COMPENSATION FOR UNFAIR DISMISSAL

HC Deb 24 April 1998 vol 310 cc1124-39

'.—(1) An employee whose dismissal is regarded as unfair under section 103A of the 1996 Act shall be entitled to compensation for unfair dismissal. The amount of compensation awarded by the tribunal shall consist of—

1. (a) the full amount of loss which, it appears to the tribunal, has been suffered by the employee; and,
2. (b) any punitive damages which the tribunal thinks appropriate in the circumstances.

(2) In determining the amount of compensation under section (I) the tribunal may reduce the award by such amount as the tribunal considers equates to the fault of the employee or to his failure to mitigate his loss.'.—[Mrs. Gillan.]

Brought up, and read the First time.

1.2 pm

Mrs. Cheryl Gillan (Chesham and Amersham)

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

Mr. Deputy Speaker (Mr. Michael Lord)

With this, it will be convenient to discuss amendment No. 1, in clause 8, page 7, line 30, leave out from beginning to end of line 17 on page 8.

Mrs. Gillan

It gives me great pleasure to move new clause 1, which concerns an important aspect of the Bill—compensation for unfair dismissal. As I have not had the opportunity to speak on the Bill before, may I welcome the Minister to the Dispatch Box? I know that he has been burning the candle at both ends—indeed, rumour has it that he attended a £500-a-plate dinner at the Hilton last night. I hope that that will not slow his responses or dim his perception. The paucity of Labour Members present suggests that few survived last night, and the fact no Liberal Democrats are here to participate in what I believe to be an extremely important debate gives rise to the question of what they, too, were up to last night. I hope that the Minister, who has a pivotal role in the Bill, will listen carefully to the arguments this afternoon, and that my colleagues and I can persuade him of the merits of the new clause and of amendment No. 1.

I pay tribute to the work that has been conducted on this measure by Public Concern at Work, and I pay special tribute to Mr. Guy Deyn, who has provided advice to all parties involved in the Bill.

The matter of compensation for unfair dismissal was aired only briefly in Committee, when the Minister told us that he had already discussed the issue at length with my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd)—who is to be congratulated on bringing the Bill before us. That means that the discussions that have taken place between my hon. Friend—the Bill's promoter—and the Minister have taken place in private. Instead of questioning whether that is right, let me express the hope that, in his reply, the Minister will reveal the details of his apparent objections to the new clause and the amendment, not least in light of the fact that—as I believe the Minister has admitted—the majority of the organisations consulted on the Bill came down in favour of the unlimited compensation proposals. The matter was discussed in greater detail in the previous Parliament, in 1996. If my memory serves me right, the Minister was involved in the proceedings on that occasion, and gave some indication that he supported such measures. I hope, therefore, that the Minister will tell us why he has apparently changed his mind. As he has changed the side of the House on which he sits, he has conveniently moved into another mode, now objecting to a measure that he purported to support when the previous Government were in office.

The Minister of State, Department of Trade and Industry (Mr. Ian McCartney)

When I respond to the new clause, I shall respond in kind to what the hon. Lady said about last night.

May I say that she has got the historical record completely wrong? The previous Government would not accept the proposals that were in the Bill; indeed, they scuppered it, and it has been left to the incoming Administration to sit down with Public Concern and hon. Members on both sides of the House to come up with a workable proposal. As the hon. Lady was involved in that Government, I assume that she was party to the decision that scuppered the Bill in the previous Parliament.

Mrs. Gillan

I know that the Minister has had a heavy night but, if my memory serves me well from my reading of the report of the 1996 proceedings, my hon. Friend the Member for Solihull (Mr. Taylor), then Minister for Competition and Consumer Affairs, said that he had no intention of scuppering the Bill. Moreover, a reading of the proceedings—you will correct me if I am wrong, Mr. Deputy Speaker—reveals that the hon. Gentleman who is now the Minister was on his feet when the Bill ran out of time. I believe that the Minister is making a brave attempt on the morning after the night before, but I find it slightly incredible that he should try to use that argument at this stage, especially when I hope to persuade him of the merits of new clause 1 and amendment No. 1.

It may help the House if I give some background, especially to clause 8. Clause 8 provides that compensation for employees who have been dismissed for making a protected disclosure will be determined by regulations. That is the approach indicated in clause 4 for a worker who is disciplined or demoted, but not sacked. The worker will receive such compensation for his actual loss as is just and equitable. Where the worker has been at fault himself, or where he has failed to mitigate his loss, the award may be reduced. The awards for victimisation short of dismissal are subject to neither a minimum nor a maximum sum.

The Government's preferred approach appears to be that compensation for dismissal under the Bill should follow the precedent for health and safety representatives under the Employment Rights Act 1996, as the Minister has indicated. A sacked worker would receive his financial losses up to £11,300 plus, in exceptional cases, the penalty award of between £16,545 and £33,800. My hon. Friend the Member for Aldridge-Brownhills, in his magnificent tour de force in the hour-long Committee stage, certainly raised his concerns on the matter. There is still a great deal of doubt that what the Minister is planning will satisfy the Bill's supporters.

