HL Deb 21 March 1978 vol 389 cc1708-18

Second Reading debate resumed.

3.56 p.m.

Lord CULLEN of ASHBOURNE

My Lords, I return to this rather drier subject. The House will be grateful to the noble Lord, Lord Wallace of Coslany, for so fully and so clearly describing this short but important Bill. As the noble Lord has explained, we are discussing continuing, modified and additional schemes to provice jobs for or to maintain in employment very many people. As the noble Lord has told us, about 320,000 people are benefiting from current employment schemes, and if the Bill passes, as I hope it will, that figure will rise to over 400,000 by March next year. Nobody believes that temporary employment subsidies, early retirement schemes to make way for others, or arrangements to support short-time working are in any way comparable to permanent jobs; however, that is no reason to decry them. Something had to be done about our desperately high level of unemployment, and I have no quarrel with the various schemes in operation or proposed.

The Bill extends or modifies schemes that were set up in the Employment and Training Act 1973 and also provides statutory backing for the small firms employment subsidy and the short-time working scheme. The costs of these schemes will be very high although they will, of course, be offset by savings in unemployment pay and social benefits; therefore, it is vital that they are as cost-effective as possible. Care will be needed to avoid what is known as the "substitution effect"—that is where an employer takes on an employee and attracts the subsidy when he had already planned to make an addition to his labour force.

We must also consider the displacement effect. It has been suggested that 30 per cent. of the jobs saved by the temporary employment subsidy have resulted in other workers' redundancies. Therefore, it will be no easy matter to run these schemes effectively and economically, and I think it would be interesting to your Lordships if, when winding up this debate, the noble Lord would tell us the estimated gross cost of the different schemes.

The Bill has already been improved in another place in two important respects: First, by the addition of subsection (3) to Clause 1 which requires consultation by a Secretary of State with appropriate organisations before setting up any schemes; secondly, by a new Clause 2 requiring authorisation by the House of Commons before either setting up, after the 30th June this year, any new scheme that is expected to cost over £10 million, or altering or extending any existing scheme after that date so that the cost would exceed £10 million. Those are obvious improvements. Appropriate consultations would, presumably, have been held in any event, but it just as well to have this written into the Bill. It is clearly prudent to ensure that these schemes should not be allowed to grow like Topsy without proper Parliamentary control. I would, however, be grateful if the noble Lord, when he comes to wind up, would explain why authorisation for setting up new schemes or altering those in existence is not also required from your Lordships' House. Is it not normal that authority should be required from both Houses of Parliament?

I do not wish to make Party points. I am, by no stretch of the imagination, a dyed-in-the-wool politician and the making of Party points bores me to the same degree of distraction that it bores, at a guess, nine out of 10 of the population. However, the unemployment problem is so serious not only in our own country, but throughout the countries of the OECD, that, however much one supports the necessary stop-gap measures that we are debating today, it behoves us to take any opportunity to put forward suggestions that one believes may lead towards a solution in the future, however distant, even if criticism of Government policies is unavoidably implicit. Despite past actions by this Government, I know that they are fundamentally worried about the recent levels of unemployment. If by waving a wand they could halve that level, wave it they would. However, sadly it is not as easy as that.

My suggestion to the Government is exceedingly simple. It is, to use the evidence of their own eyes. Why is it that the economy of this country is now in so much better trim than it was before the IMF exerted their influence over Government policy? Why is it that some other countries have succeeded in overcoming the huge rise in the price of oil? The answer is for the Government to stick to the advice of the IMF and not to listen to the siren voices of their Left-Wing which seek to influence them to inflate the economy in order to provide jobs. They must remember, having seen that done by the last Conservative Administration. It was done for the same best of motives, but it was mistaken and we must not do it again. I wonder what sort of consultancy fee the IMF would charge on a permanent basis? They might do it for nothing.

Having supported the Bill, I think that we should try to identify any positive steps that we can take to improve the position over the longer-term. The Government have been following the advice of the IMF in tackling the rate of inflation and have shown more awareness that employers are disinclined to recruit labour if profits are restricted by Government actions. So far so good. But the Government seem quite unable to realise the damage that has been done by the unfair dismissal aspects of the Employment Protection Act.

