HL Deb 25 July 1979 vol 401 cc1941-62

3.32 p.m.

The Earl of GOWRIE rose to move, That the draft order, laid before the House on 1st July, be approved. The noble Earl said: My Lords, with leave, I will speak to two draft orders, the Unfair Dismissal (Variation of Qualifying Period) Order 1979 and the Employment Protection (Handling of Redundancies) Variation Order 1979, both of which were laid before the House on 1st July in accordance with Section 149 of the Employment Protection Act 1978 and Section 106 of the Employment Protection Act 1975, respectively. It will be for the convenience of the House if we take the debate on both orders together, although I shall move them separately at the end.

Before describing the effects of the orders and the reasons for their introduction, I should like to place them in the general context of our economic policy, especially where it relates to issues of employment. As I believe I demonstrated to the House in the debates on the Budget Speech and on unemployment earlier this session, the prospects for employment at levels we are historically used to in this country are exceedingly bleak. Large firms need high investment and labour shedding in order to prosper in an increasingly competitive world outside and in a world where those in jobs, quite understandably, demand increasing wages inside.

The public sector, whether it is in services or in the nationalised industries, has outstripped the levels of tolerance for high taxation to support it, just as the public sector borrowing requirement has outstripped the levels of interest needed to sustain it. This effect is intensely damaging to wealth creation and to the creation of new jobs. In the words of the old song, " Something's got to give ", and in our case it is the ability of our economy to sustain, without the raging inflation which has the same job destroying effects in the end, the levels of employment to which we have become accustomed.

It is the Government's view that the only way out of this maze is to reduce the rate of inflation by the only practical means available to us—that is, by reducing the money supply, deflating demand and shifting resources from the public to the private sector. Both sides of the same path are stony and painful because, as all noble Lords are aware, we in this country have accustomed the electorate to a greater degree of mental and physical comfort than our national situation allows. But we have North Sea oil and a strong currency on our side, and I have no doubt that in two or three years the picture will be a lot more attractive. However, whether it is attractive or not, we shall still be depending on the private sector, and particularly on the smaller firm and the newer business enterprise, to take up the unemployment which the present inflation and switch in resources demands.

Accordingly, we believe that our best hope of creating more jobs lies in the smaller business sector, and it is therefore a major priority of the Government to stimulate the development of small businesses. One element of our policy is to examine the administrative and legislative burdens affecting small businesses, in particular the employment protection legislation. In doing so, we propose to continue the practice of consulting widely among organisations representing the interests of both sides of industry before reaching any firm conclusion.

I come now to the purpose of the orders. There are two measures, however, which the Government believe should be taken straight away, and these are the subject of the two orders which we are debating this afternoon. The purpose of the former is to raise the qualifying period of employment for making a complaint of unfair dismissal from its current level of 26 weeks to 52 weeks. The latter order is to reduce the minimum period required for consultation with the trade unions and notification to my right honourable friend the Secretary of State for Employment on redundancies of between 10 and 99 employees from 60 to 30 days.

It was a Conservative Government which introduced the concept of unfair dismissal into legislation in 1971. At the time, we set the qualifying period to complain of unfair dismissal at two years. The Labour Government reduced it to one year—that is to say, to the presently proposed 52 weeks—in 1974, and then to six months in 1975. We on this side of the House took the view that two years was about right, and I shall outline the reasons for our present modification of this period in a few moments.

Of the many representations that we have received from employers on the employment protection legislation, it is the unfair dismissal provisions, and the length of the qualifying period in particular, which have come in for most criticism. The message is that this legislation in its present form diverts management attention from the central task of running a business, and that the risk of a complaint of unfair dismissal acts as a positive disincentive to the recruitment of extra staff, particularly when they are likely to be needed for a short period only. Organisations representing small employers are virtually unanimous in their view that the unfair dismissal provisions deter firms from recruiting extra labour. Local authorities, and larger firms, also have similar difficulties, though of course to a less acute degree.

The unfair dismissal provisions in their present form act not only as a disincentive to recruitment; they also result in significant costs in management time involved in complying with the legislation, and in particular with the procedural requirements when a dismissal takes place. Additional costs, both in securing legal advice and in managerial time, arise from preparing for and attending an industrial tribunal. These costs are incurred whether or not the complaint is upheld, and they bear particularly harshly on the small employer who rarely has a full-time personnel manager.

