§ Lord LYELL rose to move, That the draft regulations laid before the House on 17th July be approved.
§ The noble Lord said: My Lords, during the passage in another place of the last Companies Bill the Government gave 951 an undertaking that they would use the powers in what is now Section 81 of the Companies Act 1980 to make regulations requiring disclosure by companies in their directors' reports of information concerning their policy in respect of the employment of disabled persons. The Government also said that they would use the period between Report and bringing forward the regulations to consult representative organisations concerned about the content of the regulations. Consultations have been held with, among others, the Manpower Services Commission, the National Advisory Council for the Employment of Disabled People, the Confederation of British Industry, the Consultative Committee of Accountancy Bodies and the Law Society. The Government are grateful for the advice received from all these bodies, which the Government have endeavoured to take into account in framing these regulations.
§ Companies will in future be required to disclose in their annual reports their policies towards employing disabled persons, covering such matters as recruitment, training and career development. Their policies in this respect will be open to public scrutiny and we believe that this will provide valuable support to other statutory provisions concerning the disabled, and contribute to the improvement of the employment prospects of disabled people.
§ The regulations require disclosure not only of the policies that apply when the company considers applications for employment from disabled persons, but also of what policies operate for the training, career development and promotion of disabled employees including those who become disabled while in the employment of the company. Thus all persons about to be employed or already employed by the company are catered for.
§ Before dealing with the individual regulations, I should explain that Section 454 of the Companies Act 1948, as amended by Section 81 of the Companies Act 1980, empowers the Secretary of State for Trade, by regulations made by statutory instrument, to alter or add to the requirements of the 1948 Act for disclosure of information in the directors' report which is required to be attached to the annual balance sheet of a company, laid 952 I before the company in general meeting and delivered to the registrar of companies where it is placed on the public file. Thus the information will relate to the financial year covered by that director's report.
§ Turning to the regulations, Regulation I is conventional. It states the title of the regulations and states that they shall come into operation on 1st September 1980. That is to say that the regulations apply to directors' reports prepared for financial years which begin on or after 1st September 1980.
§ Regulation 2 defines the terms used in the regulations. The Companies Act 1948 is commonly referred to as "the Act" in that it is the principal Act. The second paragraph of Regulation 2 defines a directors' report as that report which is required to be attached to the annual balance sheet of a company. The third paragraph provides that the use of the word "employment" in the regulations refers to employment to work in the United Kingdom; this is in line with Section 18(6) of the Companies Act 1967 which has the effect of not requiring companies to take into account employees working wholly or mainly abroad in calculating the average number of employees of a company and their aggregate remuneration. I hope that the House will agree that it is sensible for these regulations to apply to policies in the United Kingdom and not in respect of other countries where the statutory requirements and practice may be very different.
§ The fourth paragraph of Regulation 2 defines "disabled person". For the purpose of these regulations, the definition of "disabled person" will be the same as that used in Section 1 of the Disabled Persons (Employment) Act 1944. This is wider than that used in Section 6 of that Act which deals with disabled persons who are registered as disabled. Thus directors will be required to report on their policies for all disabled persons, whether they are registered as such or not. This is a point to which I understand that organisations consulted attach particular importance, and we can understand that. In addition to restating the operative date of the regulations, Regulation 3 states the size of a company that the regulations apply to. The Government have considered this matter very carefully indeed 953 and have concluded that the regulations should apply to companies who employ more than 250 people. There are a number of reasons why we have come to this conclusion. First, the statutory duty on employers is to employ at least 3 per cent. registered disabled persons. Hence, any lower level than 250 would require many companies to make statutory policy statements in relation to a very small number of employees indeed and would result in a disproportionate burden on small companies. It is in any event particularly in companies employing more than 250 employees that a clear and distinct policy on the employment of disabled persons is most likely to be evolved. The Government recognise fully the desirability of small companies doing as much as possible for disabled persons and I hope their policies, whether published or not, will similarly reflect good practice in this matter.
§ Your Lordships will note that there are no provisions for the application of the regulations to groups. This is intentional; the regulations apply to all individual companies, whether in a group or not, where they meet the relevant size criteria. Companies with subsidiaries are not required to report on the group as a whole. In many cases there will not be a total group policy towards disabled persons, indeed such an overall policy could well be unpractical.
