§ 6.10 p.m.
Lord WALLACE of COSLANY
My Lords, I beg to move that the Bill be now read a second time. This Bill, which is comparatively simple, is intended to vest in the Secretary of State for Employment the power to vary the amount of rebate payable to employers under the Redundancy Payments Act by order subject to the approval of both Houses of Parliament. In other words, this is simply and purely an enabling Bill; although I suspect the Opposition may challenge the use of the word "purely". Many noble Lords will already be familiar with the way this Act works, but for those who are not it may be helpful to have a short explanation. In 1965, legislation was introduced which guaranteed the worker unfortunate enough to be made redundant a payment on losing his job. Although the employer is liable to make the payment in the first instance, at present he may recover 50 per cent. of the cost by way of rebate from the Redundancy Fund.
What the Bill does is to allow this rate of rebate to employers to be varied between one of 10 different rates over the range of 35 per cent. to 80 per cent. Put 635 very simply, the Bill enables rebate to be varied by the substitution in Schedule 5 to the Redundancy Rebates Act of any one of the 10 sets of fractions appearing in the Schedule to this Bill. The 10 different rates of rebate span the range 35 per cent. to 80 per cent. in 5 per cent. intervals, save that the second set of fractions has been calculated to produce a rate of 41 per cent. This is quite deliberate. On an earlier occasion and in another place a Bill to reduce rebate to 40 per cent. was defeated at its Second Reading. Accordingly, at no time in the future will it ever be possible under this Bill as drafted to introduce a rebate rate of 40 per cent. It is not for me to comment on this situation, but I thought it only right to make clear to your Lordships why it had not been possible to adopt precise intervals of 5 per cent. throughout the 10-stage scale.
I would also draw noble Lords' attention to one special feature of the Bill which will not have gone unnoticed. It will amend the Northern Ireland legislation. Northern Ireland is not covered directly by the Redundancy Payments Act 1965, but by parity legislation in the Contracts of Employment and Redundancy Payments Act (Northern Ireland) 1965. The two schemes really are run side by side. In many respects they are operated as a single system, as provided for in Section 58 of the Great Britain Act, which authorises reciprocal arrangements to be made with the appropriate Northern Ireland authority for ensuring full co-ordination. In happier circumstances, it would have been right for Northern Ireland to follow the practice of the past and seek a similar enabling power. However, it was thought right on this occasion to extend a helping hand in the Westminster legislation thus avoiding the lengthy Order-in-Council procedures which otherwise would have had to be adopted. Clause 2 of the Bill, therefore, will, in effect, give the Northern Ireland authorities a similar power to vary rebate, so ensuring that any changes can be effected both here and in the Province from a common date, thus removing the risk of anomalies.
My Lords, I would also wish to be quite open with the House about the immediate use to which the powers in this Bill will be put on receiving the Royal Assent. On 22nd July 1976, the 636 Chancellor of the Exchequer made a statement on public expenditure. As he made abundantly clear at that time, reductions in public service borrowing requirements and cuts in public expenditure were essential if the prosperity of our economy was to be restored and unemployment was to be reduced. The point was also firmly made that a shift of emphasis towards selective assistance to industry would have to be offset by certain other measures, including a reduction in the employer's rebate from the Redundancy Fund. Accordingly, the first action to be taken under the proposed legislation will be the introduction of an order reducing rebate to 41 per cent.
Measured against over-all public expenditure and borrowing requirements, the savings which will result from the reduction are not large. The full year saving for a reduction to 41 per cent. is approximately £16.2 million, or approximately £1.35 million a month. I give these figures because I think they may be helpful. It is, of course, impossible to estimate the actual amount which will be saved during the coming financial year, since this must depend on how soon it is possible to reduce the rebate.
Compared with the figure of £1,000 million mentioned by the Chancellor in his July package, these figures are very small beer indeed. But I would emphasise that they must be considered as part of an over-all package which is vital to the healthy economy of this country. However, ever, I do not propose to talk at length on this point. As I said earlier, the Bill provides for an enabling power. It does not, of itself, change rebate in any way. Any such changes will have to be made under the Affirmative Resolution Procedure and noble Lords may consider it appropriate to reserve their comments on this point until such time as an order is laid and the Motion put. In turn, I would ask for your Lordships' tolerant understanding for having departed from the direct scope of the Bill itself. Nevertheless, it seemed both important and right, to me personally, at any rate, that there should be, even at this early stage, a clear understanding of the proposed first use of the enabling power and the underlying reasons. But even putting these considerations on one side, I remain firmly convinced that the Bill itself is an eminently sound piece of legislation.