There has recently been a wealth of research done into the effects of the employment protection legislation, including two surveys commissioned by the previous Administration and others by the Conservative Small Businesses Bureau, the Engineering Employers' Federation and several Chambers of Commerce, as well as the Wilson Committee. We could spend many hours discussing the relative merits of the surveys, any flaws in their methodology and the interpretation to be placed upon them. Research is useful, just as consultation is essential, but in the end the Government must themselves take a view and put their viewpoint to Parliament. Where the qualifying period of service for claims of unfair dismissal is concerned, the Government's view is that the present period of 26 weeks is simply not long enough for employers to assess the suitability of a new employee without the fear of a tribunal claim and that they therefore hesitate to recruit, especially where the extra labour is likely to be needed for a short period only. They are more ready to dismiss employees about whose suitability they are uncertain before 26 weeks have elapsed than to give them the benefit of the doubt.

These views have been widely endorsed in the course of our consultations on the proposals in the two draft orders. I have to confess that we have been widely criticised by employers' organisations for failing to extend the period to 104 weeks, or two years. However, in deference to the views expressed by the trade unions and by the party opposite, although I feel that their anxiety is quite misplaced and, indeed, a little artificial, we are not proposing at this stage to revert to two years. We shall, of course, not hesitate to lay further orders to do so should we become convinced of any need in the future.

I should like to say in conclusion on the Variation of Qualifying Period Order that, contrary to what may be stated by the party opposite, we are not dismantling the unfair dismissal provisions; we are merely making a change in the qualifying period of service. We believe that even so minor an adjustment will, however, have an impact on employers' confidence and on their willingness to take on more employees. There is also a useful side effect in that an increase in the qualifying period will bring savings in public expenditure and civil servants. It is estimated that an increase to 52 weeks will produce an annual saving of about £1½ million and a saving in staff of 140.

I come now to the second order, the Handling of Redundancies Order. The Employment Protection Act requires two things of an employer who proposes to make employees redundant: consultation with any appropriate recognised trade union and notification to the Secretary of State for Employment. The purpose of consultation is to allow the union to discuss the proposal and ways of reducing the redundancies or of mitigating their effects. Notification is required to allow the Manpower Services Commission to get to work with its employment and training services.

The Act says that consultation should start at the earliest opportunity, and we do not propose to change that, but for redundancies of between 10 and 99 employees in the same premises within 30 days the employer is required to begin consultations at least 60 days before the first dismissal is intended and that limit applies also to the notification requirement. In other words, the employer has to keep the employees in question on his payroll for 60 days after notification to the Secretary of State at the beginning of the consultation process. In our view, this length of time is a damaging burden, particularly for small firms, and we propose that it should be reduced to 30 days.

Small firms often cannot fulfil the obligations since their business horizon does not stretch to 60 days. So a firm is either forced to delay redundancies or risk the union seeking a protective award from an industrial tribunal of up to 60 days' wages, a period which we also propose should be reduced to 30 days. There is no doubt of course that even the 30-day interim period will prove burdensome for many firms in the difficult years that lie ahead of them, but at least we have lightened their load by half. I have heard it argued that the reduction in the period of consultation with the unions or activity by the employment and training services of the MSC cannot in fact be carried out in 30 days. But I am advised by the MSC itself that it will be able to act just as effectively in the shorter time scale.

As for consultation, I believe that with goodwill on both sides employers and unions will still be able to ensure that the full benefit of this process is made available to employees within the shorter period. I should add that the change we propose will be within the requirements of the EEC Directive on collective redundancies and will not put us out of step with other European countries. Indeed, I understand that our national provisions are usually more generous to the employees than obtains with our more successful competitors within the Community.

In conclusion, I would remind the House that what is at issue is not the right to redundancy payments or the requirement to consult and notify the Secretary of State, but merely the length of time between redundancies being proposed and their being able to be implemented. In laying these two orders the Government are taking a modest step—and I think some would say too modest—towards changing protectionist laws enacted by the previous Administration. Like so many good intentions, these enactments have paved the road to the very destination that they were designed to avoid. Far from protecting employment, they have actively discouraged its promotion. I commend the two amending orders to the House.


My Lords, on a point of order, the noble Earl must move the first order; he cannot move both orders together. He must move the first order standing in his name, although the House gave him permission to speak to both.

