UNFAIR DISMISSAL (INCREASE OF COMPENSATION LIMIT) ORDER 1979 (Hansard, 27 November 1979)

The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie)
My Lords, I beg to move that the draft Unfair Dismissal (Increase of Compensation Limit) Order 1979, which was laid before this House on 20th November be approved. I shall speak to the draft Employment Protection (Variation of Limits) Order 1979, which was also laid before the House on 20th November.
I am grateful to the House for allowing me to take both these orders at the same time. Perhaps 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. I should like to speak first to the draft Employment Protection (Variation of Limits) Order 1979. This order has been laid before you in accordance with Section 148 of the Employment Protection (Consolidation) Act 1978, which requires the Secretary of State to carry out each year a review of the limits to certain payments made under the Employment Protection (Consolidation) Act 1978. This is the third review since the legislation was introduced in 1975. The limits relate to guarantee payments to workers on short-time and temporary lay-off; and to the weekly earnings limit laid down for the purpose of calculating redundancy 367 payments, unfair dismissal awards and certain debts in relation to the insolvency provisions of the Employment Protection (Consolidation) Act.
The Secretary of State for Employment under the Employment Protection Act has to take account of three factors in carrying out this review and in reaching a decision. They are: first, the general level of earnings obtaining in Great Britain at the time of the review; secondly, the national economic situation as a whole; and, thirdly, such other matters as he thinks relevant. If, as a result of the review, the Secretary of State considers that any of the limits should be changed he must lay before each House the draft of an order giving effect to his decisions, and where he decides that a limit should not be varied, he must lay before each House a report giving his reasons for not varying those limits, and this report is laid simultaneiously with the orders.
As part of the review, the Government consulted a wide range of organisations for their views of the limits. In the light of these consultations we have decided that all the limits of payment covered by the review ought to be increased, and the proposed changes are set out in the order. If the order is approved in both Houses the changes to the limits will come into effect on 1st February 1980. This follows the established pattern. As I have just mentioned, in reaching decisions on the limits, the Secretary of State has to take into account the general level of earnings obtaining in Great Britain at the time of the review. The August figure for this, which has now been confirmed, showed an increase of 16.4 per cent. over the previous 12 months. The provisional figure for September has been set at 14.4 per cent. The Government also have to take into account the national economic situation as a whole and we would wish to strike a fair balance between the interests of employees and the ability of employers to pay.
Accordingly we propose to increase the daily limit on guarantee pay from £7.25 to £8 (an increase of 10.34 per cent.) and to increase the limit on weekly payments from £110 to £120. For redundancy payments, this means that the new 368 maximum redundancy payment under the statutory provisions will be £3,600, that is 30 weeks at £120, which will be the amount due to a man of 61 or over who has served 20 years and is entitled to 1½ weeks' pay for each year of service.
The increase in weekly limits also applies to the basic award of compensation for unfair dismissal. This part of an unfair dismissal award is intended to reflect broadly the amount of redundancy payment which would have been received by an employee if he had been made redundant instead of being unfairly dismissed, and it follows, therefore, that the limit should remain in line with the redundancy payments earnings limit. The new maximum in the basic award therefore remains exactly the same as the maximum redundancy payment of £3,600. The additional award which a tribunal may award where an employer has refused to comply with an order for reinstatement or re-engagement is also currently subject to a £110 weekly earnings limit, and that, too, is increased to £120. We have decided not to increase two of the limits on guarantee pay; namely, the specified number of days in any relevant period, and the length of that relevant period. The reasons for this decision are given in the report which is laid at the same time. To sum up, the increases take account of the increase in average earnings, but moderate those increases to take account of the overall economic situation. I trust that they commend themselves to the House.
I now turn to the other order for which I seek your Lordships' approval, the draft Unfair Dismissal (Increase of Compensation Limit) Order 1979. This has been laid before the House in accordance with Section 75(2) of the Employment Protection (Consolidation) Act 1978. It revokes the Unfair Dismissal (Increase of Compensation Limit) Order 1978, which set the limit on the compensatory award for unfair dismissal at £5,750 and raises that limit from £5,750 to £6,250. The limit is not subject to annual review, but it may be raised from time to time, and the Secretary of State judged it right at this time also to increase this upper limit by a modest amount to take some account of the effects of inflation since it was last revised.
369 I should remind the House that the compensatory award is given in addition to the basic award for unfair dismissal, and is tailored to the individual employee's loss. The limit will apply not only to unfair dismissal compensatory awards but also to compensation which may be awarded by industrial tribunals in cases where complaints of discrimination in employment under the Sex Discrimination or Race Relations Acts have been upheld. I likewise hope that this modest increase will be acceptable to the House. My Lords, I beg to move the order standing in my name on the Order Paper.