637 The Redundancy Fund is financed by an allocation made from the employer's share of Class 1 earnings-related contributions. This allocation is at present 0.2 per cent. The Fund is intended to be self-supporting. Given the variations which can occur in the number of redundancies each year—and I have with me figures showing that, over the life of the Act, total payments were made from the Redundancy Fund in respect of a maximum of some 370,000 employees in 1971 and a minimum of approximately 177,000 in 1973—it is impossible so to regulate in come that it precisely matches outgoings. For this reason, the Act contains provision for the Fund to be financed by borrowing from National Loans Funds if it is in deficit and for the investment of surplus if it is in credit. But these are intended as relatively short-term measures. In the longer term, it is necessary to have adequate machinery for controlling the flow of income and expenditure so that the Fund may remain in reasonable balance. One way of doing this would be to vary the 0.2 per cent. allocation. But a simpler alternative would be to vary rebate under the provisions of this Bill.
My Lords, let there be no misunderstanding about the state of the Fund at the present time. It stands in credit to the extent of approximately £13 million. If rebate is reduced, the surplus will increase. Although there can be no doubt that this surplus will have a direct beneficial effect on the Public Sector Borrowing Requirement, if it is allowed to grow beyond reason it could certainly give rise to problems in the future. In such circumstances, there is a great deal of merit in a measure, such as that contained in this Bill, which permits changes to be made within the minimum of delay according to the requirements of the economy and the state of the Redundancy Fund.
My Lords, I would commend this Bill to the House as a useful instrument in the administration of the statutory scheme. Through the Affirmative Resolution Procedure, it will ensure the retention of adequate Parliamentary control. It will in no way prejudice or alter the entitlement of employees to their redundancy payments. Its effects will be limited solely to employers. In the short term it will be used to help reduce the Public Sector Borrowing Requirement, thus making its contribution to the Chancellor's July 638 package, the importance of which it is difficult to overestimate. But looking ahead into the future, it will also make it both quicker and easier to restore rebate to its present level and to make future necessary changes as and when the economy and the state of the Fund permits.
My Lords, I should like to make a correction. I said that the Fund stands in credit at approximately £13 million. That was what I was advised in the first instance. I have now been advised that the surplus is £11 million.
As I said before, looking ahead into the future, it will also make it both quicker and easier to restore rebate to its present level and to make future necessary changes as and when the economy and the state of the Fund permits. I have no reservations in asking for the support of this House for this enabling measure. I beg to move that this Bill be now read a second time.
§ Moved, That the Bill be now read 2a.—(Lord Wallace of Coslany.)
§ 6.21 p.m.
§ Baroness ELLES
My Lords, the noble Lord, Lord Wallace of Coslany, has of course put his finger right on it: he said that this was purely an enabling Bill but he was sure that the Opposition would not agree. If he had read the Official Report of another place of 21st March, he would have seen that at col. 919 the Government declared:initially, we propose to make an order reducing rebate to 41 per cent.".So of course we do not accept that this is purely an enabling Bill and that the matter will stop there, because obviously the Government are not interested in passing such a Bill if they are not going to do something with it.
The noble Lord referred to the Chancellor's speech of July 22nd last year, when pressures were put on the Government by the IMF to cut public expenditure in exchange for what might have been regarded as a life-saving loan. While we on this side of the House agree with the urgent necessity for making cuts in public expenditure—and I think we are all agreed about this in this country—and reducing the PSBR, we must question the validity of the statement and the wisdom underlying it: 639…that a shift of emphasis towards selective assistance to industry would require certain savings in expenditure, which included a reduction in the employer's rebate from the Redundancy Fund from 50 per cent. to 40 per cent.".That was said by the Minister on 7th February in another place at col. 1126 discussing the Bill in its original form.