§ Secondly, from the technical point of view, subsidiaries often have differing financial years to their fellow subsidiaries and the present company; it could thus be very difficult to draw up an overall statement for a given financial year. Regulations made under the Companies Acts can apply only to the corporate sector. The Department of Employment will, however, be drawing the regulations to the attention of public sector employers, and I would expect the accounts of the nationalised industries to reflect on this point, as they do on others, the reporting requirements imposed on companies.
§ The rest of Regulation 3 deals with the manner in which the number of persons employed by the company is to be derived. This is the same method as that used in Section 18(3) of the Companies Act 1967, and will therefore be familiar to companies in the United Kingdom. Regulation 4 comes to the heart of the 954 matter. It deals with the details of the statement to be included in the directors' report. Regulation 4(a) requires a description of the company's policy for giving full and fair consideration to applications for employment made by disabled persons with regard to their particular aptitudes and abilities. Regulation 4(b) requires a statement of policies towards employees who have become disabled during the period in which they were working for the company, and Regulation 4(c) requires disclosure of the policy relating to the training career, development and promotion of disabled persons. I do not think I need to elaborate on these; I hope your Lordships will agree they are fairly straightforward and I understand that they reflect the views of those consulted.
§ The Government are confident that the provisions of these regulations will help to ensure that companies examine fully their responsibilities towards all their disabled employees, both existing and prospective, and will have a beneficial effect on the employment of disabled persons. I beg to move.
§ Moved, That the draft regulations laid before the House on 17th July, be approved.—(Lord Lyell.)
§ 7.27 p.m.
§ Lord WELLS-PESTELL
My Lords, I am grateful to the noble Lord for introducing this draft statutory instrument, and may I say it was rather a delight to have an instrument of this kind which is so clearly set out in its terms that anyone unfamiliar with it would have no difficulty in understanding its purpose. For that, I am particularly grateful. I feel I should like to thank the Minister also for fulfilling an obligation and a promise made some time ago in producing this particular order. I notice that the 38th Report of the Joint Committee on Statutory Instruments has nothing to comment on, and presumably this means that they are satisfied with the order.
There are just two matters I should like to raise with the noble Lord, and if he is not in a position to deal with them tonight I shall be quite happy if he gives me the answers verbally at some time because I am loath, having been in a department myself, to put further burdens on departments in writing letters. Therefore I 955 should be quite content if I could be told verbally.
I notice that this requirement will be distributed and made known to firms employing 250 or more employees. As a matter of interest, how is this to be brought to the notice of such firms, of which there must be tens of thousands? Does it mean that distribution goes to every firm? If so, I am wondering whether there could be a note of some kind enclosed, drawing attention to the fact that if firms with less than 250 employees could employ one or more disabled people, that would help a group in our community who need the employment that is able to be offered.
Among other matters, I notice that the list of organisations consulted before the instrument was drawn up was a pretty comprehensive one, and I know that one of the organisations represents about 40 organisations; but I was a little intrigued to see that the accountants and the Law Society were consulted. I am wondering why, and if I could know the reason at some later date I should be grateful. We have nothing but praise for the order and we certainly give it our unqualified support.
§ 7.30 p.m.
§ Viscount SIMON
My Lords, I feel that from all parts of the House there will be a welcome for the intention behind these regulations, and I thank the noble Lord, Lord Lyell, for presenting them so clearly. But I am bound to say that, while I am very strongly in favour of what the Government are trying to do, I am not entirely happy about the way in which the regulations have been drafted. I am sure that we are not going to seek to annul them, but perhaps it will be in order for me to outline briefly some of my worries, and the noble Lord may have comments to make.
First, I am a little surprised at the decision that the way to present this information is in the directors' report. I was looking into what was said when this matter was discussed in another place, and it is interesting to see that the Minister, at column 1238 of Hansard for 26th February, said that,no useful purpose would be served by introducing legislation requiring the inclusion of detailed 956 employment and other non-financial information in company accounts".I do not object to the Government changing their mind. But I was wondering what made them change their minds in this respect, because I should have thought it was not a very useful place to put this information. Once these regulations are established there will be a tendency for people to ask for all kinds of other information to be put into the directors' report until, in the end, the main purpose of the report—which is to report on the financial position of the company—will be completely submerged in other information.
