HL Deb 25 July 1979 vol 401 cc1970-84

Debate resumed.

4.53 p.m.


My Lords, if we may return to the debate upon the orders, at least we know where we are, and we must look at the orders we are asked to debate in that context. We are in a context of " squeezing out ", of " unpleasant measures "; and the Budget and the other statements made by the Government make it quite clear who is going to bear that unpleasantness. These orders are not simply, as the noble Lord, Lord Boyd-Carpenter, suggested, technical matters. Indeed, I am quite astonished that we are being asked to debate both of them at the same time. I have done my best to combine two different sets of remarks into one, but it seems to me an astonishing procedure to discuss two such different orders in the same debate. However, that is what your Lordships wish.

There is another preliminary point. Before the Statement from the Government Front Bench the debate had become a debate about small businesses. These orders are not orders about small businesses. They could have been. Taking the redundancy consultation order, under Section 106(4) of the Act of 1975 the noble Earl could have moved an order restricting the consultation rights of trade unions in small businesses, but he did not. The order which he is moving applies to all businesses, big and small. Under Section 149 of the Employment Protection (Consolidation) Act 1978, he could have moved an order varying the description of workers dealt with by way of different qualifying periods so as to apply special rules to small businesses. But he has not done that. He has put before us two orders which apply to those employed by businesses big and small—and I want to come back to the small business point later, if I may, in my remarks upon that.

To take first the unfair dismissal order, which we are asked to discuss with the other one, what the noble Earl is doing is asking us to agree that no worker shall be safe from unfair dismissal until he has worked one year for an employer. That, now, after the experience we have had of the six months' qualifying period, is an invitation to management to take less care about recruitment and personnel policies. I shall come to the surveys in a moment—and, really, your Lordships' House must not pass these surveys by with vague talk about " it is well known that … "—and I want to come to the actual figures. But all the surveys show that two things have come about partly by reason—and, of course, the law is only partly responsible for these things—of the employment legislation.

First of all, the unfair dismissal laws, especially, have encouraged an improvement in management practices and procedures before the point of dismissal is reached. Secondly—and this is equally clear—an improvement has taken place in management practice in the way of taking care before recruiting a worker who might turn out to be unsuitable. It is now quite clear that the longer the qualifying period is made the less incentive there is, so far as the law is concerned, for good management practice on either point.

Of course, many good managements will go on with good policies, but why encourage the bad managements? Furthermore, of course, strongly unionised workers will not accept this reduction in their rights. A strong union, told that its workers are now going to be protected against unfair dismissal only after a year, when they have got used to the law providing protection after six months, will say, " All right; you alter your law. But you try to dismiss one of our workers after six months and we shall use our muscle;" and if there is more industrial strife arising from dismissals the Government will be responsible as a result of having moved this order in the House today.

There is no reason to encourage the bad employer. Indeed, in one of the surveys which I wish to cite later—the survey prepared by Mr. Daniel and Miss Stilgoe published by the Policy Studies Institute in 1978 as The Impact of Employment Protection Laws—there is a quotation which struck me very forcefully as I read it. It was from a manager who, speaking about the 26-week qualification period before unfair dismissal comes into play, said this—and I quote from page 71 of the publication: If you cannot find out within 26 weeks if a person is suitable for the job, then you cannot be much good. You should be able to assess a person's ability in that time ". My Lords, it is also quite absurd to suggest that the employment protection laws in the form of the unfair dismissal provisions have brought about a situation where no-one can be dismissed. As my noble friend Lord McCarthy has suggested, there are simply legends about this legislation—promoted by the Conservative Party and certain other organisations—which are just untrue. To take 1977, only one-third of the applications reaching the industrial tribunals succeeded, and they included a very small number of actual dismissal cases. Secondly, the average compensation was only £400. Thirdly, only 200 out of the 4,200 awards made were for reinstatement. As my noble friend on the Front Bench has suggested, the risk of a case of unfair dismissal is very small, and yet this legend has been spread that industrial tribunals are there as some kind of institution prejudiced against the employer, especially the small employer.

