HL Deb 26 July 1968 vol 295 cc1451-61

1.50 p.m.

BARONESS PHILLIPS rose to move, That the Draft Redundancy Fund Increase of Contributions Order 1968, laid before the House on July 16, be approved. The noble Baroness said: My Lords, on behalf of my noble friend Lord Bowles I should like to move the first of the two Orders before your Lordships today, though I shall speak to them both. The effect of the Redundancy Fund (Advances out of the National Loans Fund) (No. 2) Order 1968 is to enable the Secretary of State for Employment and Productivity, with the agreement of the Treasury, to accept temporary loans from the National Loans Fund to the Redundancy Fund up to £20 million for a period of two years beginning August 16, 1968. The effect of the Redundancy Fund Increase of Contributions Order 1968 is to increase the weekly Redundancy Fund contribution paid by employers from 10d. to 1s. 3d for a man and from 5d. to 7d. for a woman with effect from September 2, 1968. This Order is made in exercise of the powers given to the Secretary of State for Employment and Productivity under Section 27(3) of the Redundancy Payments Act.

Both these Orders are made necessary because of the financial state of the Redundancy Fund. Your Lordships will recall the history of this Fund. After a short initial period during which receipts and expenditure were in balance, expenditure began to outstrip receipts, and in February, 1967, contributions were increased from 5d. for men and 2d. for women to the present level of 10d. for men and 5d. for women. The Minister of Labour, in introducing the Order which gave effect to these changes, mentioned that he had originally intended to increase the rates to 1s. for men and 6d. for women, but had accepted the advice of the C.B.I. and the T.U.C. that such increases would have been too drastic. Further rises in expenditure, however, made it necessary in July, 1967, to obtain Parliamentary approval for an increase in the borrowing power limit from £8 million to £12 million.

During the autumn of 1967 the adverse trend in outgoings continued, and further consultations took place with the C.B.I., the T.U.C. and other organisations. Following these consultations the Chancellor of the Exchequer announced in his Budget speech that the Redundancy Fund contribution would be raised from 10d. to 1s. per week for men and from 5d. to 6d. per week for women with effect from September 2, 1968. Meanwhile, in order to safeguard the solvency of the Fund until these higher rates came into operation, Parliament approved in April. 1968, an increase in the borrowing limit from £12 million to £15 million.

In the past three months the numbers of payments have slightly decreased, from 63,550 in the March quarter to 62,755 in the June quarter, but outgoings have continued to rise. This is because the average amount of individual payments of rebate has sharply increased. The average payment in the financial year ended March, 1968, was £155; but the average for the March, 1968, quarter was £164 and in the June quarter it had risen to £173. This factor had a marked effect on weekly outgoings. In the nine months up to April this year weekly expenditure averaged about £800,000. In the following three months, however, average weekly expenditure rose to over £900,000.

The increase of contributions to 1s. and 6d. in September, proposed in the Budget speech, would have produced an income of £835,000 a week. This would have covered an expenditure of £800,000 a week, and a start would have have been made to reduce the deficit. But it is clearly inadequate to deal with outgoings of £900,000 a week, and a higher increase has therefore become inevitable. At the same time the accelerated drain on the Fund has brought the accumulated Fund debt to about £14 million—very near the present borrowing limit of £15 million. It is therefore only prudent to increase the borrowing powers to a level which will ensure the Fund's solvency.

The increases in contributions to 1s. 3d. for men and 7d. for women, which now replace those of 1s. for men and 6d. for women proposed by the Chancellor of the Exchequer, will produce an income of rather more than El million a week. If present expenditure remains steady at about £900,000 a week, the deficit will be wiped out in about three years. This is not meant to be a prediction, because outgoings are so vulnerable to fluctuations in the component factors making up each redundancy payment. For instance, while increases in wages would tend to increase expenditure, a shift in the age group of redundant workers towards the younger employees would act in the opposite way. It is at any rate the hope that the deficit will have fallen at the end of two years to below £8 million. This is the original borrowing limit written into the Act, and the present borrowing Order is for this reason designed to expire at the end of two years.

