§ 2.33 p.m.
The Minister of State, Department of Employment (The Earl of Gowrie)My Lords, I beg to move that the draft Employment Protection (Variation of Limits) Order 1980, which was laid before the House on 2nd December, be approved.
The draft order has been laid 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 relating to certain payments made under that Act. This is the fourth review since the legislation was introduced in 1975. The relevant limits relate to guaranteed payments to workers on short-time and temporary lay-off; and to the weekly earnings limit laid down for the purposes of calculating redundancy payments and the basic and additional unfair dismissal award, as well as certain debts in relation to the insolvency provisions of the principal Act.
The Secretary of State for Employment has by law to take account of three factors in carrying out this review and in reaching a decision. They are: (i) the general level of earnings obtaining in Great Britain at the time of the review; (ii) the national economic situation as a whole; and (iii) 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.
The upper limit of the compensatory award for unfair dismissal (which also applies to compensation for race and sex discrimination and is relevant to compensation payable in cases involving unreasonable expulsion or exclusion from a trade union) is not subject to annual review under the principal Act.
As part of the review, the Government consulted a wide range of organisations for their views of the limits including the upper limit. In the light of these consultations we have decided that the limits of payments for redundancy, for basic and additional rewards for unfair dismissal, and payments under the insolvency provisions of the Act, should be increased; and the proposed changes are set out in the draft order.
If the order is approved in both Houses, the changes to the limits will come into effect on 1st February 1981. This follows the estalished pattern. The order was approved in the other place on 8th December. The Government did in fact review also the upper limit of the compensatory award for unfair dismissal, 1248 which was increased both last year and the year before, but in the light of these consultations we have decided against any increase.
As I have just mentioned, in reaching decisions on the limits one of the matters which the Secretary of State has to take into account is the general level of earnings obtaining in Great Britain at the time of the review. The latest month for which final figures are available is August. The August figure showed an increase of 21 per cent. over the previous 12 months. The provisional figure for October has been set at 20 per cent. and this shows a considerable drop on the provisonal figure for September which was 26 per cent. So one can see from those figures that we are reacting in fact to a falling earnings curve.
The Government also have to take into account the national economic situation as a whole. We have to weigh the need to protect employees, on the one hand, against the need, on the other hand, to keep within tolerable bounds the burdens which the Act imposes on employers when the importance of keeping employers in business is today of course so vital. Like the Labour Government before us, the Government have concluded that economic considerations prevent our increasing the weekly earnings limit to an extent that would fully restore its original purchasing power. We have decided that the maximum increase in these limits that can be justified in the present economic circumstances would be around 8 or 9 per cent. Accordingly, we propose to increase the limit on weekly payments from £120 to £130—an increase of 8.3 per cent. For redundancy payments, this means that the new maximum redundancy payment under the statutory provisions will be £3,900, that is, 30 weeks at £130, 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 to £130 will also apply to certain payments under the insolvency provisions of the principal Act. The additional cost to the redundancy fund for the year 1981–82 is expected to be about £2 million.
The increase in weekly limits also applies to the basic award of compensation for unfair dismissal. I would remind your Lordships that this part of an unfair dismissal award is intended to reflect broadly the amount of redundancy payments which would have been received by an employee if he had been made redundant instead of being unfairly dismissed. This is the reason why the Act links these limits. 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 £3,900. 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 £120 weekly earnings limit, and is increased to £130.
We propose to increase the daily limit on guarantee pay from £8 to £8.75, an increase of 9.4 per cent. 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 was laid at the same time. They are, briefly, that the maximum number of days for which 1249 payment is required to be made—that is, five days—still seems to strike a fair balance between the employer's obligations and the employees' rights. With regard to the relevant period, the fixed period prescribed by Section 15 of the 1978 Act was amended to a rolling period by Section 14 of the Employment Act 1980 which came into force on 1st October. It would not, therefore, be appropriate to make any further changes at this review. To sum up, the increases take account of the increases in average earnings, but moderate those increases to take account of the economic situation and the present earnings trends. I trust that they commend themselves to the House. I beg to move.
§ Moved, That the draft order laid before the House on 2nd December be approved.—(The Earl of Gowrie.)
§ Lord Wells-PestellMy Lords, in the normal way my noble friend Lord McCarthy would be dealing with the matter that is now before your Lordships' House, but academic responsibilities prevent his attendance here this afternoon. I have had an opportunity of discussing the content of this order with him and getting his expert guidance on the matter. I think that I could say that this stems, as the noble Earl, Lord Gowrie, has said, from the Employment Protection (Consolidation) Act 1978 which lays out very clearly what action should be taken, although it is left to the Government to fix amounts. As the noble Earl has gone into this matter very deeply—and, if I may say so, very clearly—we have no reservations with regard to it at all. I merely say that we support the order.
§ On Question, Motion agreed to.