In the Guardian of 21st August 1978, a top official who asked to remain anonymous is quoted as saying: There is a crazy theory that we are prejudiced in favour of workers ". He added, summarising the work of the industrial tribunals—and I quote again: For heaven's sake do not say who told you this, but the most important thing we have done so far is to teach employers manners ". We in this country were late in introducing unfair dismissal legislation. It was to have been introduced by the Labour Government in 1970 and it was taken up, to their credit—although part of a Statute which was disastrous in other respects—by the Conservative Party in 1971. Why we should now relieve employers from the necessity of good manners in dismissing, after 10 or 11 months, those who have only their labour to sell, I cannot see—except in the context of the Government's general policies; because the workers who will be hit worst will be those who are most weakly organised. They will be, as my noble friend Lord McCarthy said, the non-unionists; they will be the women workers, whom it is difficult for the unions to reach, and they will be the seasonal and casual workers who will find it hard to build up the weeks of qualification. The only merit that this order may have is that it may help increase trade union recruitment. It has no other virtue at all. It is not even just and fair in its transitional provisions.

Article 3 of the order gives the new qualification of 52 weeks for dismissals the effective date of termination after 1st October. A worker with 26 weeks' service whose dismissal takes effect on 30th September can sue for unfair dismissal and one who is dismissed a few days later cannot sue. Take the worker dismissed today who has 41 weeks' service behind him and who is given ten weeks' notice. That notice runs out on 3rd October and he is to have the right to sue for unfair dismissal until 1st October and not after; because then he will have only 51 weeks' notice. If the Government had an elementary concept of justice to the workers, they would have given a 26-week transitional period before the order came into effect.

Turning to the statistics which were very vaguely spoken of by the noble Earl—

The Earl of GOWRIE

My Lords, would the noble Lord be kind enough to give way? I was not bandying around any statistics.


My Lords, in that case, the noble Earl had better listen to the statistics. It is often said—and I understood the noble Earl to be supporting this—that the employment laws are antipathetic to recruitment, and that the consultation redundancy period is also antipathetic to the recruitment of workers. This has been investigated by chambers of commerce and certain employers' organisations. But the only two independent investigations of this matter have been: first, the survey by Daniel and Stilgoe in 1978 of 301 firms employing from 50 to 50,000 workers; and, secondly, the Opinion Research Centre survey, also carried out in 1978, of 301 firms employing less than 50 workers. What did they find?

The Daniel and Stilgoe survey (on page 55) shows that only 12 firms out of 301 gave an answer suggesting that the consultation period for redundancies had any effect at all on their practices. Indeed, they had already adjusted their practices to the terms of the existing legislation. In the 1978 Opinion Research Centre survey on small firms only 1 per cent. of the firms surveyed claimed spontaneously that the laws about redundancy made them less likely to take on more staff. If the noble Earl does not have the statistics, they are in paragraph 21 of that survey.

The Earl of GOWRIE

My Lords, the noble Lord must not misrepresent me. I did not say that I did not have the statistics, but that I was cautious in my use of them.


My Lords, the noble Earl will deal with that in his reply. I am saying that, as far as the statistics exist, they do not form any platform whatever for a change in the law.


My Lords, I quoted some statistics from the National Federation of the Self-Employed. Those statistics cover 1,000 members; and I think that that is a little larger than either of the statistics the noble Lord has quoted.


My Lords, the two surveys I quoted were carried out by independent investigators and they covered some 600 firms.

Coming to the unfair dismissal investigation, the Daniel and Stilgoe survey ended by saying (on page 77): There was very little sign in our findings that employment legislation was inhibiting industrial recovery or contributing to the high level of unemployment by discouraging employers from taking on new people ". Later they said: We can reject unequivocally the crude form of that criticism with regard to the sectors of employment that we studied ". As far as small businesses are concerned with unfair dismissal, the Opinion Research Centre survey—with independent and severe standards of surveying—showed that only 4 per cent. of those approached mentioned unfair dismissal legislation as a Government measure that caused difficulties as against the 22 per cent. who suggested that their real difficulty lay with VAT. That was in 1978. If the Government want to help small businesses, then let them again look at VAT instead of introducing measures of this kind.

