Employment Bill

HL Deb 28 July 1982 vol 434 cc236-87

3.12 p.m.

Report received.

Lord Rochester moved Amendment No. 1: Before Clause 1, insert the following new clause:

("Employee participation. .—(1) In this section— references to "the Act" of any particular year are to the Companies Act of that year; directors' report" means a report by the directors of a company which by section 157(1) of the Act of 1948 is required to be attached to a balance sheet of the company prepared under section 1 of the Act of 1976 (or under that section taken with section 150 of the Act of 1948); and employment" means employment other than employment to work wholly or mainly outside the United Kingdom; and "employed" and "employee" shall be construed accordingly. (2) This section applies to every directors' report of a company which relates to a financial year beginning on or after 1st January 1983 where the average number of persons employed by the company in each week during the financial year exceeded 200; and for the purposes of this subsection that number shall be the quotient derived by dividing by the number of weeks in the financial year the number derived by ascertaining, in relation to each of those weeks, the number of persons who, under contracts of service, were employed in the week (whether throughout it or not) by the company and adding up the numbers ascertained. (3) In every directors' report of a company there shall be contained a statement describing the action that has been taken during the financial year to introduce or develop arrangements aimed at—

1. (a) providing employees systematically through their managers or supervisors with information on matters of concern to them as employees;
2. (b) consulting employees or their representatives on a regular basis so that the views of employees can be taken into account before decisions are made which are likely to affect their interests;
3. (c) encouraging the involvement of employees in the company's performance through means such as employee share ownership schemes;
4. (d) achieving a common awareness on the part of managers and employees of the problems involved in allocating resources for such purposes as pay and investment.").

The noble Lord said: My Lords, this amendment is a revised version of one that I introduced at Committee stage two weeks ago at four o'clock in the morning when it was not possible for a number of your Lordships to be present. I should therefore first briefly describe the purpose and content of the proposed new clause. Its aim is positively to improve this country's industrial relations and performance by increasing the extent to which employees participate in the activities of the company in which they work.

The amendment seeks to make it a statutory requirement that in every directors' report of a United Kingdom company which relates to a financial year beginning on or after 1st January 1983, and where the number of employees exceeds 200, a statement should be included describing the action that has been taken during the year to introduce or develop arrangements aimed at furthering employee participation in the ways that are set out in subsection (3)(a) to (d) which I hope will speak for themselves.

The content of the subsections has been altered slightly from the original version to take account of views which were expressed in Committee and helpful advice that I have received from all parts of the House. I should like to take this opportunity to acknowledge gratefully that help. Perhaps the best way to summarise the discussion which took place at the Committee stage is to say that when the noble Earl, Lord Ferrers, replied to the debate, he observed that every noble Lord who had spoken on the amendment seemed to have been mildly in favour of it.

I should add that in summarising the Government's own position he went on to express what might be described as mild opposition to the amendment in saying, at col. 321 of Hansard for 13th July: we like the idea but we have misgivings about it. We are sympathetic to the amendment, and we have not ruled out a legislative step of this kind in the future, if industry makes insufficient progress on a voluntary basis. But I think it would be risky to take this step without further and careful consideration".

I should like to return to that point now, if I may. From these Benches, we have given the Government broad support on many of the more contentious provisions of this Bill concerning such matters as unfair dismissal, closed shop ballots and trade union immunities. We have done this despite the practical difficulties to which they may give rise. If there are risks for industrial relations involved in this legislation, it is in those provisions that they reside, and compared with them any that are attendant on acceptance of this proposed new clause are surely insignificant.

I was once altogether a voluntarist on this question of more employee participation; but the trouble about voluntarism is that there have to be volunteers. In the past exhortation concerning the need for speedier progress in this matter has proved largely fruitless. The Liberal Party have for the past 50 years wished to go much further in the direction in which this amendment points.

For my part, I have reached the conclusion that the time has come to make it a statutory requirement that in every company employing more than a certain number of people there should be consultative bodies of some kind. But in the present instance we are asking only for the very limited legislation contained in this amendment. Everywhere people are now seeking to exercise more influence over the making of decisions that affect their lives. They cannot surely for much longer be denied that influence only while they are at work. Some legislative action is therefore called for in this field. I should like to see the initiative for that action coming from this House.

In Committee, the noble Earl, Lord Ferrers, said also that the Government were doubtful about imposing a rigid legal system on all employers irrespective of their particular needs and circumstances. So, my Lords, am I. But all that the new clause requires is that companies should expose to public view what progress, if any, they are making in this field. Within it they are not obliged to take any action at all. If they are altogether inactive in the matter there will simply be no progress to record.

We have also tried hard in subsection (3)(a) to (d) to strike the right balance between the needs, on the one hand, to be reasonably specific concerning some of the general areas in which employee participation has been proved by this country's most progressive companies to work, and, on the other hand, to avoid rigidity and encourage flexibility by leaving companies free to act or even not to act in those areas as they think best. Then it was argued that the directors' reports are costly to produce, and the longer the report the more the expense that is incurred. It was claimed also that paradoxically a requirement of the kind proposed in this amendment would impose the greatest burden on those employers who already have well developed employee involvement policies.

In response to those criticisms, I would say two things: first, the amendment is concerned with the activities of companies in relation to their most precious asset—people. What information in the report of a company could offer better value for money than a statement about the involvement in its activities of the people it employs? Secondly, in order to comply with the spirit of this new clause, companies with admirable employee participation arrangements might indeed wish to state in the first year of their operation what in general was being done in the area covered by subsection (3)(a) to (d). Thereafter there might be little for them to say, but their reputation for good industrial relations would not suffer on that account for it would continue to depend not on their words but on their actions; so they would have nothing to fear. On the other hand, this amendment sets out to activate the directors of other less well run companies, particularly those of medium size, to pay more attention than they now do to the need to develop employee participation.

In Committee, the noble Lord, Lord Mottistone, rightly probed more deeply. He said that we were in an area of attitude-changing and he had misgivings as to whether legislation at this time would produce real change. I respect his views, and indeed he and I both know from experience how difficult it is to effect changes of attitude by another means—industrial training. But what I know is possible, because I have seen it happen, is that marginal modifications in behaviour can be brought about which eventually lead to attitudinal change by building on what has already been shown to work in practice and thus to contribute to improvements in motivation, productivity and competitiveness.

This Bill is called the Employment Bill. As it stands, it aims to do nothing to further employee involvement; but the proposed new clause would remedy that omission, not least in being seen to occupy pride of place as the first in the Bill. I do not for a moment suggest that the wording of the clause cannot be improved, but the principle underlying it is clear enough. If the Government consider such a clause should not form part of this Bill I will gladly withdraw the amendment, provided that they will undertake to bring forward another Bill dealing with this question as soon as possible in the next Session of Parliament. Alternatively, if they are prepared to discuss the matter with me and others between now and the Third Reading of the Bill in October, with a view to improving the wording of the amendment or putting down an amendment of their own on similar lines, again I will happily withdraw this amendment.

What will not be acceptable is either an outright rejection of the new clause or to be told that there is need for the Government to consult further with employers, trade unions and others before any legislation of this kind can be introduced. We have had years and years of consultation. Nowhere in the field of industrial relations has there been more talk and less action than on the question of developing employee participation. The time has surely come for this first tiny statutory step to be taken towards that goal. I beg to move.

3.24 p.m.

Lord Kilmarnock

My Lords—

Lord Boyd-Carpenter

My Lords, I think that perhaps this side of the House has priority? I am much obliged—

The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers)

My Lords, with respect to my noble friend, I think that the noble Lord, Lord Kilmarnock, although his name is not on the amendment, may be speaking for his noble friend Lord Aylestone.

Lord Kilmarnock

My Lords, I thank the noble Earl for his intervention. In fact my name is not on the amendment but that of my noble friend Lord Aylestone is, so I hope I may be taken as an acceptable substitute. Briefly, throughout this Bill we have been discussing the righting of certain wrongs and the imposition of further restrictions on the closed shop, on immunities and on the definition of trade disputes. This is the first time we have been able to discuss properly something positive, something which is designed to avoid or to reduce such disputes in the first place. The forerunner of this amendment came up at something like 3.45 a.m. on the last day of the Committee stage when we had all rather run out of steam; so I am delighted that the noble Lord has brought it forward again at "prime time", when all our minds are fresh, or at least fresher.

Proposals to improve industrial relations through some measure of employee participation are not new. The trouble is that they have tended to be either so bland as to have little practical effect, or so rigid as to put companies in a straitjacket. The attraction of this new clause is that it avoids both defects. It is perfectly specific in that it requires directors to make a statement, which can be as long or as short as they like but which must be there in their report. At the same time it recognises that there are a number of possible routes to participation and that different companies may prefer to go different ways, and some further than others. It recognises the merits of a pluralist approach and it avoids the straitjacket.

Participation is not in itself a cure for our industrial ills, but it will be vital if the technological changes, which we cannot possibly resist, are to be introduced with the co-operation of the workforce in this country. It could be said that at no previous time in our industrial history have good communications between management and workers been more necessary. My party therefore proposes to make it obligatory on large firms to introduce participation in some form, but we do not propose to shackle companies by the imposition of statutory directors or single-channel balloting for elected posts. We believe it is vital to give as much freedom as possible to workers and employers to devise the form of participation that suits them best. It seems to me that this amendment—that is, the new clause proposed by the noble Lord, Lord Rochester—is drafted very much in that spirit.

It also has another attraction for me. If it is accepted, as I hope it will be, it will provide a rich source of information concerning the way different companies go about participation. It will make it possible for one company to learn from another. It may be that a standard or code of practice will emerge in a particular industry and we shall be halfway to where we want to get, without any further legislation. This requirement upon directors of companies may seem a modest thing at first sight, but we believe that it could play a very important part in the development of employee participation and industrial democracy in this country.

Finally, let us remind ourselves what this Bill does. It seeks to right certain injustices to individuals and to oblige the trade union movement to put its house in order. But we must recognise that in very poor market conditions it is not only the unions which have obligations to society. Employers must, as far as humanly possible, take the workforce into their confidence and seek to involve them in a creative way in the future of their companies in the difficult times that lie ahead. If that is the case—and I believe it is—how satisfying it would be if we sent this Bill back to the other place a little less lopsided by the addition of this new clause. That is a contribution to better industrial relations that this House can and ought to make.

