Shipbuilding (Redundancy Payments Scheme) (Great Britain) Order 1981 (Hansard, 25 June 1981)

Viscount Long
My Lords, I beg to move that the Shipbuilding (Redundancy Payments Scheme) (Great Britain) Order 1981, which was laid before the House in draft on 1st June, be approved. For the convenience of your Lordships, I should like to point out that my remarks on the technical aspects of this order apply equally to the order which my noble friend Lord Elton will move later. The Shipbuilding Redundancy Payments Schemes in Great Britain and Northern Ireland are identical in substance.
Your Lordships will not need reminding of the uncertainties facing the shipbuilding industry. The Shipbuilding Redundancy Payments Scheme since its introduction in 1978 has been a useful and effective instrument in easing hardship in the industry, and against the present problems facing the industry it is clearly right that it should continue for the further two years set out in this order. Your Lordships will recall that I said on 24th February that we proposed to prolong the scheme for a further two years. The two year extension of the scheme is effected by Article 2(1) of the draft order. If approved by Parliament this order will have the effect of extending scheme benefits to those made redundant or transferred on or before 30th June 1983 and could give rise to continuing payments to such individuals up to the end of June 1985.
The need to prepare an order to extend the scheme provided the opportunity to consolidate the four existing statutory instruments. I hope that this will be helpful to your Lordships and also to those in British Shipbuilders affected by and involved in administering the scheme. The changes made on consolidation are mainly routine in character involving an up-dating of references to legislation and some consequential drafting changes. There are, however, three substantive changes proposed in this draft order each of which I should explain in turn to your Lordships.
There is first a change foreshadowed last February in the course of the debate in another place on the last order amending the scheme. It was then explained that the Government had agreed, subject to Parliament's approval, that the scheme should be amended 1210 to provide that benefits under the new corporation-wide British Shipbuilders pension scheme, to be introduced in April, should not result in the abatement of scheme lump sum and periodic benefits. Under the transitional provisions of the draft order this change is made retrospectively from 6th April 1981, the date when the new pension scheme was introduced. The Joint Committee on Statutory Instruments in their Twenty-Fourth Report have drawn the special attention of both Houses to this element of retrospection. I appreciate that all Members of the House dislike anything even appearing to be retrospective, but in this particular case we are giving effect to a proposal announced in February in another place which confers benefits and does not adversely affect anyone. This will become clear as I explain the reason for the amendment.
The purpose of the original provision on abatement was to prevent beneficiaries receiving redundancy benefits, in each case funded in the end by the taxpayer, both from the statutory Shipbuilding Redundancy Payments Scheme and from non-contributory company schemes. In order to accomplish this it was necessary to provide for the abatement of scheme benefits for pension as well as redundancy payments because there was no clear distinction between the two in the wide variety of company schemes inherited by British Shipbuilders.
The new British Shipbuilders pension scheme is quite clearly a contributory pension scheme subsuming existing company pension schemes. It is possible therefore, as Article 11 of the draft order provides, to exempt from the abatement provision payments under that scheme alone. Were the scheme to be changed to provide enhanced benefits on redundancy such payments would not be exempt from abatement in this way. I have accordingly no hesitation in commending this provision to your Lordships as providing a useful measure of help to those over 50 who are likely to find most difficulty in getting alternative employment through having the option of drawing on their British Shipbuilders pension right away without penalty.
The second change made by this draft order relates to the calculation of the current earnings of the self-employed. Current earnings need to be assessed in order to ensure that a person's total receipts from the scheme and from earnings together do not exceed 90 per cent. of his previous earnings with British Shipbuilders. The present scheme requires the calculation to be done weekly on the basis of a rolling average over four weeks for all beneficiaries. This is straightforward for those who are in employment and who have a relatively steady income from employment. But it was judged impracticable in the case of the self-employed. It would have meant British Shipbuilders getting weekly statements of earnings from the self-employed together with supporting evidence. This would have been burdensome both to the self-employed individual and to British Shipbuilders. They therefore developed the more manageable practice of making assessments of current earnings for this class of beneficiary on a 6-monthly basis. The practice does not accord with the scheme as it is and some action had to be taken to put the matter right.
The solution adopted by the draft order, which I commend to your Lordships, is to alter the formal 1211 provision to accord with actual practice. Accordingly the draft paragraphs (2) and (5) of Article 5 provide for a "single payment" to be made related to a "relevant period" normally of 26 weeks. Additionally we propose to give British Shipbuilders the option, in paragraphs (3) and (4) of Article 5, to make payments on account to the self-employed subject to agreement by the individual to reimburse any excess payments. Experience with the scheme shows that at least in the early months of self-employment earnings normally prove to be modest so any risk of over-payment is slight; where the assessment of current earnings at the end of the first or any subsequent period shows that payments have been made in excess of entitlement British Shipbuilders would reclaim the excess and would be cautious about making further payments on account. The course followed should provide valuable help to the self-employed individual at a time when he has all the costs of starting up his own business.
Before I leave the self-employed I should mention that I recognise that because the practice of British Shipbuilders has not accorded with the strict provisions of the scheme some individuals with a high but spasmodic income could in theory have been disadvantaged in the past by comparison with their strict entitlement. British Shipbuilders propose therefore to invite any who feel that they fall into this category to make a case for re-assessment on the basis of a weekly rolling average, that is the system for which the scheme strictly provides.
The third change made by the order is of a procedural character. Paragraph (2)(e) of Article 1 of the 1978 Order provided that references to an enactment were references to that enactment when the order was made. This had the effect that the previous earnings limit on which benefits are based was that specified in the redundancy payments legislation at the time of the order. It meant therefore a fresh order to raise the limit whenever the limit in that legislation was raised. The fact that the two limits were not automatically tied to each other may also have brought about some uncertainty in the minds of potential recipients on whether amending orders would be introduced. The policy is indeed that they should keep in step, and this order therefore omits the provision in the 1978 order which had the effect of requiring fresh orders each time the limit is raised. I hope your Lordships will welcome change proposed. I recommend the draft order to your Lordships. I beg to move.

§ Lord Ponsonby of Shulbrede
My Lords, may I thank the noble Viscount for explaining this order and for the detail of his explanation. I note, as he said, that both this order and the subsequent order have been considered by the Joint Committee in their 24th Report and that they have found that the element of retrospection in the order is such that the interests of the redundant shipyard workers are fully protected by these orders. So far as we are concerned, we welcome the laying of the orders and hope that the House approves them.

§ Lord Rochester
My Lords, from these Benches I would simply like to say that we, too, welcome the 1212 clear exposition from the noble Viscount of this order, which certainly at first sight in terms of its formulae appears rather complicated, but in the same way as the noble Lord, Lord Ponsonby of Shulbrede, has been happy to accept it, so do we from these Benches.

Viscount Long
My Lords, I am most grateful to the noble Lord, Lord Ponsonby of Shulbrede, and the noble Lord, Lord Rochester, for their kind remarks in helping through this draft order.