The Bill will not meet the actual losses of a higher-paid individual, or of the whistleblower who remains unemployed for several years after being dismissed. With the maximum, the Bill could have far less effect—for example, in the City. Cases such as that of BCCI, Barlow Clowes and the late Robert Maxwell's companies have been cited in support of the argument that we are making today. There may be natural reticence about providing employment to an individual involved in a high-profile case such as those I have mentioned.

Our proposals enjoy the support of the CBI, the Institute of Directors and the TUC. The Minister is aware that I have received a letter from Sarah Veale, the senior policy officer of the TUC. The House deserves the courtesy of hearing what the TUC has written about the matter. Ms Veale wrote that she noticed with interest the amendment on compensation tabled by my hon. Friends and me. She continued: As you may be aware, there is near-unanimous support across industry for compensation for unfair dismissal for public disclosure to be uncapped. We fully support your amendment. We believe that the employment tribunal should be able to assess compensation and damages according to their assessment of the loss suffered by the employee. This is how compensation is assessed in discrimination claims and, in our view, is how it should be assessed for all breaches of employment legislation. We have made our views on this clear to the Government and to the mover of the Bill".

That is not an ambiguous letter couched in half-hearted terms—it is an expression of full support. If the Minister cannot be persuaded by my argument—or by those which will be deployed by my hon. Friends in the debate—I hope that he will be fully persuaded by the TUC. If he is not, I would hope to be a fly on the wall at the next meeting between the Minister and the TUC general secretary, John Monks. I am sure that the TUC will have words to say if the Minister does not listen. The same view is held by the CBI and the IOD, and that shows that it is a reasonable measure.

The Minister will no doubt argue that his stance shows that he is not in the pockets of the unions. That would be a trivial response to a proposal that would make the difference to many people. It would strengthen the Bill and ensure that it has the effect that my hon. Friend the Member for Aldridge-Brownhills intended and that all right-minded employers and employees would wish it to have.

Sir Nicholas Lye11 (North-East Bedfordshire)

The legislation is complex. The Bill, which would amend the 1996 Act, proposes that the Minister should have the power to make regulations under new section 127B. Has the Minister indicated to my hon. Friend what regulations he proposes to make? Would he make regulations that would render at large the amount of compensation that could be received by a whistleblower?

1.15 pm

Mrs. Gillan

My right hon. and learned Friend is right to raise the issue. The answer is no, I have had no indication from the Minister. I did him the courtesy of discussing the matter briefly with him outside the Chamber before the debate. I hope that he retains an open mind. He gave me a mere glimmer of hope. We shall have to wait until he responds.

As with so much legislation, it seems that power is being retained by Ministers. Power is being held at the centre, giving Ministers much more control—whereas, in this case, it would be perfectly reasonable to devolve power to the tribunals, as we do with sex and race discrimination cases. I live in hope that the Minister will be persuaded by my argument, and does not have a closed mind on the matter.

I shall not delay the House for too long. The new clause provides a greater incentive for well-paid employees—those arguably more likely to have access to potentially "blowable" information. It provides for a fair and just compensation award that recognises not only salary but the additional benefits. It passes discretion to the tribunal, which is fair and equitable.

In the light of the consensus of opinion among all the organisations that were consulted on the measure, I hope that the Minister will see that it is reasonable to accept the new clause. I shall listen carefully to the response.

Mr. Peter Atkinson (Hexham)

Will my hon. Friend clarify one point about the new clause? As well as taking away a maximum limit of compensation which the Employment Rights Act 1996 included, it does away with the minimum amount that is in the Bill, as amended. Many people might be concerned that, if there was a minimum amount to be gained by blowing the whistle, perhaps unjustifiably, it would encourage dissident employees to make false allegations against their company, in the hope that they might make some money out of it.

Mrs. Gillan

My hon. Friend is exactly right. The new clause removes that incentive, which might result in vexatious cases being brought.

I have taken enough of the House's time. I am keen to hear the Minister's response, but I know that many of my colleagues are keen to discuss this important matter and deploy further arguments. I shall listen carefully to the Minister.

Mr. Edward Garnier (Harborough)

I am not sure that I agree with the point made by my hon. Friend the Member for Hexham (Mr. Atkinson), and I am not sure that my hon. Friend the Member for Chesham and Amersham (Mrs. Gillan) was right so readily to agree with him. The Bill presented by my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) makes it clear that those who make unjustifiable or malicious whistleblowing allegations will not be susceptible to the protection of the Bill, so I do not believe that the removal of the minimum will encourage people to make false accusations.

Mr. Peter Atkinson

The problem is that industrial tribunals attract a great deal of uncomplimentary publicity for the company that is accused. That company may instinctively pay out rather than face bad publicity and an inevitably one-sided report. I believe that some minimum would encourage people to bring cases before tribunals and encourage companies to give way to blackmail.

