REDUNDANCY FUND (ADVANCES OUT OF THE NATIONAL LOANS FUND) ORDER 1972 (Hansard, 3 February 1972)

§ LORD DRUMALBYN
My Lords, I beg to move that the Draft Redundancy Fund (Advances out of the National Loans Fund) Order 1972, laid before the House on January 18 last, be approved. The effect of this Order is to enable the Secretary of State for Employment, with the agreement of the Treasury, to raise the limit on loans from the National Loans Fund to the Redundancy Fund from £8 million, to which it is restricted under Section 35 of the 1969 Act, to £20 million, for a period of two years beginning on February 28, 1972.
I do not think I need give the background to the Act, but I should just like to say that the state of the Fund has fluctuated considerably since the introduction of the redundancy payments Scheme in December 1965. Expenditure from the Fund is necessarily linked with the incidence of redundancies, and the Fund is therefore especially vulnerable in times when unemployment is rising. But expenditure is also affected by the ages, length of service and rates of pay at the time of redundancy of the workers 1051 who become redundant. Through a combination of these various factors a trend to deficit appeared in the later part of 1966. It proved necessary to increase the borrowing limit to £12 million from August 1967 and—notwithstanding increases in the contribution—to £15 million from April 1968 and to £20 million from August of that year. By March 1969 the deficit was over £17 million. The Redundancy Rebates Act, which came into operation in that month, decreased the rate of outgoings from the Fund by reducing the employer's rebate from 75 per cent. to 50 per cent. of the payment due to the employee. In 1969 and 1970 the number of redundant workers qualifying for payment remained relatively stable. These factors together enabled the loan to be fully repaid from the Fund by the autumn of 1970, and at the end of that year the Fund carried a surplus of £2¾million.
During 1971, however, the number of redundancy payments increased steeply. The number of payments from the Fund in that year—provisionally 369,000—was a third greater than in the previous year Moreover, the average payment in 1971 exceeded the 1970 figure by 15 per cent.; higher wage levels being an important contributory factor. As a result, the surplus in the Fund, which had been £31¼ million in the middle of April, began to disappear and by the end of the year the deficit had reached £4¾ million, and at the end of last week it was £5,897,000. If it continued to rise at the rate it has done in recent months it looks as if the £8 million limit on the amount which can he borrowed from the National Loans Fund would be reached in a month or so.
Experience throughout the life of the Fund has shown how difficult it is to forecast what its future position will be. I cannot therefore blame our predecessors for having increased the borrowing, limit three times in twelve months. I suggest, however, that we can and should profit by their experience. And so, given the difficulties in forecasting, we think that the right thing to do now is to increase the amount which the Fund can borrow to the maximum figure of £20 million for the next two years, not because we believe that it will in the event prove necessary to borrow up to this limit but because it will at least avoid our having to come back to Parliament within a short time to increase the limit.
1052 My Lords, perhaps I should just add something about the redundancy payments scheme itself. My right honourable friend the Secretary of State for Employment has been reviewing its working, and my honourable friend the Minister of State made the following announcement in another place on his behalf: The Government consider it desirable that before any decisions are reached as to what changes, if any, should be made in the scheme, there should be full public discussion of the various issues involved. For this purpose my right hon. Friend proposes to issue a consultative document. This will examine how the scheme has operated in the light of experience; how far it has achieved its original objectives; whether changes are now required either in these objectives or in the means by which they are secured. Meantime the purpose of this Order is to ensure that there will be sufficient money in the Redundancy Fund to enable the statutory rebates and guarantee payments to be met from it, and I commend it to the House. My Lords, I beg to move.

§ LORD DELACOURT-SMITH
My Lords, we are grateful to the noble Lord for the way in which he has presented this Order to the House. We now have some six years' experience of the working of the Redundancy Payments Scheme, and we have heard with interest the reference which the noble Lord made at the end of his speech to the recent announcement on its possible future. I think it has been generally accepted as useful and as working well. But there are one or two questions which I should like to put to the noble Lord in connection with the Order. It would be valuable if we could be told when we may expect to have the accounts of the Redundancy Fund published. I think I am right in saying that the last accounts were published in November, 1970, and were in respect of the financial year 1969–70. This would have led one to expect that we should have a further set of accounts in the late autumn of last year. Perhaps the noble Lord can tell us whether accounts in respect of the year 1970–71 are likely to be published fairly soon.
1053 I think your Lordships will recognise the unhappy circumstances which have necessitated this Order, which empowers the Secretary of State to obtain this temporary loan for the purposes of the Fund. This is obviously not the occasion to dwell at any length upon the unemployment situation, but against that background it would be useful to know what are the terms upon which the loan will be made available. Will any question of interest charges arise in connection with it; and, if so, what effect is that likely to have upon the future finances of the Redundancy Fund? It would also be useful if the noble Lord could give us a more precise indication of how long it appears likely that this additional sum will suffice. If I understood aright the figures which he gave us, the deficit in the Fund has been increasing at something like £1 million a month. Bearing in mind the present deficit, this suggests that the £20 million will not be likely to last much beyond the end of 1972. In other words, it might well be absorbed in a shorter period than the two years mentioned in the Order. I am not very clear whether, in the event of the £20 million proving to be insufficient, further legislation would be necessary in order for further loans to be procured, or whether the laying of a further Order raising the limit again would be sufficient. There will obviously be no disposition on our part to oppose this Order, the necessity for which we recognise, but it would be useful if the noble Lord could comment a little on those points.

§ LORD DRUMALBYN
My Lords, I am much obliged to the noble Lord. He asked, first, when the accounts will be published, and I should think that would be quite soon. Although the accounts were published last time on November 24, one set of accounts was previously published on January 27 and two were published in February. I am afraid that I cannot give the noble Lord an exact date. He then asked me about interest 1054 charges. I understand that the rate of interest is the same as that for borrowing by the nationalised industries, but I am afraid that I cannot give him the exact figure. All I can tell the noble Lord is that the figure is the same as for the nationalised industries, and apparently this has been the practice all along. The noble Lord then asked for how long the sum is likely to suffice. I cannot fault his arithmetic, which seems to be about right, but of course this is not the only way in which the assets of the Fund can be increased. I understand that they can be increased by Order raising the contributions. But I think the noble Lord is right in implying that further legislation would be necessary to raise the limit of the loan beyond the £20 million. I hope that I have answered the noble Lord's questions.