§ 5.48 p.m.
§ THE MINISTER OF STATE, BOARD OF TRADE (LORD BROWN)
My Lords, I beg to move that this Bill be now read a second time. The Bill has only one major clause and the simple object of reducing the rebates paid from the Redundancy Fund to employers who have made statutory payments to redundant employees. Under the Redundancy Payments Act 1965 employers (except in those occupations which are specifically excluded) are required to make payments to redundant employees with more than two years' service. Workers receive half a week's pay for each year of service between 18 and 21 years of age; one week's pay for each year of service between 22 and 40; and one and a half week's pay 750 for each year of service over 40, subject to a maximum of 20 years' service. An employer who has made a redundancy payment is entitled to a rebate from the Redundancy Fund which is financed by contributions paid by all employers. The rebate under the 1965 Act is two-thirds of payment for service under 41 and seven-ninths of payment for service over 41.
Clause 1 of the Bill provides for a uniform rebate of one-half. The change is estimated to reduce the Fund's expenditure by rather more than £17 million a year, about half of which is needed to cover rising expenditure from the Fund and the rest to enable repayment to begin of the Fund's accrued deficit. The Fund has been increasingly in deficit during the last two years and it has been necessary to increase its borrowing power to the limit of £20 million laid down in the Act, and on two occasions to increase the rate of employers' contributions. When the House of Commons last approved an increase in contributions last July expenditure was running at about £900,000 a week and income was little more than £650,000. The Fund's deficit then was £14 million, which had increased to about £17 million by the time the Fund received its full income at the new level of contribution which became effective in September. A further increase in the rate of expenditure brought it only just below the new income. The difference between income and expenditure is far too small, particularly in view of the difficulty of forecasting expenditure and the need to begin repayment of the Fund's debt.
It has throughout proved extremely difficult to forecast future expenditure from the Fund. This is a matter not only of the number of payments on which rebates are to be paid, but also of the size of each payment and the extent to which it attracts rebate at the rate of two-thirds or seven-ninths. The size of each individual payment is determined by the recipient's age, length of service and weekly wages. It is the interrelation of so many variables that makes predictions of the Fund's expenditure so difficult even after three years' experience of its operation. In retrospect, however, it can be seen that the principal recent cause of rising expenditure has been a steady increase in the average size of payments.
751 In the first half of 1967, individual payments averaged £193 and the average rebate from the Fund was £144. By the second half of 1968, the average payment was £245 and the average rebate £183. Looking ahead, it is prudent to assume that this trend will continue. One factor in the increase in the average size of payments is expanding earnings. The redundancy payment is based on weekly wages, and as they increase so will the payment increase. But contributions are at a flat rate and until they are brought on to a basis related to earnings, as is envisaged in the White Paper on Earnings Related Social Security (Cmnd. 3883), the Fund's income will tend to fall short of its expenditure.
As well as providing for rising expenditure, the Government consider that a start must now be made on reducing the Fund's debt. The cost of redundancy payments is met by employers, and the Fund is a device to enable part of the cost of payments to be carried by employers in general rather than leaving the whole cost to fall on individual employers making redundancy payments. The funding system was introduced in 1965 to meet representations from employers that the cost of payments should be spread, and it was intended to be self-financing. Provision was made for it to borrow from the National Loans Fund to meet short-term fluctuations. It has now been in deficit for over two years and the time has come to reduce the deficit substantially.
Having found it necessary to improve the position of the Fund, the Government faced the question of how this should be achieved. One alternative would have been to reduce the scale of payments to redundant workers, or their eligibility for payments. This course is not acceptable. The appropriate scale of payments to redundant workers is a matter of judgment, but no evidence has been brought forward to suggest that the scale laid down in 1965 is too generous. Certainly this scale of payments has led to reduction in the friction associated with redundancy and has helped to promote the movement of workers into new jobs where they can be more effectively employed.