What has happened is that the Conservative Party and their associates have gone round the country saying to businessmen, " Look at all those terrible laws! " The noble Lord read out a list of them. " Look at that long list! Is it not terrible? Are you not worried? " Now, having stirred up the complaints and encouraged those complaints, they will not even discuss, it seems—although I hope the noble Earl in his reply will discuss—the statistics produced by independent surveys in 1978.

As far as the redundancy consultation measure is concerned, I am afraid that your Lordships are being misinformed if you think that this is merely a modest adjustment of the law. What the consultation order does is to alter a period which was very carefully thought out. As the noble Earl said in his introduction, it still requires the employer who dismisses 100 or more workers within 90 days to give 90 days' consultation. This order will reduce the period of consultation from 60 days to 30 days to an employer who is going to dismiss between 10 and 99 men. Do the Government think that 60 days was a figure conjured out of the air or imposed on the previous Government by the whim of some trade union? It was thought about very carefully. The reason it is there (and the noble Earl will deal with it in his reply, I hope) is because it forms an incentive against " salami tactics ", launching redundancies in smaller batches, when the employer is really thinking of a larger number.

May I give an example. An employer who wishes to dismiss 198 workers, if he dismisses them altogether, can expect consultations Day 1 to Day 90. Under the old law, if he dismissed 99 on Day 1, he would be in for a 60-days period of consultation; and the best (or the worst) that he could do would be to propose to dismiss the other 99 on Day 31—in which case he would be in for another 60-days period from Day 31 to Day 91. It would mean that between Days 31 and 61, he would have to discuss with the trade unions the redundancies as a whole; and he would be discussing both groups; so that although he would escape the 90-day period, he would still have to discuss the redundancies as a whole.

If this order is passed, all of that changes. If this order is passed, the rules about 90 days' consultation for 100 or more may remain; but if he wishes to dismiss 99 workers on Day 1, then he is in for 30 days consultation; and if he dismisses another 99 on Day 31, then he is in for another 30 days' consultation. It is quite clear that the employer who wishes—and many will not; but the bad employer is being encouraged to do so, if it suits him—may launch small batches or packages by " salami-type " tactics of redundancy which will effectively prevent real consultation on the matters mentioned by Lord McCarthy and which the Act of 1975 was meant to preserve.

The noble Lords, on the Government Front Bench surely do not think that the trade union movement will regard this as a mere technical adjustment. It is a major incursion into the floor of rights of workers which was put on the statute book in 1975—just as is the variation of the unfair dismissal qualification period. The same applies—and this has not been mentioned before—to the notification to the Secretary of State; because the order reduces the period to 30 days for the notification to the Secretary of State; and so the same incentive is given to notify the Secretary of State in small batches of redundancies rather than the full number.

My Lords, there are three other matters that I wish to touch on briefly but which I should like to bring to the attention of the noble Earl to see what will be his replies. If he is really worried about small businesses, surely it is true that a large number of the difficulties of small businesses in connection with redundancy consultation are in many, many cases solved by Section 99(8) of the Employment Protection Act 1975, whereby if there are special circumstances the employer is absolved from his duty to consult within a certain number of days and must do what is reasonably practicable.

I was going to describe to your Lordships the case of Association of Pattern-makers v. Kirvin Limited [1978] Industrial Relations Law Reports, page 318. That was a case of a small firm which eventually was put into the hands of a receiver. But I am sure that the noble Earl, who likes statistics, knows of the case although he has not yet used it. That was a case where a small business went downhill and eventually was put into the hands of a receiver. The courts, which are leniently interpreting Section 99(8), said that enough had been done in the few talks with the unions to do all that was reasonably practicable, special circumstances applied and the employer was not in breach of the section. What I am saying is that the courts are not applying the law which is there now in any unreasonably way where there are special circumstances.

Next, the problem of the protected award. As the noble Lord, Lord McCarthy, suggested, if an employer is in default in not consulting properly with a union, the remedy, after a trade union has taken a case to the industrial tribunal, is for the individual employee to sue for a sum of compensation which can be measured by and up to the maximum number of days in the protected period. The order is quite straightforward in reducing that period from 30 to 60 days in this respect regarding consultation. Do the Government not realise that all experience so far shows that a short period of protected award of about 28 or 30 days leaves almost nothing of the compensatory protected compensation? That is because of Section 102 of the Act. Section 102 states that various sums must be set off against the compensation for lack of consultation. They include payments made to the employee under his contract of employment; damages or wages in lieu of dismissal, and any amount which the employee would not have been paid under the contract of employment for any part of the protected period.