If I may now turn to the proposals themselves, the introductory paragraph of Regulation 4 refers to a,statement describing such policy as the company has applied during the financial yearin respect of these matters. I tried to put myself in the position of the director of a fairly small company, which falls within the ambit of these regulations, and wondered what I would say, if I had a free hand in doing what I wanted to do, after consultation with the employees; and I am sorry that there is no reference in the regulations to the desirability and, indeed, the necessity of these arrangements being discussed with the employees. I would say that my policy in relation to these matters is to do everything I can for anybody who is in this unfortunate position, and not much more than that, because what can be done for A, B or C will differ entirely, according to indvidual circumstances. It would be quite dangerous to put any detailed policy in a statement of this kind.
Let us suppose that a man has been working in a company for 15 or 20 years and has the misfortune to lose an arm in a railway accident, I am sure that we would do everything possible to try to find him a job where he could continue to work with that disability. At the same time, there might be a young man or a young woman who had been just a year with the company and, having driven rather rashly on holiday, came back with a broken arm. Would I have the same obligation to that person as I would to the first case? That is the kind of example that makes me feel it would be almost impossible to set out a policy, except in the most general terms, and I wonder whether that would perform any function at all.
957 Turning to paragraph (a) of Regulation 4, there will be people applying for jobs who have various disabilities, but my information is that many companies find it difficult to recruit their 3 per cent. of disabled people. I should not have thought there would be many people who would not be seeking to find which job in the organisation could be done by any person applying. Again, I should have thought the policy would be that we do our best. I have already mentioned what would he the appropriate arrangements, which seem to me to depend very much on the circumstances of the case.
My only other point is about the training of people who have been engaged as disabled persons. One meets them in many organisations when one does business with them. They have usually been found a job where their disability can be overcome, and I do not know what is in view here in talking about training or development. If I had engaged a man with only one arm, I would find him a job as a lift attendant. I cannot see what development or training he could have. If it is training to enable him to do a different job, then, apparently, the employer has the responsibility of training him, only to lose him later because, when he can do the different job, that job may not be available in the organisation for which he is working. If he was well looked after in the job he was doing, it would be raising his hopes unduly to suggest that training would lead to promotion or development.
Those are the points that have worried me a little. There is only one other matter which I should like to mention. The noble Lord, Lord Lyell, referred to the nationalised industries and hoped that they would adopt similar procedures. I am wondering whether Government departments could also be brought into that category. I think that this point was raised by my noble friend Lord Banks in an amendment on the Health Services Bill. I hope that Government departments, as well as nationalised industries, will apply their minds to this problem of what can be done to improve the chances of disabled people.
§ 7.38 p.m.
§ Lord LYELL
My Lords, I should first like to thank both the noble Lord, 958 Lord Wells-Pestell, and the noble Viscount, Lord Simon, for their generous words and for their general welcome of these regulations. To deal with some of the points that were raised by the noble Lord, Lord Wells-Pestell, I am flattered and grateful that he found my remarks clear. That was more due to the drafting of the regulations and to the speech that was prepared for me; if the noble Lord found my remarks clear, that was far more due to the department than to my own talents, and I shall pass on the noble Lord's thanks to the department. I am also glad that the noble Lord is with us in fulfilling a promise that was made by the Government to deal with the employment of disabled persons.
The noble Lord gave me some prior notice of both of his questions. As to why the disclosure of information is limited to 250 or more persons in a company or a department, we believe that there are good reasons for this. I understand that there is an infinitesimal number of concerns employing more than 250 persons which are not bodies corporate. This means that in the vast majority of cases we are dealing with bodies corporate which will have to produce a balance sheet and, indeed, a directors' report, in which their policies regarding the employment of disabled persons will be clearly stated.
If we took the level to be the same as that requiring disclosure to trade unions under the present Employment Protection Act—that is 100—or if we took the level at which employers are required to take a DP quota—that is 20—then we think that we should find that companies would have to disclose their policies for one, two or three employees. We think that this is impracticable. It would be a very severe burden on small companies who might well not have the relevant personnel directors. Most of it might be run by one man or perhaps by two people, and it might be a little impracticable for them. However, we envisage that there will be widespread publicity through the press, the Department of Employment and the Department of Trade, and also through other legal and accountancy publications and journals that this will be a statutory requirement and is to be added to the directors' report of a company. We think that the mechanism for informing company secretaries who will be drawing 959 up the directors' reports is adequate. However, I undertake that we shall look into any avenues which have not been explored if we think that the current channels of communication are in any way lacking. We believe, though, that they are satisfactory. Nevertheless, we will check.
