HC Deb 09 February 1994 vol 237 cc388-97

159A.—(1) The Secretary of State may by order provide for the recovery by employers, in accordance with the order, of the amount (if any) by which their payments of, or liability incurred for, statutory sick pay in any period exceeds the specified percentage of the amount of their liability for contributions payments in respect of the corresponding period.

(2) An order under subsection (1) above may include provision—

  1. (a) as to the periods by reference to which the calculation referred to above is to be made,
  2. (b) for amounts which would otherwise be recoverable but which do not exceed the specified minimum for recovery not to be recoverable,
  3. (c) for the rounding up or down of any fraction of a pound which would otherwise result from a calculation made in accordance with the order, and
  4. (d) for any deduction from contributions payments made in accordance with the order to be disregarded for such purposes as may be specified,

and may repeal sections 158 and 159 above and make any amendments of other enactments which are consequential on the repeal of those sections.

(3) In this section—

"contributions payments" means payments which a person is required by or under any enactment to make in discharge of any liability of his as an employer in respect of primary or secondary Class 1 contributions; and

"specified" means specified in or determined in accordance with an order under subsection (1).

(4) The Secretary of State may by regulations make such transitional and consequential provision, and such savings, as he considers necessary or expedient for or in connection with the coming into force of any order under subsection (1) above.".

(2) In section 176(1)(c) of the Social Security Contributions and Benefits Act 1992 (parliamentary control: orders subject to affirmative procedure), at the appropriate place insert "section 159A(1)".

(3) the Secretary of State—

  1. (a) shall lay before each House of Parliament the draft of an order under section 159A(1) of the Social Security Contributions and Benefits Act 1992 (inserted by subsection (1) above) framed so as to come into force on or before 6th April 1995, and
  2. (b) if the draft order is approved by a resolution of each House of Parliament, shall make the order in the form of the draft,

Unless before 1st December 1994 he lays before each House of Parliament a report explaining why he does not intend to make such an order.")

The Minister for Social Security and Disabled People (Mr. Nicholas Scott)

I beg to move, That this House cloth agree with the Lords in the said amendment.

Mr. Deputy Speaker

With this, it will be convenient to take also Lords amendments Nos. 2 to 4, the last of which involves privilege.

Mr. Scott

It is widely recognised that we are aware of the special needs of small employers faced with more lengthy absences due to sickness. That is why we have always intended to make generous improvements to the existing small employers' relief provisions by increasing the number of employers eligible to benefit from that concession. We shall also reduce the period after which full reimbursement becomes available, from the present six weeks to four weeks.

Those changes will be brought into effect from 6 April 1994 by means of affirmative regulations, a draft of which I propose to lay before Parliament tomorrow. Some 750,000 employers—almost two thirds of those eligible to pay statutory sick pay—will be eligible. The small employers' relief scheme will be of benefit to small firms when an employee goes sick for a long time. An alternative means of helping those employers has been proposed in another place.

We have never been opposed in principle to a new reimbursement scheme. Our concerns have centred around the need to avoid possible abuse of the new scheme and the need to obtain the relevant statistical data from employers so as to set the reimbursement threshold at an appropriate level.

10.30 pm

The lack of time available to consult both sides of industry more widely on the details of the proposed scheme means that we are unable to move as fast as some Members of the other place would wish. We believe that more time is needed to consider the proposed scheme in more detail. The amendment accepted in another place acknowledges the strength of our concerns and is worded in such a way as to allow sufficient time for the collection of data on employers' monthly statutory sick pay and national insurance contributions. That information will be crucial in enabling us to set the new reimbursement threshold at a level that will cost no more than the planned costs of the proposed enhancements to the existing small employers' scheme.