The Earl of GOWRIE

My Lords, I have not yet moved the orders. At this stage I am commending them to the House. I shall move them at the end of the debate, if the House gives me leave.

3.46 p.m.


My Lords, those of us on these Benches find that we have to oppose both orders, and since the noble Earl has taken them together, we have to take them together from this side of the House. I should like to begin, as he did, with the Unfair Dismissal Variation Order. We should like to oppose this on two grounds: first, the variation order is a licence to dismiss unfairly. What is being suggested is that it is perfectly fair and perfectly proper that we should extend the period during which an employer can sack people without giving reasons, without saying that it is a matter of conduct or capacity or the need to improve their performance; he can in fact sack them even without facing them to explain why it is being done. This variation order is suggesting that we should extend the period in which we go back to the good old practice of British management—the note in the paypacket; the DCM: " Don't come Monday ". No explanation, no justification, not even the need to face people with the reasons for their dismissal.

I must say to noble Lords, as one who has suffered from this in the past—as one who has been dismissed with a note, " Don't come Monday " for, so far as I could see, doing nothing worse than working in a warehouse in carpet slippers—that this is unfair and at this stage of the game I see no reason why we should extend the period during which employers can dismiss people unfairly without giving reasons.


My Lords, before the noble Lord departs from that point, does he not agree that the situation which he has been outlining already applies, and applies within the first 26 weeks? Does he not agree that there is no change in principle here at all?


My Lords, I want to come on to that point in more detail, but at the moment I will say only that it is perfectly true that there is this period now. But it was always the position in the past, and it was certainly the position with the previous Government, that the period of exclusion related to the case load. There is no reason in logic, and it is not the case in many other economies with many other unfair dismissal provisions, why there should be any exclusion period at all. We began with a two-year exclusion period; we reduced it to a one-year exclusion period; it is now a 26-week exclusion period. There is no reason in logic except case load, and no argument is being put forward this afternoon on case load, as I understand the noble Earl, as to why there should be an extension of the exclusion period. It may not be a difference of principle, but the Government do not seem to me to be able to justify extending this period at this time.

The second reason is that all the arguments which have been put forward for this change are really arguments based on ignorance—pandering to the ignorance of small businessmen of the worst possible kind. What is being submitted from this side of the House is that it is the Government's responsibility to stand up to ignorance, to suggest reasons why ignorance should not be accepted, and in fact to explain the very real and very wide areas in which justifiable fair dismissal can be introduced under the provisions of the present Employment Protection Act.

One of the reasons—and I have mentioned it in answer to a question from the other side of the House—adduced, is that we have had longer periods before. We had this in 1971. We had a two-year period until 1974, we had a one-year period, and now we have a six-months period. My answer is that, as I have said, we had it before on the basis of case load, and that does not seem to me to be a justification now.

Another reason given is that the small employer cannot afford the legal costs. That is an argument which has been put forward from the other side of the House. That also is a case of ignorance. It is perfectly true that if the employer goes to law, if he uses solicitors, if he uses—as some employers do—barristers, he can get himself a bill of something like £2,000. But I have never met a chairman of an industrial disputes tribunal—and I have met quite a few—who believed that lawyers were of the remotest use on the other side of the table in an unfair dismissals case. What people need to do is either represent themselves, or get their trade union representative, or get their personnel manager to represent them, or just get the people involved in the dismissal to go to the industrial tribunal. If they do that, then these vast sums of money, which we are told small employers cannot afford, are not incurred; the whole process can be cheap and it can be speedy. Thirdly, we are told—I think this is probably behind a lot of it—that the British employer must have his right to probation. This again was behind much that was said from the other side of the House; that is, that the British employer must have a right to operate a probation period.

What the probation period means in effect is a licence to dismiss unfairly. What is being said is, " I must have more than six months. I must have nine or 11 or 12 months in which once again I can tell you Don't come Monday'—a longer period in which I do not have to give you reasons or say it has to do with capacity or to do with conduct." I have tried to explain to British managers, small managers and large, that in fact it is perfectly possible to operate the probation period within the Act. If you want to extend your probation period to nine months and you say at the end of six months, " We are not certain whether we want to dismiss this man: we want to extend the period to nine months ", and at the end of the nine months you operate the probation period, as long as you carry out correct procedures and as long as you respect natural justice, that is one of the best possible arguments to make before a tribunal, if you get to a tribunal, for fair dismissal. In fact, the probation period is perfectly well able to be fitted into this Employment Protection Act as it stands, and it is ignorance and prejudice to believe that it cannot be.