Mr. Garnier

I know where my hon. Friend is coming from, but I do not accept that that underscores his objection. Defendants who are relatively better off than the complainant bringing proceedings against them are always placed in the difficult position of having to decide whether it is commercially worth while to defend the action on its merits or whether it is better, on economic grounds, simply to pay the complainant to go away. Companies and better-off defendants currently face that problem with complainants who are on legal aid. The situation is no different in industrial tribunals, although I understand that no state assistance is provided for litigants on either side of the argument.

Mr. Patrick Nicholls (Teignbridge)

May I put the point to my hon. and learned Friend in a different way? It will not always be a choice between no case on the one hand and an extremely blowable case on the other: there will be marginal cases. In those circumstances, employees may think that it is not worth the hassle bringing a case. However, if, on a balance of probabilities—my hon. and learned Friend may correct me if I have misremembered it—an employee can make the case stick and he wins £16,000 in one go, that will act as an incentive to take to tribunal the marginal cases that should never be heard.

Mr. Garnier

If that is my hon. Friend's argument, he should support our new clause, which will remove the minimum. If our new clause becomes law, anyone who puts a marginal case before the tribunal will recover rather less than the current minimum—indeed, he may recover a verdict but no reward. I do not know what cost penalty would be involved in those circumstances, but I think that the complainant would leave the tribunal hearing badly out of pocket, with his reputation as an honest broker somewhat impaired.

Mrs. Gillan

The issue is summed up partly by the comments of the hon. Member for Aldridge-Brownhills (Mr. Shepherd) in Committee. He said: My concerns are that the minimum award of £16,545 would be made irrespective of any loss and thus may be made in circumstances in which the tribunal does not think it just. As such. it might encourage claims that, otherwise, would not be brought"— [Official Report, Standing Committee D, 11 March 1998; c. 13.] That is a good summary of the Bill from the short Committee stage.

Mr. Garnier

I prefer to call the hon. Member for Aldridge-Brownhills my hon. Friend. Although his name is not attached to our new clause, I think that he would support the general thrust of our arguments. We shall have to wait and see.

The Minister gave me some comfort in Committee when he referred to an increase in the current levels of compensation under the Employment Rates (Increase of Limits) Order 1998. He told the Committee that the new arrangements from 1 April this year will mean a basic award of £2,000—or what we would call nowadays four places at dinner—a compensatory award and a special award of —14,500. The Minister went on to say that there will be a maximum award of £1220 multiplied by 30 weeks, which amounts to £6,600. A compensatory award of £0112,000 will be added to that, together with a special award of £29,000. Therefore, under the current order, the total, maximum figure is £47,600. That is good news as far as it goes, because it increases-if only marginally—the levels of compensation available under the Employment Rights Act 1996.

Mr. Ian McCartney

The hon. and learned Gentleman should not be so derisory about the increase. He was a member of a Government who refused to make any increases, and it was up to this Government to bring compensation in line with what is reasonable in today's marketplace. The hon. and learned Gentleman supported a Government who refused, year after year, to increase those limits.

Mr. Garnier

I am sorry if the Minister misunderstood me. He is being a little over-sensitive. I appreciate that he has had to wait a little before we reached this debate, but I was saying that I was pleased to note—that was the intention that I was trying to get across—that the order has increased the limit, but that the limit should be done away with altogether, so that people can be better and more adequately compensated for the losses that they suffer as a consequence of doing their public duty—exposing misdemeanours, crimes, breakdowns in health and safety, and so on, as set out in earlier clauses, which define a permitted disclosure.

I do not want to have a row with the Minister, as that would not be helpful, but if he would like one, we can arrange to have it in due course. For the moment, I shall concentrate on the merits or demerits of the arguments in favour of my new clause, which is supported by two of my hon. Friends.

As my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) said, the Employment Rights Act 1996, which the Bill seeks to amend, is incredibly complicated. One has to look carefully at sections 117 to 127, which set out the compensation regime. One does not have to be a nuclear physicist—but quite close to it—to be able to devour all that and regurgitate it in a sensible form for a lay client.

The people who need advice under the Act will not necessarily be those most readily able to understand those sections. I dare say, but I may be completely wrong, that the category of person we are seeking to protect may be somewhat different. It is likely to be those who have deliberately decided to expose something that they think is wrong rather than the unwitting victim of bad conduct by an employer, be it a commercial concern or an individual.

I suspect that the individuals we are seeking to protect are better equipped to understand the sections to which I referred, and may be in the higher income brackets. I am sure that my hon. Friend the Member for Aldridge-Brownhills, who is promoting the Bill, is not doing so to protect one economic class. I have never heard him suggest anything of that sort. That is not how he thinks or works. However, it is inevitable that we shall disfranchise quite a cohort of people who earn rather more, or who stand to lose rather more, than the current maximum under the order, which was sensibly increased by the Minister the other day.