Lord WALLACE of COSLANY
My Lords, first may I thank the noble Earl, Lord Gowrie, for his detailed explanation of both orders. Of course, it is extremely convenient to deal with them together. My position tonight is different from that of this time last year, because 12 months ago I introduced similar orders showing a 10 per cent. increase based on the average increase of some 15 per cent. in the level of earnings, but also taking into account, as the noble Earl and his Government have done, the national economic situation as a whole.
Speaking then for the Opposition, the noble Earl was very critical of both orders. He did not like them and wanted them taken back, and he made great play over the Labour Government's pay policy being 5 per cent., whereas the increase was 10 per cent. He also referred to inflation, which was then running at 7.8 per cent. and was forecast by the Treasury experts to rise to just under 10 per cent. Great play was also made by the noble Earl, and many other noble Lords on the Opposition Benches, about the so-called "sleeping worker" and the need for a review of the Employment Protection Act. Altogether on that occasion they had a great field day. Maybe there was the scent of blood in the air, because of a possible general election.
Since then, things have altered for the worse; at least, that is the view on these Benches. We have a different Government, there is now no outwardly visible pay policy, large pay claims are now 370 emerging and inflation has more than doubled and is set to increase further. The responsibility of office, facing facts and making decisions have a chastening effect. I must, however, be fair to the noble Earl, who, after all, has announced with his usual efficiency and dignity the decision of his right honourable friend the Secretary of State. I make the increases to be in the region of 9 per cent.—not overgenerous but, in the circumstances, reasonable. The increases can be drastically affected by inflation and the worsening of the serious economic situation by February next, when they come into operation. Quite naturally, I hope that this will not be the case, and I therefore accept the orders as being reasonable, bearing in mind all the unfortunate circumstances prevailing.
I have just a couple of slightly probing questions, in view of the previous debate last year. Can the noble Earl say whether any review of the Employment Protection Act is likely to take place and, if so, what form of consultation with unions and management is contemplated? On another point, is there any possibility that legislation on short-time working will be introduced and, if so, when? Apart from that, I give my paternal blessing to these orders and see no objection to their being carried into effect.

§ Lord ROCHESTER
My Lords, we on these Benches should like to join in thanking the noble Earl, Lord Gowrie, for his clear explanation of these two orders. I do not propose to revert to the situation a year ago, when I seem to recall playing some small and, I am sure, wholly emollient part in the proceedings. Nor, I think, is it appropriate to revert to the debate that we had more recently last July on two other orders concerning employment protection and unfair dismissal and affecting small employers; one increasing the qualifying period for unfair dismissal, and the other reducing the compulsory period for consultation with trade unions in the case of certain redundancies. On that occasion, on balance, my noble friends and I supported the Government, because of our over-riding concern for the welfare of small businesses.
371 There are, however, as I understand it—and this has a bearing on what the noble Lord, Lord Wallace of Coslany, has just put in the form of a question—other proposals for amending employment protection legislation on which the Government are still consulting with interested parties, among them some having specifically to do with cases of unfair dismissal in small firms. Speaking at this stage only for myself and not really looking to the noble Earl to make any immediate response—for I have given him no notice of this and it is not strictly relevant to this discussion—I should like to take this opportunity to say that, if more favourable treatment is accorded to certain firms simply because they employ fewer people than other firms, then I see certain difficulties arising including, even, potential disincentives to growth beyond the point at which the numerical cut-off applies.
Having said that as to these two orders, like the noble Lord, Lord Wallace of Coslany, I find them altogether unexceptionable. That being so, I am glad on behalf of my noble friends to support them from these Benches.

The Earl of GOWRIE
My Lords, I am grateful for the comments of both the noble Lord, Lord Wallace of Coslany, and the noble Lord, Lord Rochester, and for the relatively uncontentious way in which these innocent orders have been achieved.
The noble Lord pointed out that last year I had teased the Government that they were increasing payments by 10 per cent. at a time when they were sternly going round and urging people to settle at 5 per cent. I think that was a legitimate tease. The noble Lord's point—namely, that these increases are not out of line with the present Government's pay policy—is true because their pay policy does not make any statistical or other norms for levels of payment. It is simply concerned that people should suffer the consequences of making irresponsible, excessive or unrealistic pay claims.
It is true, however, that in setting these orders my right honourable friend has been, consistent with our policy, squeezing inflation out of the system. Although they 372 are in aggregate a little more generous than 9 per cent. they are rather less than the "going" wage round at the moment.
Both noble Lords mentioned reviews of the Employment Protection Act—in the case of the noble Lord, Lord Rochester, specifically in relation to small businesses which, as he very reasonably conceded, are not directly affected by these present orders. It is no secret to the House that the Government have recently been engaged in very extensive consultations about amendments to the employment protection legislation, and included in the Government's proposals, which were published in a working paper on 25th September, is a proposal aimed at rationalising the basis for the payment of guarantee pay by substituting a rolling three-month period for the present fixed three-month period. Since again it is no secret that that proposed legislation is now, or very shortly will be, in a form in which it will be laid before another place, it would not be right for me to take up the noble Lord's invitation to comment today on other amendments to the employment protection legislation. That said, I should like to repeat my thanks for the uncontentious way in which this modest measure, to try to protect to some degree from inflation some of these financial limits, has been received.