My Lords, the Government are not complacent about the working of the Redundancy Payments Act. Outgoings have been heavier than expected, and inevitably a new scheme of this sort has thrown up anomalies. The Department of Employment and Productivity are now examining the scheme with a view to seeing what improvements can be made. But, in asking your Lordships to approve these Orders to-day, I should like to say that the Government are convinced that the Redundancy Payments Act is serving a vital purpose in making economic and technological change, with the labour mobility that that implies, more acceptable to the working people of this country. I beg to move.

Moved, That the Draft Redundancy Fund Increase of Contributions Order 1968, laid before the House on July 16 be approved.—(Baroness Phillips.)

1.57 p.m.

LORD NUGENT OF GUILDFORD

My Lords, may I thank the noble Baroness, Lady Phillips, for explaining to us the purpose of this Order, and start by saying that I shall give my support to it. I am afraid, however, that I must say some critical things about the history of this matter (which she put before us so lucidly and charmingly that it seemed really quite innocuous) because it rally is a very unhappy story. If I may just highlight the worst spots of it, which naturally the noble Baroness did not, this Redundancy Payments Scheme, which started in December, 1965, then estimated that its revenue per week would be £350,000, and with loan facilities for £8 million from the Exchequer the Minister expected that this provision would last for a "substantial period". Those are his words.

But, as the noble Baroness has told us, within twelve months he was back. again to the House raising the contributions—doubling them, in fact—and telling the House that he expected that the expenditure would go up to double what it was, to about £600,000 per week. He then came back again in July, 1967, with the outgoings, estimated at £600,000 per week, going up another £100,000, and asked for an increase of the borrowing powers from £8 million to £12 million, saying at the time that that £12 million would never be reached. I think it is just worth repeating the Minister's words of last year. He evidently was uneasy about the course of events, for he said this: I emphasise to the House that it is our intention to examine the nature of the Fund, the nature of the contributions, and to report to the House where the contribution level stands and what are the best long term interests of the Fund and how its solvency can and should be preserved ".—[OFFICIAL REPORT, Commons, 24/7/67; col. 276.] That was a year ago. Now, as the noble Baroness has told us, this Order will again put up the contributions, this time from 10d. to 1s. 3d. for men, and from 5d. to 7d. for women. This means that the contributions have now gone up three times—300 per cent., in three years; and the borrowing limit has gone up by 250 per cent., from £8 million to £20 million. I do not think any comment of mine is needed to demonstrate that the forecasts of the Minister of Labour (or, as the Minister is now called, the Secretary of State for Employment and Productivity) have been completely meaningless, and it would be fair to say that the Minister now can have no idea what is happening in this Redundancy Fund, or what it may cost in the future. I think it is fair for me to comment that the present Government's determination to have an ever-larger say in the management of industry and commerce is all the more surprising, in view of their extraordinary record of incompetence, as here, in running our national affairs.

My Lords, I have studied very carefully the Junior Minister's speech in another place, and from this I gather that two of the major imponderables which make his forecasting look so ridiculous are, first of all, the level of unemployment, and, secondly, the age, length of service and earnings level of those becoming redundant. Indeed, the noble Baroness referred to some of these factors in her speech. I should like to make a comment on these two factors.

The unemployment level is now standing at the exceptionally high seasonally adjusted figure of 581,000, which is 2.5 per cent. It is true that this is about 1 per cent. higher than the Prime Minister predicted last November; and no doubt the unexpectedly large increase has had an important influence on the deficit in the Fund. On the other hand, the trend for long-term unemployment unfortunately seems to be increasing and now the figure for those unemployed over two months is something like 68 per cent. But presumably that is operating in the reverse direction with regard to the expenditure in the Fund. Am I right in thinking that the net effect of this very high level of unemployment has clearly upset the forecast? What noble Lords would like to know now is the Government forecast for next winter's unemployment level and how it is expected that this will affect the solvency of this Fund.

On the second point, the noble Baroness gave us some figures; but the Parliamentary Secretary in another place gave us no figures at all. But the noble Baroness gave us no precise analysis of the age, length of service and earnings level of claimants on the Fund; so we can only deduce what is happening from the bits of information which the noble Baroness has given us and which the Parliamentary Secretary gave in another place.