The choice, therefore, lay between an increase in contributions to the Fund by 752 all employers or a reduction in the rebates paid to individual employers making redundancy payments. One factor in the Government's choice between these methods was the incidence of redundancy among older workers. Part of the increase in the average size of redundancy payments can be accounted for by an increase in the proportion of long-service workers, among them many workers over 40 receiving the higher rate of payment of one and a half weeks' pay for each year of service. In 1963 the proportion of redundant workers over 40 was about 60 per cent. Last year it was about 70 per cent. It can be seen that the operation of the Act encourages an older worker to volunteer to be made redundant as he receives payment at a higher rate. This may well not be in his best long-term interest, as he will find it more difficult to obtain a suitable job, and he will be less able to adapt to new circumstances or to learn new skills. Where a choice exists, however, the employer has no reason to reject the older worker's offer of voluntary inclusion among those to be made redundant as the cost of the extra half-week's payment to the older worker is met entirely by the Fund.
A change in the rebate afforded the opportunity to remedy this problem, at least in part, by ending the system under which the Fund carries the cost of the extra half-week's payment. This is likely to encourage employers, where a choice exists, to look again at the method of selecting those to be made redundant and to select younger rather than older workers. It is also arguable that where employers are reorganising their activities to secure more profitable working they should meet a larger part of the cost of redundancy payments themselves, rather than through the contributions to the Fund of employers in general. And in the case of firms going into liquidation it is not inappropriate that other employers should bear less of the costs of their liquidation. An increase in contributions would not contribute to resolving the problem of the undesirable concentration of redundancy among older workers, and on balance a reduction in rebates has been preferred.
It has been suggested that the redundancy payments scheme is abused and that a tightening up of the scheme would improve the Fund's position. Abuse may 753 be taken to mean a number of different things. It can mean deliberate attempts to obtain rebates to which an employer is not entitled. We have found no evidence of fraud of this type. It is sometimes used to describe situations where workers volunteer to be made redundant or, having received redundancy payments, find immediate new employment. To regard this as abuse is to misunderstand the basic purpose of the scheme. The whole principle of the scheme is to provide compensation to a man who loses his job through no fault of his own. The lump sum is recompense for the uncertainty and loss of security, for the potential loss of earnings and fringe benefits, the need to adjust to new habits and attitudes. It is not a form of unemployment benefit paid in a lump sum. Protection of a redundant worker during subsequent unemployment is provided separately by earnings-related unemployment benefit. It is no abuse of the scheme when a man volunteers to be made redundant when genuine redundancy occurs in the factory. It is in fact a sign that the Act has succeeded in weakening the fear and anxiety formerly associated with redundancy and enabling necessary industrial change to take place more smoothly.
The Government accept, however, that there are some aspects of the scheme which have proved anomalous. It could be expected that experience would reveal imperfections in an Act such as this which broke entirely new ground. Perhaps the best-known example is the situation in which employees of a television company which lost its franchise were eligible for payments even though they were immediately re-employed on virtually identical terms by the new franchise holder. The way in which the Act defines "associated companies" probably requires modification. And clarification is required of the concept of "temporary cessation of work" in the Contracts of Employment Act which is relevant to computing length of service for calculating the amount of a redundancy payment. None of these anomalies materially affects the finances of the Fund, but they need to be removed as a matter of principle. The Government intend to begin early discussions on them with industry and commerce, with a view to making what changes in the Act prove desirable and necessary.
754 My Lords, the Redundancy Payments Act has been generally accepted as a valuable contribution in the field of industrial legislation, and I commend to the House this Bill which seeks to put the financing of the Redundancy Fund on to a sounder basis. I beg to move.
§ Moved, That the Bill be now read 2ª.—(Lord Brown.)
§ 5.59 p.m.
§ LORD DRUMALBYN
My Lords, I should like to thank the noble Lord for having explained to us the purposes of this short Bill. The Redundancy, Payments Act was welcomed in principle by us when it was introduced because, as he said, it was designed to contribute to the drive for improved efficiency and modernisation in industry to which we on this side of the House attach so much importance, as do the Government. We saw it as a measure which would render more acceptable the redundancy which in many cases is the inevitable accompaniment of modernisation.