Most workers who find they have a protected period of only 28 days find that their protected award compensation is reduced almost to zero. For these people, up to 100 workers being dismissed, the Government are also knocking out the possibility of a meaningful protected award. If this order is passed in this form as the unfair dismissal order, the reaction of the working people in Britain is likely to be very strong. The redundancy consultation order, as I have suggested, will not be accepted by strong unions, which will go on demanding and will get from good management—longer than 30 days' consultation on the proposed dismissal of 99 workers. Good management will place itself ahead of the squalid standards that this Government are going to put on the statute book.

So far as unfair dismissal is concerned, why is it necessary to give the employer the opportunity of forgetting even good manners in the second six months of a probationary period of employment? I suggest it has been made clear to us today why these orders are being passed: we know that there is going to be more unemployment; it has to be made easier for employers to dismiss. It has very little to do with small businesses. If it had to do with small businesses the noble Earl would be moving orders about small businesses. If he likes to suggest that he has not the power under the two sections of the two statutes that I have mentioned, no doubt he will say so in winding up. If he accepts that he has that power, if small businesses are the question, why has he not put small business orders on the Order Paper for your Lordships' House? It is not about small businesses. These orders are about employers of small and big businesses. They are about erasing basic certain rights which the 1975 and 1978 Acts established for workers in this country. They are a major step backwards; but they are necessary because of the general policies of the Government putting them forward, they knowing that they have to make it easier to dismiss in the period of rising unemployment which they are going to create.

5.15 p.m.


My Lords, we have had a fairly considerable debate on these orders and if your Lordships will give me leave, it is now time for me to make a few short remarks in winding up. We may then have to proceed to take a view about these matters. I thought, as I listened to the eloquence and indeed the passion of the noble Lord, Lord Wedderburn of Charlton, that " His Lordship did protest too much ". And looking for motives here I am aware that he is if, not the only begetter, at least a principal architect in the Labour legislation of the last Administration.


My Lords, will the noble Earl allow me to get the record straight? We are discussing the Acts of 1975 and 1978 and I state publicly and for the record that I played a very small part in advising on those two statutes.

The Earl of GOWRIE

My Lords, the noble Lord is much too modest and I am sure that the House will pay attention to what he has said. But that is not the opinion of most of those on his own side who were concerned with the legislation. They paid tribute I think publicly on many occasions to the work he had done. Maybe they were wrong in so doing; but nevertheless that is all of course that I have to go on.

I have to confess that my feelings were a little hurt though I am reasonably robust and thick-skinned, as he pursued his diatribe against me because I think the noble Lord is very little aware of the enormous amount of pressure on this Government to reduce so much of this disruptive, over-protectionist legislation and throw it out altogether. What I am engaged in doing is modestly, as my noble friend Lord Boyd-Carpenter said in a remarkable contribution, restricting some of its effects within periods of time which were suggested by the initial Labour Government which brought in these measures. I mean by initial the last Wilson Administration.


My Lords, is the noble Lord saying that what these people say is what he believes, or is he saying he does not believe this and would like to take this occasion to say that what they are saying about the Employment Protection Act is quite wrong and grossly exaggerated?

The Earl of GOWRIE

My Lords, I am saying neither. We are presented with a large body of Labour law. As we said in Opposition, our aim is to try to get industrial legislation out altogether of the argy-bargy of party political debate. To do that means that we are looking for modest ways of amending of what we and many other people find to be the greatest enormities in the legislation passed at that time.

Why I said that my feelings were hurt is that in a way I am defending a lot of the law which noble Lords have thrown at us and about which there is widespread scepticism. Put it this way: It is not as if the economic record, the practical results of the legislation in this field of the last Government has been enormously successful in real terms. We are not facing, as my noble friend Lord Cockfield said when he made his Statement, a particularly rosy economic picture. Many of us feel that some of this legislation has had some connection with that.