Lord Boyd-Carpenter

My Lords, may I first apologise to the noble Lord, Lord Kilmarnock, for the misunderstanding a moment ago. As he says, and I think he deduced, it came about because his name did not appear on this amendment and I had no reason to suppose, therefore, that he was speaking on behalf of his noble friend.

I have a great deal of sympathy with the purpose and intention of this proposal. Indeed, to some extent I can come before your Lordships in the unaccustomed apparel of a white sheet on a good deal of its contents. I happen to be chairman of a company which, as I think the noble Lord, Lord Rochester, knows, has been in the forefront of developments under all four of the headings included in subsection (3) of his amendment. Indeed, on employees' shareholdings we go a long way beyond what he suggests in the third paragraph, inasmuch as already slightly over 90 per cent. of those who work for us in the United Kingdom are shareholders in the company. I say that in order to indicate that I am far from being hostile, either in practice or in theory, to what is the plain purpose that the noble Lord, Lord Rochester, has in mind in bringing this proposal forward.

Having said that, I must say that I am very doubtful about the means which he has sought to adopt for helping these excellent developments. I very much doubt whether mandatory inclusion in the annual report, and indeed in the directors' report section of the annual report of a company, is the right way to encourage this kind of development. I can see it only too easily passing into a kind of stylised formula used year after year and conveying remarkably little. And I honestly doubt whether the annual report and accounts, which are, of course, as he knows, required by the Companies Acts and for their purposes, are the proper vehicle for a company to draw attention to its developments in this direction.

Indeed, on a small point, in my own company's case such references as we make—and I think we make them every year—to our employee shareholding scheme almost always appear, not as this amendment would wish them to appear, would hind them to appear, in the report of the directors, but in that part of the document which is described somewhat misleadingly as the chairman's speech; because, may I say in parenthesis, I do not inflict on our shareholders the cruelty of having to listen to me at considerable length. I reserve that ill behaviour for your Lordships' House.

But I feel that this is the wrong way of doing it and, indeed, would be somewhat discouraging. Also, it would be, as T think was mentioned in the small hours, a little unfair to those companies, such as my own, which have already made such progress in this matter. One would be bound by these proposals to refer to the introduction of things of this kind. We introduced them years ago. We presumably, therefore, could not on a strict reading of the amendment refer to them. And if the noble Lord says that, of course, it is also the development that is covered, there again we have an effective scheme which is operating extremely well and which, for further development, depends on Her Majesty's Government, from the point of view of adjusting the quite severe taxation restrictions, which still tend to inhibit the development of employee shareholding schemes.

To compel companies, in a document that they are compelled to produce every year, to try to set out what they are doing on these sometimes delicate and sensitive issues, such as the consultation one, would not serve the purpose which the noble Lord wants. I think that it could produce even a little counter-reaction, even a little feeling that what a sensible company does, for good and sensible reasons of its own, does not need to be set out in a legal document under legal compulsions every year. It very soon, as the noble Lord knows, becomes known—becomes known, very often, by the performance of the company—when companies are progressive in this way, and it is a much better expedient to let a company's sensible handling of these matters speak for itself.

I do not know what my noble friend Lord Ferrers will say about it, but I am disposed, on balance, to object to the insertion of any further compulsory material in a company's annual report. We are bound by statute to include a great deal; we are bound by the rules of the Stock Exchange and of the auditor's profession to include a great deal and it is quite a laborious business. To include under statutory compulsion what we are doing as a matter of sensible policy for the fostering of co-operation would not only be counterproductive; it would tend to produce a little prejudice against developments of this kind. I very much hope that, after your Lordships have debated this amendment, we will not put it into this statute.

3.35 p.m.

Lord Houghton of Sowerby

My Lords, I added my name to this clause, because it represents a meeting of minds rather than any change in political alignment. But my noble friend Lord Rochester is the secretary of the House of Lords Industry Study Group, of which I have the honour to be chairman. If that is not a commercial, I do not know what is. I could also refer to the fact that the noble Lord, Lord Aylestone, was a colleague of mine in the Labour Government, so I think that the support for this new clause has a respectable background.

May I, for a moment or two, say why I think that this new clause should go into the Bill? I think that it would give it a balance which it does not have at the present time, because this Bill is mainly about the conditions under which workers and management may confront each other. To some extent, the provisions of this Bill supplement the Employment Act 1980, which began to draw afresh the lines of conflict.

Both of these measures represent a kind of new Geneva Convention on the rules of war. I do not think there is much hope for this country in all this, unless it is a sort of run-of-the-mill approach to fundamental upheaval, politically and industrially. What I am sad about is that the word "co-operation" is becoming obsolete in the vocabulary of industrial relations today. "Participation" is not the vogue word that it was. In our economics, Keynes is out, Friedman has been briefly in and now Karl Marx is stirring in his grave—stirred by travellers and fellow travellers who are keeping political leaders and trade union leaders awake at night. They surely are.

If noble Lords are wanting a suggestion for reading during the Recess, I would recommend Mass Unemployment and the Future of Britain by Bill Jordan. It is nice and gloomy. The author predicts that some time in the mid-1980s, and probably during the year after the next General Election, the country will become increasingly ungovernable.

Strong forces of left and right will confront each other on the streets of Britain", says the author. That sort of perception seems to reduce this Bill, and indeed this amendment, to a sort of tawdry irrelevance; at least, one might be forgiven for thinking so. Though I think, on second thoughts, it is the Bill that is the real irrelevance, because this new clause is relevant, quite apart from the Bill. But I think that it would add something to the Bill.

For myself, I am all for scrutinising the use of power. It is the most dangerous thing in the world in human affairs, whether it is the power of Government, of bureaucracy, of monopolies, of employers or of trade unions. Where power lies, there is the likelihood of abuse and abuse can become tyranny. That is one of the dangers confronting the world today.

Taken to pieces and looked at bit by bit, some of this Bill may be needed to curb excesses, but taken as a whole it presents a sinister purpose in the eyes of a great many people. And it may indeed have that purpose. Call it a threat, or call it an attack, or call it anything you like. It has been called all those things, and worse. The trade unions would not take it from the Labour Government, and some appear now to be preparing to reflect on their defiance in the solitude of a prison cell. I hope that the Official Solicitor will be on hand to get them out. But in this amendment there is a faint shaft of light in the gloom of the English summer which has now settled on the countenance of Mr. Tebbit. It requires companies to extend their reports beyond the list of directors' fees, which are constantly rising. If one wants to know about pay increases, only have a look at directors' fees. We want to know a little more than that. One of the things we want to know is what they are doing about the workers.

What is in the new clause is all conventional stuff, really. We are asking companies to tell us a little more about how good they are at communications and consultation, if not positive participation. We are debating this new clause in the shade of Bullock, the fifth directive and all the other plans to change the face of capitalist enterprise. Against that background, this new clause is a mere flick of a feather. The noble Lord, Lord Boyd-Carpenter, criticised the proposal to add more to the statutory obligations of directors in their companies' reports. This ought not to trouble them in the least. It seems to me that it would probably add to the interest of company reports. It would enable them to include more—more that is relevant, perhaps, to the workers' interests—about their relations with their staff in the supplement which many companies admirably produce for the special interest of their employees.

Lord Boyd-Carpenter

My Lords, I wonder whether the noble Lord would give way?

Lord Houghton of Sowerby

Yes, certainly, my Lords.

Lord Boyd-Carpenter

My Lords, I am sure the noble Lord will agree that there is nothing whatever to prevent a company which wishes to set out its activities of this kind in some part or other of its annual report from so doing, and as I told the noble Lord we in fact do it from time to time.

Lord Houghton of Sowerby

My Lords, I agree entirely but there are times when just a gentle nudge helps, and this is what the new clause suggests. It does not tell companies what they must do. It merely asks them to tell us what they are doing. And that I think is of great interest, because it is one of the most important aspects of industrial relations today. My firm conviction is that our existing system cannot last unless there is a better understanding between management and workers under our existing system. I do not think that prosperity lies the way of this Bill; I do not think it puts us on the way at all. But if this new clause went into the Bill, it would be the one thing which indicated that there was some constructive proposal in the Bill to establish evidence of a better relationship between management and workers. So I sincerely hope that the amendment will not be brushed aside by minor objections.

The noble Lord's own company ought to be proud to include in its reports what it has done in this particular field and it might get some satisfaction from looking at the reports of other companies to see whether they have got anything to match it. Let us have rivalry in industrial relations as well as in profitability and in other aspects of industrial and commercial enterprise. I feel that there is great merit in this proposal. It would be highly diverting for the members of many companies to read what their directors are doing in this field, and it would not be without interest among the workers, who would be very glad indeed to read the directors' version of their relations with the staff.

Lord Mottistone

My Lords, when the noble Lord, Lord Rochester, moved this amendment, he made mention of my contribution to the debate in the early hours of the morning. He was kind enough to say that I had talked rather more deeply about the philosophy of it. I still think that it is a desirable attitude-changing thing. I said also at that time that to use the directors' report was an ingenious way of getting it into the system but that I wanted to reflect upon it. I think I said at that time, and I say it again, that what the noble Lord has put into subsection (3) is much too detailed. Subsection (3)(d) in particular has got an element of bias in it which does not make it encouraging. But what is important is whether it is in the right place.

Since the Committee stage I have taken advice from companies and from the CBI. Their main point has been very well put to us by my noble friend Lord Boyd-Carpenter. I shall not go into that point too far, but I was disappointed to hear from my noble friend that he deprives his shareholders of the most eloquent speeches which he gives to us. I think it would be only fair to them if he were to expand on his speeches. Perhaps he might take Lord Rochester's advice and in his directors' report or his chairman's report at least give them that part which relates to the subject of this amendment.

Having said that, the point is that it is not very suitable to put in a Bill of this nature something which is more suited to a Companies Bill. It is a bit of a trick to try to put legislation relating to annual reports and directors' reports into an Employment Bill. For that reason, although the idea is a good one, I should not have thought that it ought to go into this Bill. By that I mean that the idea of encouraging companies to do what is set out in subsection (3) is a good one. I am persuaded, however, that the directors' report is not the right place for it. My noble friend Lord Boyd-Carpenter has told us why, and I endorse what he said.