My Lords, assistance to industry is not achieved by imposing further restraints and increased expenditure, not only on industry in general but in particular on those firms which are suffering acutely from the economic climate and having to reduce their labour force. They are surely precisely the firms which need help, not further burdens, and we must ask whether Mr. Varley's statement to the American multi-national companies made on 11th May and quoted in the Financial Times of 12th May to the effect that:Industrial profits are necessary to pay for social objectives and the Government are giving priority to industry over social objectives".can really be endorsed by a Bill of this kind.
If Mr. Varley's statement reflects the Government's view, this Bill of course has no basis for implementation. If it does not represent the view of the Government, the sooner the truth is told, the better. The Government are taking every means to expunge the private sector of industry to the great detriment of this country as a whole, and to the workers in particular. The bankruptcy figures tell their own story: in 1973 there were about 3,900 bankruptcies and about 2,500 liquidations. By last year this figure had risen to over 7,000 bankruptcies and over 6,000 liquidations. Each of these figures in themselves represent the human drama of several hundred—if not thousands—of workers having to lose their jobs, and not because of the fault of the employers.
So first it should be clarified that the whole of any redundancy payment is made by the employers. Up to now, 50 per cent. has been borne by the individual employer who has had to make the redundancy, and 50 per cent. has come from the Redundancy Fund to which of course contributions are paid, as the noble Lord correctly and clearly explained to your Lordships. These contributions are paid entirely by employers right across industry under the National Insurance scheme.
640 The Fund is not only composed of payments made solely by employers—and perhaps the noble Lord did not mention this but the costs of running the Fund are also borne by the employers, although in fact it is run by the Government. The Government claim back the costs from the employers. It is questionable whether redundancy payments in principle are the right way to set about curing the chronic unemployment which is besetting this country and indeed other countries in Europe, but I do not wish to enlarge on this particular aspect at the moment. I should like to put to the noble Lord that this is surely a subject which should be discussed in a much wider context than just the question of the Redundancy Rebate Fund. I believe that this is a whole area which should be fully debated by this House, another place, and by all those sectors of industry which are concerned, whether unions, workers who are not in unions, the CBI, the Government and so on.
The original Bill, which was defeated on Second Reading, sought to reduce the payment from the Fund from 50 per cent. to 40 per cent. The Bill now before your Lordships' House has much the same effect but under another guise. It is an enabling Bill, as the noble Lord rightly said. As I have indicated, the Government have already declared their intention to introduce an order to reduce the payment to 41 per cent.
In the process, the Government claim that a saving of about £18 million will be made this year by this reduction, and it has now been changed to about £16½ million by the reduction to 41 per cent. My honourable friend Mr. Hayhoe in another place pointed out that the Fund was said to be running at a deficit of about £1½ million per month, which would have totalled £18 million last year, the amount which the Government claimed would be saved. According to my honourable friend in another place —and in fact it was confirmed in a Written Answer he had put down which appears in the Commons Official Report for 2nd May at column 1137—the Fund was in credit to the amount of over £5 million by the end of the year, and the noble Lord has kindly informed your Lordships that it is now somewhere near £11 million. This is despite the new provisions of Sections 63 to 69 of the 641 Employment Protection Act, increasing the spectrum which will be covered by the Fund to include insolvency provisions.
So will this Bill in fact make the savings on the PSBR which the Chancellor claimed? Despite the very serious decline in viable businesses which I mentioned in connection with a number of bankruptcies, the Fund has managed to be in credit. By the end of April, we had this figure of over £10 million. Is it not a fact that the basis on which contributions now have to be made by employers—another increase in their outgoings, by the way—that is, on an earnings-related calculation, makes it much more likely that the Fund will remain in credit? Is it not therefore all the more unreasonable—and I use specifically a word which may be possibly acceptable to your Lordships rather than using some stronger term—that the Government should put their hands into a Fund which is contributed to by a specific sector of the community for a specific purpose; that is, to look after those employees who are declared redundant because of the impossibility of surviving the financial and economic difficulties of today?
