Redundancy Payments (Hansard, 23 July 2002)

§ Mr. David Crausby (Bolton, North-East)

I beg to move,

That leave be given to bring in a Bill to remove the maximum amount of a week's pay for the purpose of calculating redundancy payments.

When the Redundancy Payments Act 1965 was introduced, the Government restricted the amount of statutory redundancy pay per week and the maximum number of weeks to 30. The cap on redundancy payment currently stands at £250 a week, and I am delighted to be given the opportunity to introduce this Bill, which is designed to eliminate the injustice faced by those who suffer the pain and anguish of redundancy, many of whom have previously earned above the £250 a week cap only to find that their redundancy pay entitlement is limited to £250 a week.

I am grateful that the Employment Relations Act 1999 ensured that a limit on a week's pay would increase in line with inflation. In a growing economy, however, wages inflation will inevitably run higher than the retail prices index, and the relative value of a week's pay calculation will fall further and further behind. I am not, of course, asking for a limitless amount, as that would be ridiculous in the case of those who are in receipt of tens of thousands of pounds per week. The cap should, however, be aimed at the level of average earnings, and it should be linked to increases in the average wage.

The Redundancy Payments Act 1965 was introduced to compensate workers who had lost their jobs. It was set up with a maximum payment of 30 weeks' pay after 20 years' employment. The effect of the maximum weekly payment is to limit the level of compensation to £7,500 to an employee who, for example, is aged 60 and has worked for the company concerned for as many as 45 years. With five years to wait for a pension, £7,500 is little enough on which to exist. When the earnings of the individual concerned have previously been above the £250 cap, however—say £500 a week—the redundancy compensation would consequently be reduced to 15 weeks' pay instead of 30 weeks' pay.

It should be obvious that, for elderly workers with little chance of further employment, those levels of redundancy compensation are derisory. A maximum weekly payment cap was included in the 1965 legislation, when employers received a rebate of 40 per cent. from the Government, and the Government of the day undoubtedly wanted to restrict the Treasury's exposure to such claims. That has now changed, with the rebate that employers received being reduced initially and then removed entirely. Employers were properly compensated for the removal of the rebate by a reduction in national insurance contributions at the time. That was done because some people considered that it was too easy for certain employers to use redundancy as a first option and to claim a rebate from the Government subsequently.

In its day, the Redundancy Payments Act was an important and welcome step forward for workers' rights. It has barely changed in nearly 40 years, however, and advances in employees' rights in other countries have passed by the British worker. To be fair, whenever there are major high-profile redundancies in this country, political pressure is inevitably exerted to provide help for 888 those affected. However, the problem comes with small-scale redundancies. When added together, they are just as damaging to the community. As with a large-scale factory closure, they are just as traumatic to the individual who suffers the loss of his or her job. The time has come for the working people of this country to be paid by right simply in relation to what they have lost. They should be compensated at least at the levels that their counterparts in Europe enjoy.

I argue that point not just from the standpoint of more financial compensation, but as much in the cause of deterring multinational employers from selecting British workers simply because it is cheaper and easier to make redundancies in the UK than it is elsewhere. For example, in the Netherlands and Spain, regional employment offices must authorise redundancies. In France, Germany, Austria and Luxembourg, employers are required to fund a social plan that may cover both financial compensation and measures to alleviate the impact of redundancies.

In France, employers must consult works councils or staff representatives and send a note of the consultative meeting to the labour inspectorate. They must consider retraining, shorter or reorganised hours and two consultation meetings are required with a gap of 14 to 28 days. In Italy, employers must inform workers and, within seven days, a joint review of proposals that can last 45 days must consider alternatives to the redundancies. Individual notice is then governed by collective agreement, which involves a two-stage procedure whereby workers are covered by lay-off provisions and then by mobility provisions. Faulty procedure can mean reinstatement. The House of Commons Select Committee on Trade and Industry considered the relative UK position in January 2001. Its report said: The suggestion that it is easier and cheaper to dispose of employees in the UK than elsewhere seems to us to have been shown to be factually correct. I do not want to put excessive burdens on British employers, especially those in manufacturing industry. They need all the help that they can get in the current circumstances. However, the truth is that UK law gives poor protection in comparison with legislation in other countries. The French courts clearly demonstrated the difference, to the cost of Marks and Spencer when the company announced the attempted closure of its continental branches in March 2001. Our colleagues and competitors in Europe are unlikely to allow employers to make redundancy easier, and neither should they. It is therefore intolerable that, in the event of a need for a reduction in the number of employees, the burden should be disproportionately shouldered by the British working man and woman.

We could, of course, pursue justice through European legislation so as to level the playing field, but our Government argue that subsidiarity should apply and that such matters should be left to national Governments. That is fine just as long as we do not allow British employees to miss out and remain the poor, redundant employees of Europe.