I support also very much the fact that it would become a rote for those companies which were not doing it properly. What one wants to do is to get the thinking there so that it develops. I do not think we shall get it there just by making people write something down every year. Many enthusiastic companies have been doing this kind of thing for 10 years or more. The ones who are not enthusiastic—I had experience of this in an earlier job—will shuffle through and give some kind of a cosmetic report which means nothing, while the ones who want to do it do not need to put it down. This is the conundrum. It would be nice if there were an element of compulsion, but even if you introduce an element of compulsion you cannot bring it about unless you send people to prison if they fail to do it. It can only be done by persuasion. The question therefore is how to introduce the persuasion. I should have thought that if you are to do it by persuasion it needs to go a little wider, but I suggest that you cannot do it by legislation. Therefore we are back again at trying constantly to get the message across, to make speeches, to get trade associations to tackle it for their industries, to get the CBI to encourage it, which indeed they do, and then gradually to get across the message that if one does not do these things then one's company is not going to be so profitable. That is one of the factors to which one returns. Unless one gets the message through that there should be a degree of communication which involves the people in one's employ, one will not get the extra profitability that one needs. That is the key message—but one does not do that by legislation; one does that by all sorts of other means. I am sorry, but for those various reasons I do not believe that this amendment should be supported, but I shall be most interested to hear what my noble friend on the Front Bench has to say.

3.51 p.m.

The Earl of Halsbury

My Lords, I am by no means disposed to brush aside the amendment in the manner suggested by the noble Lord, Lord Houghton of Sowerby. I have the utmost sympathy with what it proposes as an end, but, like the noble Lords, Lord Mottistone and Lord Boyd-Carpenter, I am doubtful about its inclusion in the statute as a means. I entered industry when I was 20 and retired when I was 70. I had 50 years in industry and during all that time I never worked for, was a director of or was associated as a consultant with any firm that did not bend over backwards to try to develop its relations with its employees.

One of the most careful and meticulous in this respect was Joseph Lucas, of which I was a director for many years. We took an enormous amount of trouble to publish a special balance sheet which explained to the laity, as it were, what the official balance sheet meant, and a special edition of the cash flow statement and profit and loss account in simplified terms which enabled everyone to understand it. I remember that at Schweppes, the chairman Sir Fredrick Hooper used to have a regular meeting of his shop stewards at which he explained his progress in the financing of the company. At Lucas, for example, if we included in the directors' report and accounts all that we were doing with our employees by way of employees' relations, we would have trebled or quadrupled the length of the directors' report and accounts. That is what the house magazine is for, and it is the development of house magazines over the last few years which has done so much.

Furthermore, in incorporating such a thing into the statute, one is rather taking it out of the discretion of the directors just how far various acts of judgment they have to make are to be regarded. All boards of directors operate under various Stock Exchange conventions and rules for security in relation to whatever might create an artificial value for the shares in the context of mergers, takeover bids and so on. It is a very difficult thing to know just how far one can go in taking this matter, which is of substantial interest to employees, into employees' confidence in this sort of way.

It must be a matter of judgment, and I do not believe that it should go into the statute. But, in saying that it is for this reason that I cannot vote for the amendment, I would not in any way like to withold my sympathy from what it aims for as an end, although I cannot agree with this as a means.

Lord Oram

My Lords, when the noble Lord, Lord Rochester, moved a similar new clause at Committee stage, I gave it my support, but was unable to express myself in any terms of enthusiasm. I noticed that the version which the noble Lord has now moved includes some changes which he has explained, but I must say that my enthusiasm is not greatly enhanced by the changes he has made.

I regard this proposition as a commendable tentative first step in what is a much more fundamental problem of industrial democracy than the noble Lord appears to appreciate, in the way in which he has drafted his amendment. It reminds me of a bather putting a tentative toe into the water, but being afraid to take the plunge into the sea. What is involved in the achievement of a worthwhile system of industrial democracy is, I believe, much more than the provision of information or even the establishment of consultative committees for employees. It goes much deeper than that. If workers really are to be involved in decision-making in industry, then it is my view that they should be much more involved in ownership and real control than is provided for by the orthodox schemes of share ownership, such as that which has been described by the noble Lord, Lord Boyd-Carpenter, and such as those advocated with enthusiasm by the Liberal Party.

I suggest that this is not the occasion on which to spell out the details of a more fundamental approach. I feel sure that if we did engage in such a debate, my views and those of the noble Lord, Lord Rochester, would fairly soon take divergent paths—not least on the question which his amendment ignores, of the degree to which trade union organisations should be involved in planning and the control of industrial enterprises. I reiterate what I said at Committee stage; that I gave his proposition mild support. I believe that he and I ought to rest content today with that very modest degree of agreement, rather than take things any further at this stage.

Lord Campbell of Alloway

My Lords, may I support the spirit of this amendment, which seeks to introduce this concept of worker participation; a peculiarly English concept of consultation before decision making and a measure of participation in profits. The distinction between this concept and other concepts is of importance because of the obligations arising by virtue of United Kingdom accession of the Common Market. I refer to worker participation in the sense of worker representation, which the noble Lord, Lord Houghton of Sowerby, has touched upon. There are two types, your Lordships will appreciate.

The first type is the worker participation referred to as such in paragraph 999 of the Donovan Report where the concept of worker participation in management bodies below board level is discussed and adversely commented upon, The other type of worker participation is that at board level, which really is the subject matter of all the talk, talk, talk which has gone on. That stems from the 5th draft directive in 1972, Bullock in 1977, and the Vredeling draft—all within the Community context—in 1980. Very recently (this year in fact), there was the report of the Legal Affairs Committee. That is the concept which reflects the two-tier structure of the Netherlands and West German companies. This amendment has nothing whatever to do with those other concepts of worker participation which are in effect forms of worker representation.

Why do I support this so strongly? First, because in the technological age—the age of the microchip—and with the development of the new service industries, it is conducive to a better order of industrial relations, because these new developments are bringing about very substantial changes in the pattern of employment. Secondly, because these proposals are conducive to the national interest, because they provide a means, albeit a small means, of seeking to relate pay to profitability and beating the bogey of inflation.

Furthermore, they provide the employee with a sense of involvement, they provide him with a spur, an initiative. So far as the employer is concerned, they constitute what your Lordships may think is a timely and requisite exhortation, an exhortation without compulsion, because the employer is under no obligation to disclose any sensitive information, and in fact, as pointed out by others, the employer is not really under an obligation to do anything, to take any positive step other than to say in his report what he has done. Here I go along with the noble Lord, Lord Houghton of Sowerby; we do need a new initiative, we do need a new approach and we do need a new spirit within the framework of existing law.

This amendment, if it does nothing else, seeks to herald this new approach. It is a step, and in my submission an important step, in the right direction. Whether one regards it as the brainchild of the union of its sponsors or as some hybrid adoption, this is at least indigenous; it is related to our needs and is in accordance with our traditions.

But, surely, before this could be brought into law the views of all interested parties ought to be canvassed, and they ought to be known before any legislative proposals are made. The questions arising are not only as to the substance but as to the means, as the noble Lord, Lord Boyd-Carpenter, so rightly observed. Furthermore, surely the other place could hardly be expected to welcome this surprise bundle on its doorstep at this stage of the legislative process.

Finally, within the dimension of the European Community, to which of course we are bound, surely consideration has to be given to the deveolpments there which to some degree could overlap with the proposals here, and furthermore and in particular the degree to which the 1975, 1977 and 1978 directives are relevant. They affect consultation over redundancies, protection or workers, amalgamations, mergers, takeover situations, the question of guaranteed wages for insolvency when insolvency is used, and that will come into effect in October next year. All these aspects surely have to be considered in relation to this matter.

Finally, if only my noble friend the Minister were able to give some assurance that this subject of worker participation should find its way into the next Green Paper, with a view, if possible, to introducing legislation, after consultation, before the next general election, surely that would commend itself to many, if perhaps not most, of your Lordships. I most respectfully ask—while expressing gratitude to the sponsors for having brought forward this very important idea and this very useful constructive proposal, while acknowledging the rectitude of their approach and the sincerity of their purpose—would it not be premature to move towards legislation in this sphere, for the reasons I have given, without adequate consultation?

4.4 p.m.

Lord Aylestone

My Lords, may I take one or two brief points. We have already taken rather a long time on a rather long Report stage. I was delighted to hear from the noble Lord, Lord Boyd-Carpenter, that the company of which he is chairman—and one would expect it of a company of which he is chairman—already engage in this type of participation. What I cannot understand is his reluctance to put the fact in the annual report. It does not require, as has been suggested, paragraph after paragraph about detail as to whether the tea break shall be taken in half an hour and so on. What it does require is instruction in the annual report of major decisions that have been taken by the company in consultation with their employees. Nor does it require the employees always to agree. The fact that they have been consulted is the important thing.

My point is that this would be of great value to shareholders. Shareholders get a copy of the annual report; they do not all get a copy of the house magazine—in fact, few of them do. A shareholder reading the annual report will feel that any suspicion has been laid of possible trouble that could have arisen because of something that was happening within the company. A short paragraph would unquestionably help to diffuse the fear in the minds of shareholders that things are not being carried on as they should be. My final point is that those companies that are already doing this—there are many; I know of some and they are doing it extremely well—would have little or no objection to putting a short paragraph or two into the annual report. But if this amendment is approved and becomes legislation it will help to persuade those companies which are less helpful in this direction to move, and to move rather quickly.

The Earl of Halsbury

My Lords, before the noble Lord sits down, would he clarify his usage of one word? He spoke of the amendment requiring major decisions—

Earl Ferrers

My Lords, I wonder if I may interrupt the noble Earl. I realise he is asking for clarification, but it is Report stage and he has spoken once. I think we might be contravening custom if the noble Earl made a second speech.

Viscount Massereene and Ferrard

My Lords, may I speak for three minutes on this? I have often spoken on it before. I think it is a very nice idea and I have always supported it. But one has to be practical in these matters. I have had experience of being a small employer. Of course, the average small employer takes his employees into his confidence, but it is far more difficult in a big public company, and I think it would be almost impossible in a nationalised industry. I am all for giving bonus shares—I am talking now of public companies—but if you give bonus shares in public companies the employees will instantly sell them. You have to give a special sort of share that they cannot sell straight away. Otherwise, giving these shares would seem pointless. The object of giving employees shares is to encourage them to take an interest in the company.