When the Redundancy Payments Act was introduced in 1965 it was described in another place by a Government spokesman as "a landmark of first importance in industrial policy". Nevertheless, its Second Reading was moved in this House at nearly 10 p.m. in the week before the House adjourned for the Summer Recess, and it received the Royal Assent only nine days later. The Minister who moved the Bill spoke for twelve minutes. I have re-read his speech and I find that he did not mention the method of financing the scheme at all. I remember pointing out at the time that this was a somewhat cavalier way to treat a "landmark", and the subsequent history of the Act has amply justified our misgivings.
As the noble Lord said, the Act set up a Redundancy Payments Fund which was to be wholly financed by a weekly levy on employers, to be known as "the Redundancy Fund contribution" and to be paid along with the employers' National Insurance contribution. The Fund was to be controlled by the Minister. The Act laid down that the weekly contribution should be 5d. for each male employee and 2d. for each woman, and the Minister was given power with the consent of the Treasury 755 to vary contributions. In introducing the Bill in another place the Minister said:… we have proposed a levy of surcharge"—which I take to mean an addition to the weekly National Insurance contribution—which should, we think, ensure that the Redundancy Fund is self-financing over a substantial period.—[OFFICIAL REPORT, Commons, 26/4/65, col. 44.]To enable the scheme to get off the ground, and to even out fluctuations in demand on the Fund from year to year, the Treasury was empowered to advance out of the Consolidated Fund such sums as the Minister might request, up to a maximum of £8 million or such larger sum, not exceeding £20 million, as the Minister might by order, subject to Treasury consent, determine. The Minister has had to exercise his order-making powers to the limit, and we are now told that unless something is done the limit of £20 million laid down in the Act will be exceeded. And that, my Lords, despite the fact that contributions were doubled in 1967, and then trebled in 1968 for men, making it three times for men and three-and-a-half times for women what was originally in the Act. In other words, in spite of the incomes and prices policy the price of this service to industry as a whole has increased more than threefold in three years.
The Government must accept responsibility for what has proved to be a gross miscalculation, and it is the employers and the public who have to pay for the Government's mistakes, since the Exchequer bears none of the cost—unless, of course, the advances are ever written off. So though the burden on employers as a whole is already three times as great as it was when the scheme was started, the Government now propose to increase the burden on those employers who dispense with the services of employees on redundancy.
When an employee is made redundant the employer makes the redundancy payment and receives a proportion of it back from the Fund as rebate. The noble Lord said that that proportion is now seven-ninths in respect of qualifying service over 41 and two-thirds in respect of qualifying service under 41. The Bill proposes that it should be a half in both cases. I think it is worth while looking 756 at the effect of this. If my calculations are right, the effect of the change is that whereas at present the net cost of redundancy to the employer is the same whether the payment is in respect of service under 41 or over 41, if the Bill becomes law the cost to the employer will be 50 per cent. more in the case of service under 41 and half as much again (I think it is 125 per cent. all told) more in the case of service over 41. The effect of the Bill is to transfer £17 millions a year of the cost of redundancy from the Fund to the firm in which redundancies occur. I understand that about one employee in 330 in the work force is receiving redundancy payments each year and the average payment is running at about £248.
Having regard to the national purpose of the scheme, which is to reduce resistance to reductions in manpower where they are needed in particular firms, one must ask whether this is the right policy. Will it not mean that firms where reductions should take place in the interests of efficiency and modernisation will be that much less willing to carry them out? That is what one may describe as voluntary redundancy. Applying the average figure, again if my arithmetic is right, it will cost a firm employing 2,000 men some £50,000 to reduce its labour force by 10 per cent., of which it will get not more than half back in rebate. But what of involuntary redundancy—that is, for example, where an employer has to dismiss employees or close down entirely because of decline in demand for the goods or the kinds of goods he produces or because he is too old or too sick to carry on.
Let me take a case. Suppose such an employer had to give up his business through ill health, and had two employees who had been with him for 20 years each, each earning £24 a week. This Bill, as I understand it, would cost him £400 more than these redundancies would do at present: it would cost £720 instead of £320. In another place the Minister did not deny that this was harsh he merely said he did not think it was unduly harsh. In the extreme case of a firm going into liquidation the people who are going to suffer, of course, will be the creditors. If my researches are correct, the Government accepted the case for the two-thirds and seven-ninths contributions from the Fund to the rebate in the course of the 757 Bill in another place; that was three and a half years ago. Now they are going back on it entirely.