The Parliamentary Secretary in another place told the House that it was common practice when staff reductions had to be made in a firm for the employer and employees to put their heads together to make the maximum possible use of the Fund by inviting employees to volunteer for redundancy, with the incentive that those entitled to large sums would obviously do so. The Parliamentary Secretary commended this practice as being in the interests of industrial harmony. I do not know what value this practice would have for industrial harmony even in the short run; but bearing in mind that entitlement to a substantial claim for redundancy is once and for all, I should doubt whether in the long run it would be helpful. Certainly, the Minister's approval of this practice—which in my view is "a fiddle" and nothing less—goes a long way to explain why this high expenditure has so far exceeded the forecast. Indeed, the figures which the noble Baroness gave us to-day, that the average sum paid out on redundancy is increasing every quarter, makes it plain that the Minister's approval of this "fiddle" has undoubtedly become widely known, with the inevitable result that the claims coming in are above the average predicted.

If this kind of "fiddle" is approved by the Minister, it is not surprising to hear that other and more blatant arrangements are practised also. I read in The Times of March 23, of this particular incident, which I am sure is now well known: Technicians have all been guaranteed jobs with the new London Week-end Thames Television, the Welsh Harlech, and the Yorkshire Television Groups, but as well as continuity of employment and full pension rights, they have also received payments believed to total up to £250,000. This is a shocking state of affairs. I say this with all sincerity. I hope that the noble Baroness will take this back to the Minister in another place: if the Minister lowers the standards of administration, it is not surprising if others follow him down the scale.

BARONESS PHILLIPS

My Lords, could the noble Lord give me the source of the quotation he attributed to the Parliamentary Under-Secretary in another place?

LORD NUGENT OF GUILDFORD

My Lords, as I proceed with my speech I will give this information to the noble Baroness. It was referred to in another place; the Parliamentary Secretary approved of it. The point I want to make is that in my judgment it is high time that the Minister published a report of the review of this fund which was promised. If that is not to be done, I hope that the Commons watchdogs of the public purse, the Public Accounts Committee, will cast their expert eyes on what I regard as this highly unsatisfactory administrative affair.

I just throw this into the picture—I think it is relevant. The Minister of Social Security has now taken action to check what is, I think. officially called "voluntary unemployment" by those more generally called the "workshy". This indicates that the scale of this abuse of public funds by people who are receiving unemployment pay plus supplementary benefits and who are unwilling to take on jobs which are offered to them has reached serious dimensions. There are, unfortunately, many people who will abuse public funds, and, indeed, the Redundancy Fund, where the opportunity is offered. I think the Government have a duty to investigate, report and check what abuses there are in this field. I think they could be stopped.

My Lords, as I said at the start, the intention of the Scheme commands general approval. It is to soften the blow of redundancy—and we all wish to do that—and to ease the transition to a new job. But the existing Scheme in its present form bears all the signs of being no more than a rough-and-ready affair. In terms of making the best use of national manpower by helping the transition to a new job, it is not by any means clear that it is succeeding. The rising trend of unfilled vacancies in companies in the South-East and the rising unemployment levels in the North and Scotland, I think, tend to bear this out.

Now that the total expenditure of the Fund is running at a level of £900,000 a week, or £45 million a year, very large sums of money are involved. It is, in fact, quite a significant extra cost for industry to carry. I suggest that the rough-and-ready methods of the past are just not adequate and that in the light of almost three years' working experience a much more precise Scheme should now be worked out. I would suggest that some thought should be given to using at any rate some of the money for fitting a redundant worker for his new job, if necessary by re-training, rather than for paying him an unconditional lump sum. At the end of the day, this is going to be very much in his own interests as well as in the country's

I should like to make this suggestion, as an alternative approach that might be considered by the Ministry when this existing review is going on. Instead of the existing lump sum payment when a worker becomes redundant, there should be, to start with, a special high late of unemployment pay, which should continue until such time as he is offered suitable alternative job or is given a training course to fit him for another job where vacancies exist. Thai high rate should continue until the training is finished. If he refuses a suitable job or refuses the training scheme, his unemployment pay should be reduced to the basic level. I commend this as a constructive thought which I believe would make a better use of these very large sums of money now being paid out. Incidentally, I think this suggestion would embrace the need to expand the industrial training scheme which is running at too low a level to carry the large number which would be brought into it if my idea became practicable. In answer to the question of the noble Baroness, I have been able to look at the Hansard record of another place, to see where this particular reference came from, and my impression is that it came from col. 401, in the reply of the Parliamentary Secretary to the debate on 23rd July.