One of the most important aspects is to try to explain a balance sheet to employees. It is extremely difficult. If an employee reads in the newspaper that such and such a company has made a profit of £1 million he thinks, "I should like some of that". If only it could be explained to him where that …1 million goes! A great deal goes in tax; a lot goes back to the reserves to keep the employee employed and for new machinery; the balance goes to the shareholders who have to pay their tax and who are the people who have taken all the risk. So the majority of the money goes to the state, to pay for the employees' children at school and all the social benefits. If only we could explain that to the employee! I have found it very difficult. In my experience the average employee is interested only in the size of his wage packet. He is rather inclined to live in the present.

However, I am all for some form of employee participation and sharing financially. I have in mind the speech of the noble Lord opposite who spoke on workers' ownership, and I wonder whether the workers would be prepared to see their savings go if the company fails. Any business is a gamble and not every business succeeds. In fact, hundreds go down every year. Is the employee prepared to take the risk, the gamble, that the employer is prepared to take? I have sometimes thought that an amendment like this should be in a Bill, but, with great respect to the mover of this amendment, I do not think that this is the right Bill. As my noble friend behind me said, it is really a matter for a Companies Bill, but it would be extremely difficult in big public companies to have such a statutory arrangement.

Lord Howie of Troon

My Lords, I should like to take up the points raised earlier this afternoon by the noble Lord, Lord Boyd-Carpenter, and the noble Lord, Lord Mottistone; to agree with what they said; to add—your Lordships will be happy to learn—very little to it; and to dissent ever so mildly from their conclusion. They were quite correct when they said that many firms already do these things—and the firm with which the noble Lord, Lord Boyd-Carpenter, is connected is a notable example of that—and do not need encouragement. They were also correct in saying that there were a number of firms that would do these things in a phantom or spurious way, giving lip service to the idea. However, there is a great group of firms in between those two groups, many of whom will respond to the kind of encouragement which the noble Lord, Lord Mottistone, quite rightly said was the best way to go about these things. However, I am sure that when he reflects he will agree that even encouragement sometimes needs help.

Ideas of this type have been around for quite a considerable time. I think that noble Lords will agree that progress has been slow, glacially slow. Anything which agitates the process, which makes progress quicker, ought to be encouraged. I think that noble Lords, on reflection, will agree with me that legislation has often been used for the purpose of education and for encouragement, as well as for the ordinary uses of legislation which we understand perfectly well. It seems to me that this is a situation in which the prod or goad of legislation, added to the kind of encouragement that the noble Lord, Lord Mottistone, argues is necessary, might increase the pace towards the aim which most noble Lords in all parts of the House seem to agree is required. I hope that your Lordships will agree with this amendment and that the noble Lord, Lord Rochester, will not withdraw it. In fact, I hope that he will pursue it and that, if he does so, noble Lords on all sides of the House will support him, as I certainly shall.

Lord McCarthy

My Lords, I do not want to keep the House long. According to my calculations we have had seven speeches in favour of this amendment and, I think, four against it. I want to support it in much the way in which we on these Benches supported it when it came up on Committee. I think that the arguments for it have been put very fully this afternoon, much more fully, of course, because we have discussed it at a much better time than when the arguments were put last time.

I want merely to point to a paradox, as I see it, in the arguments, to some extent in the source of the arguments, of those so far who are opposing the amendment. It is a paradox which I think would be particularly notable if it were to be reflected in the speech of the Minister when he replies. It is what one might call the recrudescence of voluntarism. We are told that people do this already, so why can we not leave them alone? We are told that even if they do not do it already, there is nothing to prevent them from doing it; and anyway we are told that it has been done for years. We are told: "These are good practices; they are excellent things; people ought to be like this, but you cannot force them. You have to allow for the voluntary system; you must trust the voluntary system". Indeed, that is very much what the noble Viscount, Lord Trenchard, said when the noble Lord, Lord Rochester, put forward this argument first of all in the 1980 Industry Bill. As I recollect it, he said that it was reasonable enough but he could not accept it because the voluntary method was the way, and anyway there were no powers in the Bill.

The noble Lord, Lord Rochester, has come back and has put it forward again. This time there are some powers, but when we discussed the matter in Committee we received from the noble Earl the same arguments: "There is nothing to prevent it; we have done it for years; you cannot force people to do it; trust the voluntary system". This is extremely paradoxical, when you compare it with the general drift of the debate which we had all through the Committee stage and which we shall be having later on tonight and again on Monday about legislating about the conditions of UMAs, picketing and responsibility in trade unions, and probably in the next Bill when we talk about elections and trade union government. When we have these things we have moved away from voluntarism in all those areas. But there is nothing to prevent it. We have told you—and am afraid it is Professor Gennard again—that the great majority of UMAs have all these things. In other words, they have done it for years. That argument does not do for the greater part of the Bill: it only does for this amendment in this particular clause. I suggest that it does not do there either.

4.19 p.m.

Earl Ferrers

My Lords, we have had an important debate on what is a very important matter. The noble Lord, Lord McCarthy, said that he wondered when I spoke whether I was going to use the argument that this was the recrudescence of voluntarism. I am bound to say that I do not know whether I am going to do so because I am not quite certain what the expression means. But I am quite certain that every other noble Lord knows what it means, and I shall listen to my speech with interest to see whether in fact I shall achieve what the noble Lord anticipates! We had a similar debate on an almost identical amendment during the previous proceedings in Committee, and I am bound to say that I admire Lord Rochester's parliamentary dexterity in ensuring that, by putting this amendment down for mention even before Clause I, his arguments and his amendment will be properly considered, as opposed to what happened when the matter was dealt with at 3.46 in the morning. He certainly has ensured—and quite rightly so—that it has had a good hearing.

I think that everyone agrees with what this amendment seeks to achieve in the overall sphere of industrial relations. This afternoon, as indeed in our previous debate, there has been no dissension from the general proposition that it would be for the benefit of the economy generally if greater advances were made in British industry towards employee involvement. I think the differences arise over what one considers to be the best methods by which the common objective of making progress would be achieved.

My noble friends Lord Mottistone and Lord Boyd-Carpenter and the noble Earl, Lord Halsbury, all thought that legislation was not the right way in which to achieve this. I should like to assure your Lordships that the Government are firmly committed to the principle of managements informing and consulting their employees about matters which affect them; but we are equally opposed—and I am bound to say this—to imposing rigid and possibly inflexible legal systems on employers which take no account of their particular needs or circumstances. I agree with my noble friend Lord Mottistone that in the end it is a question of persuasion and not of legislation.

I think that there has been much progress in what one might generally call employee involvement. A recent survey by the Confederation of British Industry some nine months ago showed this to be the case, but some understandably wished the progress to be greater. I think it was the noble Lord, Lord Howie of Troon, who used that graphic expression that it was "glacially slow". The amendment which the noble Lord, Lord Rochester, has tabled would require directors of companies over a certain size to include in the annual report, which is required of them under the companies legislation, a statement of the arrangements which have been introduced or developed by the company during the financial year concerned to promote employee participation and economic understanding. If this amendment is accepted, this they will have to do year after year, every year.

I agree with my noble friend Lord Boyd-Carpenter that there is the danger that these reports may become routine or anodyne. There is a similar reporting requirement which was introduced under the Companies Directors Reports (Employment of Disabled Persons) Regulations 1980. This requires directors to include in their report a statement describing the company's policy towards the employment of disabled people. No formal review has been conducted of the statements which are made under these regulations, but an initial analysis has revealed a considerable number of brief and rather bland statements, and it is by no means certain that the legislation is stimulating employers to adopt more progressive policies.

I think that it would be wrong to legislate in this way unless industry itself believes that the costs and the burdens, which would undoubtedly be imposed upon it, would be outweighed by the resultant benefits. I agree with my noble friend Lord Mottistone that the concept of employee involvement is one of the changing of attitudes. It must be done consonant with the fortunes of a company. Employee involvement, desirable though it is—and I think that we all desire it—does not of itself ensure success, and the worst way to encourage genuine progress towards employee involvement would be to create difficulties or opposition within companies by imposing a legal obligation to report annually on the steps which they have taken towards what is, after all, a social goal, and a commendable one, but one which may be considered by some in certain circumstances—but not all—to be distant from economic enhancement.

I would, therefore, urge your Lordships not to accept this amendment until such time as industry itself has indicated that it is convinced that the benefits would outweigh the costs. The noble Lord, Lord Rochester, prayed in aid that he and his colleagues had supported the Government over the Bill and he hoped, therefore, that the Government would, in return, be enabled to accept this amendment. I am bound to say that I appreciate the support of the noble Lord. I do not think that it emanates from any natural feeling of generosity that he may have, but merely, probably, because he thinks the Government are right in the Bill. I commend him and his party for their judgment.

The noble Lord said that he would be prepared to withdraw this amendment if the Government would consult with him. But then he made the quite extraordinary remark, if I may say so, that it was no good the Government saying that they would consult with employers, trade unions or others, provided that they consulted the noble Lord, Lord Rochester. It is certainly the case that there will shortly be placed before the Council of Ministers proposals from the European Community Commission for directives about employee involvement. Before we start serious discussions on these proposals there will have to be consultation and discussion about the best method of achieving employee involvement. I fancy that those consultations will display strong support for the Government's current policy. But it will provide an opportunity for interested parties to register further their views about how progress could best be made.

I do not think that the noble Lord, Lord Rochester, could genuinely say that it is all right to discuss this with him, but not with those who are intimately involved. I must stress that all this Bill—except Clausel, which is different and totally separate—has been the result of discussion and consultation; and I agree with my noble friend Lord Campbell of Alloway, who said that it would be unfortunate to include in legislation something which, however commendable the objective may be, has not been discussed with those who will be deeply affected and something over which many of your Lordships, while expressing sympathy, have nevertheless expressed a reservation.

The amendment is similar to a Private Member's Bill which was introduced in another place. By raising it now, the noble Lord, Lord Rochester, has made it quite certain that company reports will be considered in the forthcoming debate on the European Community directives on employee involvement. But I urge upon your Lordships the desire that we should not put into legislation in this Bill something which, however good it may be, has not had the fullness of consultation with others and which might not achieve the admirable intention which the amendment of the noble Lord, Lord Rochester, seeks to achieve.