There will be a huge number of people-in the health service, local and central Government, as well as in the City, as my hon. Friend the Member for Chesham and Amersham made clear-who earn the £47,000-odd maximum in a week or two. I regret to say that I do not. They will be disinclined to expose wrongdoing, in the City or in other areas where high salaries exist, because of the relatively low limits provided in the order.

I have a horror of government and legislation by regulation. I prefer those enactments to be on the face of the Bill, but that is another week's work. I see that the hon. Member for Dudley, North (Mr. Cranston) is keeping a close eye on me, so I shall be careful in what I say. In common law, in actions for breach of contract or wrongful dismissal, there are areas available to a complainant or plaintiff that would allow higher awards for damages. If translated into the Bill, they would allow the tribunal to give a fairer assessment of the loss to the unfairly dismissed complainant in the event of his being in need of compensation.

1.30 pm

Some employees who are dismissed for whistleblowing may be fortunate enough, because of the publicity surrounding the way in which they made the disclosure, to be re-employed pretty quickly. Let us take the example of someone working in the national health service who exposes misconduct by a consultant or a department in a hospital, who as a result of that disclosure receives tremendous publicity in the newspapers. Much of that publicity will denigrate the person who made the disclosure for speaking out of turn. No doubt that person and his or her family will have to undergo the most appalling public criticism from some for letting the employer down or letting the side down and not being a team player.

On the other hand, there will be another group of people whose views will, no doubt, be reflected in and approved by the media. They will applaud the person for exposing a particular wrong or a series of examples of misconduct. Given that treatment in the public prints, it may be that the person concerned will attract employment from another employer in the health world, perhaps in the private sector, which means that he will not lose as a consequence of having lost his previous employment. In such cases, the money question does not bite.

I am mindful of the strict laws in Switzerland that apply to telling tales out of school, which mean that an employee can be dismissed summarily without compensation, as I understand them. The chances of such a person being re-employed in Switzerland, in the financial sector or in any other economically meaningful sector there are pretty small, if not impossible.

Hon. Members will no doubt recall the case in Switzerland two or three years ago of a man who was eventually driven to suicide by his inability to come to terms with his failure to be re-employed. He felt that he had let his family down by exposing them to penury. In some senses, it was felt that he had let his country down by talking out of turn.

I produced that case to simplify my argument, but given that extreme case, I suggest that the Bill, as drafted, does not assist very much. A man on a basic salary of £100,000, who may be entitled to bonuses—they are not unheard of in the City, even under a new Labour Government—of £200,000, £300,000, £400,000 or £500,000, in addition to share options, private medical health insurance and other perks such as cheaper mortgage rates or subsidised mortgage rates, will find it extremely difficult to work out where his best interests lie.

Would that person's interests lie in public disclosure, following a proper assessment of his public duty, in relaying to the proper recipient of information the fact that some wrongdoing, fraud or misconduct is taking place within his firm or within the sector of the City with which he is concerned, or would he say, "There is no point, no matter how bad I feel about it and no matter how bad I think what I know is—1'm not going to give up my package of half a million pounds for maximum compensation of a little under £50,000"? It would be unrealistic to expect that to happen.

One or two public-spirited people—not the majority—would cast aside thoughts of the likely compensation, either because they are independently well off or because they have made arrangements to meet their family's commitments. The compensation levels in the Bill would discourage public-spirited, law-abiding people from coming forward to give a good account to the proper authorities of what has happened, so that the public would be better protected from misdeeds in high places or in places to which they do not usually have access.

My next point concerns another aspect of the common law. Again, I look to the hon. Member for Dudley, North—I hope that I do not embarrass him by saying that he is a noted commercial lawyer—to discover whether I am right that the courts can take into account loss of reputation as a consequence of unfair dismissal.

My right hon. and learned Friend the Member for North-East Bedfordshire will remember from law school the case concerning Addis v. the Gramophone Company, from which an employee was dismissed in humiliating circumstances. In 1909, the Judicial Committee of the House of Lords decided that, even though he was dismissed in abhorrent and objectionable circumstances that struck at his reputation, he could not recover damages under the unfair dismissal claim for the increased hurt to his feelings caused by the manner in which he was dismissed.

We must distinguish between feelings and reputation. A man's reputation can be destroyed by being sacked for whistleblowing perfectly properly and in the public interest, and the tribunal should take into account the damage to his reputation in his sector of employment. In the City, for example, trust and financial confidentiality are important. A stockbroker, banker or dealer may be thought by his peer group to have gone outside regimental ethics and breached—properly, in one sense, but improperly in the in-house sense—the parameters within which such matters are considered in the industry.

Such a person should be compensated, or the court should at least have available to it a means of compensating him for the additional injury to his reputation. As a consequence of going outside the laager and speaking against his colleagues, even though some of them may grudgingly admire him, such a person would never get a job in that sector again.

