam (Mr. Osborn) on introducing this Bill. Whatever our differences of view about the Bill and about small businesses, the subject is vitally important in terms not only of the economic health of the country but of the general social well-being of the country. The hon. Member is to be congratulated on enabling us to debate this issue. Unfortunately we have been subjected to a propaganda campaign on behalf of small businesses which has been based on a great deal of mythology and very little fact.

The hon. Member for Basingstoke (Mr. Mitchell), speaking from the Opposition Front Bench, slipped into this style of speech and method of attack. There is no party in this House with a monopoly of concern for small businesses. The Conservative Party is no more concerned than the Labour Party, the Liberal Party, or any other party. The kind of propaganda approach to the subject of which the hon. Member for Basingstoke was guilty does more harm than good to the cause of small businesses.

Mr. Graham Page

I am trying to assist the hon. Member for Luton, East (Mr. Clemitson) in trying to talk out the Bill. But surely the last Minister who spoke from the Government Front Bench gave us what was entirely a propaganda speech. He did not deal with the Bill at all. He simply outlined all the actions the present Government had taken and even went so far as to say that capital transfer tax had been of benefit to small businesses. What utter nonsense.

Mr. Clemitson

I am not trying to talk out the Bill. I am grateful to the right hon. Member for Crosby (Mr. Page) for underlining my point. Neither party has a monopoly of concern. My hon. Friend the Under-Secretary cited many actions of this Government that have assisted small businesses.

A number of my hon. Friends and myself were fortunate enough to get through a Private Members' Bill—the Industrial Common Ownership Bill, which, although not concerned solely with small businesses, concerned them a great deal. Many hon. Members have been very concerned to promote co-operative and common ownership enterprises. These forms of ownership are particularly appropriate in the small business sector.

Mr. John Lee (Birmingham, Handsworth)

If anything, my hon. Friend the Member for Luton, East (Mr. Clemitson) is too kind to the Conservative Party. The history of British capitalism is one of more and more agglomeration into larger units. The Conservatives have done very little to stop this trend, despite their alleged support for the small man rather than the big man.

Mr. Clemitson

There is a lot of merit in my hon. Friend's point. Either a small business is successful as such, or it is taken over by a larger business. The phrase "small is beautiful" has been quoted by many hon. Members in this debate. But the author of the book "Small is Beautiful", Ernst Schumacher was a great advocate of co-operative and common ownership enterprises. We all regret his sad death recently.

The picture presented by the propaganda approach to the subject is threefold. First of all, it is claimed that small businesses are in decline, often rapid decline. Secondly, it is alleged that the cause of this is primarily the various restrictions imposed on small businesses by the Government. A whole string of Acts and taxation measures is quoted in defence of this point. Thirdly, it is claimed that the panacea for unemployment problems is to encourage small businesses.

I challenge particularly the first of these propositions. I have looked at a document that was quoted earlier in this debate "Enterprise into the Eighties" published by the CBI Smaller Firms Council three or four months ago. At the beginning of that document it says: Given the limited availability of official statistics much of the individual information presented must be treated with caution. Collectively however, and when added to the mass of anecdotal evidence, the message is unmistakable—the UK's smaller firms sector is small relative to those of virtually all this country's main competitors, and the various constraints on small businesses and would-be entrepreneurs are endangering their important function as a 'seed bed' and as the nation's traditional source of innovation and growth for the future. It is to be noticed that at the beginning of that statement it is admitted that the evidence available is, to say the least, somewhat questionable, but it goes on to draw all kinds of conclusions which cannot be substantiated by the evidence.

The authors of this document say: Given the limited availability of official statistics much of the individual information presented must be treated with caution. … Apart from the Bolton Report there remains relatively little research and information on smaller firms in the UK so that reliable, up-to-date statistics are often not available. I emphasise "up-to-date statistics".

When we examine the document, we find that in many ways the statistics are very dated. I am making a serious point, because I am examining the evidence on which many of the Opposition's contentions are based.

Turning to Table 1.3, we see at the bottom the sources of information: The Census of Employment 1971, the Censuses of Production and Distribution 1971 and so on. The figures are therefore dated, to say the least. In later tables we have 1972 statistics and so on. The conclusions drawn in this CBI document are based on very dated statistics. I am not blaming the CBI for that. One of the problems when discussing small businesses is the lack of accurate and up-to-date statistics on the subject. But, given the limited and dated nature of the statistics, it seems odd that the CBI should draw these conclusions in this document.

Again, there is the problem that units or establishments as defined in statistics do not necessarily correspond with individual discreet businesses. They may be units of larger businesses. It is difficult to sift this information.

Mr. Rhodes James

Does the hon. Gentleman agree that statistics relating to bankruptcies of small businesses, which are at an all-time high, are easily available?

Mr. Clemitson

I have not considered the figures, but, in private discussion earlier today with my hon. Friend the Under-Secretary of State, I did have sight of some statistics on that matter. As I recall—my hon. Friend will correct me if I am wrong—the number of bankruptcies has been declining during the last couple of years.

I searched for more up-to-date information. I looked in the Department of Employment Gazette for January—in other words, the latest edition. In the Gazette is an article entitled How big is British business? These are the results of the latest Census of Employment 1976. I would be the first to admit that the figures must be treated with a great deal of caution. As I have said, establishments do not necessarily correspond with individual units.

However, the figures are interesting. They compare employment units with establishments. I take the figures that relate to 1973–76, and employment units that employ between one and 10 persons. There is an increase of units of 28,500 and an increase of employees of 149,500. I could continue, but I do not wish to bore the House with too many statistics.