Lord Somers

My Lords, before the noble Earl sits down, I should like to ask him one question. He said that these matters are best dealt with by persuasion, and I am inclined to agree with what he said about the undesirability of very rigid legislation. But can he tell me how this persuasion will be put across, who will do it, and what proportion of business magnates he thinks is likely to respond to it?

Earl Ferrers

My Lords, with the leave of the House, perhaps I may reply to that intervention by the noble Lord, Lord Somers. I would ask him to look back over the last 10 years and see the enormous progress which has been made by industry over employee participation, over the general understanding of the new ways in which people think. No one person is responsible for doing the persuading. It is a matter of fact and it is a fact of life that public opinion persuades people to change their attitudes.

Lord Rochester

My Lords, I am most grateful to all noble Lords who have taken part in this debate, which I think has been worthy of the subject matter. I do not want to detain your Lordships for very long and I think it would be fair to say that I endeavoured to anticipate in my opening remarks a number of the arguments which have been adduced against this amendment. But a number of points have been made to which I think I should offer some reply because they are new.

First, perhaps I may turn to what the noble Lord, Lord Mottistone, had to say. I was disappointed that he should feel that in subsection (3)(d) there was a certain bias. The wording in subsection (3) is specifically framed in order to avoid that bias. At the moment the trouble is that managers and employee representatives often have different ideas as to how resources should be allocated for the purposes of pay and investment, for example. That was why this subsection is framed to indicate that what we are after is the achievement of a common awareness on the part of great groups as to the problems that arise in that connection.

The noble Lord came very near to telling me that there was an element of trickery in my having sought, along with my noble friends and allies, to include, a clause of this kind in the Bill. I hope on reflection that he will absolve me from any such motive. The sole purpose of seeking to introduce this clause into the Bill is to give it a positive complexion as opposed to the necessarily negative attributes that it now has.

Lord Mottistone

My Lords, would the noble Lord allow me to reassure him that at no stage was I trying to indicate that there was any trickery on his part or that of his noble friends in any way?

Lord Rochester

My Lords, I am obliged to the noble Lord. We are good friends and I am grateful for that assurance. The noble Earl, Lord Halsbury, if he will forgive me for saying so, seemed to come very near to being complacent in this matter. I can only say that, if he has been engaged throughout the 50 years of his distinguished industrial connections with only those firms which have good employee involvement policies, he must have been very fortunate.

I wish that Sir Raymond Pennock had already taken his seat and had been able to take part in this discussion. I am not for a moment suggesting that he would necessarily have supported this amendment, but I am sure of one thing, and that is that, since he has made it perhaps the major theme in his two years' presidency of the CBI that there are still far too many firms with inadequate employee involvement policies, he would have been heartily behind the objective which this amendment seeks to achieve.

The noble Lord, Lord Oram, seemed to feel that it did not go far enough. That was a change. In particular, as I understood it, he thought that there was insufficient emphasis given to trade union representatives in the consultative exercise here proposed. I should like to reassure him that, in so far as employee representatives are trade unionists, as they are in the firm for which I used to work—where I think I am right in saying they are still all shop stewards—it is they who of course would be engaged as the employee representatives in the consultation exercise.

I am more grateful than I can say to the noble Lord, Lord Campbell of Alloway, for the support he offered at least to the principle underlying this amendment. I am sorry that the noble Earl, Lord Ferrers, when he replied did not even take up the suggestion made by the noble Lord, Lord Campbell, that at least this question of employee representation should feature in the consultations that the Secretary of State is to have with employers and trade unions on other matters in connection with ballots.

I was disappointed but not altogether surprised by the response of the noble Earl. He is certainly right to say that in so far as we have given the Government support on the main issues of this Bill it is because, in general, we have felt that, despite the practical difficulties to which I referred earlier, they deserve that support, but certainly there was no element of horse-trading involved in the suggestion that I made that, that support having been given, for some reason the Government should support this amendment. This amendment is left to be supported on its merits or not at all.

Similarly, I am sorry that he should have felt that it was inconsistent of me to say, as I understood it, that I was seeking consultation on the part of the Government with me but not with others. The point of the distinction was one of time. If there were consultations with me and others between now and Third Reading, that would place a maximum time on the process of 10 weeks. If there were to be further consultations with employers and trade unions, at the rate at which these consultations have taken place in recent years, I certainly would not see anything happening this side of the next general election, if then.

A clear division of opinion has arisen in the House today. Our views are strongly held, they are sincerely held, and I should like to take the advice, for which I was grateful, of the noble Lord, Lord Howie of Troon, that the distinction is great enough to mean that I should divide the House.

4.37 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 116; Not-Contents, 112.

DIVISION NO. 1
CONTENTS
Airedale, L.	Elwyn-Jones, L.
Amulree, L.	Esher, V.
Ardwick, L.	Evans of Claughton, L.
Auckland, L.	Ewart-Biggs, B.
Aylestone, L.	Fisher of Rednal, B.
Banks, L.	Gaitskell, B.
Barrington, V.	Gladwyn, L.
Beaumont of Whitley, L.	Glenamara, L.
Beswick, L.	Gosford, E.
Bishopston, L.	Grey, E.
Briginshaw, L.	Hampton, L.
Brockway, L.	Hatch of Lusby, L.
Brooks of Tremorfa, L.	Houghton of Sowerby, L.
Bruce of Donington, L.	Howie of Troon, L.
Burton of Coventry, B.	Hughes, L.
Byers, L.	Hunt, L.
Chitnis, L.	Hunter of Newington, L.
Cledwyn of Penrhos, L.	Hylton-Foster, B.
Clifford of Chudleigh, L.	Ilchester, E.
Collison, L.	Jacques, L.
Cooper of Stockton Heath, L.	Jeger, B.
Craigavon, V.	Jenkins of Putney, L.
Crook, L.	John-Mackie, L.
Cudlipp, L.	Kennet, L.
David, B.	Kilmamock, L. [Teller.]
Davies of Leek, L.	Kinloss, Ly.
Diamond, L.	Kitchener, E.
Donaldson of Kingsbridge, L.	Leatherland, L.

Lee of Asheridge, B.	St. Davids, V.
Lee of Newton, L.	Seear, B.
Listowel, E.	Sefton of Garston, L.
Llewelyn-Davies of Hastoe, B.	Shinwell, L.
Lloyd of Hampstead, L.	Simon, V.
Lloyd of Kilgerran, L.	Stamp, L.
Longford, E.	Stedman, B.
Lovell-Davis, L.	Stewart of Alvechurch, B.
McCarthy, L.	Stewart of Fulham, L.
Mackie of Benshie, L.	Stone, L.
McNair, L.	Strabolgi, L.
Mais, L.	Strathcona and Mount Royal, L.
Mar, C.
Mayhew, L.	Strauss, L.
Molloy, L.	Tanlaw, L.
Ogmore, L.	Taylor of Gryfe, L.
Oram, L.	Tordoff, L.
Parry, L.	Underhill, L.
Peart, L.	Vernon, L.
Phillips, B.	Wade, L.
Plant, L.	Wallace of Coslany, L.
Ponsonby of Shulbrede, L.	Walston, L.
Porritt, L.	Wells-Pestell, L.
Raglan, L.	Whaddon, L.
Rathcreedan, L.	White, B.
Redcliffe-Maud, L.	Wigoder, L.
Ritchie of Dundee, L.	Willis, L.
Roberthall, L.	Wilson of Langside, L.
Robson of Kiddington, B.	Winstanley, L.
Rochester, L. [Teller.]	Wynne-Jones, L.
Ross of Marnock, L.

NOT-CONTENTS
Ailesbury, M.	Gray, L.
Airey of Abingdon, B.	Gridley, L.
Aldenham, L.	Hailsham of Saint Marylebone, L.
Alexander of Tunis, E.
Ampthill, L.	Halsbury, E.
Avon, E.	Hankey, L.
Balerno, L.	Hatherton, L.
Balfour of Inchrye, L.	Hawke, L.
Belhaven and Stenton, L.	Hayter, L.
Bellwin, L.	Henley, L.
Beloff, L.	Hives, L.
Belstead, L.	Holderness, L.
Bessborough, E.	Home of the Hirsel, L.
Boyd-Carpenter, L.	Keyes, L.
Caccia, L.	Killearn, L.
Campbell of Croy, L.	Kilmany, L.
Carnegy of Lour, B.	Kimberley, E.
Cathcart, E.	Lane-Fox, B.
Clitheroe, L.	Lauderdale, E.
Coleraine, L.	Long, V.
Constantine of Stanmore, L.	Lyell, L.
Cork and Orrery, E.	Mackay of Clashfern, L.
Cullen of Ashbourne, L.	Macleod of Borve, B.
Daventry, V.	Mancroft, L.
Davidson, V.	Mansfield, E.
De La Warr, E.	Margadale, L.
Denham, L. [Teller.]	Marley, L.
Dilhorne, V.	Massereene and Ferrard, V.
Drumalbyn, L.	Mersey, V.
Duncan-Sandys, L.	Milverton, L.
Ebbisham, L.	Minto, E.
Eccles, V.	Morris, L.
Elibank, L.	Mottistone, L.
Ellenborough. L.	Mountgarret, V.
Elles, B.	Moyne, L.
Elliot of Harwood, B.	Murton of Lindisfarne, L.
Elton, L.	Newall, L.
Faithfull, B.	Orkney, E.
Ferrers, E.	Pender, L.
Ferrier, L.	Penrhyn, L.
Fortescue, E.	Platt of Writtle, B.
Fraser of Kilmorack, L.	Rankeillour, L.
Gainford, L.	Reigate, L.
Gibson-Watt, L.	Renton L.
Glenarthur, L.	Rochdale, V.
Glenkinglas, L.	Romney, E.
Gowrie, E.	St. John of Bletso, L.

Sandys, L. [Teller.]	Thorneycroft, L.
Seebohm, L.	Trenchard, V.
Selkirk, E.	Trumpington, B.
Sharples, B.	Vaux of Harrowden, L.
Skelmersdale, L.	Vickers, B.
Soames, L.	Vivian, L.
Spens, L.	Wakefield of Kendal, L.
Swinfen, L.	Westbury, L.
Teynham, L.	Young, B.
Thomas of Swynnerton, L.

