HC Deb 15 May 1986 vol 97 cc931-48

'The provisions of Part III of the Act shall not take effect until the national insurance payments made by employers and employees into the redundancy fund are reduced to a level sufficient to cover no more than the likely costs to the fund of redundancy payments.—[Mr Prescott.]

Brought up, and read the First time.

Mr. Prescott

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

Mr. Deputy Speaker (Sir Paul Dean)

With this it will be convenient to take amendment No. 80, in clause 32, page 29, line 39, leave out 'August' and insert `November'.

Mr. Prescott

There are two principles embodied in these proposals. New clause 6 is concerned with the principles of the contribution and distributiom of the redundancy fund. Amendment No. 80 is concerned largely with the date. Dealing with the times from which the proposals in the Bill would apply to remove the rebate of 35 per cent. to companies employing over 10 people in redundancy situations, the date is 1 August. Although the date in the Bill, as I recall, is 31 July, it is effectively applicable from 1 August.

The debate in Committee showed that we recognise that the redundancy fund established in 1965 has covered different forms of rebates. It started with something like 75 per cent. This was changed by the previous Labour Government to 50 per cent. A year or so ago it went to about 35 per cent., the level at which it remains.

The operations of the fund are such that it is a contributory fund in terms of the employee and the employer. Its profits in its last year of operation were about £9 million, according to the last annual report, with approximately £751 million in receipts. While that is not a large amount, the fund is in surplus and has attracted the attention of the Chancellor. The first mention of it came in the Budget speech when he proposed to remove the 35 per cent. rebate in the case of companies with more than 10 employees. The Chancellor estimates that there will he a saving of about £200 million. The justification, according to the Government, is that this would be used to fund some of the employment scheme measures, particularly those which are long term. It is a pity that the moneys that we are always finding from one source or another are all for employment schemes and never to do with real training or jobs, but that is the nature of this Government's approach.

It is perhaps appropriate that we should be debating this on the day on which the unemployment figure is at a record level of well over 3.2 million. Considering that and the scale of redundancies, the levels of unemployment in the country are on a scale comparable to the 1930s. Unemployment now lasts longer and has been increasing every year for six years. In the 1930s, the increase each year continued for four years. That is the scale of change in the economy that has taken place in recent years. That has had an effect on redundancies and subsequently the great claims that are being made. After the recent announcement, there are to be further redundancies in a number of companies.

Our position was made clear in Committee. We did riot wish to amend the relevant clause or the one concerning dates and times. We thought that the redundancy fund was paying out fairly. The 35 per cent. kept it in balance with a surplus of £9 million.

If the Government were so concerned about the money, perhaps the surpluses could be paid off, as our amendment suggests, to the employers and the employees by making a reduction in their contributions. Instead, the Government have chosen to save money and use it in another way. The case is not unique. There is a strong feeling that, with contributory funds, the Government are denying the rights for which the people paying and then denying them benefits promised from the fund. Employees and employers were promised that they would receive in redundancy cases a 35 per cent. rebate. That was changed, which is a denial of benefit to people who have paid into the redundancy fund.

My memory goes back to the graduated pension fund, another great swindle perpetrated on the British electorate. Despite the fact that people had paid contributions, the Government finished the fund, the money was transferred and the benefits were either denied or were so small as not to be worth a great deal. The earnings-related benefit is a more modern example. If a private company had changed the fund in the same way, it would have been taken to court. The Government, with their power, can raid public funds, and today another public fund is raided to finance some of the Government's other policies—in this case, employment schemes. We have not sought to amend the Bill in this way, but we are making it clear that, to be fair, the surplus should go to those employers and employees who have contributed.

We hear a great deal from the Government about the costs of industry, and here we are talking about, as the CBI pointed out, an extra £200 million of costs on industry for financing redundancies. Unemployment is continually increasing, and no member of the Government is able to say when it will stop doing so, let alone go down. We can assume that redundancies will continue apace. If we wanted any reminder of that, we have only to listen to the radio or watch the television today. About 4,000 people are to lose their jobs in the shipyards; British Caledonian will be making 1,000 redundant; and today the first suggestion came of more redundancies, at British Rail Engineering Ltd, which will mean that a few more thousand are unemployed, leaving BR ready for the privatisation proposed by the Government, or the transfer of the parcels business. Perhaps many of these companies will be encouraged to rush through their redundancy programmes because substantial amounts of money are still available under the 35 per cent. rebate on redundancy.

In Committee, my hon. Friend the Member for Jarrow (Mr. Dixon) asked whether the 90-day principle applied. Clearly, if it were applicable until August, 90 days before that would be 1 May. If a company—say, British Caledonian or British Shipbuilders—puts in an application now, will the company be able to get the money for redundancies? If it will, that will encourage companies to throw people out of work much more quickly than they might otherwise do. In that sense, the Government may be using their £200 million for employment schemes, but they have created a financial incentive for people to be thrown out of work at a faster rate. We may not have seen the end of that, because this can run up to 1 August.

Perhaps it is the Paymaster General's view that, by bringing the scheme forward to August, the Government will avoid a mass of redundancies because people will wait even longer than a year. The Minister needs to give us a clear answer showing how that applies. An answer was not given in Committee, and Ministers may not have known it. However, the Minister should tell us the position of a company that makes application for payment under the fund. Is the payment allowable on the day that the redundancy takes place or from when the company gives notice and makes the application for the redundancy fund?

That brings us directly to our amendment, which is about setting a time. In Committee on 29 April, the date of 31 July was written into the Bill, but that is creating a number of problems. The first is that to which I have just referred—companies rushing through redundancy schemes. A second difficulty arises out of other legislation. In Committee on the Transport Act, we warned that the Act would bring about many redundancies and reductions in services, and that deregulation would be disastrous. The Government have never accepted that argument, but it seems that the by-elections and local elections have painfully printed it on their minds.