A great deal has been said—I am glad that not a lot has been said in this House about it: the noble Earl did not say a great deal, but he did say a little and a great deal has been said elsewhere—about surveys which have been done by the EEF, by the PSI and other surveys. The interesting aspect of these surveys, and it comes out very clearly in the PSI survey, is that the more people know about the operation of the Act the less fearsome they find the Act is. For example, personnel managers who have had day-to-day experience of the Act think that it is, on the whole, a good thing; they believe that it enables them to have a more systematic system of promotion, recruitment, discipline, and that it is a good thing. The people who do not like this Act are, on the whole, general managers who do not know the first thing about it.

In one of the surveys those involved were asked a number of simple factual questions about, for example, the period in regard to which the Act operates, both on the redundancy and on the unfair dismissal side. What we find so far as the general managers are concerned is that over 60 per cent. of those asked these questions cannot answer a simple factual query about the statutory provisions of the Act. In fact, most of these surveys indicate that those who know least about this Act, those who fear that you cannot dismiss anybody any more, are the people who oppose the provisions of the Employment Protection Act. There are in fact many small employers who believe that nobody is dismissed in British industry any more. In fact, the PSI survey shows that, although there has been a modest reduction in the number of dismissals, it is still the case that 1 per cent. are dismissed on grounds which would make them eligible for a claim for unfair dismissal. It also shows that 86 per cent. of those dismissed never make any formal complaint before a tribunal, and we know that the majority of those who make claims before the tribunals do not sustain those claims. So the chances are today that if you dismiss somebody, even in areas covered by the Act, you have a 95 per cent. chance of dismissing that person without having a decision go against you at the tribunal. If people were a little more careful, if they carried out the procedures and if they observed the elementary principles of natural justice, they would find that there are grounds under the Act now for fair dismissal on grounds of capacity, of qualification, of conduct or redundancy, or, as the Employment Protection Act says, some other substantial reason.

So for these reasons, so far as this particular variation order is concerned, we are saying that the case is not made out. We are saying that those who know most about the Act in this respect do not believe that it has the disadvantages which are put forward. We are saying that the opposition which small businessmen often feel to the Act is very largely based on ignorance, based on the fact that they do not know what the provisions of the Act are. They do not know that you can dismiss on grounds of qualifications or capability or conduct. Their opposition is to the very existence of the Act. They want to be excluded from the operation of the Act: what they require is a licence to dismiss.

Let me move on to the second variation order. We on this side of the House oppose this order on four grounds: first, the reduction from 60 days to 30 days seriously affects what can be done by unions and by the placement service—and I am not satisfied with the assurances which have come from the Manpower Services Commission on this point—for those who are declared redundant. We do not think that 30 days is long enough. Secondly, at this moment when the Government's policies are, quite deliberately and intentionally, raising the level of unemployment, as one of the ways of dealing with inflation, we think it is monstrous to reduce whatever protection there is for workers who are to be declared redundant. Thirdly, again we believe that these arguments feed upon prejudice and misunderstanding of the way the Act works by small businessmen. It is the function of Government to explain the way its legislation or the legislation of its predecessors works, rather than pandering to mis-information about it. Finally, we believe that it is a very poor beginning to a winter of industrial relations problems to select two groups covered by two aspects of the Act for this particularly mean and nasty attack. These are the four reasons, and I want briefly to say a word about each.

First of all, let me take the point about the serious effect upon the operation of the Act. At the moment the unions are given 60 days to ask about the reasons for redundancy, the numbers and grades involved, the principles of selection, the procedures for carrying it out. They then have to take this information to their members, decide what their policy is, consider alternatives and go back to the employers and put their position before them. Now, we are told, all within 30 days, the employers will have to consider their response and put their response to the unions. At the moment if this is not carried out within 60 days the unions can make a complaint to the industrial tribunal that the employer has not carried out the provisions of the Act; the employer then has to plead either special circumstances or that he has done all that is reasonably practicable, If he cannot prove either of those things the unions are able to get a protective award. In my experience this cannot effectively be done, in many circumstances, in 30 days.