The new clause allows the Secretary of State to provide by order for employers to recover that amount of their statutory sick pay payments that exceeds a specified percentage of their national insurance contributions liability in a given period. If, following consultation, the Government decide that they do not wish to proceed with the new scheme proposed in another place, the amendment also requires the Secretary of State to lay a report before Parliament explaining his decision. That is a wise way to consider the future of the provision. The new clause also provides for my right hon. Friend the Secretary of State to repeal the existing small employers' relief provisions at sections 158 and 159 of the Social Security Contributions and Benefits Act 1992. That would be a logical consequence of introducing a new SSP reimbursement scheme. It would be nonsensical to have both schemes running at the same time. The intention of the amendment is clearly to replace the existing system, not to augment it. The Government should accept the amendment, which I commend to the House.

Mr. Keith Bradley (Manchester, Withington)

It is rich for the Minister to move the amendment and claim that the Government always had the interests of small businesses in mind, and that it was only a matter of time before the amendment appeared. We should pay tribute to the other place for debating the subject so effectively and putting pressure on the Government to recognise the factor that we recognised on Second Reading—the great unhappiness among small businesses about the Bill's original provisions.

We only have to look yet again at the comments made by the small business organisations at the time to recognise that, even then, the Government were in trouble over the provision. The Institute of Directors stated that it was worried about the damaging effects on business of the new burdens created by the changes in the statutory sick pay provisions. Surprisingly, the Confederation of British Industry stated: It poses fundamental questions about who should bear the cost of social security provision. I shall not expand on that subject tonight as I would be straining the terms of the amendment. A marker has been put down to show us that we should keep a wary eye on the Government, otherwise other potential social security and social insurance provisions may be passed on to small businesses. Maternity pay may be the next provision that businesses have to fund in future. In the past it has been funded through the social security system.

The Forum for Small Business—not an organisation that would normally defend the suggestions that we made at the time the problems arose—made the following statement: Current proposals if implemented are likely to become the principal cause of a significant number of insolvencies. On Second Reading, we flagged up the potential problems for small businesses when the £750 million statutory sick pay burden was shifted to industry. We are debating a major change, and the time for us to do so is being limited. Any amount of time was given to ensuring proper debate of an earlier measure that merely—I use the word "merely" for purposes of comparison—reduced a 100 per cent. clawback to 80 per cent. I shall not repeat all the arguments that expressed our outrage at the guillotining of this Bill; we are all living with the consequences.

As the Minister said, the amendment was prompted by widespread anxiety—first expressed by the Labour party in the House of Commons, but pursued more vigorously by the other place because of the extra time allowed there—about the way in which small businesses would be affected by not being able to claw back rebate for sick pay in the first four weeks.

It was felt that—as the Opposition had made clear in this House—most illness leading to a requirement for sick pay occurred in those first four weeks; indeed, research had shown as much. The Government were placing a particular burden on small businesses; they were tackling the problem of long-term sickness, rather than considering the short-term sickness that potentially posed the biggest problem for small businesses. An epidemic, for instance, could cause enormous problems for the businesses that can least afford not only to pay sickness benefit to staff, but to provide replacement staff.

Having heard the arguments advanced in the other place, the Government considered them carefully. They had two main objections.

First, as the Minister said, the shift of burden might be open to abuse by employers who, the Government believed, might move their statutory sick pay payments from one month to another so as to reach the set level over a period. We therefore welcome the new mechanism to avoid that problem.

The Government's second worry was that there would not be enough time to implement the scheme—the necessary consultations could not be concluded in time to have the revamped arrangements in place by April. As we now know, the new proposals to meet the Government's objection to their Lordships' original plan decree that the revised scheme will come into force on 6 April 1995. This will give the Government not two but 14 months to prepare the scheme. Our chief reason for not opposing the Lords amendment is that it will allow for proper consultations to be held with the main organisations that will be affected by it.

One of the merits of the proposed new scheme is that there will be some simplicity in its implementation. There is always the danger, however, now that more and more legislation is effected by regulation, that schemes will become much more complicated when translated into regulations. We want to ensure that the regulations, when they eventually appear, do not cause more bureaucratic and cost complications for small businesses. That would defeat the whole object of the exercise. The Opposition maintain that this is a time when small businesses can ill afford additional cost burdens. I therefore hope that the regulations will ensure that the simplicity of the new system is maintained.