Therefore, it would seem reasonable to me to ask the Government to reconsider their position in the light of the figures produced by the Answer to that Written Question, which indicated that since the end of December the Fund has always remained in credit. Surely, as a minimum, the Government should undertake not to reduce the amount of rebate from 50 per cent. so long as that Fund is in credit, particularly taking into account the new form of contribution that has been introduced. So there can be no justification for this Bill or for the introduction of an order under the Bill, as has been indicated by the Minister in another place, not only on account of the state of the Fund but also on account of the very detrimental effect it will have, particularly on small businesses; for example, those firms with a few employees, especially family firms, trying to keep their employees and trying to keep going, but being forced to make some redundancies in the present unfavourable economic climate. In fact, they are torn between having to declare their employees redundant and having to carry on with enormous difficulties towards bankruptcy or insolvency, because they have not the funds to make the redundancy 642 payments which have to be made, not only under the old Act but also possibly under the potential order which the Government have indicated they will introduce.
Here, what I find so remarkably lacking in understanding is the statement of the Minister in another place on 21st March, reported in the Official Report at column 922. He said then:Additional costs of this order should not be difficult to assimilate".Are your Lordships aware that the present payrolls of large companies which are on the borders of bankruptcy amount to several thousands of pounds a week and the decrease in rebate from 50 per cent. to 40 per cent. of course makes a corresponding increase in the amount the firms have to pay out? That can mean several thousand pounds added to the costs of a firm which regrettably has to declare its employees redundant. I do not think that the Government seem to be at all preoccupied by that or have taken into account the effect it will have on an enormous number of businesses. So this measure, allied to the immediate stopping of the regional employment premium and the new 2 per cent. payroll tax, have all combined to discourage further the private sector of industry. One indeed must ask: in present circumstances and considering the projected plans of the Government, who in this country would be willing to invest in industry?—investment which is so badly needed.
In conclusion, my Lords, the Chancellor's measures of July 22nd now seem totally inadequate, totally irrelevant and indeed, if I may be allowed to use such a word, misleading, when he announced that his so-called package, which included the reduction in the redundancy repayment rebate,…will enable us to maintain steady and continuous progress towards full employment without refuelling inflation…".I quote from the Official Report of 2nd August 1976, Column 1237. Ten months later, with unemployment increasing, nearly half a million young people who are said to be out of employment at the end of this school-leaving year and with inflation running now at over 16 per cent., the Government introduce what can only be called a rather spiteful and harmful Bill, which will do 643 nothing to reduce the borrowing requirements of the Government or help the workers of this country who, more than any other sector of the population, stand to benefit not from industrial decline but from industrial prosperity.
§ 6.34 p.m.
§ Lord ROCHESTER
My Lords, as the noble Baroness, Lady Elles, has just reminded us, the Government have made it plain that, although this Bill is an enabling one, it is the intention that under it in the first instance an order should be made, reducing the amount of rebate payable to employers from 50 per cent. to 41 per cent. under the Redundancy Payments Act 1965. We on these Benches feel, as clearly does the noble Baroness, Lady Elles, that that is wrong in principle for a number of reasons, which I should like briefly to speak about—briefly, because the noble Baroness has covered many of the points I might otherwise have made.
The Government are constantly saying that a basic tenet of their economic policy is to promote investment by transferring resources to industry; with that aim we on these Benches are certainly very much in agreement. But those words, we have so often found, are not matched by deeds; and the action that is now contemplated is to take money away from industry. The amount involved is not large, particularly when compared with the 2 per cent. surcharge on employers' National Insurance contributions, imposed last autumn, and which employers are now having to pay. But it is no more desirable for that, and surely this further imposition will add, however marginally, to unemployment just at the time when all our efforts should be bent towards creating new jobs. As the noble Baroness has already said, it is just those firms which are in the greatest financial difficulty, and which, therefore, are having to declare redundancies, which will have to find this additional money.
Secondly, when the original Act of 1965 was introduced, it was made plain that the Redundancy Fund would not be used for any purpose other than to finance a redundancy payment. Yet it is the Government's avowed intention, we have just heard from the noble Lord, 644 Lord Wallace of Coslany, to use that saving they will now achieve to reduce the public sector borrowing requirement and to use that money for other purposes. There may be a case for reducing the rebate to employers when there is a deficit in the Redundancy Fund. There can surely be no case when it is in surplus to the extent that it is—of more than £10 million—and when, as we have been reminded, that surplus is growing.