Is it not questionable—I would raise this general question—whether the same scheme should cover both voluntary and involuntary redundancy, or at any rate whether it should cover it in exactly the same way? Admittedly, looked at from the point of view of the employee made redundant it does not matter whether redundancy is voluntary or involuntary; he goes. But Parliament has to look at schemes from the national and not the sectional point of view, and, as in this Bill, Parliament has to look at the cost and who should bear it and in what proportions. Is there not a strong case for considering involuntary redundancy as a risk to be borne by both employer and employee, not necessarily in the same proportion? Changes in the nature of demand and the conditions of trade may render a whole industry obsolescent and even redundant. It is not necessarily the fault of management if an industry declines or disappears.
Surely in the long run the interests of the employee should be covered by social insurance in the case of involuntary redundancy, and we should work towards that. It is a risk that he enters into, and a risk for the employer, too, that is inherent in business. On the other hand, the purpose of voluntary redundancy is to improve the efficiency of the company, and it is in the interest of the company as well as of the employee that there should be a redundancy scheme. It is also in the interests of the nation, and it would therefore be not unreasonable for Exchequer assistance to be given as an inducement to make such a scheme. But this Bill goes exactly in the opposite direction. It is deliberately increasing the cost of redundancy to employers. That is bound to make them hesitate to introduce changes which would improve efficiency but would involve some redundancy. I must ask, is it right to move in the wrong direction merely to achieve a short-term objective?
Obviously, the Fund cannot be allowed to continue to run into deficit. But the change proposed in this Bill is to ensure not merely that the £20 million limit of borrowing will not be exceeded but that it will be repaid in quite a short period of time. As I understand it, the period 758 of time the noble Lord envisages is about two and a half years, and I take it, therefore, that it is the Government's intention that all the advances should be repaid before the new method of financing the Fund proposed in the White Paper on earnings-related pensions comes into operation, in about two and a half years. If the noble Lord's predictions work out, that is what it will mean.
As he said, there were two main ways in which the situation could have been dealt with. The first was to increase the income of the Fund by raising the weekly levy, and the second was to reduce its outgoings, which could have been done either by reducing the redundancy payments made and by reducing the rebate to what the Government originally proposed. The obvious way to reduce the redundancy payments was to provide that one week's pay would be given for each year of employment for men over 41 instead of one and a half weeks, as at present, and so put service over 41 on the same level as service between 22 and 41.
The Government put both these proposals—that is, the reduction in rebate and the reduction of redundancy payment—to the T.U.C., the nationalised industries and the C.B.I. I wonder whether the noble Lord could tell us what advice the Government received from each of them? The noble Lord has told us in just one short sentence that the Government rejected the suggestion that the weeks taken into account should be calculated at the same amount that is, one week per year of service whether in respect of service over 41 or under it.
If I understood the noble Lord correctly, one argument for making the redundancy the same for all is that many older men are volunteering for redundancy payment. The noble Lord was not entirely clear about this. He said. "It would seem" that this is so. Has he any positive figures to give us about this? I took down his words. He said. "It would seem" that that is what is happening. The next time he referred to it he put it as a fact of an undesirable concentration on older workers. I wonder whether he could give us some further and more positive information about this? If it is so, I should like to ask him this: how will the tendency be checked by making the employers pay more for the 759 older man than for the younger man? Will they refuse to let older volunteers go? If a man volunteers will they say, "No, you cannot go. We are sorry, but we are withdrawing this." Will they not allow any older man to volunteer, or will they stop volunteering altogether? Whichever way the Government do this, it seems to me they are making trouble for industry.
Take the case of two employees, one of 36 and one of 56, both with 14 years' service, each earning £40 a week. Why should the employer necessarily have to pay more for the older man? The younger man will probably have children at school and a move for his family is likely to upset more people than a move for the man of 56. At present, the net cost to the employer is the same fox both—about £187 in that case. Under the Bill, redundancy would cost the employer £420 for the man of 56 and £280 for the man of 36.