I hope to hear from the Under-Secretary this evening which bodies and organisations he proposes to consult. I hope that the Government will consult not just those who represent small businesses but others who will be affected by the changes. I am, for instance, especially worried about the effects on disabled people.

On Second Reading, we expressed our anxiety lest the changes to SSP led to what might be termed a charter to sack the sick. We wanted to ensure that the fact that small businesses will be denied the chance to reclaim SSP forfour weeks did not lead to a reluctance on the part of employers to employ certain categories of people. We were thinking particularly of disabled people.

There is grave concern about this in the Committee scrutinising the Social Security (Incapacity for Work) Bill. We have yet to debate the medical test that the Government intend to introduce, but they seem to assume that about 70,000 people who are on invalidity benefit will become "employable". We have always feared that they may be too sick to be employable—employers may look at their sickness record and be reluctant to employ them given the possible burden that they represent following the changes in statutory sick pay—but not sick enough to be able to claim the new incapacity benefit.

They will fall between two stools, because they will remain on the unemployment register, which the Government claim they are trying to reduce, but the Government are not aware of the difficulties that people with a sickness record experience in seeking employment.

I very much hope that the Government's consultation will not only cover bodies that represent firms but will range wider and will consider how the changes that the Government propose will affect particular groups of people.

10.45 pm
Mr. Tim Devlin (Stockton, South)

Is the hon. Gentleman aware that, when the Government limited reimbursement of SSP to 80 per cent., the hon. Member for Oldham, West (Mr. Meacher) said: The employers say that, if the Bill is passed into law, they will be extremely careful about who they employ, and will make their decisions on the basis of an applicant's health record. Anyone with a poor health record or a poor prognosis of good health for the future will be unlikely to get a job."—[Official Report, 26 November 1990; Vol. 181, c. 652.] That is what was said last time. The hon. Member for Manchester, Withington (Mr. Bradley) has said it this time. Have the predictions that the hon. Member for Oldham, West made about the outcome of the Statutory Sick Pay Act 1991 proved accurate?

Mr. Bradley

It is clear from talking to disabled people or to their organisations that they feel a great impediment to employment generally because of their disabilities. I pay tribute to some of the work that the Minister has done to facilitate disabled people entering the employment market, but all the surveys that have been conducted by disabled groups show that great difficulties remain. We want to ensure that there are no further barriers to employers taking on disabled people.

Extra costs and burdens are being placed on small businesses by their having to pay a greater proportion of sick pay. I should be amazed, therefore, if the hon. Member for Stockton, South (Mr. Devlin) does not recognise that small businesses will look even more carefully at the sickness records of people with disabilities.

It would be in all our interests to ensure that there is no impediment to disabled people returning to employment. That is the purpose of our seeking assurances tonight that that point will be covered in the report that will be provided to the House.

In the other place, amendments were proposed to the principal amendment that we are debating. Assurances were given, which I am sure will be repeated tonight, that we shall debate the report on the new scheme. If the Government's consultation reveals that there may be major difficulties in introducing a scheme, the amendment aims to ensure that it will not be quietly dropped. The details of introducing a scheme, or of not doing so, must be properly debated in the House.

We should not want the issue to slip away, nor would small businesses. The Government have many tried and tested mechanisms which could enable the report to slip off the agenda despite promises having been made in all good faith. Such mechanisms could include the pressure of parliamentary business in which we might be engaged in 14 months' time.

The Minister mentioned the costings of the amendment, which need to be made clear. There is still a debate about the cost of the changes, and the Government's belief that the extra burden of £750 million on businesses will be offset by alterations to the national insurance rate and that the reduction of 0.2 per cent will even out the effects needs careful consideration, as do any changes that result from the Lords amendments.

We should also be grateful for further comments on how the Government regard the provisions concerning a percentage of national insurance being used as the criterion for repayment of statutory sick pay. We should be grateful for some preliminary estimates of how it will work in practice. As the amendment has only just come from another place, I shall be happy for the Minister to write to me with details of the costings, which would be useful in our future deliberations on the report.

I look forward to obtaining the necessary information and assurances from the Government so that we can accept the amendment.

