SHIPBUILDING (REDUNDANCY PAYMENTS SCHEME) (GREAT BRITAIN) (AMENDMENT) ORDER 1979 (Hansard, 19 July 1979)

§ Viscount TRENCHARD
My Lords, I beg to move that the Shipbuilding (Redundancy Payments Scheme) (Great Britain) (Amendment) Order 1979, which was laid before the House on 2nd July, be approved. With the permission of the 1566 House I should like to speak simultaneously to the Motion to approve the parallel order relating to Northern Ireland.
Their purpose is the same: namely, to amend the shipbuilding redundancy payments scheme put into operation by orders made in August last year under the Shipbuilding (Redundancy Payments) Act 1978. That scheme applies alike to employees of British Shipbuilders and Harland and Wolff Limited. But, as the Act specifies that a scheme shall be either for Great Britain or for Northern Ireland, two separate orders are required. Though differing slightly in wording for technical statutory reasons, the 1978 orders were identical in substance and effect—and this is also the case with the two amending orders before your Lordships now.
The proposed amendments are set out in Article 2 of the draft Great Britain Order and the Schedule to the draft Northern Ireland Order. I think your Lordships will, however, find it clearer if I explain their effect by reference to the Explanatory Note on page 3 of each draft order. This lists seven changes.
By far the most significant change is the first, which will extend the period for which the scheme is to operate. The situation envisaged by the previous Administration in introducing the scheme with support from all sides of Parliament was one in which the severest depression in the shipbuilding industry for 40 years was likely to lead, and was leading, to a substantial reduction in shipbuilding employment in this country. The Government legislated not for indefinite special redundancy payment provision but for such provision during a restricted period. Nobody could know then precisely how long it would take before a stable situation was reached. It was therefore enacted that the scheme should initially last for two years, with provision for another two years should events prove it necessary.
I think it is generally recognised that further contraction is still to come, and the Government think it right in these circumstances that the scheme should continue for the full period allowed by the Act. The effect of the amendment will be that employees made redundant or transferred to less well-paid employment between 1st July this year and 30th June 1567 1981 may become eligible for payments under the scheme on the same terms as those made redundant or transferred between 1st July 1977 and 30th June this year.
The other six amendments set out in the Explanatory Note on page 3 to the draft orders all concern minor technical matters. Some of them are complex, but I shall be as brief as I possibly can. The second amendment is a consequence of the shipbuilding scheme having certain features in common with the general redundancy payments provisions of the Employment Protection (Consolidation) Act 1978. In both cases, the level of weekly earnings prior to redundancy is one of the determinants of the amount of redundancy payment to be made in individual cases, and there is an upper limit to those weekly earnings which are taken into account (any excess over the limit therefore being ignored). The weekly earnings limit for the purposes of the Employment Protection (Consolidation) Act provisions was increased from £80 per week to £100 per week for those made redundant on or after 1st February 1978 and from £100 per week to £110 per week for those made redundant on or after 1st February 1979. The first of these increases was automatically incorporated in the shipbuilding scheme by the orders establishing it last August, and it is proposed to incorporate the second increase through the present draft orders. The practical effect of doing so will be slight, since few eligible employees have weekly pay approaching £110. I should say here that the calculation is on a 40-hour week, not including overtime and only to a degree including bonus payments. I think your Lordships will agree that it is desirable to keep the shipbuilding scheme in line with the general redundancy payments provisions in this repect.
The third and fourth amendments are closely related. The existing scheme provides that if a qualifying company diversifies and still remains a qualifying company, an employee who has been transferred and then is made redundant would still be eligible under the scheme in spite of the transfer. The intention of this is to safeguard potential eligibility for scheme benefits of employees who are transferred by British Shipbuilders or Harland and Wolff from their existing work 1568 to other work in order to minimise redundancies by diversification. The need to do so was raised by a number of speakers, including my noble friend Lord Campbell of Croy, during debates on the original orders, and the previous Administration undertook to provide such safeguards.
In the event, however, the provision has been found defective in two ways. First, an employee's service after transfer does not count as part of his qualifying employment for calculating scheme payments. Secondly, a company may change its activities to such an extent that it ceases to be a qualifying company for the purposes of the scheme. The third and fourth amendments will remedy these defects and meet in full the intention of the previous Administration's undertaking to both Houses of Parliament. As there is only a remote possibility of transferred workers subsequently becoming redundant while the scheme is in operation, it is unlikely that these amendments will add anything appreciable to the cost of the scheme.