Now that that Act has been in force for some time, I have no doubt that large companies are aware that it is possible to dismiss an employee if the proper procedure is carried out. But that is just not the case with respect to small businesses. If the noble Lord, Lord Wallace of Coslany, spent a few hours visiting the shops in his area I am sure—unless he lives in a very unusual area—that he would receive overwhelming confirmation of what I have said. I rather expect that the noble Lord will tell the House that it is all quite simple, and that, if employers behave in a sensible and reasonable way they have nothing to fear from industrial tribunals. To that I would reply that the proprietor of, say, a chemist shop is hard put to it to cope with all that is involved in running his business and the filling up of forms, such as his VAT returns, and simply does not have the time to keep up to date with legislation about industrial relations.

It is obvious that the Government now accept that the best hope for increasing employment lies in small firms. These are the employers who are scared stiff of recruiting new employees because they think that, however unsatisfactory these employees turn out to be, they will either be unable to dismiss them or, if they do, will be liable not only for a very large sum in compensation but also for hours of work in preparing for the case as well as in attending the court. I suggest to the Government that they should either amend this legislation so that it does not apply to firms with fewer than, say, 50 employees, or that they make arrangements with the media for some sort of child's guide to be made available; otherwise the hopes of the Government that small firms will be their salvation have no hope of being realised.

Finally, the Budget is not far distant. I hope and pray for the country that it will be a Budget of incentives, so that people will want to work to create wealth, to make large and small enterprises flourish. If not, there will be little point in temporary employment schemes and the like as there will be no permanent jobs to replace them.

4.4 p.m.

Lord ROCHESTER

My Lords, we on these Benches should also like to thank the noble Lord, Lord Wallace of Coslany, for the clear way in which he has presented this Bill to us. I should like to thank him for an additional courtesy in meeting my request for a copy of the Statement made in another place last week, which for some reason was not repeated here and which, as he has said, is closely related to this Bill. That was, of course, before it was known that the Official Report of the proceedings in another place on the day in question would be available to us this afternoon.

Our attitude is one of qualified support both for the Bill and for the schemes to which the noble Lord referred. Specifically, we welcome one matter which I do not think he mentioned—that is, the extension to the country as a whole of the Job Release Scheme and also the intention to add to the number of training places available under the Youth Opportunities Scheme. Perhaps when he replies the noble Lord will be kind enough to confirm that that proposal is quite distinct from the document, Programme for Action; Training for Skills, which was recently published by the Manpower Services Commission and which has al ready been endorsed by the Government. As the noble Lord knows, we on these Benches place great emphasis on the need for additional training, particularly for skilled engineering workers, which was identified last year by, among others, the National Economic Development Office, as a serious potential constraint on the further growth of output.

We would also applaud the extension of the scope of the small firms employment subsidy to cover assisted areas and in particular inner city areas where the increase in unemployment, especially among the coloured population, has been relatively high. However, I should like to ask the noble Lord why this particular subsidy cannot be extended to the country as a whole, as is the Job Release Scheme.

As good Europeans, we on these Benches accept that there was a need for the Temporary Employment Subsidy to be modified so as to make it compatible with the Treaty of Rome. The particular means adopted to do this fills me with no great enthusiasm—that is, the short-time employment scheme for the textile, clothing and footwear industries. I say that because, in my view, the problems in those industries are of a structural kind which call for longer-term solutions, which may be painful but which are nevertheless highly necessary.

The trouble with the Temporary Employment Subsidy is that it does nothing to solve our basic economic and industrial problems as a nation. Indeed, by selectively protecting jobs in declining industries, it may sometimes be the means of displacing people—and the noble Lord, Lord Cullen of Ashbourne, made some reference to this—from other jobs in areas of potential growth. In addition, it can act as a disincentive to that improved productivity which alone, as the noble and learned Lord, Lord McCluskey, reminded us just now in his Statement on North Sea Oil, can in the long-run give us the edge over our international trading competitors.

In Cheshire, where I live, I have the honour to be the chairman of one of the district manpower committees which has been set up by the Manpower Services Commission to advise on employment and training problems. The district in which I live is not an inner city or an assisted area. In it, there is one very large employer and it is plain that, if and when there is an upturn in the economy, that employer will not take on further labour. This is because there is altogether too much spare capacity in that organisation. The employer, trade union, local authority and other representatives on the local manpower committee of which I speak are agreed that the only hope of adding to employment in that area is to encourage the expansion of existing small businesses and to develop new ventures in both the manufacturing and the service sectors. One particularly enterprising attempt is being made to do that in the area of which I speak, but it will get no help from this Bill.