Resolved in the affirmative, and amendment agreed to accordingly.

4.46 p.m.

Schedule 1 [Compensation for certain dismissals.]:

Lord McCarthy moved Amendment No. 2: Page 27, line 10, after ("applicant") insert ("and, so far as is practicable, the relevant employer and the relevant trade union specified in the union membership agreement,").

The noble Lord said: My Lords, I will, with permission, speak also to Amendments Nos. 3, 4 and 5. First, however, I would remark that I would give the noble Earl full marks for the recrudescence of voluntarism, in view of the last contribution he made. This series of amendments is concerned with the schedule which spells out what the objectives are in Clause 1, and we return to the issue we raised in Committee about the degree of discretion given to the Secretary of State under this procedure. In Committee we tried to insert a number of conditions on those wide areas of discretion. We wanted the grounds of the discretion specified, we wanted a role for industrial tribunals and we wanted to provide the same basis for the payment of compensation as other forms and so on; but in all those attempts we were unsuccessful. However, today may prove a precedent, so we can hope.

We were told two things by the Government on that occasion. It was said that all our attempts to introduce some modification of the discretion given to the Secretary of State were unnecessary either because they would happen anyway—because he would act in the ways we tried to prescribe he should act—or because (and in particular we were told this by the noble Earl, Lord Gowrie) it was really an administrative process and not a judicial one. We do not accept that. We consider that to pay out money for past circumstances in which it is alleged that people were unfairly dismissed—or would have been unfairly dismissed if the law had been otherwise—is just as much a judicial process as to pay out compensation in cases of unfair dismissal which happen today under the 1980 Act.

Therefore we have returned to the same issue and we have tried to do it in a very modest way, because in this series of amendments we are really only dealing with a situation where there may have been a mistake—that, in terms of paragraph (9) of the schedule, it has been thought that maybe there is a case for a reconsideration of the decision because it may have been, made in ignorance of, or was based on a mistake as to, some material fact. We are saying that it should be possible for that kind of process to be started not only by the complainant, but by other interested parties, too; for example, the employer, or the trade union. They should be able to invoke the procedure whereby they claim that the decision, was made in ignorance of, or was based on a mistake as to, some material fact". The other interested parties should be able to invoke the procedure just as much as the complainant can invoke it.

The only argument that I see it might be possible to advance against our proposal was, in a slightly different form, advanced by the noble Earl, Lord Ferrers, at col. 689 of the Official Report of the Committee stage on 6th July. He said that so far as he could see, going back to the model of an administrative process, the facts, and ascertaining them, was a simple matter and in effect was no concern of the union or the employer. He said at col. 689: The Government accept that the dismissals of those who will be eligible to apply under these arrangements were not unlawful at the time. There is no question of seeking to establish whether these dismissals were right or wrong in some legal sense. The sole questions at issue now will be factual ones which—and again I must emphasise this—cannot lead to any liability on the part of a former employer or trade union. In view of this there can be no case for giving a former employer or trade union the right to state their views, as these amendments seek. In fact, the views of the employer or of a trade union are neither here nor there".

We would submit that the noble Earl went on somewhat to argue against himself when he subsequently admitted that there were cases where the facts might be in dispute, and it might not be all that apparent. If that were the case, then, going back to the first defence of the Government—that they would do all the things, anyway—the employer or the union almost certainly would be contacted. He stated: Then, of course, in other cases there will be more difficulty in establishing the facts. In these cases the appointed person will no doubt wish to ask the former employer and possibly the union concerned for details, and this the Bill permits him to do". He then said: I need hardly say that if there is any doubt about the facts of a dismissal or about the loss which the applicant has suffered, then the appointed person will seek the facts from any individual or organisations who may be able to help".

The point that we are making is, how can we be certain that the appointed person, prompted, as he may well be, by the complainant, knows whether there has been ignorance of facts, so far as he is himself concerned? How does he know about his own ignorance? How does he know whether he has based his decision on a mistake as to some material fact? Of course, if he bases his decision on a mistake as to some material fact which affects the complainant, we can expect the complainant to set him aright. But it is not true, nor is it fair, to say that the union and the employer are not involved. They may well wish to argue that there was not an unfair dismissal in the terms of the legislation. They may wish to feel, and may very well feel, that to suggest that there was an unfair dismissal is a slight upon their own procedures. They may very well have had operating in the period their own domestic procedures, which allowed for conscientious objection, and allowed existing employees to opt out of union membership agreements. Therefore, they may feel that those facts are material, and that in one way or another the decision must have been based on a misstatement of fact, believing that the actual facts were in their favour.

So the aim of the amendment is simple and straightforward, and we look forward to hearing the Government's arguments. We believe that the parties are involved. We believe that in a minority of cases they could correct the facts upon which the decision of the appointed person is based, and the object of the amendments is to give them the right to do that. I beg to move.

Earl Ferrers

My Lords, I am greatful to the noble Lord, Lord McCarthy, for taking Amendments Nos. 2, 3, 4 and 5 together. This group of amendments reverts to a theme which, as he quite rightly said, we discussed at the Committee stage. At that stage your Lordships debated whether the opinion of an applicant's former employer and the relevant trade union should have to be sought before payments could be made under the provisions. Now, with Amendment No. 2, the noble Lord seeks to have all decisions notified to the former employer and trade union, and with Amendments Nos. 3, 4 and 5 he seeks to allow employers and trade unions to be able to request reconsideration of a decision on compensation, on the grounds that the decision was based on a mistake as to, or ignorance of, some material fact.

Perhaps I may be permitted to look at each amendment in turn. Amendment No. 2 would require the Secretary of State to inform not only each applicant of his decision on each case, but also so far as was practicable, the former employer and the trade union concerned. I ventured to make clear in Committee—the noble Lord, Lord McCarthy, this afternoon has reminded us of this—that it is wholly mistaken to view the former employer or trade union concerned as being in any sense parties to the applications. I think that the noble Lord quoted the words that I used—that it is nothing to do with them. In Committee I tried to make it plain that no blame or liability will attach to any employer or trade union as a result of an application under Clause 1 of and Schedule 1 to the Bill. They are not the ones who are being judged. They have nothing to gain and nothing to fear from the outcome of the applications. If that is so, in my view there can be no justification for requiring the Secretary of State to inform them of his decisions on individual applications.

Amendment No. 3 seeks to allow the former employer or trade union to apply for a reconsideration of the Secretary of State's decision. I must say that I find that unacceptable. As I have said, neither the employer nor the union will in any way at all be parties to the applications, and yet here it is being argued that nevertheless they should be able to come along and say, "Excuse me, I know that the outcome has nothing to do with me, but you must look at this again". With the greatest of respect to the noble Lord, Lord McCarthy, that simply does not make procedural sense, if it makes any other kind of sense—which I rather doubt.

In Amendment No. 4 the noble Lord seeks to require the Secretary of State to inform the employer and trade union concerned as well as the applicant if, off his own bat, he decides to reconsider an application. This is the same well-worn theme, and so I shall not repeat myself yet again, other than to say that the employer and the union would not have been parties to the original application, and therefore they would not be parties to the Secretary of State's reconsideration.

Amendment No. 5 seeks to impose on the employer and the trade union concerned a time limit of three months in which to apply for a reconsideration. Well, perhaps we should be grateful for small mercies. If we were to allow employers and trade unions to apply for reconsideration of someone else's application, at least it would be nice to be able to limit the time in which they could do so. I have suggested that the Government do not see it right to tread down that cobbly, old path, and I would ask the House to reject this amendment, as well.

Lord McCarthy

My Lords, I would not say that the noble Earl has disappointed me, but there it is. He has gone through each amendment and, as he has said, he has repeated his well-worn track answer that it has nothing to do with anybody other than the Government and the complainant. What we are saying fundamentally is that it has something to do with other parties, and that they should have at least the very limited rights that we are suggesting. I do not feel disposed to withdraw the amendment.

On Question, amendment negatived.

[Amendments Nos. 3, 4 and 5 not moved.]

5 p.m.

Lord McCarthy moved Amendment No. 6: Page 27, line 40, leave out sub-paragraph (2) and insert— ("(2) Where the Secretary of State, after reconsideration of a case under paragraph 9, is satisfied that a payment has been made by reason of a fundamental mistake as to some material fact, he may, within three months of the payment being made, cause the person to whom it has been made to repay such part of it as he considers just and equitable.").

The noble Lord said: My Lords, we are still on Schedule 1, and this is the final attempt on our part to inject a little equity and fairness into this procedure. We feel, as we have said, that it is biased against those who consider the fairness and justice of the original dismissal. What we are trying to do is to widen the basis on which, in this case, there might be repayment through some mistake, fraud or something of that kind.

At the moment, as I understand it, the schedule allows for liability for repayment in one extreme case and in one extreme case only, and that is in paragraph 10 on page 27: Where … any person misrepresents or fails to disclose any material fact, whether fraudulently or otherwise". An example, I suppose, would be where he was warned five times for unsatisfactory work: that that is why he was dismissed and it was not anything to do with his union membership. Or it might be that he had refused to obey a lawful order, or something of that kind. If he suppressed or fraudulently misrepresented the facts of his dismissal in a circumstance like that, then, I take it, that would be covered by this part of the schedule. The most common case, I suppose, would be where he had already obtained an alternative job somewhere else and wished to leave anyway, and where the throwing in of his union card, or whatever, was simply a way of applying for the money. If it could be shown that these statements were made, or had failed to be made, and that therefore there was fraud, there would be a liability for repayment.

What we are suggesting in this amendment is that in some ways it is an exceptional circumstance that fraudulent misrepresentation exists. We do not suggest it is common. More common, I would suggest, given the administrative nature of this procedure—what we called at Committee stage this hugger-mugger procedure; that is, the privateness of this procedure and the distance from the event (because these are circumstances in which the decision by the appointed person is some two, three or four years from the event itself)—is the innocent mistake of fact. The most common one, I suppose, might be the date on which a UMA became operative. It may be that the individual was not in fact in employment at the time; or, rather, to put it the other way round, that the UMA did not come into operation when he was first engaged but came into operation subsequently or previously, or there was some mistake about the date on which the UMA became operative. That might affect whether or not he had a case for compensation under the Act, and some innocent mistake might be made in that respect.