The fifth amendment proposed is, I think, largely self-explanatory. Under the existing scheme, a period spent in National Service will have broken continuity of employment taken into account in calculating an eligible employee's redundancy payments, and thus qualifying employment before National Service is not added to qualifying employment afterwards. This is, we think, an oversight in the design of the scheme which ought to be put right by following the procedure adopted for the general redundancy payment provisions of the Employment Protection (Consolidation) Act, which ignores such breaks in continuity. Few scheme beneficiaries will be affected, since call-up for National Service ceased in the late 1950s and only a minority of redundant employees reach the maximum of 25 years of qualifying employment taken into account for the scheme. The point is, therefore, a narrow one and the remedy is inexpensive, but I think noble Lords will agree that equity demands the remedy.
The sixth amendment is to rectify an anomaly arising from the way in which the periodical payments under the scheme are calculated. Redundancy benefit under the scheme is partly a lump sum payment and partly weekly payments made over a 1569 period of up to two years. The amount of the latter depends on whether the individual is unemployed or employed during that period. The anomaly is that a former shipyard worker who wishes to acquire new skills on a course of retraining is, under the existing definitions in the scheme, classified as neither employed nor unemployed. He would, as a result, cease altogether to be entitled to periodical payments while his course lasted. Clearly, such a situation cannot be tolerated, and the purpose of the proposed change is to allow periodical payments to a trainee to continue at the same rate as though he had remained unemployed. The problem came to light as a result of some scheme beneficiaries attending training courses operated by the Manpower Services Commission, but the Government think the principle should apply to all forms of vocational training and the amendment will allow this.
The object of the seventh, and last, amendment is transitional. Noble Lords who followed the earlier debates on the scheme will recall that the orders, establishing it were not made until early August last year, although they applied to redundancies made on or after 1st July, 1977. It then took some time for British Ship-builders and Harland and Wolff to disseminate all the details of the scheme widely to employees and company personnel staff. There was, therefore, an interval for some scheme beneficiaries between their redundancy and the time at which they first knew of all the details of the scheme.
One feature of the scheme not widely known during this interval is that early retirement payments under company pension schemes are deductible from scheme redundancy payments. It has emerged that the company pension schemes concerned permit their members to opt whether or not to receive pension scheme payments commencing on early retirement through redundancy. Redundant employees may, quite properly, arrange their affairs to their own best advantage, and in practice they can avoid deduction from their scheme redundancy benefits by electing not to take early company pension scheme payments.
But some who were made redundant before this detail of the scheme was known to them exercised options under 1570 company pension schemes, in ignorance of the effect on their scheme redundancy benefits. They have therefore suffered a financial penalty which those made redundant at a later date have had the knowledge to avoid. The Government think it right to rectify their position by an amendment to nullify any deductions from redundancy payments of pension scheme payments made as a result of options exercised before 31st October, 1978. The significance of this date is that by then all those concerned would have had sufficient information about the scheme to know where their best interests lay.
Finally, having described all the Amendments, I will say a word or two about their cost. The technical amendments really add a very small amount in relation to the cost of the scheme as a whole. It is clear, however, that the main Amendment—the extension for a further two years—is quite another matter and the cost will be very substantial. As I think noble Lords on both sides of the House know, it is not, in fact, possible to forecast the cost of the provision in total. It depends, of course, to an enormous degree on the numbers who are likely to be made redundant; and it depends to a very great degree on exactly which employees are made redundant. For all these reasons, the previous Administration were also unable to forecast the cost.
It will be recalled that spokesmen for the previous Government were obliged by these circumstances to confine themselves to an illustrative estimate of cost per 1,000 beneficiaries on the assumption that the age, length of qualifying employment and previous pay of redundant employees would correspond to those of British Shipbuilders employees as a whole. On that basis, they arrived at a figure in July, 1977, of £1.725 million per thousand employees. They added a number of qualifications, as rightly they should have, at that stage. With the advantage of some months' experience of actual payments, I can now say that lump sum payments for British Shipbuilders workers are running at an average of £1,375 per head, and that it seems most likely that the overall cost of lump sums and periodical payments together will be not less than £2,500 per head; or, as figures were previously quoted in millions per 1,000, £2.5 million per 1,000. I am 1571 afraid that even now it is not possible to be more precise than that. I am grateful to the House for its forbearance while I have tried to make clear these many important, but technical, amendments. My Lords, I beg to move.