The truth is that the scheme is riddled with anomalies. It is not just a question of the odd anomaly here and there. The Government really must study this scheme to see how it fits in with public and private social security arrangements. It is important that they should be doing this at the time when the White Paper that they have just laid before the House on earnings related benefits is being considered. If the purpose of the scheme is to indemnify men for being made redundant by paying them a lump sum related to their length of service and current pay up to the specified amount of £40 of earnings, then why limit the years of service qualifying for the indemnity to 20? If, on the other hand, the purpose of the scheme is to provide men made redundant with the wherewithal to live until they find another job and to move to another job, why give a man who leaves one job on a Friday and starts another in the same town on the following Monday the same amount as the man who has to find work in another area and may take weeks or months to find it? This is a curious interpretation of the proposition "To each according to his need".
According to The Times of January 21, the Department's statistics show that one worker in three finds work almost immediately; yet if his earnings are average 760 and he is 41 or over and has served for 20 years with the same firm, he gets at least £480, and may get up to £720. Again, it was a mistake to fix the contribution to the Fund at so much per head instead of as a proportion of the pay-roll. I admired the way that the noble Lord glossed over this particular mistake. That is an error which the Government now propose in their White Paper on earnings-related pensions to correct. That mistake may have contributed in part to the financial difficulties into which the scheme has run. But even if the contribution had been fixed as a proportion of the pay-roll, the proportion would have had to be increased by order, because of the Government's initial miscalculation.
The Economist expressed the view that it was crazy to differentiate between service before and service after 41. Certainly, if temporary steps have to be taken to bring the Fund into balance, it is difficult to see the justification for laying the whole of the cost of the temporary steps on the employer to seek to make himself more efficient. Would it not have been better, as an interim measure, to raise the levy payments to the point where the Fund would break even? The only reason I can think of against this is that it would have turned the landmark into too conspicuous an eyesore. So, instead, the Government have gone back on their previous decision.
The Economist also expressed the view, in its headline, that the Bill is a product of Britain's machinery for taking wrong decisions at its bumbling worst. It begged progressive M.P.s of all Parties to join together to throw out the Bill. Well, progressive M.P.s did not do so, and this is hardly the sort of Bill which your Lordships should throw out after it has gone through another place. All we can do is to urge the Government to press on with their examination of the 1965 Act and to produce as soon as possible a new scheme that makes more sense.
§ 6.18 p.m.
§ LORD BROWN
My Lords, I have taken careful note of the noble Lord's points and I will try briefly to wend my way through them. Some of them overlap a little. I should like to take 761 up this question of the "gross miscalculation" said to have been made by the Government. Much was made of this in another place in long speeches. Noble Lords opposite, especially those with previous ministerial experience, know well that calculations upon the basis of a scheme such as this are made by statisticians and economists employed by Government. Ministers have to accept this advice. These people are competent professionals.
It is quite obvious that with a scheme of this nature, with the number of variables that we have to face in the scheme—that is to say the amount of redundancy that is going to occur, the average length of service of those who are to be made redundant, the rate of pay and the age distribution of these people—it really is not possible to be absolutely accurate; and if one looks at the actual movement here one sees that payments from the Fund varied from £20 million, in 1966, to £38 million in 1967, and £46 million in 1968. It would have been a brave economist who, on that basis of the random variables with which one has to deal in a calculation of this sort, could have looked forward and said, with his hand on his heart, that he was within plus or minus 5 per cent., or who claimed any marginal error of that kind. It is almost impossible, and it is no good heating the Government about the head.
This scheme was a sound scheme, as the noble Lord has been good enough to agree. It was generated and thought about in the first place by his own Party; and it is much better to face the introduction of a scheme like this and get the experience of what it generates in the nature of variable sums, than to shrink from it simply because it is going to vary in this degree. I am quite sure that it will vary in erratic fashion throughout its operation. I am convinced of that. We have had to make some predictions for next year. I should be the last to stand up here—and one or two of my colleagues have perhaps gone further than I would have gone in backing the predictions they have had to make for the future—and claim in the light of the experience we have had in this scheme, any high degree of accuracy for the predictions now made. But I certainly reject the criticism that has been 762 made of the Government on these grounds.