Thirdly, the Bill in its original form at least had the straightforward aim of reducing the rebate from 50 per cent. to 40 per cent., but, as the noble Baroness has said, that Bill was rejected only three months ago in another place. To put it bluntly, we dislike the way in which the Government are now seeking indirectly to achieve an aim which was then out-voted in principle. The dilemma in which the Government therefore find themselves is well illustrated by the complicated fractions to which reference has been made in the Schedule to the Bill, so as not to fall foul of the Public Bill Office.
Finally—and this is the point on which I feel most keenly: it was touched on by the noble Baroness, but I should like to elaborate on it a little—it would surely have been much better for the Government, before seeking again and so soon, to effect a saving which anyway is of a relatively small amount, to have embarked on a thorough-going review of redundancy and indeed of other payments which are related to this great problem of unemployment.
In a recent debate in your Lordships' House on unemployment, I made the suggestion that it would be better that those aged, say, 60 should be encouraged to retire prematurely rather than that there should continue to be so much unemployment among young people. To a limited extent, voluntary early retirement to achieve that aim was the stated purpose of the Job Release Bill, which we discussed soon afterwards.
But one of the difficulties which arose in discussion of that Bill, about getting elderly people in employment to accept the financial inducement which would enable them to retire early, was the adverse effect which they felt this might have on their occupational pensions. If the problem cannot be resolved in that way, what 645 about making lump sum redundancy payments relatively even more attractive for people in their late fifties and in their sixties, so as to achieve the same end in another way? This has proved a paying proposition in many progressive firms, and is equally acceptable to the employees of those firms. Why should it not have more general application?
I found it very depressing to read in one of this evening's newspapers, a report that the Union of Post Office Workers has today approved a deal which goes in precisely the opposite direction, in allowing them, as I understand it, to work until at least the age of 65, instead of retiring now, presumably, at 60. What possible justification can the Post Office have, in times of heavy unemployment such as those we are now in, for doing this? And what of the further demoralisation of young people which this may bring about—young people on whom the future of our social democratic way of life quite literally depends? That is a digression from the Bill, but not I suggest completely irrelevant to it.
The basic point I was seeking to make is that it is high time for the Government to undertake a comprehensive review of the effect of payments, under a number of apparently unrelated schemes, on this fearsome problem of unemployment, particularly among young people, rather than that they should go on dealing with it in what we can only regard—and I am sorry to say this—as a piecemeal and ineffective way. It is on account of that basic failure, as we see it, and for the reasons that I gave earlier, that we on these Benches do not feel able to support this Bill, nor the immediate use that it is intended to make of it.
§ 6.44 p.m.
§ Lord GEORGE-BROWN
My Lords, I am very grateful to the Minister for being kind enough to withhold his reply for a minute or two, while I— although I have not put my name on the list—intervene briefly. I do so because what, with the exception of what the noble Lord, Lord Rochester, said at the end of his speech, seems to me the attitude of mind of those who have taken part in this debate is quite contrary to the approach which, with respect, we should now be making. Because we have a very 646 high apparent level of unemployment, measured by those who sign on at the labour exchanges, we become led, as I think the noble Baroness allowed herself to be led, into the thought that we must at all costs try to avoid that number increasing, and we do that by keeping people in their present jobs in their present industries. I should have thought that that was totally contrary to any economic industrial strategy that the country should at this moment be following. We are at the moment using too many hands to do too little. That is what we mean when we say that our productivity is so much less than that of our competitors on the Continent.
The immediate corollary of that is that any steps we take should be such as will encourage—to use a phrase which the noble Viscount, Lord Amory, will recognise—the shaking out of people, who are at the moment not fully employed, from their posts in industry. If that increases the numbers signing on at what I believe are now called employment centres, but which are known better to me as labour exchanges, then we must find other ways of dealing with that. One of them, to which the noble Lord referred, and which the Post Office workers seem to have gone against, is of course to make early retirement easier and more comfortable. Another, which he personally will know very well, is to provide much more adequately for the retraining of those who are retrainable—not everybody is; it would be hard to train many of us for much else, at our age of life—by a massive increase in the finance and the facilities for doing that. It is still ridiculous that we compare so inadequately with what a little country like Sweden does in this regard.