I conclude my comments, my Lords, by saying that if the Government wish to repair the damage to their reputation from the administration of this Fund—and I am sure they do—they have an urgent obligation to complete the promised review and make a full report of their plan—which I hope will mean a completely revised scheme—to Parliament, and to do that as quickly as possible. My Lords, I am sorry to have to say so many critical things, especially to the noble Baroness, Lady Phillips, but I feel that the record deserves it, and I hope that, as the general idea has my warm support, the noble Baroness will take back those thoughts to her right honourable friend in another place, and perhaps they will be of help in the review that is going on.

2.11 p.m.

BARONESS PHILLIPS

My Lords, I should like first to thank the noble Lord, Lord Nugent of Guildford, for his constructive suggestions. Inevitably, the idea of any payment in a situation of redundancy or unemployment must be linked with the desire to enable the man or woman to seek employment as early as possible. I will certainly convey to my right honourable friend the ideas that the noble Lord has put forward. As he was courteous enough to let me know that he was going to raise the point I did check about the review, and I find that in fact the Minister did not promise to give an account of a review. However, the whole Act and the working of the Act is under very close review all the time.

I think it worth while to point out to the noble Lord (I am sure he will agree with this) that the fact that the increases have been several, rather than one larger one, represents an attempt on the part of the Government not to place a greater financial burden on industry than is absolutely essential. This procedure has necessitated the Minister's returning to ask for several increases in the contribution. I think that also we must bear in mind (I am sure that your Lordships will be fair over this) that this is a scheme where there are no comparable precedents, and of necessity it will have to be kept under constant review. It is now moving into a stage where it will be a little easier to give more firm forecasting figures. It is a matter of regret on the part of the Government that it should be necessary to place an increased burden on industry at a time when higher productivity is being called for.

In a sense, the Scheme has been proved successful by the very fact that there have been these calls upon it. In relation to the figures concerning television employees, it has since been appreciated that these figures were greatly exaggerated; and the Government is satisfied that in most cases the redundancy proposals were justified. I still have not quite taken the noble Lord's point that the Under-Secretary was supporting what the noble Lord called "fiddles". I think that the Under-Secretary was trying to point out that in several of the cases mentioned redundancy payments were justified.

LORD NUGENT OF GUILDFORD

My Lords, may I interrupt the noble Lady? I should he very pleased to read the statement, though it is not normal to do so. It shocked me so much to read it that I felt it was only right to comment on it to-day. It is stated in col. 401: The second sort of abuse—and I emphasise that it is abuse, in my view, only in the minds of the people who claim it to be so—concerns an employer who knows that a percentage of his work force is likely to be made redundant and offers his work force the opportunity to opt for redundancy if a portion of it chooses to do so. For example, the company with, say, 500 employees which says that 50 must be paid off on the first of next month and is prepared to take 50 volunteers. Clearly, the 50 volunteers are likely to be men who say, 'regretful as I am …' and so on. Then the Under-Secretary goes on: …and the more substantial the sum, the more likely they are to volunteer for redundancy. This does not seem to me to be an abuse of the scheme. Indeed, it seems to be a way in which redundancy can be carried out without friction, with the minimum of hardship and with a positive contribution to industrial relations rather than industrial relations of the firm deteriorating. My Lords, there may be some slight point in that, as I commented, but the general principle of this simply horrifies me. It really is a complete connivance in order to extract the maximum amount from the Scheme, and to a very large extent that is why the sums keep on going up and up.

BARONESS PHILLIPS

My Lords, I should not like at this point to indulge in a debate on this question. It seems to me that it is a question of the interpretation the Under-Secretary was placing upon this particular situation, and it is, I think, related to the question of age. As a 50-year-old I rather resent the statement that a 50-year-old cannot be retrained, which seemed to me to run through some of the debate in the other place. As the prime of life must rise with the increased length of life, it seems that this is a matter which might well merit some discussion. I hope that the noble Lord will accept that I have tried to cover the points he raised. I will certainly convey his suggestion of an alternative approach, and we shall undoubtedly have an opportunity of reviewing this Act. Inevitably, in an Act of this kind there must be a great deal of flexibility in operation.

On Question, Motion agreed to.