§ LORD DRUMALBYN
My Lords, there is a difference between a high degree of accuracy and a 300 per cent. mistake.
§ LORD BROWN
My Lords, it is not a mistake; it is a prediction that was greatly out, due to the difficulty in making these predictions. If the noble Lord is really going to criticise, what he is saying, in effect, is that we must have better statisticians and better economists in Government service. I do not think this is the answer to the problem of getting greater accuracy. I think it is difficult always to be accurate about a matter of this sort.
The noble Lord asks whether this is the right policy, and goes on to point out that the cost to a firm employing 2,000 men, with a redundancy on its hands of 200, is about £50,000. I would point out with reference to that example, which is slightly over-estimated, that in the new situation the cost of that redundancy might be substantially less.
May I now take up this business of all the points the noble Lord has made about the man of over 40? First, we must be clear that in one sense there is no such thing as a "voluntary redundancy"; in another sense there is such a thing. Let me try to clear the air on this. The management of a firm decides that the time has come when they have to reduce the number of employees. Without a decision of that sort on the part of the employer no employee can say, "I am a volunteer for redundancy". It is only when the firm say, "We must reduce", then the man can volunteer; and it is for the firm to decide whether they say, "Yes, you shall go as you volunteered" or, "Somebody else must go who has not volunteered". What has been happening is that a larger percentage of the men over 40 have been offering themselves for redundancy than used to do so.
I am accused of having glossed over the point, but in 1963 a survey was carried out as to the percentage of men over 40 being made redundant. The figure came out at about 60 per cent. By the time of the second survey, carried out in 1968, that figure had moved up to 70 per cent. We cannot be certain of the part this higher rate of redundancy pay 763 has played in that movement. It is our opinion that it is substantially a reason for that happening. If an employer is at present faced with a volunteer of over 40 or a volunteer under 40, it costs him the same in both cases; but if this Bill goes through it will cost the employer more to make a man of over 40 redundant than a man of under 40—simply because he is likely to have more years of service and the rate at which he has to be paid is one and a half weeks per year of service instead of one week.
It is our view that it is in the national interest for a smaller proportion of men over 40 to be made redundant because they are the men who are less likely to benefit by training for different jobs than those which they are accustomed to doing, whereas the younger men are much more likely to be able to pick up and do efficiently in a short space of time some alternative job.
§ LORD DRUMALBYN
My Lords, this is an important point, and I am grateful to the noble Lord for giving way again. Unless and until the Government can give more specific figures of this, I do not think they can reach any positive conclusions. I remember very well that in the days of the Coal Board redundancy, and the railways redundancy, workers in the older age brackets were encouraged to volunteer to go, and it was made worth their while to go rather sooner than their normal retirement age. Surely this is right in cases of redundancy. What may be undesirable is that the man of, say, 55 should be encouraged to go. But until the Government have more specific figures of what particular ages of the older bracket of employees are being encouraged by this scheme to volunteer, I do not think they can draw the kind of conclusions which they are drawing and which the noble Lord is now indicating.
§ LORD BROWN
My Lords, I do not think one will ever get proof of the effect of one factor like this on a general trend, but there is strong presumptive evidence that this is what is happening. I do not disagree with the noble Lord that a man of 60, 61, or whatever it may be, engaged in the railways or coal mines, where the work is heavy, might well be encouraged to leave the industry and 764 take lighter work; or even to retire. But we are dealing with an age bracket extending from 40 up to retiring age, and we think it right that we should not encourage industry to make these older men redundant, which is the current effect of the Act as it now stands, though it will be corrected by this Bill. It will put a deterrent on the managerial behaviour which has led to this growth in the redundancy of older men.