8.45 pm
Mr. Nellist

My hon. Friend may be interested in the figures from the west midlands. We already know that 500 of the 1,800 buses in the west midlands will stay in the garages from 26 October. If this part of the Bill goes through unamended, with the loss of the 35 per cent. rebate to the transport authorities, which have already had their grants cut by the Secretary of State for Transport, the redundancies, with which I disagree, will be even higher because the authorities will have to find the 35 per cent. as well as the cuts in the transport supplementary grant.

Mr. Prescott

I was coming to that point.

The passenger transport executives, or the district authorities such as Hull, will have many difficulties. Several of my hon. Friends may mention the case of south Yorkshire, where all the PTEs expect redundancies as a result of the reorganisation now that the subsidies and funding for transport have been reduced. South Yorkshire will lose about 1,800 jobs. All the PTEs together will lose about 9,000.

This is a problem not just for the PTEs but for the municipal bus corporations. In previous legislation, it was agreed that there will be a transfer to another body—for example, in Hull, to a private company. The local authorities cannot give financial support to those companies from 25 October. That would mean that the transfer has to be done by August. Therefore, most PTEs and municipal authorities, with the reorganisation required of them by previous legislation, took into account the redundancies that will take place and the cost of financing them. However, they are now being denied the 35 per cent. rebate, which they assumed would apply to October or November—hence the relevance of our November amendment. The PTEs no longer have the resources to fund the level of redundancies except by cutting services or by making even more redundancies, and problems could be even more accelerated, bringing about yet more redundancies.

Mr. Don Dixon (Jarrow)

There is no supplementary rate either.

Mr. Prescott

My hon. Friend reminds me about my next point—the similar legislation on financing that prevents councils from making a supplementary rate. Other legislation has not been co-ordinated with this date. The Chancellor saw a chance to get a few bob on the side to finance his employment scheme, and to take a penny off the rate of income tax. It would have been better to keep the tax at the same rate and fund the employment schemes, but he wants to give money to those who can well afford to live without tax cuts. He has robbed redundancy funds to find that money.

If the councils are not to raise a supplementary rate, how are they to get over their difficulties? If the Government would accept an amendment to extend the scheme to November, the PTEs could proceed to do what has already been determined under the financing of their reorganisation as required under other legislation. On 29 April, the Minister made it clear, when challenged by a number of my hon. Friends: I have no doubt that we shall divide on it. If it assists the hon. Gentleman, I shall write to him and the hon. Member for Ladywood, with a copy to each member of the Committee, take on board the points made and explore still further whatever I undertook to consider this morning. I can say no more than that."—[Official Report, Standing Committee K, 29 April 1986; c. 879.] I note that he wrote to my hon. Friend the Member for Birmingham, Ladywood (Ms. Short) and probably to one or two other members of the Committee. He made it clear in the letter that discussions were still being undertaken with the Department of Transport and the Department of the Environment. He did not think that he would be able to amend the Bill on Report. There is a possibility therefore that he will have it amended in another place.

We should like to know what the Paymaster General thinks about this matter. Is he making desperate phone calls and conducting discussions? Perhaps he could enlighten the House as to what is happening on this important matter. What does he intend to do in another place to amend this point?

There is a great deal of anxiety among transport authorities at the moment. They have carried out their statutory obligations under other legislation but now find themselves forced against the wall. The Government, in all justice, could keep their principles by accepting the amendment. They could say that the change will not be applicable until 1 November.

Mr. Richard Caborn (Sheffield, Central)

The Government have hit the jackpot again with part III. The trade unions and the employers, through the Confederation of British Industry, have said that they do not want the redundancy payments to be tampered with or effectively removed in relation to Government contributions. That point was revealed in an article in the Financial Times on 17 March, which we discussed fully in Committee. It showed that the Government are out of tune with what is happening in industry.

My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) made a number of pertinent points, and I should like to cover several other matters which cover future employment patterns and so discuss what the Government are putting on the employers' plate.

The Government's action over the qualification period for redundancy pay could mean, as my hon. Friend the Member for. Kingston upon Hull, East said, that redundancies will be declared in the near future. The Government's actions could accelerate the number of redundancies either before 1 August, or beyond that date, depending on the Paymaster General's reply about the 90-day period. The Government's action could spark off a considerable number of redundancies in companies which are considering rationalisation, and we have seen many examples of such redundancies this week.

When the Bill reaches the statute book, it could destabilise the labour market. An employer will ensure that he does not have long-term employees, and therefore will not have to bear the full burden of redundancy costs. In future, an employer might not necessarily declare a policy, but will work to a policy which will ensure that people are not on payrolls for more than two or three years. This will ensure that the employer has to pay only a minimum amount of redundancy pay at any one time. I could quote many examples of industries where that kind of attitude might be prevalent.

Redundancy payments have been funded on a commonsense approach. Through national insurance contributions, all industries contribute to the redundancy payments fund. The sole burden for redundancy payments is not placed on the industries which are having problems with finance or restructuring. The burden has been borne, to some extent, by profitable industries, and the employees in the successful industries have been paying into the central fund, which has been used to make redundancy payments. Responsibility has been shared across industry and commerce throughout the United Kingdom.