10.54 pm
Mr. Archy Kirkwood (Roxburgh and Berwickshire)

I found my case on the remarks on the hon. Member for Manchester, Withington (Mr. Bradley), who has covered the most important issues in this debate, which is important but nevertheless constrained in terms of time. The hon. Gentleman made a comprehensive speech and the Minister should pay proper attention to it.

I was disappointed by the intervention of the hon. Member for Stockton, South (Mr. Devlin). If he is looking for extreme statements made recently by the hon. Member for Oldham, West (Mr. Meacher), he picked a mild one. The hon. Member for Oldham, West regularly used to anticipate, even encourage, Armageddon in every speech that he made from the Front Bench.

The hon. Member for Stockton, South should not discourage Labour's new social security Front-Bench team, which is much better than before, and I do not mean to sound patronising. If he is interested, he can meet me outside later and I will show him some truly extreme statements made by the hon. Member for Oldham, West.

Mr. Devlin

I have no doubt that such statements will recur in the speeches of the new Front-Bench team, who seem to be recycling some material.

Mr. Kirkwood

I part company with the hon. Gentleman on that point, but we are straying out of order.

It is worth spending a moment considering how we allow the other place to make important changes, such as this amendment. I welcome the amendment, which is a great improvement as far as it goes. It has already been said that, if the proceedings in this place had been better ordered, we should have agreed something similar. That would have been the right way to proceed.

I know that there were difficulties about the timetabling. I listened carefully to all the arguments about having time to organise ourselves, and I know that improvements have been made, but it is worth stressing that the Government have to ca' a bit canny in future, to use the vernacular, in order to ensure that the House has an opportunity to consider in good time the detailed improvements that can and should be made to Bills such as this.

We should spend time on the process of consultation with small businesses, too. I am not making a party political point, because Governments of all kinds have difficulties with that. The mechanisms in place are perfectly adequate for big business—international companies and world leaders such as ICI and GEC. They have well established contacts with the Government machine, and with Departments at all levels, and they can look after themselves. It must therefore be reasonably easy, so long as one takes the time to go through the process, to collect sensible views from a range throughout industry, and arrive at some idea of what the options are.

That is much more difficult when we are dealing with businesses employing two, 10 or 20 people. It is difficult for those businesses, too, because they are organised across all sorts of different interest groups, from tobacconists to knitwear manufacturers. They themselves find it difficult to arrive at a consensus.

There have been developments and improvements in that direction, through the formation of the Federation of Small Businesses, but it is still difficult for the Department, even using its best endeavours, to arrive at a consensus. The Government should work harder at trying to make contact with what they would call very small businesses.

Their definition of a small business is probably one with 100 or 200 employees, but we must not forget that the regulations probably bear down most heavily on the firms that the hon. Member for Withington was talking about when he said that, if a company with 10 employees was hit by a flu epidemic and four of them were sick, it would have a real problem. I realise that it is difficult for Government to cope with such, small firms with so few employees, but we always have to work harder to do better in that respect.

I understand the function of the report, but what is in the Government's and the Minister's minds about monitoring the process? Ministers will always say that everything is continuously under review, but there is a case for examining the effects on people with disabilities.

It is wrong to over-dramatise the argument, but there is a fair point to be made about the potential and even subliminal discrimination that may take root if the regulations are not carefully monitored. I hope that the Department will set up some systematic monitoring over the next two or three years, so that the Minister can satisfy himself that he is taking all possible steps to examine how the principles work out in practice.

An awful lot can go wrong with the implementation of detailed regulations. With the best will in the world, when simple concepts are put into the hands of the parliamentary draftsmen they can come out looking complicated and difficult to implement. Efforts have been made to simplify the process; I realise that, and I welcome it. But will the regulations spawned by the amendment be approved on an affirmative or a negative basis? If regulations are to be introduced, the House should know that.

I hope that, by that time, the usual channels will have got back into kilter, so that we shall not have to debate every motion and statutory instrument on the Floor of the House. If that goes on much longer, we shall all end up in lunatic asylums [HON. MEMBERS: "You first."] Yes, perhaps I shall be one of the first inmates. It is important to know whether the orders will be affirmative or negative, so that we know what scrutiny of detailed regulations the House faces.