This is not the occasion to anticipate the Chancellor's forthcoming Budget, but I should like to concur with what the noble Lord, Lord Cullen of Ashbourne, was saying just now, and indeed to take it a little further and say that, in my view, the single most important step that the Government could now take to encourage the development of the kind of new enterprise about which I have been speaking would be substantially to reduce the rates of both personal income tax and corporation tax on profits up to a certain level.

There is also need in this same connection to provide a better channel of communication between these small firms and the Government. This applies particularly—and again I agree with the noble Lord, Lord Cullen of Ashbourne—to the operation of the Employment Protection Act, which, at least where I live, is viewed very differently by the local authority from the way in which it appears to be regarded by central Government. The Act may serve to protect existing employment. It seems to me to be a deterrent to new employment.

Then there is training. The noble Lord, Lord Wallace, will know that under the Employment and Training Act 1973 small firms are exempt from payment of the training levy because of difficulties in dealing with them through the Industrial Training Boards. In winding up the debate on the Second Reading of this Bill in another place the Under-Secretary of State recognised this as a special problem, and he said that it would be looked at very carefully indeed. May I ask the noble Lord, when he comes to reply, if on that point there has as yet been any progress.

Finally, I should like to refer to the question of Parliamentary control of expenditure and, in view of the detailed statement which was made by the noble Lord, Lord Cullen of Ashbourne, on this point, simply to endorse what he had to say. That is to say, where there is urgent need, as is recognised in Clause 2(3) of the Bill, for the Secretary of State to take measures to provide additional employment, and he is obliged in those circumstances to explain to the House of Commons what action he has taken and the reasons for that action, I too should be glad to know why it is that the Government should not also be required to make a similar explanation in this House.

We recognise the need quickly to give legislative cover to some of the schemes to which reference has been made, particularly the extension of the small firms employment subsidy, and that is why, subject to our receiving satisfactory answers to the questions I have this afternoon asked on behalf of my noble friends, we shall do what we can to facilitate the passage of the Bill through the House this week.

4.15 p.m.

Lord WALLACE of COSLANY

My Lords, I am very grateful indeed to the two noble Lords, Lord Cullen and Lord Rochester, for their contributions to this debate. The noble Lord, Lord Cullen, tactfully avoided direct political issues and indicated that Government and Opposition, when they were in power, were sinners in certain respects. I have reservations on that, but I accept the point he has made.

Of course it is true that these measures are temporary measures; some measures of alleviation. But there is a tremendous problem for us to tackle. An indication of that problem is that of course there are other countries in even a far worse position than ourselves. For instance, Canada has a far higher rate of unemployment than Britain. That is an indication of the international nature of the problem. My right honourable friend the Prime Minister is well aware of this. He has also stressed the fact to the EEC, and he is undertaking a visit to the United States, and is bringing as much pressure to bear as possible to obtain recognition that countries of the world affected by these problems must unite to find some common solution. We can do our best to solve our own problems but, as noble Lords will appreciate, we are very much subject to the winds of change emanating from other countries and the fluctuation in currency values.

The noble Lord, Lord Cullen, raised a number of points. First of all he asked me for the gross cost. As a result of the decisions about the future of the temporary employment subsidy and other measures announced on 15th March, it is now possible for us to provide some more detailed and up-to-date estimates. It is estimated that during the next financial year, 1978–79, existing commitments under the temporary employment subsidy, the small firms' employment subsidy, and the youth employment subsidy will cost £135 million in Great Britain and £7.5 million in Northern Ireland. The cost of operating the new short time working scheme, the modified temporary employment subsidy, and the extended small firms' employment subsidy, is expected to be a total of £260 million spread over the two financial years 1978–79 and 1979–80. The comparable figure for Northern Ireland, including the cost of the job introduction and capital grants scheme for disabled people, is expected to be about £14 million. I would be happy of course to write to the noble Lord with a more detailed breakdown of these figures if that would be helpful to him. Incidentally, I make the total, if my arithmetic is still up to standard, £416.5 million. That is the total gross cost.