I must say to the noble Lord, Lord McCarthy, who again gave a spirited and informed speech as one would expect from him from the Front Bench opposite on this subject, that it is irresponsible of him to try to relate the orders we are passing today to the wage round. The noble Lord is perfectly well aware, as is his noble friend Lord Wedderburn, that the statutory period of notice and con- sultation for redundancies of 100 or more employees, the larger firm, is 90 days and is not in any sense changed by these orders. It is not the smaller firm which sets the pace of claims in the wage round in the economy.

When the noble Lord, Lord McCarthy, opened his speech he was both emotional and emotive about the question that this would lead to the proliferation of dismissals. There are very clear dismissal procedures and redresses against unfair dismissal obtainable against all employees. In no sense do these orders which we are here debating alter these rights. They simply return the position to where it was under the Government led by Mr. Harold Wilson (as he then was) in 1974 and 1975 and now perhaps noble Lords may see why I was expecting less vigorous opposition on from the opposite side of the House than from my own side of the House. My Lords, I am sympathetic—


My Lords—

The Earl of GOWRIE

My Lords, I think I have given way quite enough today and we must now proceed to taking a view. I was impressed by the doleful litany that the noble Lord, Lord Spens, outlined to us of the legislation burdening the smaller businessman: the noble Baroness, Lady Seear, made the same point. I would point out to the noble Lord, Lord Wedderburn, and others that, so far as I know the noble Lord, Lord Spens, is no Conservative. He certainly does not sit on these Benches, and since I have been working in this House he never has.

We believe, in short, that employment legislation is in many respects tilted too

much in favour of employees. We have said that we shall amend this legislation to redress the imbalance and to ensure that it does not act as a disincentive to employers to create more jobs. However, I would say that the whole point of the orders procedure is to make slight adjustments in the legislation as and when necessary. If some of the dire effects with which the noble Lord, Lord Wedderburn, has tried to frighten us this afternoon—and I think he is totally alarmist in so doing—should come to pass, we are entitled under the orders procedure to make amendments to the situation should we wish to do so. In the meantime, until such predictions come to pass, and I do not think they will, I beg to move the first order standing in my name on the Order Paper.


My Lords, before the noble Earl sits down, since he comes and poses to us—and I am glad he does—as a friend of the Employment Protection Act, will he assure us that this is all he intends to do to the Employment Protection Act, or are we going to see reductions in the individual parts of the Employment Protection Act when the House reassembles?

The Earl of GOWRIE

My Lords, I made it perfectly clear in my opening statement that we are reviewing all the workings of this legislation. I now beg to move the first order standing in my name on the Order Paper.

5.23 p.m.

On Question, Whether the said Motion shall be agreed to?

Their Lordships divided: Contents, 162; Not-Contents, 74.