The question of costings, on which the hon. Member for Withington ended his speech, is important too. There has not been time to do much detailed arithmetic, but there must be some ball park figure in the Government's mind. It would be helpful to the House if the Minister would say a word about that matter when he sums up.

11 pm

The Parliamentary Under-Secretary of State for Social Security (Mr. William Hague)

It seems that the proceedings on the Bill can end with some harmony at least. There seems to be all-party agreement on the Lords amendment, if perhaps a little marred by the hon. Member for Manchester, Withington (Mr. Bradley), who still talks about a shift of the burden to industry.

In fact, industry is the net beneficiary of the changes to statutory sick pay and the consequent reductions in national insurance contributions. Since small companies tend to have a lower incidence of sickness and absence than large companies, small companies especially stand to gain from the changes that the Government are bringing about.

The hon. Member for Withington asked about the consultation process, and especially expressed the hope that great complications and administrative burdens would not arise as a result of any new measures which may arise from the Lords amendment. I agree that extra complications and administrative burdens would be a serious disadvantage. Of course, it is in the mind of the Government to keep such burdens and complications to a minimum.

We intend to consult both sides of industry. We shall consult employers, unions, give especial weight to the opinions of small businesses and their organisations, and we shall also consult disability organisations.

The hon. Member for Withington raised the point about disabled employees. I remind him, as has my hon. Friend the Member for Stockton, South (Mr. Devlin), that no evidence has ever been proffered to justify the charge levelled against the SSP scheme ever since it was first introduced more than 10 years ago, that it would have an adverse effect on disabled employees.

Research carried out by the Centre for Research in Social Policy shows that the reduction in SSP reimbursement from 100 per cent. to 80 per cent. three years ago had no impact whatever on the willingness of employers to recruit employees with disabilities. It confirmed earlier research findings that such employees tend to take less time off through sickness than able-bodied colleagues.

My hon. Friend the Member for Stockton, South was right to ask the hon. Member for Withington to recall the forecast of the hon. Member for Oldham, West (Mr. Meacher). As the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) so rightly observed, the forecasts of the hon. Member for Oldham, West could be a most entertaining catalogue, which could keep us here for a long time.

Mr. Bradley

On the question of forecasts, may I assume from the Under-Secretary's comments on the burden that will be placed on small businesses and the way in which he says they will be net gainers from the scheme, that he has given a commitment not to increase national insurance contributions in the future?

Mr. Hague

The hon. Gentleman would not expect me to pre-empt the decisions of all future Chancellors and Secretaries of State, any more than he would want to pre-empt those of any future Chancellors or Secretaries of State from his party, remote though that possibility may be. People can look to the record of what has happened to national insurance contributions during our time in office and how it compares with the 13.5 per cent. level reached for employers' national insurance contributions with the surcharge in the 1970s. The record tells it all.

If there are great difficulties in the creation of the new scheme outlined in the Lords amendment, we will be able to consider them in the report to which the hon. Member for Roxburgh and Berwickshire referred. He may also like to know that, assuming that there is not a report but a new scheme, the orders will be affirmative. I am sure that he will be pleased to note that.

The Government will now proceed to consult industry on the proposal. Employers and their organisations will be able to compare the benefits of the new proposal with the existing help for small employers. They will be able to judge whether the loss to those employers who will not benefit under the new scheme is outweighed by the gains of those who will.

We will proceed to collect data on employers' monthly SSP and national insurance contributions payments so that the reimbursement threshold can be set at the appropriate level. I do not yet have any preliminary estimate, but there will be no secret about the estimates when we have arrived at them. We will also—this is most important—consider the monitoring and policing requirements of the proposed scheme to reduce the risk of abuse.

It is good to see that the measure has the support of hon. Members on both sides of the House, and can proceed successfully.

Lords amendment agreed to. [Special Entry.]

Subsequent Lords amendments agreed to. [Some with Special Entry.]