When part III reaches the statute book, it will compound the problems of the industries which are having difficulties with finance or restructuring. Liquidations and closures might be brought forward because, if there are more than 10 workers in a company, that company will have to bear 35 per cent. of the redundancy payments. Increasing the redundancy payment burden to 35 per cent. might tip the balance for a small company, employing 12 or 14 people, which was previously on an even keel. It could cause that small company to go into liquidation or bring in the receiver. The collective funding of redundancy will be altered and a company will have to bear the full cost of any redundancy pay. Rather than helping small businesses or industries which are in financial difficulties or which are restructuring, the Government are compounding their problems.

I should like to consider amendment No. 80, which is important for my constituency in south Yorkshire. If the amendment is not accepted, or if there is no response from the Government to our proposition, there could be serious problems for constituencies such as mine.

My hon. Friend the Member for Kingston upon Hull, East, was fortunate to receive a letter from the Minister. In Committee I asked: Will the Minister do the same with the Department of Transport, with regard to transport supplementary grant? Probably as profound a case can be made on this as has been made by my hon. Friend on the local authorities. The Minister replied: Absolutely, I am delighted to respond to the hon. Gentleman on that point."[Official Report, Standing Committee K. 29 April 1986, c. 870.] I have not received a letter on that issue, and I have nor seen the correspondence to which my hon. Friend the Member for Kingston upon Hull, East, referred.

South Yorkshire passenger transport executive is probably the executive that has been hit hardest. It has had to bear about £30 million worth of cuts in transport supplementary grant. This has caused fare increases of 250 to 300 per cent. It has also meant a reduction in services, and a reduction of 35 per cent. in the number of passengers carried.

The effect of the Transport Act 1985 on south Yorkshire has been to rip the heart out of the community. Now, in this part of the Bill, we see the vultures of the Department of Employment homing in to pinch another £1.5 million to £2 million. This means that we could see further redundancies, in addition to the 1,600 redundancies which south Yorkshire will experience as a result of the Transport Act.

South Yorkshire made representations to the Secretary of State for Transport on the transport supplementary grant. In Committee the Minister refused even to look at the redundancy payments issue, but at least the calculation of the transport supplementary grant did include something for redundancies. From that date to this, as a result of part III, the full cost will have to be borne. It is estimated that in south Yorkshire this will be about £1.5 million.

Will south Yorkshire reduce services further and have more redundancies? It will not be able to go out to tender or subsidise those routes. Will it put the fares up? It can do that, and if it does there is every chance that passenger numbers will decline again, leading to further redundancies.

9 pm

It is now incumbent upon the Paymaster General to answer the questions that we put in Committee. Those questions must be answered within the next few weeks, because the tenders for those routes have gone out and decisions have to be made. It might mean that the executive will bring forward the redundancies to some time in July, to protect the services and stop further fare increases.

Unless the Paymaster General or a Minister from the Department of Transport gives us a decision, things will be extremely difficult for PTEs throughout the country. It is estimated that as a result of the movement of three months they will lose about £9 million which will effectively be taken away from the subsidies for the routes, many of which will be rural routes, which I have no doubt many Conservative Members would wish to maintain.

I hope that the Paymaster General will accept the modest amendments. If he is not prepared to do so, it is incumbent upon him to tell us how the PTEs and the other local authorities will operate.

Mr. Peter Hardy (Wentworth)

Amendment No. 80 contains an entirely reasonable and responsible proposition, and it is that proposition to which my brief remarks will be addressed. This matter should not be considered now; it should already have been resolved. The Government clearly bear a serious responsibility and it should have been accepted before now.

My hon. Friends the Members for Kingston upon Hull, East (Mr. Prescott) and for Sheffield, Central (Mr. Caborn) have put the basic arguments. The fact remains that the PTEs have been placed in a dreadful position over their redundancies. They have been put in that position as a result of the timing in the Bill. I imagine that if any Minister were here from the Department of Transport he would have to accept—he could not deny—that the arrangements made by the PTEs have been dreadfully imperilled, and they were made at the behest of this Administration.

As the Bill stands, the proposals mean that PTEs in south Yorkshire and elsewhere face substantial burdens which in this financial year may be intolerable. They made those arrangements in response to Government policy, and the Secretary of State for Transport was well aware of them and could be said to have been a party to those arrangements.

As has been pointed out, the PTEs cannot raise interim revenue directly. Rate capping and other local authority expenditure controls make that clear. Nor can they guarantee to raise the income which will otherwise be required if the Government do not accept the amendment, because if they increase fares, the certainty in south Yorkshire is that ridership will decline, and income might be diminished rather than enhanced. The PTEs cannot easily make additional redundancies. The burden accepted is already well nigh intolerable. In any case, if they make additional redundancies they could aggravate the situation about which we are complaining now.

As a result of the Bill, passenger transport executives are being squeezed between the upper millstone of Government negligence and the lower millstone of Government incompetence. The Secretary of State for Transport is not present, but someone from that Department should be here. The passenger transport executive acted in good faith. It was not enthusiastic about the arrangements. We in south Yorkshire do not like the arrangements, and I do not think that any of the other PTEs in metropolitan areas like them either. The PTE made a democratic response to statute, and now the Government have changed the ground rules. That is intolerable.

I should have thought that at least a junior Minister from the Department of Transport would have the grace to come to the House to make it clear that that problem, which the Department created, and which the Department of Employment is now compounding, exists. In the absence of such a Minister, the Paymaster General must make a responsible response to the House; otherwise the Government will once again be shown up in a very poor light. By their response to amendment No. 80, the Government will demonstrate whether they are prepared to act with integrity, like a sensible Administration.

Before we conclude this debate, I hope that the Government will recognise that the PTEs have a powerful case. The Government should respond to it and relieve the anxieties that exist in my PTE area in south Yorkshire and in all the other PTE areas. I trust that the Paymaster General will reassure us that there will not be any insistence on the irresponsibility and incompetence to which I have referred.