My calculations are that between 1973 and 1976, taking employment units employing fewer than 200 people, there was an increase in establishments of 51,236 and an increase in employment of 1,023,510. At the other end of the scale, taking employment units employing over 1,000 people, we have a decrease in establishments of 320 and a decrease in employment of 819,154.

I do not wish to put too much emphasis on those statistics, as clearly the units do not correspond necessarily with individual businesses. However, it would be surprising if within that remarkable shift there was no increase in employment in small businesses and no decrease in employment in large businesses.

Mr. Graham Page

rose—

Mr. Clemitson

No. I must get on because I have a great deal more that I wish to say.

Hon. Members

Get on with it.

Mr. Graham Page

rose—

Mr. Russell Kerr (Feltham and Heston)

Sit down.

Mr Clemitson

I submit, Mr. Deputy Speaker, that I am not wasting the time of the House. I am dealing with a basic argument. The whole of the case that has been presented to us is based on the assumption that small businesses are in decline because of the terrible Government who are constantly imposing burdens upon them. I am demonstrating that there is some statistical evidence that a reversal of that trend has been taking place.

Even within the CBI document, to which I referred earlier, and which I wish I had more time to analyse in more detail there is evidence that there was a sharp decline in the number of small manufacturing units from the 1930s onwards, that from the 1960s the trend bottomed out, and that an increase took place with the 1970s. There is a considerable amount of evidence that small businesses, far from declining, are increasing in number and in the employment—

Mr. John H. Osborn

rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The House divided: Ayes 86, Noes 26.

Division No.125]	AYES	[3.59 p.m.
Awdry, Daniel	Havers, Rt Hon Sir Michael	Pardoe, John
Bennett, Dr Reginald (Fareham)	Hayhoe, Barney	Price, David (Eastleigh)
Benyon, W	Holland, Phillp	Rawlinson, Rt Hon Sir Peter
Berry, Hon Anthony	Howell, David (Guildford)	Renton, Rt Hon Sir D. (Hunts)
Biggs-Davison, John	Hunt, John (Ravensbourne)	Rhys Williams, Sir Brandon
Blaker, Peter	Jenkin, Rt Hon P. (Wanst'd&W'df'd)	Ridley, Hon Nicholas
Bowden, A. (Brighton, Kemptown)	Jessel, Toby	Ridsdale, Julian
Braine, Sir Bernard	Johnson Smith, G. (E Grinstead)	Ross, Stephen (Isle of Wight)
Brooke, Peter	Lamont, Norman	Sainsbury, Tim
Bryan, Sir Paul	Lawrence, Ivan	St. John-Stevas, Norman
Buck, Antony	Loveridge, John	Shelton, William (streatham)
Bulmer, Esmond	Macfarlane, Neil	Shersby, Michael
Clark, William (Croydon S)	MacGregor, John	Sinclair, Sir George
Cockroft, John	Madel, David	Smith, Timothy John (Ashfield)
Cope, John	Marshall, Michael (Arundel)	Stainton, Keith
Dean, Paul (N Somerset)	Marten, Neil	Stanbrook, Ivor
Dodsworth Geoffrey	Mates, Michael	Taylor, R. (Croydon NW)
Drayson, Burnaby	Mayhew, Patrick	Thomas, Rt Hon P. (Hendon S)
Eyre, Reginald	Meyer, Sir Anthony	Townsend, Cyril D.
Finsberg, Geoffrey	Miller, Hal (Bromsgrove)	Wakeham, John
Fisher, Sir Nigel	Miscampbell, Norman	Walder, David (Clitheroe)
Fry, Peter	Mitchell, David (Basingstoke)	Walker, Rt Hon P. (Worcester)
Gardiner, George (Reigate)	Moate, Roger	Weatherill, Bernard
Gilmour, Rt Hon Ian (Chesham)	Moore, John (Croydon C)	Wells, John
Glyn, Dr Alan	More, Jasper (Ludlow)	Whitelaw, Rt Hon William
Goodhew, Victor	Morrison, Hon Peter (Chester)	Wiggin, Jerry
Gorst, John	Neubert, Michael
Gow, Ian (Eastbourne)	Onslow, Cranley	TELLERS FOR THE AYES:
Grant, Anthony (Harrow C)	Page, John (Harrow West)	Mr. John H. Osborn and
Grieve, Percy	Page, Rt Hon R. Graham (Crosby)	Mr. Robert Rhodes James.

NOES
Anderson, Donald	Hamilton, W. W. (Central Fife)	Price, C. (Lewisham W)
Barnett, Guy (Greenwich)	Jackson, Miss Margaret (Lincoln)	Sandelson, Neville
Clemitson, Ivor	Jay, Rt Hon Douglas	Shore, Rt Hon Peter
Cocks, Rt Hon Michael (Bristol S)	Jenkins, Hugh (Putney)	Walker, Harold (Doncaster)
Cryer, Bob	Kinnock, Neil	Ward, Michael
Davidson, Arthur	Litterick, Tom	Weitzman, David
Douglas-Mann, Bruce	Lyon, Alexander (York)
Edwards, Robert (Wolv SE)	Meacher, Michael	TELLERS FOR THE NOES:
English, Michael	Pavitt, Laurie	Mr. John Lee and
Foot, Rt Hon Michael	Fraser, John (Lambeth, N'W'd)	Mr. Russell Kerr.
Graham, Ted

Mr. Deputy Speaker (Mr. Bryant God-man Irvine)

Because fewer than 100 Members have voted in support of the motion, Standing Order No. 31 provides that the Question is not decided in the affirmative. I accordingly declare that the "Noes" have it.

It being after Four o'clock, the debate stood adjourned.

Debate to be resumed upon Friday 14th April.