Sir Nicholas Lyell

I am most grateful to my hon. and learned Friend for referring to the common law position, which is confined to the damages that are relevant to the notice period, which may be two years or six months, or even a week or a month. The sum would be modest. The question is whether someone who, in the public interest, puts at risk his future livelihood and ability to work again should be confined to compensation under employment rights legislation. The first step was taken by Lord Howe with the 1971 industrial relations legislation, which is relevant to the debate.

Mr. Ian Stewart (Eccles)

Will the right hon. and learned Gentleman give way?

Mr. Garner

The hon. Gentleman is a well-known joker, and I invite my right hon. and learned Friend not to give way to him, because I am still on my feet.

I entirely agree with my right hon. and learned Friend, and I draw to his attention a paragraph from a textbook with which he is familiar—McGregor on Damages". The paragraph states: Injury to reputation stands on a slightly different footing from injury to feelings. In so far as the injury to reputation results in a non-pecuniary loss it is irrecoverable, as is the non-pecuniary loss from the injury to feelings, but it is possible that the injury to reputation may cause pecuniary loss if it causes the plaintiff to have more difficulty in obtaining new employment. That is broadly what I was saying before my right hon. and learned Friend intervened.

I ask my hon. Friend the Member for Aldridge-Brownhills and the Minister to take a view on the matter. We are debating an area of public and private conduct in which the reputation of a person is at stake. If, as a consequence of doing their public duty, people lose everything, it would be unjust for the courts not to provide on behalf of the House a proper way to compensate them at a proper level.

Mr. Stewart

I have tried not to intervene on the hon. and learned Gentleman, because I know that he is sincere. However, it is a bit rich for Opposition Members to show such concern for a section of the work force that is in a high wage bracket. I remind the hon. and learned Gentleman that his Government removed protection from millions of workers, by raising the qualifying period for industrial tribunals from six months to two years.

Perhaps I could put the matter in context. Since the industrial tribunals legislation was implemented, less than 25 per cent. of applicants have been successful, and the average award has been of hundreds rather than thousands. Opposition views would be more appropriate if the previous Government had shown for low-waged people who were unfairly dismissed the sympathy that the hon. and learned Gentleman expresses for higher-waged people.

Mr. Garnier

As the hon. Gentleman is an experienced and respected trade union official in the north-west, his comments are not surprising. I wish that he could make them to the previous Government but, sadly, they are the previous Government and there is nothing that I can do about that, much as I regret their demise. I advise the hon. Gentleman to visit the Vote Office and look at section 108 of the Employment Rights Act 1996, because in that he may find one or two words of comfort.

Mr. Nicholls

Does my hon. and learned Friend agree that it is not a question of sympathising with high wage earners who have much to lose if they blow the whistle? As he says, unless the matter is dealt with, they will not make use of the legislation and of the good intentions and consensus in the House. The debate is not about sympathy but about the legislation having practical effect.

Mr. Garnier

I agree with my hon. Friend. Wages have increased tremendously over the past 25 to 30 years, and many traditional Labour supporters—this is not a party political point—such as head teachers and nurses, whose salary of £46,000 may not be reflected in the maximum under the order, stand to lose much more than that over time.

It does not matter whether one is a coil winder earning £200 a week or the international chief executive of Megaton plc. What they have to consider is what they will lose if they tell the truth about what is going on. If they are going to be compensated only up to a maximum of £46,000, £47,000 or £48,000, whichever the exact figure is, it will not encourage a head of a big comprehensive, a senior or even junior nurse, a general practitioner, or a middle manager in a factory in the constituency of the hon. Member for Eccles (Mr. Stewart), still less one of his most ill-paid employees, so I ask him to bear it in mind that we are talking about just compensation for the total loss. We are not talking about comparing annual salaries, although, obviously, it is useful to bear them in mind.

I shall sit down at this point, because I should like other hon. Members to address the House on this important matter.

1.45 pm

Mr. Nicholls

When I came to this, I thought that it was a slightly strange debate because, although my hon. Friend the Member for Chesham and Amersham (Mrs. Gillan) made the point that the Bill had been discussed exhaustively in Committee, it has not been exhaustively discussed on the Floor of the House. As I recollect, Second Reading went ahead on the nod.

Mrs. Gillan

The point that I was trying to make was that the Bill had not been extensively discussed. It has had only one hour in Committee, and it went through on the nod on Second Reading. I am sad that we have not been able to debate the Bill at more length, because it is of great significance.

Mr. Nicholls

I entirely agree with my hon. Friend. The fact that the debate seemed to take on a slightly Second Reading hue was in some ways inevitable, bearing it in mind that the broad principle of the Bill has not been discussed. That is slightly unusual. It must have happened before, but I cannot immediately recollect it. A detailed Committee discussion has taken place even though the broad merits of the Bill have not been debated on Second Reading.

I always find that the Bills introduced by my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) are usually well worth having a look at and supporting, but something troubled me about this Bill. I do not know whether I am alone in saying that I felt slightly queasy about it until I started to examine the detail and to think about it.