Mr. Allen McKay (Barnsley, West and Penistone)

I wish to reinforce the arguments made about the clause and the amendment. I am sure that the Paymaster General did not envisage the problems that would he created by altering the redundancy scheme, particularly in relation to the south Yorkshire PTE. When legislation makes a change, there is always a dividing line, and there are always problems with it. There are always losers and winners on either side of the dividing line. The problem is where to draw it.

I believe that the Government are slowly moving towards not making any contributions at all. People will be dismissed, and will get just a vote of thanks before moving down the road. We are discussing how the legislation will affect, in particular, the south Yorkshire PTE. We pointed out the problems that deregulation would cause and we will be proved right. South Yorkshire has had to cut about 30 per cent. of its traffic. By and large that affects the rural areas, weekend services, and school and hospital services. I have a list of the services being tendered for. There are fairly isolated areas round Penistone, but there are no Sunday or Saturday services. The first bus into Penistone is at 8 am and the last bus out is at 7 pm. We do not yet know how people will get to work. That is why we are trying to overcome some of these problems.

No one knows what the cost to the local education authority will be. After all, all the school services have been stopped. I accept that the process has not yet come to an end. But this is where the legislation is relevant. The £9 million that it will cost the south Yorkshire PTE is the £9 million that it hopes to use for subsidies. Thus, one Department is not thinking about the effect of its legislation on another. The amendment does not make a very big change, but it is a sensible change. There is nothing to stop the Paymaster General accepting it. He could give us an assurance that he will consider it, or arrange for the Bill to be altered in the other place. However, he should not dismiss our arguments out of hand by rejecting the amendment.

About 30 per cent. of our bus services have disappeared. I hope that we can find the money to reinstate them. If the Bill is not amended, the PTE will have to make 1,600 people redundant immediately. That is the only way that it can save £9 million to £10 million. However, we are approaching the holiday period and. if it makes 1,600 people redundant, how will it cope with holiday absences? It would mean even less services.

Of course, the PTE could try to recoup the finance from another area. However, fares have already risen by 250 to 300 per cent. and there has also been a severe cut in services. If the PTE has to raise fares again, that will mean even fewer services and more redundancies. Where will the PTE find the money? Local authorities cannot increase rates or they will face rate capping. It is a catch-22. Without any shadow of doubt, the problems are very serious.

I am sure that the Paymaster General did not consider the problems that would be caused. Government policy has caused problems by deregulation of transport, and Government policy will cause further problems with transport, which the local authorities will have to overcome. Rather than compound the problems, the Government should accept an amendment that would help to alleviate them.

All local authorities budget for a 12-month period. Indeed, the Government have stopped local authorities from making any interim rate increases. That is another outlet that the Government have blocked, and there are no longer any gaps or outlets for the PTE. I ask the Government seriously to consider the problems that this legislation will cause. It is bad legislation. Local authorities have budgeted on the Government's original intentions, and that should not be altered now.

Mr. Nellist

My hon. Friend said that one avenue of escape for the south Yorkshire PTE was to bring forward the 1,600 redundancies. The social security costs for 1,600 sacked workers must be about £100,000 or £200,000 a week, so for every week that the redundancies are brought forward the DHSS will have to find a couple of hundred thousand pounds. That is another financial idiocy in this part of the Bill.

Mr. McKay

My hon. Friend is right—the Bill shuffles the problems from one Department to another. It is hardly the way to treat workers who have worked for a firm for 30 or 40 years. All the planning has been carried out in accordance with Government wishes.

Mr. Caborn

The PTE faces another problem. Within the normal functioning of a commercial department, the profit from one area can be transferred to a less profitable area; it is called cross-subsidisation. However, that option has been removed by the Transport Act. The PTE cannot transfer profits from a route in a city or town to a less profitable route. Every avenue has been closed.

Mr. McKay

Every loophole has been closed and there is no room left to manouevre. It is ridiculous to introduce such proposals halfway through a financial year. If a local authority had done that, there would be slapped wrists and bottoms. If the Paymaster General thinks about the problems a little more deeply, he will come to realise that he should never have brought forward the proposal.

We are asking the Minister to have another think. The Government will not gain anything by implementing this provision because any benefit to them will be lost in DHSS payments. The people need to be treated in a better way than that which the Government propose.

9.15 pm
Mr. Dixon

This issue arose in Committee on 29 April. Any employer who pays out more than 100 employees must give 90 days' notice of his intention to do so. The idea of that notice—the Paymaster General should know this because he is the Minister in charge of labour relations—is to enable trade union representatives to negotiate with employers to ascertain whether some of the redundancies can be avoided or whether the impact of redundancies can be alleviated. For example, it is sometimes possible to arrange transfers. Any employer who wanted to qualify for the 35 per cent. discount would have had to give the unions notice two days after the Government's amendment was moved. The amendment was moved on 29 April and the 90-day requirement for negotiations with trade unions would have compelled employers to issue notices only two days afterwards.

We did not receive a satisfactory explanation from the Minister in Committee. He told us that a decision had been taken above his head and explained that it would save £55 million in public expenditure. In fact, he meant that £55 million would be stolen from le contributions made by employees and employers to the central fund.

The purpose behind the Government's amendment was to steal money from others, and they are damaging industrial relations. It will be impossible for anyone to qualify for the redundancy rebate and for the unions to be given 90 days notice to negotiate with the employer to try to avoid redundancies by, for example, arranging transfers.