I would fear—and I have made this point to the CBI but I do not get much percentage, I am bound to say—that the consequence of changing this Act in this way is that more tribunals will be asked by more unions to issue protective awards. Unions will say that the employer has not carried out all the provisions in 30 days, because often that is very difficult to do. Very often the employer will come forward and say that there are special circumstances or that he has done all that is reasonably practicable, and all that the Government will get, as a result of this legislation, is additional altercation and disputes before industrial tribunals.

The second point is that in a period of rising unemployment, when the Government are introducing a policy aimed at creating unemployment in order to deal with inflation, it seems to us to be quite fantastic that we should be introducing changes of this kind in the Employment Protection Act.

Thirdly, let me make a few comments about the so-called " psychological boost " to the ignorant and prejudiced employer who believes that the EPA is somehow affecting his ability to take on additional people. I do not know of any circumstance in which elementary manpower planning requires people to declare men redundant with less than 60 days' notice. It seems to me to be an indictment of any firm that it has to dismiss people with less than 60 days' notice. I sometimes feel that the problem with British employers is that none of them understand this part of the Act. They think that this 60 days means—I have heard this from employers at seminars—that at the end of the day, if they cannot reach an agreement with the union, the union can stop them dismissing anyone for 60 days. In other words, they do not think that it is a notification period; they think that it is a type of 60-day T and G veto. Indeed, I have heard it referred to as the 60-day T and G veto. Once again, that is ignorance and prejudice. We should not be basing our legislation upon the ignorance and prejudice of employers. We should be basing our legislation on the facts of life.

Finally, what a way to set a climate for the winter. What a way to begin the negotiations—because there will be negotiations—with the Trade Union Congress. We cannot say, of course, that either of these orders is directed to getting the trade union movement back into line. Any strong trade union—the miners for example—will never he affected by either of these provisions. The unfair dismissal provisions will affect, on the whole, the non-unionised. The redundancy payments provisions will affect the weakly organised—the half a dozen carpenters up the North End Road employed by a bucket shop employer, or labour only sub-contractors. If they are sacked instantly the UCATT can say, " No, you cannot do that, there is a law about it ". Those are the type of people who will he affected.

What a way to start the winter. The Government know, if they are honest, that the wage round is slowly escalating. One cannot get a settlement for 11 per cent. any more and even the moderate unions in ICI, on a ballot have rejected a proposal of 11 per cent. This is a time when claims being fed into the pipeline in Fords and elsewhere are in excess of 20 per cent. All the indications are that many employers in the private sector are getting ready to meet those claims. This is a time when the Government know that they are not out of the wood, for example, as regards the electricity supply industry and there is a real possibility of a major dispute because manual workers in the electricity industry want to follow the EMA agreement. What a time, what a climate and what a spirit, in which to introduce these two nasty mean instruments into this House.


My Lords, on a point of order, I wonder whether your Lordships could assist me by telling me what is the Question before the House to which we are speaking? As I understand it the procedure of your Lordships' House is to talk not at large, but to Questions before the House. On the Order Paper there are two Motions regarding two orders. However, neither of those Motions is before the House because neither has been moved. The House has agreed that they may be discussed together, but not in Vacuo when neither of them is before the House.

The Earl of GOWRIE

My Lords, that is not my understanding, but I am, of course, very ready to be corrected by the noble Lord, Lord Paget of Northampton, and by the House at large. As I understood it, I had leave from your Lordships to commend these orders in the form of a general debate on them, at the conclusion of which debate I would move them formally and we would take a view on them. If I did not have that permission, I apologise. However, I was under the clear impression that your Lordships had given me that permission.


My Lords, the noble Earl was probably under a misapprehension. I have presented many of these orders from where the noble Earl is sitting now. The noble Earl has two orders in his name on the Order Paper. The House gave him permission to speak to both of the orders, and he very properly spoke to both of them. In fact, he spoke to them the other way round, but that is a small matter. However, at the end of his speech he should have moved the first order standing in his name. That would then be dealt with, and then he should move the second order formally if he wishes.

The Earl of COWRIE

My Lords, I am grateful to the noble Lord for that correction, although I must repeat, in fairness to myself, that I was of the opinion that the House had given me leave to proceed as I have done. However, if the House now wishes that I should proceed differently, I am, of course, at the disposal of your Lordships.