I suppose old habits die. I said to myself, "Are we legislating for a sneak's charter?" Are we in the business of encouraging difficult troublemakers, the awkward squad, who exist in any organisation, by almost giving them financial incentives to behave in a way that many of us would find unattractive?

To be fair, I do not think that that is correct, even if the Bill comes across that way to begin with. Reference has been made to some of the more famous cases where whistleblowers have been ruined. My hon. and learned Friend the Member for Harborough (Mr. Garnier) reminded us of the case in Switzerland in which an employee was literally ruined—by the sound of it, unto death—because he had had the courage to come out and talk about the corruption in his organisation.

We have not yet heard anyone say—perhaps because we have not had many contributions from Labour Members; I look forward to hearing them—that it is wrong to compensate, and that, if something is right, one should come out and do it. That is marvellous stuff for us to say on the Floor of the House and sounds very noble, but, frankly, it does not matter whether someone is earning £200, £2,000 or £20,000 a week.

During the course of a relatively long life, I have never met anyone who did not have any trouble living up to their income level. Whistleblowers have to contemplate taking a decision that could wreck not only their lives, but those of their wives and children. Therefore, if we are going to ask someone virtually to make the supreme gesture by coming out, taking their chance before a tribunal and perhaps making themselves unemployable—

Mr. Deputy Speaker

Order. The hon. Gentleman has reminded the House that this is not a Second Reading debate. I should be grateful if he would try to confine his remarks to the new clause and the amendment.

Mr. Nicholls

The point that I was going to make was simply this. If someone is going to do that, compensation must have some relevance. I look forward to hearing from the Minister when he replies. I do not see what the argument is for not removing the minimum and for not ensuring at least that the tribunal or whatever body is used has the discretion to make up its mind at what level it should compensate.

The minimum payment may not be the most important aspect of the new clause, but it is important. I cannot see any reason for a minimum payment. Having been both an employer and employee, I can see every possible argument for not making it possible to win a big prize with a technical victory, and I am sure that that was not the intention. It is one of the matters that might have come out in a Second Reading debate. However, as things stand, we could be looking at that scenario.

There will be marginal cases. A responsible, prudent person might go to his employer and say, "I am extremely unhappy about this situation. It may not be desperately important, but it is not right and something should be done about it." That would be a relatively low-key case. It is wrong to have as an alternative simply going down to the tribunal to win a quick prize of £16,545 minimum.

In the past, I have criticised decisions taken by the judiciary and by lawyers. However, I have enough confidence in the tribunal system to want it to decide what the level of compensation should be. A minimum payment does not have a part in that.

Let us examine the case—which the new clause reflects—for saying that there should not be a maximum payment of £45,000 or thereabouts. What will be the effect if the Bill passes into law but the new clause fails? The legislation will not be used. It actually reads better than the Road Traffic Reduction (National Targets) Bill, which we debated earlier. It is extraordinary that this Bill could turn out to be just as useless. I do not think that any of us wants that. There is a consensus that legislation is necessary, that we have learnt by events that it is necessary, and that we want to make it work. If a maximum payment is imposed, the Bill will not work.

Implicit in all that—my hon. and learned Friend the Member for Harborough touched on this—pis that, when a tribunal comes to consider a major whistleblowing case, it must have the ability to consider all the consequences. Let us take the case of someone on a substantial financial package, with free health care and so on—a major amount of money being put at risk. If that person had detected, for example, fraud in a merchant bank, in an ideal world all the other merchant banks would say, "That's marvellous; that's a very honest chap—let's have him in our organisation." And pigs may fly.

I suspect that, when someone goes in for a major whistleblowing exercise, whether aged 20, 40, 50 or 65, the reality is that he will probably never work again. We are expecting people to take the chance of litigation and put their reputations heavily under threat. Let us be fair—tribunals and courts can be quirky, so people have to face the fact that they might lose. Therefore, we must at least give the tribunal the opportunity to consider the possibility that the person may never work again.

I do not make light of the fact that, when we hear some of the figures being bandied about, it is tempting to say, "It's all very well for those earning a lot, but if you're only on 200 quid a week it might look different." It is not a question of that—we want the Bill to succeed; we want people to use it. However, we do not want to give people an artificial incentive to use it. That is why having a minimum payment would be utterly wrong.

We have to face the fact that the people who will use the legislation may lose everything. They will be putting their reputations on the line. They will have to face the fact that they may never be employed again. That is precisely the type of issue that might have arisen on Second Reading, and it has not been thought through properly.

I have deliberately kept my remarks brief because I know that some of my hon. Friends want to speak, and I cannot imagine that some Labour Members would not wish to contribute. When the Minister replies, I hope he will say that, no matter how he feels about the drafting, if the Bill is to succeed, it has to be useable. Without the new clause, it might just as well stay on the lawyers' shelf because, for all the use that it will be put to, that is where it will belong.

Mr. Ian McCartney

I congratulate the hon. Member for Aldridge-Brownhills (Mr. Shepherd) on the progress that he has made so far, supported by my hon. Friend the Member for Dudley, North (Mr. Cranston) and others. My Department is also grateful for the help provided by the charity Public Concern at Work.