Mr. Flannery

Those of us who were not members of the Committee are beginning only now to grasp the trickery that has gone on. The issue before us arose only on the Committee's final sitting. It is almost unbelievable that the Government should have introduced such a provocative measure at this stage. Anyone who canvassed prior to the local elections will realise that the Government are in a mess. They could not have planned their own demise more brilliantly.

We in south Yorkshire feel especially deeply about the Government's proposals. In part, that is because we have only just learnt about them. The ordinary people in the area are unaware of what has gone on. The Minister may laugh, but the facts have not been brought home to ordinary people.

In south Yorkshire, we have kept fares down to the best of our ability. There was a larger vote at every election for the Labour party because of its policy of holding down the level of fares. It was a process of real democracy. Rate capping pushed us into an extremely difficult position and the result was that fares had suddenly to be tripled. Indeed, they will have to be increased again.

On Saturday morning, I travelled into Sheffield from outside the town. I had to pay nearly four times as much for my ticket as I had been used to paying. I travelled on a one-man bus. Nowadays, most buses do not have clippies. The bus on which I travelled pulled up at every stop. Because it was a one-man bus, the driver was completely occupied collecting fares, to the danger of the public. On double decker buses, vandalism and activities of that nature could take place upstairs. That poses great difficulty. I cannot believe that the Government could plan to do what they have done at the last minute. If it were explained to an ordinary person, he would not believe that it could happen.

Mr. Kenneth Clarke

The hon. Member for Barnsley, West and Penistone (Mr. McKay) implied at one point, in an otherwise careful, considered and clear speech, that we might be moving to a position whereby an employee who faces the unfortunate possibility of redundancy might lose his statutory entitlement. That is certainly not contemplated by the Government or the Bill. When we consider the amendments, we must bear in mind which part of the Bill they relate to. The Bill does not affect in the slightest the statutory entitlement to redundancy compensation of an employee who faces redundancy. The Bill aims to get rid of a method of financing companies that make redundancies—a method which in our opinion, is obsolete.

I shall not repeat the arguments I used on Second Reading to explain why economic circumstances have changed since the measure was introduced. The rebates actually make it cheaper and easier for an employer to contemplate redundancy. An employer receives a subsidy—it was reduced by the Labour Government and ourselves to 35 per cent.—which is taken out of a fund to which employers and employees contribute. It is a churning of money to make it easier to make people redundant. In the present conditions of unemployment, we did not think that that should continue.

Because the payments out of the fund, by the conventions used by former Governments and our own, technically count as public expenditure, we were able to make public expenditure savings which we have diverted to the other employment measures which we announced last autumn and in this year's Budget.

Neither the Opposition's proposed new clause nor their amendment challenges the fundamental policy decision to end the rebates. Both bear on the timing of the change. Assuming that the House carries the Bill, that it goes to another place and becomes law, I expect that, if the labour party ever came to power, it would not bring back the redundancy rebate system, in view of present labour circumstances.

The new clause and the amendment essentially urge delay. One says that we should delay until the contributions to the fund have been brought down so that the fund pays for redundancy payments only, and the other says that we should delay from August to November. That is the only issue before us regarding the new clause and the amendment.

I can understand, in some ways, the need for delay, but I do not think that it goes with the arguments that have been made to us about the fear that employers will somehow speed up redundancies in order to get the rebate. In my opinion, that is not a relevant consideration. Normally, employers declare redundancies only when they are forced to do so. They do so extremely reluctantly. Nobody times redundancies to get a rebate. I think that under the arrangement, an employer receives, on average, £600 each rebate. If an employer is contemplating redundancies and is tempted to speed them up then, of course, the more time that is given before the change comes into effect the more likely it is that people will act to speed up the redundancies.

The hon. Member for Jarrow (Mr. Dixon) intervened briefly and said how bad it was that we had tabled an amendment in such a way that employers planning large redundancies, who had to give 90 days notice to the trade unions, had only two days in which to do so. If he really feels that there is a danger of employers rushing forward, which I do not agree with, all I can say is that if we give them more time there is more chance of them bringing forward redundancies.

We had to introduce an operative date. Whatever date we chose, there would have been hardship for some employers from a cash flow point of view. The more time we give, as advance warning, that we plan to end the rebates, the more likely it is that an employer who feels doomed to make redundancies, and for some reason is tempted to bring them forward to get the rebate, will actually do so. I do not follow that point.

I shall deal with the practical reasons why the new clause and the amendment are somewhat misconceived. It is important to realise that the fund is not just for redundancy payments. It will not be wound up completely. Last year, as well as paying out nearly £250 million in rebates to employers and £55 million direct to employees when their employer defaulted on the redundancy payments they were due, the fund paid out some £50 million to employees who were owed arrears of wages, accrued holiday pay, pay in lieu of notice and certain other debts when their employer had gone into liquidation, receivership or bankruptcy owing money to the employees. When the Bill is enacted, the fund will still be paying out statutory redundancy payments to those redundant workers whose firms could not afford to pay what they owed and will be paying out those other sums owed to employees when a firm unfortunately goes into receivership. The basis upon which the new clause is intended to operate is misconceived.

The new clause refers also to contribution levels by employers and employees to the inevitably reduced fund. I accept that that is a relevant point, but I point out that every autumn we review the contribution levels for national insurance generally. Any changes are included in the Social Security Contributions (Rerating) Order which both Houses debate in November or December each year. At present, the contributions to the redundancy fund represent 0.25 percentage points of the standard 9 per cent. employee's national insurance contribution and 0.15 percentage points of the employer's standard 10.45 percent. contribution. When the time comes to make the rerating order, obviously my right hon. Friends the Secretary of State for Social Services and the Chancellor will have to look at the total make up of what is required to finance all the national insurance funds.