The noble Lord referred to the employer with two employees. In quoting this example he was making a general point. In my own view I think it is essential that employers, however small, should, in the event of their going out of business, face their obligations to deal with their employees in a satisfactory manner. I do not think it is right that they should be able to pass over the burden of what are properly an employer's responsibilities to the Government or to other employers through some amendment of this scheme. I do not weep for such people. Very many of them retire from business, or close it down, having made a great deal of money, as well as those who go bankrupt and are very hard up. There are two sides to this case.
The noble Lord has stated that it is questionable whether the same scheme should cover voluntary and involuntary redundancy. Here we are back on this word "voluntary" again. I would merely comment again here that all redundancies are involuntary so far as the firm is concerned. That is necessarily the case. I think he was suggesting that some firms would fail to reduce their working force appropriately if they had to pay out a large amount of money to employees made redundant. That is a commercial decision they will have to take. I do not think this scheme will affect it one way or another. I know there are companies in the country—and this has been particularly so at some periods in the past—where, as has been shown by statistics, the employers were hanging on to their employees and depriving the country of a working force which would otherwise be available. Economically that is a very bad thing for the country.
One of the effects of this Bill, if indeed companies have to pay out a large amount, might conceivably be that 765 they would be less ready to release employees; but if you look at the margin of expense in which they involve themselves by retaining people for whom they have not sufficient work, and the cost of paying those people appropriate redundancy payments, I cannot believe that an economically-minded manager would ever for the reasons stated by the noble Lord retain employees who ought to be made redundant. If we are going to have economic idiocy in managerial behaviour, I do not think we can put it right by an amendment to the Redundancy Act.
The noble Lord has asked me to state something more about the attitude of the C.B.I. and the T.U.C. in the discussions which took place. I have a note on this. The C.B.I. have backed the idea that about half of the required reduction in the Fund's expenditure should be achieved by changes in the level of rebate, and that the balance should be obtained by increasing from two to three years the period of qualifying service and by raising from 41 to 51 the age at which each year of service attracts the extra half week's payment. I hope that I have expressed their view correctly. The T.U.C. expressed strong opposition to any changes which would reduce the value of payments or limit eligibility for payments. They were particularly opposed to any reduction in the benefits of the scheme to older workers. The Government do not accept that any part of the required reduction in the Fund's expenditure should be met by reducing the employees' entitlements to payments. Out of those cross currents of opinion—and there were many—has emerged the Bill which we now have before us.
The noble Lord drew attention to the matter of anomalies. I agree with him; and discussions have already started in regard to dealing with some of those anomalies. They mostly arise from conditions of association of companies which were not foreseen in the drafting of the original Bill. Situations now arise where companies which are not in the same financial ownership, or maybe not even financially associated, are nevertheless almost alternative employers for the same employees, who switch between one and the other. One has had cases there where 766 tragedy has occurred, either for the firm or for the employees, because the law did not recognise this rather unusual situation. There are more dramatic cases, and I referred to one relating to the change of television franchise, but I think that it would be wrong to exaggerate the financial effects of all these anomalies. They are distressing, one reads about them in the Press, and sometimes ill-informed comment is made upon them, and we in the Government take them seriously. We will go into them and shall have to introduce legislation as soon as possible to put them right.
The noble Lord suggested that it would be more appropriate to take recognition of the fact that some men made redundant immediately get fresh jobs in the same town, while others spend weeks looking for new jobs and maybe have to move to other towns. There is a difference in principle between myself and the noble Lord on this matter. This Bill is not intended to cater for ensuing unemployment periods following redundancy. There are other means of looking after that matter. It is a recognition of long service on the part of employees such as any good employer has for many years acknowledged by paying people three or six months' salary geared up according to the length of service and related to previous pay. That is the principle which has always stood behind this Bill, and it is not compensation for a period of unemployment that might follow. Indeed, the legislation necessary to gear this scheme to the ensuing circumstances endured by a man after redundancy would be extremely complex. I should not like to think how accurate predictions would be on the matter if something were introduced to that effect.
I hope that I have dealt with most of the criticisms by the noble Lord. I think there has been some misunderstanding about the underlying principle of this Bill. I hope I have helped to clear this matter, and I trust that the House will give the Bill a Second Reading.
§ On Question, Bill read 2ª; and committed to a Committee of the Whole House.