My Lords, it is not a question of the wish of the House to proceed in one way or another. It is the essence of our debating procedure that there must be a Question before the House before anyone can debate a matter. We have had a most interesting speech from my noble friend Lord McCarthy, but I am afraid that it is quite out of order.

The Earl of GOWRIE

My Lords, in that case I beg leave to move the first order standing in my name.

Moved, That the Employment Protection (Handling of Redundancies) Variation Order 1979 laid before the House on 1st July, be approved.—(The Earl of Gowrie.)

4.7 p.m.


My Lords, whatever the procedural niceties which here apply, I understand that we are now talking to the first order—that is, the one dealing with the handling of redundancies, although with the leave of the House and, like the noble Earl, Lord Gowrie, and the noble Lord, Lord McCarthy, I shall, if I may, speak to both of them. We on these Benches would like to thank the noble Earl for the way in which he has explained to us the reasons why these orders are being introduced. He will not expect me to go along with all that he had to say—there was not very much—regarding the general point he was making at the start on the Government's economic policies. However, it may be that, on behalf of my noble friends, there will be more to be said about that by my noble friend Lady Seear, when we come to deal shortly with the Government's Statement on the economic policy.

I should make it plain from the outset on behalf of my noble friends that we are in sympathy with these orders. Your Lordships will know that we are very keen to do all that we can to assist the encouragement and establishment of small enterprises, especially those of an innovative kind. Having myself worked in a large company for many years until recently, it is quite plain to me at least that we cannot look to such firms to provide many new job opportunities. In order to remain internationally competitive they have somehow to continue improving productivity.

If they continue to be pressed by trade unions to grant increases in pay that are not matched by corresponding increases in productivity, there are only two courses open to them. The first is to incur the risk of prolonged strikes, bringing with them discontinuity of production that may result in a lasting loss of orders. The second is to reduce their labour forces to a greater extent than would otherwise be necessary. Those, as I see it, are the economic facts of life with which such firms must contend in order to survive. In the crazily inflationary conditions that now apply, they will simply have to go on shedding manpower, very possibly at an accelerating rate. All this means that it is only to small businesses that we can look for the provision of new job opportunities.

Last year, as chairman of one of the district manpower committees that have been set up in various parts of the country to advise the Manpower Services Commission on employment and training problems, I took part in a seminar which we organised in mid-Cheshire for small employers in order to make sure that they were aware—and this point has already been touched on by the noble Lord, Lord McCarthy—of the various resources available to them. There I learned at first-hand that under the shadow of various sections of the Employment Protection Acts 1975 and 1978 such enterprises were in some cases reluctant to take on more people because of possible difficulties involved in dismissing them if the need arose. It can be said—indeed the noble Lord, Lord McCarthy, with all his experience on these matters, has said it and, in degree, it may be true—that fears of this kind are sometimes exaggerated. But it seems to me at least to be sufficient that they are there, and in practice they have an adverse effect on employment generally.

We on these Benches are strongly in support of the concept that there should be adequate consultation with trade unions before employees are made redundant. But this is a matter on which a fair balance must be struck, and in our view at present that balance discriminates unduly against employers and, more particularly, small employers. We believe that a period of 30 days from the time consultation begins until dismissals begin to take effect is quite sufficient to meet the principle which is involved, and that anything more than that can very easily prejudice the creation of the additional job opportunities that are so badly needed.

As to the other order, concerning unfair dismissals, we do not, of course, condone dismissals that are unfair, but I do not feel able to go along with all that the noble Lord, Lord McCarthy, had to say on this point, preferring rather the view already expressed by the noble Lord, Lord Drumalbyn, in an intervention. There is no distinction in principle between what is the case now and what the Government have in mind. In our view there is no doubt that employers—and, more especially, perhaps, small firms—are sometimes reluctant to take on more employees because of the difficulties which they may encounter if, after a period of only six months, they wish to dismiss one of those whom they have taken on. Here again, we believe that it is a matter of striking the right balance, and that to increase to 52 weeks the qualifying period for complaints of unfair dismissal to an industrial tribunal is likely overall to have a beneficial effect in providing for new job opportunities. This is a matter of balance; but, on balance, and for those reasons, we offer our support to the Government in the case of these two orders.

4.14 p.m.