Mr. Prescott

Put up the rates. That is another £200 million.

Mr. Clarke

The rates might even come down.

The fund is in surplus and, obviously, payments are not likely to go down. That is only one part of the picture. Under the present arrangements, all Governments have to consider all the components of the overall contribution together if they are to make any sensible changes. We cannot do that until the autumn.

It has been said that we are stealing the money from the fund. All sorts of allegations have been made. Obviously, some hon. Members have a vision of a swag bag being put over someone's shoulder and carried away.

Mr. Prescott

£200 million.

Mr. Clarke

Thanks to the accounting convention used by Governments, this is one of those marvellous public spending savings where we do not take away any money from the fund.

Changing the rebate entitlements in August, rather than next April, does not cost the fund any money. The £140 million which is saved stays in the fund and earns interest for the fund. But the reduction in public expenditure, which counts now, enables us to boost our spending on the positive employment measures which we announced in one instalment last November and again in this year's Budget.

For those reasons, I ask the House to accept that the new clause and the amendment which are designed to alter the time when a change comes into effect—I cannot believe that any hon. Member would contemplate reversing that—are misconceived and should be rejected.

The hon. Members for Sheffield, Central (Mr. Caborn), for Wentworth (Mr. Hardy), for Kingston upon Hull, East (Mr. Prescott) and for Sheffield, Hillsborough (Mr. Flannery) have raised a matter on behalf of the south Yorkshire passenger transport executive, and it is relevant also to the west midlands passenger transport executive and other such bodies. They are concerned with the impact on those groups if the Bill becomes operative in August and with possible redundancies that those PTEs will have to make as they prepare to make themselves more competitive and face up to the new position in the autumn. The hon. Member for Kingston upon Hull, East thought that this matter arose out of legislation we used to debate when we both spoke on transport Bills. We disagreed on the deregulation of coach transport and I have no doubt that we disagree in the same way about the deregulation of local bus services. I am an enthusiastic supporter of the recent Transport Act and I believe that improvements will come from deregulation.

9.30 pm

I do not think that the hon. Member for Kingston upon Hull, East or I would claim to have bang up-to-date knowledge of all the technical details which flowed from the Transport Bill, on which we were not directly engaged. I do not know that within the passenger transport authorities the PTEs are looking to a date when they will become separate entities with their own trading accounts. There is a tendering exercise to go through in the summer before we will know the full extent of the services available in south Yorkshire, the west midlands and elsewhere. I will not be drawn into debating the transport policies of the south Yorkshire passenger transport authority. I am on record as having discussed that in the past. I regarded the business of freezing the fares to some set date, which I believe was back in the 1960s, as absurd and loading the Government with subsidy and the ratepayers of Sheffield with an unnecessary burden. That is all behind us.

Having listened to the speeches, I know hon. Members obviously feel very strongly that a problem is being faced by the passenger transport authority. I have had some talks with my right hon. Friend the Secretary of State for Transport following the exchanges that took place between my hon. Friend the Under-Secretary and others in Committee and I shall certainly continue those discussions. Some of the figures bandied about as to the costs struck me as extraordinary. If, in order to enter the new competition, redundancies are contemplated, costs will obviously arise and the effect of those costs on passenger transport undertakings will depend on the day on which they take effect. I was asked some questions about that. If the redundancy is one of which notice has been given and which has taken effect before 1 August, rebate will be payable. If there is a late claim, after 1 August, but the redundancy became due before that date again, rebate will be payable. Thereafter, rebate will not be payable.

Until the tendering exercise has been undertaken, hon. Members cannot make assertions about what services they will or will not have, as the hon. Member for Barnsley. West and Penistone tried to do, and nobody can calculate with precision how many redundancies might be necessary. I have not claimed expertise on this matter. I have undertaken to consider the points made by the members from Yorkshire arid the west midlands and to continue discussions with my right hon. Friend the Secretary of State for Transport to ensure that an announcement is made on behalf of the Government in time for consideration in another place.

Mr. Allen McKay

Is a correct that the Minister accepts that people made redundant before 1 August will be subject to rebate but those made redundant after 1 August will not? I do not accept the right hon. and learned Gentleman's arguments because one has to plan 12 months or two years ahead and, irrespective of what the Minister says, at least 1,600 people will be made redundant, even in the best scenario. Is the right hon. and learned Gentleman saying that, if notice is given before 1 August that the PTE is expecting 1,600 redundancies in October, they will receive a rebate?

Mr. Clarke

If the notice is given and dismissal on the grounds of redundancy takes place before 1 August and the claim is made the rebate will be received. I shall happily continue to attend to those details and I know that my right hon. Friend the Secretary of State for Transport is considering the matter. As I have said, an announcement will be made on behalf of the Government.

Mr. Hardy

I recognise that the Minister appears to be moving in the direction of concession, but I should like to tie him down just a little. Does he not accept that he needs to consult the Secretary of State for Transport to establish one thing above all—that the Department of Transport, in effect, endorsed the plans for redundancies, which were under way in the passenger transport executives before the Bill received Second Reading? If the Secretary of State for Transport accepts that that was the case, the moral obligation on the Government is unanswerable.

Mr. Clarke

Before the hon. Gentleman assumes that I am moving in the direction of concession, I should like to tell him that, for example, to concede new clause 6 would cost about £140 million if it delayed the implementation of the change until April 1987, which it would at the earliest. To concede amendment No. 80 would cost £55 million of public expenditure, if we moved the implementation from August to November. No doubt many other industries would find that they would benefit from rebates if we chose the month of November, and they would not if we chose August. Because of the political position of transport and its position vis-à-vis local authorities and central Government, the south Yorkshire passenger transport executive has its usual ability to beat its way to the Chamber of the House of Commons, unlike other industries.

