REDUNDANCY FUND (ADVANCES OUT OF THE NATIONAL LOANS FUND) ORDER 1968 (Hansard, 2 April 1968)

§ LORD HILTON OF UPTON

My Lords, I beg to move that the Draft Redundancy Fund (Advances out of the National Loans Fund) Order 1968, laid before the House on March 25, be approved. The effect of this Order is to increase the borrowing power of the Redundancy Fund under Section 35 of the Redundancy Payments Act to £15 million for the period of twelve months beginning on April 25, 1968. I would remind your Lordships that the Redundancy Payments Act 1965 provides for lump sum compensation to workers who lose their jobs through redundancy. The Redundancy Fund set up under the Act is financed by contributions from employers and is administered by the Ministry of Labour. When employment is terminated through redundancy, the employer pays the worker the amount due to him according to the provisions of the Act and claims what is called a rebate from the Redundancy Fund. The amount of this rebate which is paid to the employer by the Ministry of Labour is, on average, three-quarters of the total paid by the employer to the redundant worker. Such, in brief outline, is the Redundancy Payments Scheme.

When the Act came into force in December, 1965, weekly contributions were fixed at 5d. for men and 2d. for women. This produced an income of about £300,000 a week. By mid-April, 1966, the fund had acquired a balance of £2,500,000. From then on outgoings 1188 rose rapidly to an average of £430,000 a week, and at the end of October, 1966, the fund was exhausted. The main reasons for this were that claims were running at a higher rate than had originally been assumed, and an unexpectedly high proportion were for people with long service.

At this point the Government proposed that, to meet the increased demands on the fund, and to pay off the consequential borrowings, contributions should be raised to 1s. for men and 6d. for women. This would have provided a weekly income of £850,000, which would probably have been sufficient to wipe out the deficit by the end of March, 1968. However, the C.B.I., the T.U.C. and the nationalised industries were opposed to increases as large as those suggested, and in the end the Government decided to raise the contributions by smaller amounts to 10d. for men and 5d. for women. It is estimated that these new rates will produce a weekly income of about £690,000.

Your Lordships will recall that in November, 1966, the House approved the necessary Order, which came into operation on February 6, 1967. In November, 1966, there was a sharp rise in expenditure, which continued into 1967. The deficit, which at the end of 1966 was £2 million, increased to £5½ million on June 30, 1967. As a consequence, your Lordships approved an Order last July increasing the borrowing limit from £8 million to £12 million for a period of 12 months. Since then the deficit has still further increased, and it now stands at £10 million. The deficit could easily reach the present borrowing limit of £12 million by early or mid-May, and the raising of the limit has therefore become an urgent matter.

Your Lordships will be aware that it was announced recently in another place that employers' contributions to the fund would be increased by 2d. per week for men and 1d. a week for women from September 2 of this year. This will certainly put the fund on a sounder footing, especially if it is coupled with a fall in the number of redundancies. This Order is intended to preserve the solvency of the Redundancy Fund until the contribution increases become fully effective. I therefore ask your Lordships to approve it.