The second point raised by the noble Lord, Lord Wells-Pestell, related to the two bodies which were involved in the consultations—the Consultative Council for Accountancy Bodies and the Law Society. In the case of the first body, I understand that the measure with which we are dealing is incoprorated in the Companies Act. As it concerns extensively auditors, auditors' reports, directors and balance sheets, it was thought fit that the accountancy bodies should give their opinion on how these matters of policy should be drafted. The Law Society are also concerned, because one has to get the language right in order to give the relevant information.
In this connection I come back to the point which is always raised by the noble Viscount, Lord Simon; namely, that of drafting. The Law Society were consulted with this point in mind and we hope that they have done a reasonable job. The noble Viscount, Lord Simon, who traditionally does his homework on all measures, expressed mild dissatisfaction with some aspects of the drafting. I think I heard him correctly and I see that he is nodding his assent. The noble Viscount raised one point about the directors' report.
We agree entirely with the general principles which the noble Viscount put forward. We believe that this policy statement which we intend to incorporate in the directors' report will not, and need not, clutter up any accounts. There has been general agreement on all sides of this House and in another place in favour of a policy statement of this type being incorporated where we believe that it should be incorporated; namely, in the directors' report. The annual accounts and the directors' report, which are published every year by companies, are a convenient place for the annual statement of this policy.
Powers exist under the Companies Act and the various other Acts which I have mentioned in my remarks concerning 960 the regulations to require information of this type—and specifically the regulations which I have raised tonight—to be included in the directors' report. We think that this is the relevant and the best vehicle for all the bodies which were consulted in framing these regulations to become aware of the policies for the employment of disabled persons throughout the corporate sector.
Secondly, the noble Viscount raised the difficulty about finding the statutory number of disabled persons who must be employed by a company. I think the noble Viscount framed the likely remarks of directors as, "We are doing our best", but I believe that the directors would frame their remarks a trifle more narrowly than that. However, may I stress that the proposed regulations are to ensure that directors give some account of their policy regarding disabled persons. As I pointed out in my remarks, there are registered disabled persons and also disabled persons who, for various reasons, are not registered under the auspices of the 1944 Act. They too, we believe, merit special consideration. That is why the regulation is to be a little wider than the very narrow definition of 3 per cent.
I think that the noble Viscount was worried about discussing policy with employees. We think that this is desirable but the noble Viscount is worried that policy might not be discussed with employees. However, the Secretary of State has no power to require companies to discuss this or any other matter with their employees. Companies employing more than 250 persons will be fairly substantial concerns. If the regulations are incorporated into the Companies Act, we believe that there will be a de minimis level of employee discussion and participation as to employing disabled persons.
One of the methods for companies to be able to employ disabled persons in various sectors of their concerns would be through existing employees bringing to the notice of their employee representatives the fact, which could be passed on to the personnel department, that they knew people who were disabled and who could do a good job. In general, companies would welcome such information, were it to be given. This is part of the employee participation which goes on extra-legally—at the moment it is not statutorily required 961 —and I believe that that point could be taken care of. I see that the noble Viscount has a point to make.
§ Viscount SIMON
My Lords, I intervene merely because something which the noble Lord said made me think that I must have expressed myself very badly. He seemed to think that I was worried about there being discussions with employees. I was worried about there not being discussions with employees.
§ Lord LYELL
My Lords, the lack of clarity was on my side, and I apologise. It was certainly in my mind that the noble Viscount was worried about the lack of discussion. I hope that I said that we do not think there is anything that we can enact by statute to enforce discussion between employees and employers on this or any other special subject. We hope that good companies of a respectable size, which we are dealing with tonight, will listen to and discuss any opportunities which should arise with their employees. I am sure that if companies have to publish —as they will have to do—what they have done and their possible programme for the employment of disabled persons, they will take this into account and will discuss it, possibly informally, with their employees. With that, I beg to move.
§ On Question, Motion agreed to.
§ Lord LYELL
My Lords, I beg to move that this House do now adjourn during pleasure until eight o'clock.
§ Moved accordingly, and, on Question, Motion agreed to.
§ [The Sitting was suspended from 7.49 to 8 p.m.]