Nevertheless, what is being said is that it is the Government's policies and the two pieces of legislation that are giving rise to the problem. I have undertaken to do pretty well what the hon. Member for Wentworth (Mr. Hardy) repeated—to carry on consultations, which I have already begun, with my right hon. Friend the Secretary of State for Transport. The Government will honour any obligations that it may transpire we have towards the passenger transport authorities. We shall look at the concessions with care.

Hon. Members will want to know at what stage an announcement will be made so that it can be considered. I hope that an announcement will be made on behalf of the Government before consideration begins in another place. On that basis, we can defer the argument and the battle—if there has to be one—about the passenger transport authorities to a later stage. I ask the House to reject the new clause and the amendment, on the narrower point.

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

The House divided: Ayes 155, Noes 203.

Division No. 182] [9.37 pm
Abse, Leo Campbell-Savours, Dale
Adams, Allen (Paisley N) Carter-Jones, Lewis
Archer, Rt Hon Peter Clark, Dr David (S Shields)
Ashley, Rt Hon Jack Clarke, Thomas
Ashton, Joe Clay, Robert
Atkinson, N. (Tottenham) Clelland, David Gordon
Bagier, Gordon A. T. Clwyd, Mrs Ann
Banks, Tony (Newham NW) Cohen, Harry
Barnett, Guy Cook, Frank (Stockton North)
Barron, Kevin Cook, Robin F. (Livingston)
Beckett, Mrs Margaret Corbyn, Jeremy
Bell, Stuart Cox, Thomas (Tooting)
Benn, Rt Hon Tony Craigen, J. M.
Bermingham, Gerald Cunliffe, Lawrence
Bidwell, Sydney Cunningham, Dr John
Blair, Anthony Davis, Terry (B'ham, H'ge H'l)
Boothroyd, Miss Betty Deakins, Eric
Boyes, Roland Dobson, Frank
Bray, Dr Jeremy Dormand, Jack
Brown, Gordon (D'f'mline E) Duffy, A. E. P.
Brown, Hugh D. (Provan) Dunwoody, Hon Mrs G.
Brown, N. (N'c'tle-u-Tyne E) Eadie, Alex
Brown, Ron (E'burgh, Leith) Eastham, Ken
Buchan, Norman Edwards, Bob (W'h'mpt'n SE)
Caborn, Richard Evans, John (St. Helens N)
Callaghan, Jim (Heyw'd & M) Faulds, Andrew
Field, Frank (Birkenhead) Millan, Rt Hon Bruce
Fisher, Mark Miller, Dr M. S. (E Kilbride)
Flannery, Martin Morris, Rt Hon A. (W'shawe)
Forrester, John Morris, Rt Hon J. (Aberavon)
Foster, Derek Nellist, David
Foulkes, George Oakes, Rt Hon Gordon
Fraser, J. (Norwood) O'Brien, William
Freud, Clement O'Neill, Martin
George, Bruce Orme, Rt Hon Stanley
Godman, Dr Norman Park, George
Golding, John Parry, Robert
Gould, Bryan Patchett, Terry
Hamilton, James (M'well N) Pavitt, Laurie
Hamilton, W. W. (Fife Central) Pendry, Tom
Hancock, Michael Penhaligon, David
Hardy, Peter Pike, Peter
Harrison, Rt Hon Walter Prescott, John
Hart, Rt Hon Dame Judith Randall, Stuart
Haynes, Frank Raynsford, Nick
Heffer, Eric S. Redmond, Martin
Hogg, N. (C'nauld & Kilsyth) Rees, Rt Hon M. (Leeds S)
Holland, Stuart (Vauxhall) Richardson, Ms Jo
Home Robertson, John Roberts, Ernest (Hackney N)
Hoyle, Douglas Robertson, George
Hughes, Dr Mark (Durham) Rogers, Allan
Hughes, Robert (Aberdeen N) Rooker, J. W.
Hughes, Roy (Newport East) Ross, Ernest (Dundee W)
Janner, Hon Greville Rowlands, Ted
John, Brynmor Sedgemore, Brian
Kennedy, Charles Shore, Rt Hon Peter
Kilroy-Silk, Robert Short, Ms Clare (Ladywood)
Lambie, David Silkin, Rt Hon J.
Lamond, James Skinner, Dennis
Leadbitter, Ted Snape, Peter
Lewis, Terence (Worsley) Spearing, Nigel
Litherland, Robert Steel, Rt Hon David
Lloyd, Tony (Stretford) Strang, Gavin
Lofthouse, Geoffrey Straw, Jack
McDonald, Dr Oonagh Thomas, Dafydd (Merioneth)
McKay, Allen (Penistone) Tinn, James
McKelvey, William Torney, Tom
McNamara, Kevin Wareing, Robert
McTaggart, Robert Weetch, Ken
Madden, Max Welsh, Michael
Marek, Dr John Wigley, Dafydd
Marshall, David (Shettleston) Williams, Rt Hon A.
Martin, Michael Wilson, Gordon
Mason, Rt Hon Roy Winnick, David
Maxton, John Young, David (Bolton SE)
Maynard, Miss Joan
Meacher, Michael Tellers for the Ayes:
Meadowcroft, Michael Mr. Don Dixon and Mr. Ray Powell.
Michie, William