A good Bill has been improved in Committee, and I look forward to further progress being made today to ensure that, after many years of campaigning in and outside the House, with a great deal of support from the business community, from organisations that represent workers and from academia, we can at last put in place legislation to protect people who, until now, have suffered greatly for having the guts and integrity to put in the public domain things that would otherwise have remained secret. Because there has been no protection for such people, they have often suffered detriment to their health and their career. The Government strongly support the Bill, but I cannot accept the new clause.

Like the hon. Member for Chesham and Amersham (Mrs. Gillan) I enjoyed a meal last night. We shared a taxi—I went to one very expensive hotel and she went to another. I enjoyed every morsel of my meal as I sat back, enjoying the celebration of the first year of the Labour Government—and what a year it has been for employment rights and the changing nature of British society.

Mrs. Gillan

I thank the Minister for revealing our travelling arrangements to the rest of the world. I believe that my dinner was more enjoyable because I was learning about the pharmaceutical industry, not paying £500 towards Labour party funds.

Mr. McCartney

That probably means that the hon. Lady did not pay for her meal at all. Never mind, I am sure that she enjoyed not only the discussion but the speech made by my right hon. Friend the Secretary of State for Health, who, in the first year of the Labour Government, is proving to be the most successful Secretary of State for Health, since the creation of the national health service. I am pleased that, although the hon. Lady did not have the opportunity to celebrate new Labour, she was able to celebrate the new NHS under new Labour.

Mr. Nick St. Aubyn (Guildford)

rose—

Mr. McCartney

I have hardly started, but I shall give way.

Mr. St. Aubyn

It is not strictly relevant, but perhaps the Minister could clarify his comment. Is he praising the Secretary of State for Health for the fact that waiting lists have increased by nearly 100,000 since Labour came to power?

Mr. McCartney

I am praising my right hon. Friend for getting rid of the Conservatives' plans to privatise the national health service and for putting millions of pounds into the service. We are reducing waiting lists—indeed, 18-month waiting lists have gone, ahead of schedule. By the next election, we shall have a health service of which the country will be proud.

My right hon. Friend has had a role to play in tackling the problems facing whistleblowers. One of his first actions as Secretary of State for Health was to remove the previous Government's gagging clause on doctors and nurses, clauses that led to the sacking of Graham Pink and the destruction of his career. The previous Government wanted to silence his criticism of the NHS under the Tories, so we shall take no political lessons from them.

I hope that our debate on the Bill will take the same approach as the Government. Along with the hon. Member for Aldridge-Brownhills, Members of all political persuasions want to see the Bill—

Mrs. Gillan

On the statute book.

2 pm

Mr. McCartney

I am grateful to the hon. Lady. Obviously I got to bed later than she did.

Compensation under the Bill will be determined by secondary legislation. However, it is our view that compensation should be based on remedies available under existing employment legislation. After all, the Bill is an employment measure.

We believe that compensation limits generally should be increased in line with inflation. Indeed, we recently announced increases with effect from 1 April this year. In the longer term, we shall want to consider whether the limits and arrangements for reviewing compensation work in the best way to achieve fair minimum standards and a competitive business environment.

I know that the hon. Member for Aldridge-Brownhills has had discussions with the banking sector in respect of third-party disclosure. It is certainly not the intention that, where a bank has acted diligently, it should be liable for a breach of confidence claim by a client when a bank employee has made a public interest disclosure.

I understand that one of the reasons behind the new clause is that higher earners should be properly compensated if they blow the whistle. To limit compensation would prevent that. As hon. Members will be aware, the Government favour following the compensation model currently available for health and safety disclosure. Contrary to apparently popular belief, the sums available in such cases are by no means insignificant. Where someone is dismissed unfairly and does not get his job back despite a re-employment order having been made, the compensation is based on three times annual salary. So while someone on average earnings of £368 a week could receive more than £57,000, someone on £1,500 a week could receive £234,000 and those earning the equivalent of £ 1 million a year—such as the individuals that have been mentioned in the debate—could receive £3 million in compensation. In the case mentioned by the hon. and learned Member for Harborough (Mr. Garnier), who is no longer in his place, the compensation would be £1.5 million.

Therefore, the proposal before the House is not insignificant, and potentially takes into account the earnings levels of all those—low, average and high earners—who could be covered by the Bill. There is no cause for concern or worry among hon. Members or those outside the House that the Government's intention is any different from that of the hon. Member for Aldridge-Brownhills and his supporters—to put in place a compensation regime that takes into account the losses that people may suffer if they lose their employment as a result of having acted within the context of the legislation.

I hope that my assurances and the figures that I have provided in respect of the Government's intentions will make it possible for the hon. Member for Chesham and Amersham and her hon. Friends to withdraw the new clause so that we can proceed a little further towards ensuring that the Bill reaches the statute book. From that moment onwards, there will he legislation to ensure people in Britain who have the courage and commitment to enter the public domain to assist the public will not suffer the same disadvantages as they do now.