Alexander of Tunis, E. Bessborough, E. Craigavon, V.
Allen of Abbeydale, L. Blake, L. Craigmyle, L.
Alport, L. Bourne, L. Cranbrook, E.
Amherst of Hackney, L. Boyd-Carpenter, L. Crathorne, L.
Amory, V. Boyle of Handsworth, L. Cullen of Ashbourne, L.
Ampthill, L. Byers, L. Daventry, V.
Atholl, D. Caithness, E. Davidson, V.
Avebury, L. Carr of Hadley, L. de Clifford, L.
Avon, E. Carrington, L. De Freyne, L.
Balfour of Inchrye, L. Cathcart, E. De La Warr, E.
Banks, L. Clancarty, E. Denham, L. [Teller.]
Beaumont of Whitley, L. Clifford of Chudleigh, L. Digby, L.
Bellwin, L. Clitheroe, L. Drumalbyn, L.
Belstead, L. Cockfield, L. Dulverton, L.
Duncan-Sandys, L. Inglewood, L. Robbins, L.
Dundee, E. Kemsley, V. Rochdale, V.
Eccles, V. Kimberley, E. Rochester, L.
Effingham, E. Kinnaird, L. Romney, E.
Eldon, E. Lauderdale, E. Runciman of Doxford, V.
Elliot of Harwood, B. Lindsey and Abingdon, E. St. Davids, V.
Emmet of Amberley, B. Lloyd of Kilgerran, L. Sandys, L. [Teller.]
Evans of Claughton, L. Long, V. Seebohm, L.
Exeter, M. Lucas of Chilworth, L. Selkirk, E.
Faithfull, B. Luke, L. Sempill, Ly.
Ferrers, E. Lyell, L. Sharples, B.
Ferrier, L. McFadzean, L. Skelmersdale, L.
Forester, L. Mackay of Clashfern, L. Sligo, M.
Fortescue, E. Macleod of Borve, B. Soames, L. (L. President.)
Fraser of Kilmorack, L. Mais, L. Somers, L.
Gainford, L. Mansfield, E. Spens, L.
Galloway, E. Marley, L. Stamp, L.
Garner, L. Merrivale, L. Strathcarron, L.
Geoffrey-Lloyd, L. Meston, L. Strathclyde, L.
Glasgow, E. Milverton, L. Strathspey, L.
Glenarthur, L. Monck, V. Sudeley, L.
Glendevon, L. Monk Bretton, L. Suffield, L.
Glenkinglas, L. Monson, L. Tenby, V.
Godber of Willington, L. Mowbray and Stourton, L. Thomas, L.
Gowrie, E. Moyne, L. Thorneycroft, L.
Granville of Eye, L. Netherthorpe, L. Thurso, V.
Greenway, L. Newall, L. Torphichen, L.
Grey, E. Norfolk, D. Tranmire, L.
Gridley, L. Northchurch, B. Trefgarne, L.
Hailsham of Saint Marylebone, L. (L. Chancellor.) Ogmore, L. Vaux of Harrowden, L.
O'Hagan, L. Vickers, B.
Hampton, L. Orr-Ewing, L. Wade, L.
Hankey, L. Pender, L. Wakefield of Kendal, L.
Harmar-Nicholls, L. Pike, B. Ward of North Tyneside, B.
Hawke, L. Polwarth, L. Ward of Whitley, V.
Henley, L. Powis, E. Westbury, L.
Home of the Hirsel, L. Rankeillour, L. Wigoder, L.
Hood, V. Reilly, L. Willoughby de Broke, L.
Hylton, L. Richardson, L. Wise, L.
Hylton-Foster, B. Ridley, V. Young, B.
Ilchester, E.
Ardwick, L. Galpern, L. Pitt of Hampstead, L.
Aylestone, L. Gardiner, L. Ponsonby of Shulbrede, L.
Bacon, B. Gordon-Walker, L. Rhodes, L.
Bernstein, L. Goronwy-Roberts, L. Ritchie-Calder, L.
Blyton, L. Gosford, E. Sainsbury, L.
Boston of Faversham, L. Hale, L. Sefton of Garston, L.
Brimelow, L. Hatch of Lusby, L. Segal, L.
Brockway, L. Henderson, L. Stedman, B.
Brooks of Tremorfa, L. Houghton of Sowerby, L. Stewart of Alvechurch, B.
Burton of Coventry, B. Howie of Troon, L. Stewart of Fulham, L.
Campbell of Eskan, L. Janner, L. Stone, L.
Castle, L. Kaldor, L. Strabolgi, L.
Chitnis, L. Leatherland, L. Strauss, L.
Collison, L. Lee of Newton, L. Taylor of Gryfe, L.
Cooper of Stockton Heath, L. Llewelyn-Davies of Hastoe, B. Taylor of Mansfield, L.
Crook L. Longford, E. Thomson of Monifieth, L.
Darling of Hillsborough, L. McCarthy, L. Wallace of Coslany, L. [Teller.]
David B. McGregor of Durris, L,
Davies of Leek, L. Maelor, L. Wedderburn of Charlton, L.
Diamond, L. Melchett, L. Wells-Pestell, L. [Teller.]
Donaldson of Kingsbridge. L. Mishcon, L. Whaddon, L.
Dowding, L. Murray of Gravesend, L. White, B.
Fisher of Camden, L. Pannell, L. Wigg, L.
Gaitskell, B. Pargiter, L. Wilson of Radcliffe, L.
Galloway, E. Peart, L. Wynne-Jones, L.

Resolved in the affirmative and the Motion agreed to accordingly.