A further example might be where there was an appeals machinery. If one tries to give this clause a little concreteness, one is reminded of the case of Miss Joanne Harris, who, we understand, failed to use the machinery for appeal which was available to her. That might be taken into account—I do not know—by the appointed person if he knew of it. I do not know about Miss Harris; perhaps she forgot that there was such machinery. It might quite innocently he forgotten that there was a form of redress and that the form of redress was not followed. These are facts which could quite innocently have been withheld from the tribunal; and they are mistakes of fact, not deliberate matters of misrepresentation. It is this kind of thing that we are trying to cover in this amendment, and we are saying that there should in effect be an additional reason why there could be a reconsideration of a liability for repayment, not simply when there is some misrepresentation but when there is some innocent misstatement of fact. I beg to move.

Earl Ferrers

My Lords, we have had our two old friends pop up from the Committee stage again—Professor Gennard, and now hugger-mugger. I wondered whether we were going to see them appear again. As Schedule 1 is presently drafted it will make an applicant liable to repay compensation which he has been awarded only where he has been at fault; for example, by failing knowingly to disclose some material fact. The amendment moved by the noble Lord, Lord McCarthy, could require him to repay compensation where he in fact has acted in perfectly good faith but where some mistake has nevertheless occurred.

I am bound to say at the outset that I think that the amendment is directed at an eventual which seems unlikely to occur very often, if ever, but I also accept the fact that it is proposed in perfectly good faith. But if the facts cannot be established, payments will not be made; and if the facts have been deliberately misrepresented or concealed with the consent or the connivance of the applicant, the Bill already provides for a liability on the applicant to repay. The noble Lord, Lord McCarthy, is entirely right in saying that that appears in paragraph 10(1) of the schedule. But this amendment seeks to go further by making the applicant who has acted with total honesty nevertheless liable to repay compensation if a mistake occurs elsewhere.

My Lords, let us consider the case of a person who makes an application, in good faith, in which every particular is true to the best of his knowledge and belief. After the appointed person has considered his case and has made his recommendation, the Secretary of State makes a payment. The applicant might well use that money straightaway to pay off debts, to take a holiday or to do whatever else he likes to do with it. Then, two months later, the Secretary of State might write to him and say, "I am terribly sorry, I have made a mistake; my calculations were wrong"; or, indeed, he might say," I made a mistake; your former employer has now sent me some further facts which he did not send when my assessor first asked him about your application, and therefore you ought to repay the money which you received ". I do not really believe that it would be right or just that that person should repay the compensation because of a mistake for which he was not responsible.

In prescribing that it would be wrong for the applicant to have to repay in such circumstances, the Government have followed the precedent—and, indeed, virtually the same words—in two other similar Acts, both passed by the previous Government, which provide for payments of compensation. They are the Vaccine Damage Payments Act and the Pneumoconiosis Act. The same principle is also present in the Social Security Act 1975, where it provides that repayment of benefits will not be required so long as the beneficiary can show that he has used due care and diligence to avoid overpayment. So, while I sympathise with what the noble Lord, Lord McCarthy, is trying to achieve, I think he will agree that if his amendment were to be made to the Bill it would really be putting an imposition on the recipient of the money for reasons for which he was not responsible and in conditions in which it would be unfair for him to have to repay.

Lord McCarthy

My Lords, I accept what the noble Earl says and I thank him for it. Certainly he is perfectly correct to say that if our amendment were introduced as it appears on the Marshalled List—at least, I think he is right—we might be getting at people who had, in the terms of, I think he said, the pneumoconiosis legislation, used due care and diligence, and I would not want to do that. I would say that if somebody has done his best to present the truth—and I think "due care and diligence" is a very good phrase; it should have been in our amendment—then I should want to leave him outside.

But, as I indicated in my example, I was thinking of somebody who was not aware that when he came to the place of work there was indeed a UMA. People forget, and they may not always know. These things do not always work in the proper way; and so he believes that the UMA came after he arrived when in fact the UMA was there before. If the appointed person knew that, he would rule the case out, and then, to take the noble Earl's own case, subsequently the employer gets to know the true facts and writes to him. This is one of the arguments for having the employer play a role in this matter, but the Government have ruled that out. The employer gets to know the evidence on which the appointed person has taken his decision and says, "That is quite wrong; in fact we have had a UMA in this establishment for two years, or four years, and it is quite wrong. I do not suggest that the man was not using due care and diligence, but he just happened to be wrong That is the kind of circumstance I was trying to deal with and I still maintain that it is one which it would be fair to put in the Bill, but I must accept the point made by the noble Earl that it is not there in our amendment. Therefore, I am prepared to withdraw the amendment.

Amendment, by leave, withdrawn.

5.10 p.m.

Lord Hatch of Lusby moved Amendment No. 7: Page 2, line 47, leave out from ("agreement") to end of line 5 on page 3 and insert— ("(3A) Subsection (3) shall not apply where within six months of the delivery to the employer of a petition signed by not less than 20 per cent. of those employees of the employer who on the day of the delivery of the petition belonged to the class to which the union membership agreement relates and calling for a ballot on the question whether the agreement should apply in relation to them the union membership agreement has not been approved in relation to employees of that class in accordance with section 58A provided that no such petition for a ballot has been made within the preceding three years.").

The noble Lord said: My Lords, I beg to move Amendment No. 7 and in doing so I should first apologise to the House for the very convoluted wording of this amendment. In fact, the wording is not really my responsibility. I do not think that I could have composed it on my own. It is taken—with one addition—from an amendment that was moved in Standing Committee in another place by a member of the Social Democratic Party. I spoke to the principle contained in this amendment on Committee stage and pointed out at the time that it appeared that the so-called alliance between the Social Democratic Party and the Liberal Party had broken down in the Standing Committee and that it was only right that the country should know where they stood on this very important principle of how they intend to deal with the closed shop.

The noble Lord, Lord Rochester, in speaking about a similar amendment moved by my noble friend Lord Jacques, objected to the references I made at that time, by saying that the noble Baroness, Lady Seear, had faithfully reflected the ideas and words of their honourable friend Mr. Cyril Smith in the Standing Committee. That is perfectly true. But what I think we are entitled to know is just where this alliance stands on this issue. We know, broadly, where the Government stand. I had thought that the Government would support the amendment moved by my noble friend Lord Jacques at Committee stage, because I had always believed that the Government supported the principle of contracting-in rather than contracting-out. This amendment, and the amendment of my noble friend Lord Jacques, is based upon contracting-in as far as balloting is concerned.

We were left just as mystified—except in the vote on that amendment—as we had been before. In the vote, the members of the Social Democratic Party and the Liberal Party voted together, with the Government, against the amendment. This afternoon I should like to invite them both to clear up this matter. During my speech at Committee stage, the noble Lord, Lord Kilmarnock, pointed out that his objection to the amendment moved by my noble friend Lord Jacques was that the use of what is known as the trigger mechanism for balloting, rather than the automatic five-year balloting, was open to the abuse that it could be used too frequently; that there could be constant requests for ballots and that this would ruin the whole principle of the idea.

I have allowed for the objections of the noble Lord, Lord Kilmarnock, which have some point to them, by adding the words of his honourable friend in the Standing Committee in another place. The provision at the end of this amendment is: that no such petition for a ballot has been made within the preceding three years". I am not fussy about whether it is two years or three years, but that is put in specifically in order to make sure that there is no covering over of the objections which he made during Committee stage.

My Lords, the other objection made was the difference between the amendment of my noble friend Lord Jacques and the amendment proposed in Standing Committee by the member of the SDP. Whereas my noble friend Lord Jacques had referred to 10 years, Mr. Bradley in the Standing Committee had referred to 20 years. The 20 years is now there. Therefore, it would seem to me that we are entitled to know where stands this alliance, which claims to be considered a future prospective Government.

In the Standing Committee it was clear that the Liberal representative was so passionately opposed to the whole concept of the closed shop that he would not accept the amendment that had been moved by the member of the Social Democratic Party, because he believed that it might weaken the attack on the closed shop which is represented in this Bill. At the same time, in the Committee stage in this House the members of the Social Democratic Party voted against the amendment that allowed for the trigger mechanism, as opposed to the automatic five-year balloting—so where do they stand?

Let me say one thing about the Social Democratic Party in this House. I make a distinction here between those members of the Social Democratic Party who were never members of the Labour Party and those who have defected from the Labour Party. The members of the SDP in this House, as distinct from those in another place, who have not defected were mostly splendid, delightful, independent Members of your Lordships' House who contributed very greatly, with their expertise and their experience, to the work of the House. We welcomed on many occasions the stands that they took. Then they apparently began to feel lonely—a quite normal, human emotion—and wanted to join a community. Well, they have moved one step. I think it is fair to say that moving into the Social Democratic Party from independence is one step towards the recognition of the Socialist message. So we welcome that.

That is very different from the case of those whose public life has been based largely on support of the Labour and trade union movement. Nevertheless, they claim to be one party and they also claim to be a part of a political alliance; and I should like to hear from the Front Benches of the Liberal Party and from the Back Bench of the Social Democratic Party whether they have a policy towards balloting in connection with Clause 2 relating to the closed shop. I invite them to clear up this matter so that we and the country may know where they stand.

Is it the case, as appeared to be exhibited in the Standing Committee, that the Liberal Party and the Social Democratic Party are engaged in battle over whether there should be an automatic five-year ballot or whether there should be a trigger mechanism for such a ballot? To what extent is the Social Democratic Party accepting the known obsessive dislike, indeed hatred, shown by some members of the Liberal Party towards the closed shop? Whether that is cleared up or not, I still submit to the Government that if they are genuinely concerned, as they claim to he, with industrial relations in this Bill, as distinct from antiunion ideology and hostility towards the closed shop, then they will recognise that there is at least a very strong case to be answered as to whether the automatic five-year ballot concerning the closed shop will not provoke industrial unrest, chaos in many industries and hostility within the trade unions inside those industries.

I pointed out at Committee that, if it is known that in 1987 there is going to be a ballot regarding the closed shop, then the preceding six months to a year will be taken up with lobbying, with pressures, leafleting, meetings and so on, which is not going to help industrial relations in this country. That automatic form of ballot, as contained in the clause as it presently stands is, as the Government will accept, opposed and disliked by both employers and trade unions. One can quote—as the noble Lord, Lord Jacques, quoted in a similar debate in Committee—the Engineering Employees' Federation, and I am sure that the Government Front Bench know of the opposition of the merchant shipping employers. It is also opposed totally by the trade union movement. So this is surely a prescription for industrial unrest.