As the noble Lord rightly pointed out, there are savings in unemployment benefit, tax, and so on, and it is difficult indeed to give an accurate estimate of figures because one does not know exactly what the take-up in any of the respective schemes would be; but there will be deductions giving a net cost of an "X" figure, which I cannot give the House at the present time. The noble Lord, Lord Cullen, and the noble Lord, Lord Rochester, also referred to the authorisation by the House of Commons in a Resolution. Naturally, as a House of Lords' Member, when I saw this I said, "What is this here?" But in point of fact the issue arose by the Opposition raising certain points about Parliamentary control, an Amendment was tabled by the Government to meet the Opposition's point, and that was accepted. Of course it is normal practice, when the Government decide to introduce any significant new measures to combat unemployment, for parallel statements to be made to both Houses. Unfortunately the Statement made last week was not repeated in this House, I believe, at the request of the official Opposition because they felt the House was under pressure in relation to the Scotland Bill. I believe I am correct in saying that that was the reason why last week's Statement was not repeated here.

The noble Lord, Lord Cullen referred to the employment protection legislation, which is not strictly related to this Bill but to which I will refer because he was kind enough to advise me in advance of the points he intended to raise. I readily agree with him that there is a degree of unemployment involved here and I have a great deal of sympathy for the point he made. He advised me to visit shops in my area. He may care to know—I do not know whether or not I am a good husband—that I do the family shopping every week, including shopping mid-week. I do that for various reasons, some of which are personal, and I have done so for a long time. In fact, I once challenged the then Prime Minister—of the Party opposite, I might add—who was the MP for the constituency, in which I lived, to come shopping with me because I felt that, as a bachelor, he did not know much about it. However, that is history and suffice to say that I take Lord Cullen's point on this issue.

The Government are well aware of the concern that is being expressed about the effects of the employment protection legislation on small firms, in particular the claim that it discourages small firms from employing more staff. Much of the problem is due to the fact that many small firms have had difficulty in familiarising themselves with all the legislation in this field that has come into force in recent years, and so causing them to be wary. The Department issues free guidance leaflets about all the legislation, and free advice is available on request from the Advisory, Conciliation and Arbitration Service. In addition, I understand that ACAS is making copies of its Code of Practice on Disciplinary Practice and Procedures available to organisations representative of small businesses for distribution to their members.

I would only add that there is a danger of this problem being over-emphasised. The likelihood of a small employer being faced with a complaint of unfair dismissal is generally exaggerated; the chances of this happening in any one year are about one in 100 and the probability of a small employer being faced with a tribunal decision requiring him to pay compensation is even smaller, about one in 1,000. However, as I said, the Government are well aware of the problem. If anything further can be done to ease the problems facing small businessmen—knowing, as we do, that with a small business one man has greater responsibilities for the running of his business and the filling in of forms and so on, compared with a larger business where experts are employed—then, if noble Lords have any suitable suggestions, we shall be only too pleased to consider them and do what we can to meet the cases that are raised.

I have already referred to the question of House of Commons Resolutions and the fact that it is normal practice for Statements to be made to both Houses. If noble Lords have any objection to this procedure, I hope they will get in touch with me and we can discuss the matter; but we cannot alter the Bill for a number of specific reasons, the main one being because a Resolution coming forward would mean payments to employers, and of course that would involve money. I am certain a Statement will be made when a Resolution is being moved, and I will certainly convey the feelings of the House to my right honourable friend.

The noble Lord, Lord Rochester, referred to the temporary employment subsidy and the EEC. As a member of the EEC we are subject to certain regulations, codes of practice and so on I believe it is true that the EEC raised a problem about this particular subsidy and the effect on competition. However, we have had discussions and the matter has been settled amicably; but of course we could have been taken very seriously to task had we defied the EEC. As it so happens, nobody has won a victory and nobody has suffered a defeat; we have come to a reasonable solution.

Lord Rochester also referred to training skills. The proposals in Training for Skills are separate from the schemes which will be operated under this Bill; training programmes are run by the Manpower Services Commission under the Employment Training Act 1973. If the noble Lord requires any further information on this point, I can arrange for him to be supplied with it. I think I have covered all the main points that were raised; if I have missed any, perhaps noble Lords will advise me and we can go into the details later.

As I said at the outset of my reply, I am very grateful to noble Lords for their contributions. I recommend the Bill to the House; it is not a little Bill but a vitally important one. Let us hope that, with the joint effort of the workers and management in this country and the goodwill and co-operation of international statesmen, we shall get away from the necessity of introducing measures like this and get down to giving a man a chance to work for his living and enjoy doing so without having the spectre of unemployment, a spectre which I have personally experienced.

On Question, Bill read 2a; Committee negatived.