Mr. St. Aubyn

I shall not detain the House long. I do not often agree with Labour Members, and I have some reservations about the full scope of the new clause. My hon. Friend the Member for Teignbridge (Mr. Nicholls) warned against creating a nark's charter. The unfortunate and no doubt unintended consequence of the new clause might be to create a super-nark's charter.

Some months ago, we had a debate on industrial tribunals in which I made the point that it is important to set a limit on compensation in cases of dismissal because, without such a limit, the position of smaller businesses could be extremely vulnerable. In cases arising under the Bill where a small business has committed some misdemeanour, justice may not be served if that firm is exposed to the risk of a high level of damages being awarded to a former employee. The situation might not be black and white, or the former employee might have a private agenda in bringing the company's wrongdoing to the authorities' attention. If the court is obliged to consider the full financial consequences for the former employee in an extremely favourable light, the balance might swing in favour of the employee, at the expense both of the firm and of the other people whom that firm legitimately employees.

The House should be cautious about agreeing to amendments that allow for unlimited compensation for former employees. We heard from my hon. and learned Friend the Member for Harborough (Mr. Garnier) of the plight of formerly well-paid ex-employees. One reason why those in the City are paid handsome compensation for the time and effort that they give to their employers is that they often do not expect to be in such lucrative employment for very long. One of the risks of their job is that, if they simply make a bad call on the market, demand for the services rapidly diminishes. The fact that such an employee may, as a result of exercising his or her conscience—something that many would do in any event—suffer some financial loss is part of the risks and rewards they accept when they go to work in such a high-risk environment.

Many such employees will have planned to use the generous remuneration that they receive during their years working in that world to go and do something else quite different when they leave. I believe that, in one case, a trader at a large American bank who had been earning tens of millions of year decided to become a Catholic priest at the age of 35. We cannot predict what such employees will do, but we can state, based on that case, that they have a conscience and that they do not need money to be persuaded to exercise it.

Mr. Robert Walter (North Dorset)

I shall be able to keep my remarks brief, as many of the points I wanted to cover have been raised by my hon. Friends. We are dealing with the integrity of our financial markets and financial institutions. The new clause would cover some of the highest-paid employees in financial institutions, and, if the Bill is to be effective in the City of London, we must accept it.

BCCI and Barlow Clowes have already been mentioned; I would add Barings and, from the United States and Japan, Drexel Burnham Lambert and The Sumitomo Trust and Banking Company, whose activities extend to this country. A catastrophic disaster beset Barings, but it is possible that certain people within Barings knew what Nick Leeson was doing. If the Bill, with the new clause in it, had been in force at that time, they might have been prepared to blow the whistle earlier and, in so doing, save Barings from disaster.

Mr. St. Aubyn

In the case of Barings, people did indeed know—but did not understand—what was going on in Singapore. The problem was one of comprehension. Many of those who knew what was going on would certainly have had an interest in bringing it to the attention of management if only they had understood it.

Mr. Walter

I do not want to enter into a lengthy debate about what happened at Barings, but I suspect that some people preferred their bonuses to be looked after by Mr. Leeson than to blow the whistle.

The financial markets, especially in the City of London, have the highest integrity and command the highest respect in the world. We continue to set high standards for them—through the Financial Services Authority, for example. If those institutions are not to be brought into disrepute—or brought down—by the occasional rogue, we must ensure that people can blow the whistle when they see wrongdoing, so I believe that we should incorporate the new clause and the amendment into the Bill.

Mrs. Gillan

We have had a long debate on the new clause and the amendment, and I should say now that I do not intend to speak on Third Reading, as I am conscious that time is pressing and I want the Bill to be enacted.

I hope that the Bill will act as a deterrent to employers who might be minded to rely on the inaction of their employees in the face of malpractice. I hope, too, that it will reassure employees that they will not be victimised if they speak out on good grounds. I believe that it will make a positive contribution to the means available to combat fraud—it should be welcomed.

I am very disappointed with the Minister's response to the new clause. His wits have obviously been dulled by the events of last night, as he has not been persuaded by the powerful arguments of my hon. and learned Friend the Member for Harborough (Mr. Garnier), my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) and my hon. Friends the Members for Teignbridge (Mr. Nicholls), for Guildford (Mr. St. Aubyn) and for North Dorset (Mr. Walter).

I am sad that, as time is pressing, my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) has not been able to contribute to the debate, but I hope that common sense will prevail when the Bill is considered further, especially in another place. It is not often that a Minister stands out against a measure that is recommended by the Institute of Directors, the Confederation of British Industry, the Trades Union Congress, all the other parties that were consulted and the majority of hon. Members—it is a brave Minister who stands like a little terrier guarding his hole. I know that I shall not persuade the Minister—he has dug his little heels in, which is a great shame—but in the greater interests of the Bill, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.