Mikardo, Ian
Aitken, Jonathan Browne, John
Amess, David Bruinvels, Peter
Ashby, David Bryan, Sir Paul
Atkinson, David (B'm'th E) Bulmer, Esmond
Baker, Nicholas (Dorset N) Burt, Alistair
Baldry, Tony Butler, Rt Hon Sir Adam
Banks, Robert (Harrogate) Butterfill, John
Batiste, Spencer Carlisle, John (Luton N)
Bellingham, Henry Carlisle, Kenneth (Lincoln)
Bendall, Vivian Carttiss, Michael
Bevan, David Gilroy Cash, William
Biggs-Davison, Sir John Chapman, Sydney
Blackburn, John Chope, Christopher
Body, Sir Richard Clark, Dr Michael (Rochford)
Boscawen, Hon Robert Clark, Sir W. (Croydon S)
Bottomley, Mrs Virginia Clarke, Rt Hon K. (Rushcliffe)
Bowden, A. (Brighton K'to'n) Clegg, Sir Walter
Bowden, Gerald (Dulwich) Cockeram, Eric
Braine, Rt Hon Sir Bernard Colvin, Michael
Brandon-Bravo, Martin Coombs, Simon
Bright, Graham Cope, John
Brinton, Tim Couchman, James
Brooke, Hon Peter Cranborne, Viscount
Brown, M. (Brigg & Cl'thpes) Critchley, Julian
Crouch, David Lyell, Nicholas
Currie, Mrs Edwina McCrindle, Robert
Dickens, Geoffrey MacGregor, Rt Hon John
Dorrell, Stephen MacKay, Andrew (Berkshire)
Dover, Den Maclean, David John
Durant, Tony McNair-Wilson, M. (N'bury)
Dykes, Hugh McNair-Wilson, P. (New F'st)
Evennett, David Major, John
Eyre, Sir Reginald Malins, Humfrey
Fallon, Michael Maples, John
Favell, Anthony Marland, Paul
Fookes, Miss Janet Marlow, Antony
Forman, Nigel Mates, Michael
Forth, Eric Mather, Carol
Freeman, Roger Maude, Hon Francis
Fry, Peter Mayhew, Sir Patrick
Gale, Roger Merchant, Piers
Galley, Roy Miller, Hal (B'grove)
Gardiner, George (Reigate) Mills, Iain (Meriden)
Gardner, Sir Edward (Fylde) Mitchell, David (Hants NW)
Garel-Jones, Tristan Moate, Roger
Glyn, Dr Alan Montgomery, Sir Fergus
Goodhart, Sir Philip Moynihan, Hon C.
Gorst, John Mudd, David
Greenway, Harry Murphy, Christopher
Gregory, Conal Neale, Gerrard
Griffiths, Sir Eldon Nelson, Anthony
Griffiths, Peter (Portsm'th N) Newton, Tony
Ground, Patrick Nichotls, Patrick
Grylls, Michael Norris, Steven
Hamilton, Hon A. (Epsom) Oppenheim, Phillip
Hamilton, Neil (Tatton) Oppenheim, Rt Hon Mrs S.
Hampson, Dr Keith Osborn, Sir John
Hanley, Jeremy Page, Richard (Herts SW)
Hargreaves, Kenneth Patten, J. (Oxf W & Abgdn)
Harris, David Pawsey, James
Haselhurst, Alan Percival, Rt Hon Sir Ian
Hawkins, C. (High Peak) Portillo, Michael
Hawkins, Sir Paul (N'folk SW) Powell, William (Corby)
Hawksley, Warren Powley, John
Hayhoe, Rt Hon Barney Price, Sir David
Hayward, Robert Proctor, K. Harvey
Heathcoat-Amory, David Raffan, Keith
Heseltine, Rt Hon Michael Rathbone, Tim
Hickmet, Richard Renton, Tim
Hicks, Robert Rhodes James, Robert
Hind, Kenneth Rhys Williams, Sir Brandon
Hogg, Hon Douglas (Gr'th'm) Robinson, Mark (N'port W)
Holland, Sir Philip (Gedling) Roe, Mrs Marion
Holt, Richard Rost, Peter
Howard, Michael Sainsbury, Hon Timothy
Howarth, Alan (Stratf'd-on-A) Sayeed, Jonathan
Howarth, Gerald (Cannock) Shaw, Giles (Pudsey)
Howell, Rt Hon D. (G'ldford) Skeet, Sir Trevor
Howell, Ralph (Norfolk, N) Smith, Sir Dudley (Warwick)
Hubbard-Miles, Peter Soames, Hon Nicholas
Hunt, David (Wirral W) Spencer, Derek
Hunter, Andrew Stokes, John
Jessel, Toby Taylor, Teddy (S'end E)
Johnson Smith, Sir Geoffrey Thompson, Donald (Calder V)
Jones, Gwilym (Cardiff N) Thompson, Patrick (N'ich N)
Jones, Robert (Herts W) Thome, Neil (Ilford S)
Key, Robert Trippier, David
King, Rt Hon Tom Viggers, Peter
Knight, Greg (Derby N) Wakeham, Rt Hon John
Knight, Dame Jill (Edgbaston) Waller, Gary
Knowles, Michael Wardle, C. (Bexhill)
Knox, David Watts, John
Lamont, Norman Wells, Bowen (Hertford)
Latham, Michael Wheeler, John
Lawler, Geoffrey Whitfield, John
Lawrence, Ivan Whitney, Raymond
Leigh, Edward (Gainsbor'gh) Wilkinson, John
Lewis, Sir Kenneth (Stamf'd) Wood, Timothy
Lightbown, David Yeo, Tim
Lilley, Peter
Lloyd, Ian (Havant) Tellers for the Noes:
Lloyd, Peter (Fareham) Mr. Mark Lennox-Boyd and Mr. Michael Neubert.
Lord, Michael
Luce, Rt Hon Richard

Question accordingly negatived.

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