My Lords, in view of the very great knowledge of the noble Lord, Lord McCarthy, on these subjects, it is a little surprising that he made a most strenuous attempt to blow up the debate on the modest adjustments involved in these two orders into great issues of principle. As I see it, no question of principle arises. Let us take first the qualifying period. If one listened to some parts of the noble Lord's speech, the logical conclusion one would draw is that there should be no qualifying period at all. But, under the Government which he supported, the 26-week period operated and there was no suggestion at that time that there should be no qualifying period—the 26-week period was accepted.

Therefore, all that is involved in the order today is an adjustment between 26 and 52 weeks. I agree that opinions can differ on such adjustments, but this is very largely a technical change, which I hope and believe is based on some practical experience and inquiry into the needs of industry. The same applies to the other order which advocates a change from a 60-day to a 30-day period.


My Lords, the position is as follows. In the past the justification given for the exclusion period—whether it was two years, one year or 26 weeks—was a question of case load. The implication always was—certainly it was my belief and I believe it was right—that when the case load problem justified it, there would be no exclusion period. We are now being given a quite separate set of reasons for exclusion, based on the so-called needs of industry, which are the needs of industry to dismiss unfairly.


My Lords, with respect, the noble Lord cannot duck the issue quite so blatantly as that. There was nothing to prevent the Government which he supported, if they thought all qualifying periods were wrong, legislating—in their habitual happy way, generally under the guillotine—to put through an amendment to the law. They very wisely did not do so, because in their day, if the noble Lord will allow me to say so, they were wiser in this matter than the noble Lord himself. The same applies in the change from a 60- to 30-day period, as I was saying when the noble Lord sought to assist me. That is a modest adjustment—some may think it is too modest—within the existing framework. I believe that there is a very good reason at least for making these two adjustments at this stage, although it may well be that experience will show that Her Majesty's Government ought to go further, certainly in respect of the qualifying period.

There is no doubt at all that the general provisions of the Employment Protection Acts are antipathetic to the provision of more employment. They are a factor which tends to aggravate the very high unemployment figures from which we suffer at present and which every noble Lord on all sides of the House immensely deplores. Undoubtedly, they work that way. They work that way for the reason that—and I think the noble Lord, Lord Rochester, with whose speech I wholly agree, indicated this—the main field for additional employment at present is with the smaller businesses. It is precisely those businesses which are most deterred from taking on additional labour by the general provisions of the Acts and by the two particular provisions to which these orders apply, yet that is the area which anyone who has studied the matter knows is the area which offers the best hope of immediate alleviation of our employment problems.

As the noble Lord, Lord McCarthy, said, it may be that some of the fears of these small employers are unfounded and that, if they had the advantage of employing the noble Lord, they would be so knowledgeable that they would be less deterred. I would not dispute that there might be such an element in their thinking, but it is only an element. However, with respect to the noble Lord, the House must face the fact that this is a deterrent to the provision of additional employment, and if the provisions of this Act doom even a dozen people to unnecessary unemployment, in my view it is incumbent on the Government to seek to modify its operation so as to take away that effect. There is—and I shall recall this to the noble Lord—an analogy to be found in the well-meaning provisions included by a whole variety of Governments in landlord and tenant legislation. The cumulative effect of that legislation was virtually to destroy the provision of rented accommodation by private owners. The amount of accommodation lost to people who needed it, as a result of that legislation, was—as those who, like myself, have had some concern in the property field know—very substantial indeed.

There is a warning under this newer legislation as to the effect on the now crucial question of unemployment. Therefore, I very much welcome these orders. I commend the energy which has caused the Government to bring them forward before the end of this Session. I hope your Lordships will accept them, and I hope and believe that they will make a contribution, however modest, to the problem that concerns us all—the employment of our people.

4.21 p.m.

Baroness SEEAR

My Lords, I do not in the least intend to disagree with the substance of what has been said by my noble friend Lord Rochester. I accept the reasons that lie behind these variations. But I want to underline what the noble Lord, Lord McCarthy, has said about the profound ignorance among many small employers because they are extremely busy, because they are occupied with a great many other matters, because the legislation is often quite difficult to follow, and not only the legislation but the procedures.