There are many ways by which one can deal with the consequences of high unemployment. But if we are very cruel, in order ultimately to be kind, a large increase in unemployment is an immediate and necessary requirement if we are to make industry more competitive. My difficulty with this Bill is that it seems to me to do exactly the opposite. I do not necessarily follow the noble Baroness and the noble Lord in their cries on behalf of the hard-done-by employer—I am happy to leave that to them—but I share the ultimate conclusion, even if I reach it by different steps, that this is not the 647 moment at which to make it more costly for an employer to declare redundancy. If anything, this is the moment to make it more cheap for him to declare redundancy, so that we encourage him to do so, and you certainly will not do that by increasing the amount which he has directly to find, which is what this Bill does.
We are all full of the inequities—to take a less important sector, perhaps—of over-manning in Fleet Street. We have all been made very aware of it in the last week or so, because of the London Evening Standard and Evening News situation. The manning is simply enormous. The amount that would have to be paid for redundancy, to those who lost their jobs because of the merger, would run into millions and millions of pounds. A similar situation, applies to the knowledge of many of us, in manufacturing industries and people tend not to face what would, industrially, be a dreadful headache, of persuading the trade unions to allow the redundancies to be created, because, in addition to that, they then have to find a very large additional sum of money if the 50 per cent. rebate is cut to 41 per cent.
So that, without developing the point at great length—and I did come in rather late, and was tempted to speak by having heard what there has been of a debate—I thought I would say to the Government, very firmly, that even if they get this Bill they ought to think very hard before they make the order. If we have to make savings, I would much rather see a cut in the employment subsidy except in those areas where, for social reasons, we want to attract new industry. I would much rather see an increase in the payment out for retraining and the maintenance of, or even an increase in, the payment out to encourage redundancy.
§ Viscount AMORY
My Lords, I am sure that what the noble Lord is saying is extremely relevant to the general problem we are discussing. Am I right in thinking that the noble Lord is saying that more emphasis should be put upon the creation of new jobs rather than upon the preservation of existing jobs?
§ Lord GEORGE-BROWN
My Lords, exactly so. I wish I had put it so succinctly. Indeed, the noble Baroness used the phrase, "the creation of new 648 jobs" when she was speaking about the encouragement of people to stay in their present jobs. I agree entirely with the noble Lord's formulation. Emphasis must be placed upon getting people out of where they cosily are and into new jobs and new places where they will exercise new aptitudes, if not skills, even at the cost of disruption to their lives.
Putting it as responsibly, respectfully and affectionately as I can to the Government, I believe that this Bill has got it frighteningly wrong. I suspect that what happened was that they came up against a practice which most of us who have been Ministers know has operated many times in the past. In the old days it was our own Treasury, but in this case I suspect that it was the IMF who went along to the Government and said that the public sector borrowing requirement would have to be cut by X hundreds of millions of pounds, correct to the final 50p. We have just seen how impossible this is, for the Minister reduced the figure of £13.5 million to £11 million in the space of one sentence. But never mind! The IMF want it to be done and they fix a figure; then every department has to contribute towards the cut.
In the days of the 1945 and 1964 Governments, of which I was a member (happily in one way and regretfully in another, because it makes me seem so old) we were always in the position of trying to make up the last £10 million or £11 million —as though it mattered a tuppenny damn in the end! Therefore we did things which, because they made the sums come right—E&OE—were in themselves wrong. I believe that this is what has happened here. The Government have satisfied the IMF by reducing their total requirement for PSBR by the agreed figure, and in the course of doing so have been reduced to a form of economic strategy or strategic planning which makes a nonsense of everything else that they are trying to do and that the IMF wishes them to do. If somebody were to put this to the IMF team, who are either here or on their way here, I am quite sure that they would see the point.
I shall not go to the extent of voting against the Bill, although I think there is a great case for doing so. However, I urge that further thought should be given by the Government to the question of 649 whether we should rush into making an affirmative order. I wholeheartedly support the two previous speakers when I say that perhaps we should have a much wider debate about economic and strategic thinking and the place that all these various parts play in it. Since the Government are not in a hurry for legislation at the moment, I understand, perhaps it might be put to the legislation committee of the Cabinet, if such a body still exists, that this is a very good way in which, from the Party managers' point of view, they could waste Parliamentary time. Then we might do a useful job in guiding them on the steps they should take on both this and various other subjects. I am very much obliged to the Minister for allowing me to say this.
