Unfair Dismissal (Increase of Compensation Limit) Order 1981 (Hansard, 21 January 1982)

The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers)
My Lords, I beg to move that the draft Unfair Dismissal (Increase of Compensation Limit) Order 1981 be approved. It may be to the convenience of your Lordships if I were to speak at the same time to the draft Employment Protection (Variation of Limits) Order 1981. Both orders were laid before your Lordships on 7th December 1981.
The Secretary of State for Employment is required to carry out each year a review of the limits relating to certain payments which are made under the Employment Protection (Consolidation) Act 1978, taking account of certain factors laid down in the Act. The limits are the weekly earnings limits which are laid down for the purpose of calculating redundancy payments, the basic and additional unfair dismissal awards and certain debts in relation to the insolvency provisions of the Act; and the daily limit on guarantee payments to workers on short-time and temporary lay-off.
As part of the autumn 1981 review, the Government consulted a wide range of organisations for their views of what changes, if any, should be made to the limits. In the light of these consultations the Government have decided that all the monetary limits, which are covered by the review, should be increased. They are the limits of payments for redundancy, for basic and additional awards for unfair dismissal, for certain debts payable under the insolvency provisions of the Act, and for guarantee pay. The proposed changes, as set out in the draft order, will come into effect on 1st February 1982.
The Government have decided that an increase of around 4 per cent. is the maximum increase in the limits which can be justified in present circumstances. The Government therefore propose that the current weekly earnings limit should be increased from £130 to £135. The Government also propose to increase the daily limit on guarantee pay from £8.75 to £9.15. Guarantee pay is payable for five days in a quarter and the Government have decided that this should not be altered. While these increases take some account of the increases in average earnings, they are inevitably strongly influenced by economic and employment considerations.
The other order for which I seek approval—the draft Unfair Dismissal (Increase of Compensation Limit) Order 1981 revokes the Unfair Dismissal (Increase of Compensation Limit) Order 1979 which set the limit on the compensatory award for unfair dismissal at £6,250. This limit is not subject to annual review, but it may be reviewed from time to time. I should mention that, as in previous years, those who were consulted on the limits covered by the statutory review were also asked for their views on this limit. The Government propose that the upper limit on the compensatory award should be raised from £6,250 to £7,000. It has remained at £6,250 since February 1980, and the Secretary of State considered it appropriate that some account should be taken of the effects of inflation during the past two years. 727 I have deliberately given a fairly brief exposition of these orders which in effect make small adjustments to the existing limits on compensation, and which I think are probably uncontroversial, as I thought that I might be best interpreting the wishes of your Lordships if I were so to do. I beg to move.

§ Lord Bishopston
My Lords, I am sure that we are grateful to the Minister for his explanation of these two orders which I think he has rightly taken together. As he has reminded us, one is subject to an annual review and the other to a review at various periods, and with the rate of inflation in recent years it might be desirable at some time perhaps in the future to review more frequently than every 12 months. Anyway, I think that he will be relieved to know that we support the orders, but I should like to put one or two questions to the noble Earl.
As regards the factors which the Minister has to take into account, I understand that they would include the level of earnings and that, of course, would take account of the profitability of firms and employers. So one has to balance the interests of the employers and the employees concerned, especially in cases of unfair dismissal. Secondly, I believe that the general economic situation is a factor; and thirdly, there are other relevant factors.
In regard to unfair dismissal one must have regard not only to the interests of the employers but the employed as well; and in a time when there are nearly 3 million unemployed the possibility of getting alternative employment is all the more difficult. Those are factors which might be taken into account. The other factor, of course, is to have regard possibly to the levels of redundancy payments. There are two types: the statutory ones which most people receive and there are others running into hundreds of thousands of pounds, as recent publicity has indicated. One might suggest that the level of redundancy payments, unfair dismissal payments and so on should be in relation to those factors.
As regards the unfair dismissal order which refers to Section 75 of the Employment Protection (Consolidation) Act 1978, I notice that the next section, Section 76, refers to compensation payable in respect of sex and racial discrimination. I may presume, I hope, that the levels which the Minister has just indicated to us might also apply to compensation payable in respect of those two forms of discrimination. In the case of sex discrimination there may be some feeling that the lower income levels of many women might justify a lower rate of compensation for unfair dismissal, but I would hope that that is not the case.
The final question that I should like to put to the Minister concerns consultation. The noble Earl has said that consultations have taken place and I may presume, I hope, that they include consultations with the TUC; the CBI representing the employers; and employees' organisations. With those few comments and one or two questions, I would suggest that we support the order and hope that the factors that I 728 have mentioned might be taken into account in subsequent reviews.

Earl Ferrers
My Lords, I am very grateful to the noble Lord, Lord Bishopston, for the welcome which he has given to these orders. He is, of course, quite correct in his concern about the provisions for dismissal for sex and racial discrimination. The limit, of course, will apply not only to unfair dismissal compensatory awards but to compensation which may be awarded by industrial tribunals in cases where complaints of discrimination under the Sex Discrimination Act or the Race Relations Act have been upheld. In both those cases the limits are increased from £130 to £135.
I certainly take note of the points which the noble Lord made about inflation and the need to review these things more frequently, but, of course, I would give no guarantee as to what would happen in the future. But I understand the point which the noble Lord seeks to make. As regards consultation, of course, the TUC was indeed consulted.