Those of us who are at all in close touch with the way industrial tribunals work know that again and again the small employer falls down on procedure. The Government are really moving these variations because so many people do not understand the extent to which it is perfectly possible to get dismissals where there is good ground for dismissal. There is a widespread belief, quite fallacious, that you cannot get rid of anybody. This is repeated up and down the country. If no counter action is taken and this belief continues as at present, then a great many employers will go on employing people that they really ought not to be employing, because it is deeply entrenched in their mind that you cannot get rid of people.

If the Government are going to take this action now in order to relieve the burden on the small employers, there ought to be concomitant action to try to get over to the small employer what can be done, and that in fact a great many people successfully get dismissals carried through where there are good grounds. This is not understood. I very much support the noble Lord, Lord McCarthy, on this. It is not understood by a great many people that this is in fact the position.

4.23 p.m.


My Lords, I welcome these orders and I also support the speeches made by the noble Lord, Lord Rochester, and the noble Baroness, Lady Seear, because I am speaking on behalf of small businesses. Just over a year ago I wrote a letter to The Times which said that, although there was the possibility of an improvement in the economy—that is rather surprising these days, but apparently it was the case then—the expansion of small businesses would be very limited because they would be unlikely to take on additional employees whom, once the boom was over, they would be unable to dismiss without making huge redundancy payments at a time when their cash flow would be squeezed by tax on their higher profits.

Unfortunately—or, perhaps, fortunately —I mixed up the provisions of the then Employment Protection Act and the Redundancy Payments Act and, sure enough, I received a public reproof from the then Minister at the Department of Employment, Mr. Harold Walker. I waited to see if any businessmen would come to my rescue. They did, and I want to quote from one of the letters printed. It was signed by five members of the Union of Independent Companies' Standing Committee on Employment, and it lists some of the legislation with which employers are required by law to be familiar and to obey.

In addition to the Redundancy Payments Act 1965, they are—and there is quite a long list which I will read out—the Disabled Persons Acts 1944 and 1958; Statistics of Trade Act 1947; Factories Act 1961; Training Act 1964; Race Relations Acts 1965 and 1968; Redundancy Rebates Act 1969; Industrial Relations Act 1971; Contract of Employment Act 1972; Employment and Training Act 1973; Social Security Act 1973; Health and Safety at Work Act 1974; Trade Union and Labour Relations Act 1974; Employment Protection Act 1975; Social Security Pensions Act 1975; Equal Pay Act 1975; and the Sex Discrimination Act 1975. Those are the Acts listed in that letter, which goes on to say that the authors do not find it surprising that even those responsible for scrutinising the legislation—which presumably was me—should be confused by its mass and complexity.

Dare I say that my confusion arose because we were about to pass the Employment Protection (Consolidation) Act 1978 which does include, in Part VI, a chapter on redundancy payments? This last Act has 191 pages, and one would have thought that a Consolidation Act would consolidate—but, as is demonstrated by these two orders, the first one refers to the Employment Protection Act 1975 and the second to the Employment Protection (Consolidation) Act 1978. The Employment Protection Act 1975 itself has 208 pages. In fact, the 1978 Act has repealed parts of the Redundancy Payments Act 1975; parts of the Employment Protection Act 1975; a part of the Social Security Act 1973; a part of the Employment and Training Act 1973; parts of the Trade Union and Labour Relations Act 1974; a part of the Race Relations Act 1976—which my businessmen had not picked up—and, thank goodness!, the whole of the Redundancy Rebates Act 1969.

How can we expect small businessmen to comprehend that amount of legislation? I am a member of the National Federation of Self-Employed and Small Businesses which publishes a monthly newspaper, First Voice. That Federation has recently carried out a survey among its members, the results of which are published in the July edition. Among the questions asked were: In the past five years have any particular pieces of legislation helped your business? Sixteen per cent. replied, Yes; 82 per cent., No. Of the 16 per cent., stock appreciation relief and raising the VAT threshold from £5,000 annual turnover to £10,000 were the two most popular subjects mentioned.

The next question was: In the past five years have any particular pieces of legislation damaged your business? Seventy-one per cent. replied, Yes; 26 per cent., No. Of the 71 per cent., Employment Protection was named by over 50 per cent., and VAT by 41 per cent. My Lords, until the Government can relieve the small businessmen of the mountain of restrictive legislation which weighs them down, we are not going to see the quick expansion in small businesses which is absolutely essential if we are to conquer unemployment.