§ 6.55 p.m.
Lord WALLACE of COSLANY
My Lords, I have a rather difficult job to tackle in summing up the debate on an obviously unpopular measure, so far as the Opposition are concerned, which is before the House. Perhaps I may deal first with the remarks made by my noble friend Lord George-Brown, because he is an old colleague. He and I are, I hope, still members of the same trade union. I am a life member of it.
Lord WALLACE of COSLANY
My Lords, my union did me an honour. Perhaps my noble friend will deserve his later. My noble friend has touched upon a very important point. So far as the employment and economic situations of the country are concerned, there is an urgent need to retrain our young people and to train semi-skilled people to do skilled jobs. There will be a further opportunity to debate this matter. I am awaiting—as, indeed, many are—the recommendations of the Manpower Services Commission. The noble Lord, Lord Rochester, may have better information than I about this. However, it is conceivable, although I have no authority to say so, that before very long the Government must state their conclusions. That will give us a peg on which to hang a major debate on the employment situation on the lines that the noble Lord, Lord Rochester, wants. I agree with this, 650 because many problems are left unsolved, even after our unemployment debate and today's tiny debate.
A great deal of huffing and puffing has been done tonight by the noble Baroness, Lady Elles, and the noble Lord, Lord Rochester. The Bill is designed to allow the Minister to introduce an order, subject to the approval of both Houses, which (who knows?) they may accept or reject. It will not be at an enormous cost to the employer.
§ Baroness ELLES
My Lords, perhaps the noble Lord will allow me to intervene. Is he then able to withdraw the statement made by the Minister in another place that initially an order would be introduced to reduce the borrowing power from 50 per cent. to 41 per cent.? It would give us great encouragement if we knew that an Affirmative order was not going to come early.
Lord WALLACE of COSLANY
My Lords, I stated in my opening speech that once the Bill is passed an order will be introduced but that it will be subject to the approval of both Houses. Then we shall see whether both Houses accept it. The purpose of the debate today is to allow the Bill to go through, and then to see what happens to the order when it is laid. The average redundancy payment, in round figures, is about £600. Under the present rebate scheme, the employer gets a rebate of £300. Under the 41 per cent. proposals—and more of that in a moment—it would be reduced to £240, resulting in a drop of £60. This is not much more than an average employee's wages, anyway.
The noble Baroness made a strong attack, as I expected, because I have read Hansard and I know about the fun and games that another place had over the Bill. Incidentally, I understand that the first defeat arose as a result of one of the Conservative colleagues of the noble Baroness in another place. It was a complete surprise both to the Opposition and to the Government. The colleague concerned went home, not thinking that there was to be a vote. Apparently the Whips got their arithmetic wrong and consequently there was a defeat. However, we have the new Bill which contains some improvements, because the Affirmative Resolution is now embodied in it. The noble Baroness asked whether employers can afford this.
Lord WALLACE of COSLANY
Then, my Lords, she suggested that it would be a strain on employers. As I have already said, it should be borne in mind that the average redundancy payment at the moment is £620, of which half can be recovered from the Redundancy Fund. Therefore in many cases an employer will recover the additional costs through wage savings over a comparatively short period. It is also true that employers have continued to make payments in substantial numbers, and I have no firm evidence that the cost of the statutory payment has proved to be an active deterrent. If real financial difficulty exists, then the Redundancy Fund may bear the whole cost of the redundancy payment and recover the employer's share at a later date. It is true that the total cost is borne by the employer, and in this case paragraph 95 in the redundancy scheme booklet says:An employer who admits liability for a redundancy payment but is unable to meet it because of financial difficulty, should explain his problems to the nearest employment office of the Employment Service Agency and be ready to send to the specialist officer of the Department of Employment, a statement of account or a written statement from an accountant or a solicitor, stating the position".So that in times of acute financial pressure on a small employer there is some relief for him.