§ Lord MELCHETT
My Lords, I should like to thank the noble Viscount very much for his clear explanation of the seven changes which this order introduces, and to welcome very much the fact that we have moved on from some rather controversial exchanges across the Floor of the House, on various Statements which the noble Viscount has had to make in recent days, to a scheme on which there is a very large measure of agreement—in fact, total agreement—on both sides. For my part, I welcome the various changes which the Government are making and which the noble Viscount has explained to us, while at the same time regretting the necessity, as I am sure the Government and the noble Viscount do, for a scheme of this kind, and the generally gloomy prospects which continue to face shipbuilding throughout the world.
I do not want to detain the House when there is a large measure of agreement. I should simply like to ask the noble Viscount a couple of questions, of which I have not given him notice, and I shall quite understand if he is not able to deal with them this evening. He very kindly gave us a good deal of information about the costs of the scheme and, in particular, the future costs, and I certainly accept from him—indeed, I think he used almost the same words as I did when I introduced the original orders—the impossibility of predicting future costs. But it might be useful to have on the record some indication of the costs of the scheme in the immediate past; that is, for the period of the last six months or three months or something of that kind. If the noble Viscount could give us that, it might be some indication of the likely costs in the immediate future.
The other question on costs, which I should like to ask the noble Viscount, is about the maximum sum payable to any individual employee. The noble Lord, 1572 Lord Campbell of Croy, very kindly asked me this question when I was moving the order from the noble Viscount's position, because at that time there was considerable speculation in some sectors of the national Press that this was to be an enormous bonanza for individual employees, who were going to walk off with millions of pounds as a result of the introduction of the orders. I imagine that the changes which the noble Viscount has outlined have slightly increased the theoretical maximum which any one individual could receive under the scheme, so it might be useful just to put on the record at some stage what that maximum now stands at.
There is one other matter about which I should like to ask the noble Viscount. When this order was originally introduced, there was a popular version, as it were, produced for employees in the shipbuilding industry in a little more simple language than the order, although the noble Viscount himself made an excellent job of explaining it. I wonder whether there will be a need to reissue that in a new form now that these changes have been made in the scheme, and whether the noble Viscount can tell us if there are any plans to do that. I know that my noble friend Lord Blease would like to refer in a little more detail, when we come to the second order, to some confusion that has arisen in Northern Ireland. This is clearly a difficult scheme and it seems to me, from what the noble Viscount said, that those of us responsible at the time, and subsequently, have not always got the drafting exactly right; but he has, in fact, tidied up some of the mistakes. So I think any effort that anybody can make to get the essential details across to anybody affected, who will have to make some quite complicated and difficult choices, will be very important. I do not want to turn to any of the controversial aspects of the Government's industrial policy, or the future of shipbuilding, in discussing this order. I imagine that in the near future there will be a Statement about the future of British Shipbuilders—possibly early next week. While we are discussing this subject it might be helpful if the noble Viscount could indicate when that Statement will be made.

§ Viscount TRENCHARD
My Lords, I thank the noble Lord. I, too, am relieved 1573 to be on a non-controversial subject for a little while. The first point which he raised related to the immediate past cost. I gave this information on the basis of per 1,000 employees. That information, therefore, will be in Hansard.
Turning to the noble Lord's last point, there will be a Statement before the recess. It will not enable exact calcuations, either past or future, to be made. However, it will help the noble Lord and other noble Lords to understand the significance of the scheme, in view of the likely future of shipbuilding. I agree with him that, regrettably, the outlook is not very good. The noble Lord will be able to put two and two together and make the calculations which he wishes to make.
So far as the maximum is concerned, I do not believe that the theoretical maximum—which I understand to be £8,750—is at all helpful. The noble Lord probably knows, because of his familiarity with the matter in the past, that the figures relating to people with 20 years of service but who are still only, say, 45 seem to get up to the £6,000 level. For those who are near to retirement, the total figures are less, and for those with shorter service the figures are also less.
Turning to the explanatory material, I have a note which tells me that revisions covering the amendments will be made to British Shipbuilders' leaflet for employees. I imagine that Harland and Wolff have that leaflet; I see that I am correct. So I think that I have answered the noble Lord's question. I shall certainly advise those of my colleagues who are concerned with the matter that we should endeavour to make these complicated issues as clear as we possibly can in the kind of leaflets which have been described.