It has been suggested generally that there is no relief of public expenditure and that in fact there will be no real savings. It is true that public expenditure is of different kinds, and there is plenty of scope for argument about whether transactions should be included in public expenditure figures; but it is a matter of fact that the expenditure of the Redundancy Fund in respect of rebates to employers has been counted within the public expenditure programme for some years, including during the time of the last Conservative Administration. Income to the Fund is also taken into account in the Financial Statement and Budget report, together with any other income such as taxation, and if the Fund is in deficit it can borrow from the National Loan Fund, which involves a direct charge to public funds by any definition. On the other hand, if it is in surplus, the surplus has the effect of reducing the public sector 652 borrowing requirement. How does it do that? When the Fund is in surplus the monies are handled in what may be regarded, for the sake of easy understanding, as three separate accounts: a current account, a deposit account and an investment account. The first or current account is operated by the Paymaster General as the paying authority and is fed only with sufficient funds to enable the day-to-day outgoing payments to the Fund to be met.
The second account, which can be regarded broadly as a deposit account, is used for surplus which may be needed fairly quickly or which has to be held temporarily until investment can be made. In short, the money is put into Ways and Means, which is part of the Consolidated Fund and results in the payment of interest, usually a little below the Treasury rate for bills. The third or investment account is that operated under the authority of Section 26(3) of the Redundancy Payments Act 1965. Investment is made through the National Debt Office, usually in either Treasury bills or Treasury stocks, and any surplus in the Fund therefore will become available through the public sector use, which in turn must reduce the borrowing requirement. That, basically, is the reason why this Bill is before the House, and the Affirmative Resolution will be placed before the House in due course. So there is some small—certainly not very large—saving, but small savings as well as large savings are important in the present economic situation.
As usual, the noble Lord, Lord Rochester, made some interesting suggestions, and certainly with the last one about age 60 retirement I have a degree of sympathy, but of course in this matter sympathy is not enough. He has made the proposal before and it is an interesting one, but it would mean a major change in social security policy, as I think he will readily admit, and it is certainly outside the scope of my Department. This is a line which is being put forward by many organisations and individuals but, quite frankly, at the moment the economic position does not warrant acceding to it.
The noble Lord suggested that there should be an overall review of all the various schemes, some of them temporary 653 and some of them permanent, that the Department of Employment is putting forward at the present time to relieve the employment position. The blunt fact is that all employment measures are under constant review. The machinery exists in the Department to do this, and there is a regular routine review of all the various forms and measures that are being employed at the present time. Although it does not come in as a form of review, the noble Lord and other noble Lords will he interested to know that there is a possibility shortly of the Employment Protection Bill 1977 being considered by the Joint Committee on Consolidation Bills, which will bring together convenient statutory provisions covering employers' rights as contained in the following Acts: The Redundancy Payments Act 1965, the Contracts of Employment Act 1972, the Trade Union and Labour Relations Act 1974 and the Employment Protection Act 1975. The first two Acts will be consolidated in full, the last two Acts will he consolidated to the extent that they are only concerned with the individual rights of the employee. The Bill which will come forward will in no way change employees' rights but it is a useful step forward in making them easier to identify and understand. The Bill does not cover any provisions relating to trade unions, employees' associations and collective bargaining, which it is proposed to consolidate later. At least the consolidation is a move to get things on a simpler basis and we all wish for some improvement in the employment situation. Any constructive suggestion will never be neglected.
I do not think we should make too much heavy weather over this Bill. It is an enabling measure. It is true that in the present economic situation there will be a move to bring in the Affirmative Resolution to reduce to 41 per cent. On the other hand, it must be recognised that the enabling Bill also allows an Affirmative Resolution to be passed, to put it back as soon as the opportunity arises to 50 per cent. and indeed, if the economic situation improves still further, even to go a little above that. That is possible, so it is not a Bill which is brought in simply to achieve one objective, as may be suggested by some noble Lords. It is a Bill to assist—in a small way, I frankly admit—the present economic situation, but, on the other hand, 654 the Bill will allow quick and prompt adjustment in the, I hope, not too distant future when, as we all hope, things improve economically in the country.
There will he an opportunity for further debate at the Committee stage, when no doubt Amendments will be put forward, but I ask the House to give this Bill a Second Reading. It had exhaustive examination in another place, as noble Lords who have read Hansard of another place will have seen, not only on Second Reading but in Committee and on Third Reading. It was subjected to a vote; it has been carried in another place. I ask your Lordships to allow a Second Reading now, and we may have our arguments in Committee.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.