With those two points, and a request to both the Social Democratic Party and the Liberal Party to let us know where they stand so that we know whether we may count on their votes in the Division Lobby, together with a request to the Government to take seriously the danger that their present proposals will lead to serious industrial unrest, I move Amendment No. 7.

Lord Rochester

My Lords, I suppose I should respond briefly to the bait put before me by the noble Lord, Lord Hatch. But it will be brief. I think that he is stirring the pot. I think that he is wasting the time of the House, in that we have better things to do than argue on this point. Briefly, on behalf of my party, I have made it plain that we oppose the closed shop in principle but we have some reservations on practical grounds concerning the operation of the ballots. It is for that reason, your Lordships will remember, that we put forward certain amendments which were designed to reduce the percentage of support required before an existing closed shop would retain protection. We made it plain that we prefer the Government way of approaching this method, however, by that kind of ballot rather than by the trigger mechanism. It may be that there has been some difference of emphasis on this matter between my party and our allies in the Social Democratic Party. That is for them to comment on as well as myself.

What irritates me, frankly, is the reaction to any minor difference of opinion on complex matters like this. It may not be a bad thing that in Committee and in your Lordships' House there are these differences. In the last vote, for example, certain members of the Conservative Party had the courage to vote with members of the Liberal and Social Democratic and indeed Labour Parties. I do not think that they deserve reproach for that for one moment. Any differences that there may be of this minor nature between my party and the Social Democrats as our allies are as nothing compared with the vast gulf which lies between right and left wings of the Labour Party.

5.26 p.m.

The Minister of State for Defence Procurement (Viscount Trenchard)

My Lords, I do not know whether a Report stage on a trigger amendment should give rise to a general debate on the state of the Alliance. I note that the Members of the SDP present shake their heads, and that the noble Lord, Lord Rochester, has already spoken. I suggest we leave that for another occasion.

Lord Boyd-Carpenter

My Lords, would my noble friend allow me to speak? Would not such a debate be most appropriately conducted during the dinner adjournment?

Viscount Trenchard

My Lords, I think that is an excellent idea. This is another trigger amendment which, apart from the discussions in the other place to which the noble Lord has referred, has been very well discussed in this House at the Committee stage. The noble Lord who moved the amendment suggested that we ought to have been more attracted to it because of our views about contracting in and contracting out. Frankly, I think that analogy bears on an individual's right to contract in and out. In an authorised closed shop, subject to the provisions concerned, he has to contract in and cannot contract out, so I do not accept the analogy.

The difficulty with trigger ballots lies in the problems which employees would be likely to face in practice in achieving the required threshold level to "trigger" a ballot. We must remember that efforts by individual employees to canvass or simply inquire into possible support for a ballot among fellow employees could in many cases be strenuously resisted by the trade unions concerned. It must be realistically expected that in many cases people attempting to promote a ballot would suffer attempts to dissuade them from such a course. I do not think it can be right that 20 per cent. or any other percentage of employees should declare themselves in order to gain the right to vote in a secret ballot, particularly when those prepared to press publicly for a ballot could suffer actual or threatened disciplinary action from their union as a result Noble Lords will remember the quotations from rule books to which I referred previously.

This provision—indeed, any trigger provision—might result in ballots hardly ever being held even where employees would like them, as indeed the opinion polls tend to show that they would. We therefore do not consider that trigger ballots are an acceptable substitute for the automatic balloting in the provisions of this Bill. We believe—and we made this clear at Committee stage—that it is likely that there will be much less disruption on an automatic check with the alternative ways of doing that check which in closed shops which have the support of the vast majority allows the alternative of 85 per cent. of those voting.

I am puzzled that trigger ballots should continue to be recommended rather than what I would have thought would have been supported by many responsible trade unions—or ought to be supported—namely, the great authority they are bound to draw from an authorised closed shop position should they have the authority of a secret ballot every five years. That must give them much greater strength than an authorised closed shop which has not been checked, and which it would be difficult to check, which has existed for years and years and years. I therefore ask the House to resist this amendment.

Lord Oram

My Lords, I think it was right that my noble friend Lord Hatch should seek clarification from various quarters in the House of the attitude of different parties to the ballot. He has achieved two-thirds of his objective in that we have had statements from the noble Lord, Lord Rochester, and the Minister who has just spoken.

Viscount Trenchard

My Lords, I wonder if I may intervene to make the noble Lord, Lord Oram, aware that the representatives of the Social Democratic Party behind him nodded when I asked them whether they wanted to say anything further—that is to say, they nodded that they did not want to say anything further.

Lord Oram

My Lords, I am sorry that I cannot see the gesticulations of the Social Democratic Party behind me, but I should like briefly to remind the House of the purpose which my noble friend Lord Jacques and I sought to serve at the Committee stage when we moved a similar, though somewhat weaker, amendment than that which is before the House now. Our purpose was to ensure that where closed shop arrangements had been satisfactorily operated over the years, particularly in large and complex business organisations, then those arrangements should not be easily disturbed unless there was sufficient evidence that there was opinion within the workforce in favour of a change.

That is why in our amendment at the Committee stage we suggested that requisition by 10 per cent. of the workforce was reasonable. It was put to us during that debate by the noble Lord, Lord Kilmarnock, that 20 per cent. might be a more reasonable and certain figure; and my noble friend Lord Jacques indicated that he was not particularly sticking on the 10 per cent. figure. Moreover, the noble Lord, Lord Kilmarnock, quite validly made the point that there was nothing in our amendment to prevent a whole series of requisitions for ballots, even if those ballots did not lead to the turning down of the existing closed shop arrangements. We consider that both points put by the noble Lord, Lord Kilmarnock—whether he is shaking his head or nodding, I cannot be sure at the moment—were valid points, and I am glad my noble friend, Lord Hatch, has included in this amendment words which fully take into account those words spoken by the noble Lord during his intervention last time. Therefore I hope that we may hear briefly from the noble Lord on behalf of the Social Democratic Party, not in terms of how divided or how allied they are with this, that and the other party, but what he thinks about this particular "trigger" suggestion.

Lord McCarthy

My Lords, I did not want to intervene in this debate, but the noble Viscount the Minister has made a number of statements which I think must be corrected. We do not argue on this side of the House for trigger ballots. If someone comes along and introduces statutory ballots—and it is the Government who would introduce statutory ballots, automatic statutory ballots—in certain circumstances, by and large there is a balance of advantage in favour of trigger processes rather than automatic processes. It is as broad as it is long. The problem with this amendment is that although it gets rid of automaticity it introduces a trigger ballot over a rather shorter period, but we are not coming before the House arguing for trigger ballots. Unfortunately, the main objective, which was to get the Social Democratic Party to say what they would like to do, has not been fulfilled because they will not say anything.

The only other thing I would say is that once again, in arguing against trigger ballots, the noble Viscount has gone back to a statement he made in an earlier debate about rule books. He really must not make this statement about rule books in the way that he does. He quotes general expulsion rules. Every voluntary association has a general expulsion rule: that is, the equivalent of Section 40 of the Army Act. Judges have said in cases of expulsion that you cannot operate unions without general expulsion rules because those who sought to do so would require vast rule books which specified every conceivable thing that a member might do which might in some way lead him into trouble. Every organisation has general expulsion rules. It is quite a different thing how you impose those rules and how frequently you cause them to be used to expel people; and even if you do that you must really appreciate that there were first-class common law defences and protections against the abuse of general expulsion rules, long before the 1980 Act.

Lord Hatch of Lusby

My Lords, I am sorry I have been unable to elicit clarification of the position of the Social Democratic Party towards this important issue—I think the noble Lord, Lord Rochester, somewhat played this down—regarding the future of industrial relations. I still think we are entitled to know where the Social Democratic Party, as well as the Liberal Party, stand in their view on the future of industrial relations and how they would deal with this important matter if they achieved their aim as the Government. However, it may be that the position of the Social Democratic Party in politics has been aptly represented by the noble Viscount's comment that they nodded when they meant "No".

My noble friend Lord McCarthy has put his finger clearly on a very important issue that was raised at Committee Stage and which apparently has not yet sunk into the mind of the noble Viscount the Minister. I think he revealed the thinking of the Government when he said in his argument against the trigger mechanism that if there was a trigger mechanism perhaps ballots would not often be held. But do we want ballots to be held? We certainly do not, and nothing that is in this amendment is designed—I assure the noble Lord, Lord McCarthy, about this—to support the principle of balloting. It is only if ballots are going to be put into the Bill that we would then be trying to minimise the damage they will do. We think it is less dangerous to have the trigger mechanism than to have the automatic ballot. When the Minister says that one of his objections to the necessity for 20 per cent.—one in five—of the workforce to ask for a ballot concerning the closed shop, and that that provision would lead to ballots being held only infrequently—here I am paraphrasing his actual words—that reveals, to me at least, what the thinking of the Government is.

Why do the Government want to force these ballots against the wishes of the employees and the trade unions? What we have been trying to do is to minimise the insistence of the Government that ballots should be held, by saying that ballots will be held when the people concerned—only one in five of them—show that they want ballots. We are not going to force ballots on them. The point that has been made regarding the danger to members in collecting that 20per cent. has surely been exploded by now. What evidence has there ever been that there is any substantial appreciation, pressure or intimidation by members of trade unions regarding the decisions that they take? That was challenged in another place, it was challenged in Standing Committee and there has been no answer to it.

I do not believe that the noble Viscount has made out a case for saying that the kind of dislocation and hostility that would be created in the lead-up to these ballots would be less under his automatic system, than it would be if the trigger mechanism were to be adopted. All I am suggesting in this amendment is that the damage to industrial relations would be less—it will apply, anyway, from this clause—if it were a requirement that a ballot would be held at the will of 20 per cent. of the workforce, rather than an automatic ballot held every five years.

Viscount Trenchard

My Lords, just let me say to the noble Lord, Lord McCarthy, that I certainly do not today want to enter into the question of whether or not there is a case for changing or regulating rule books. I merely pointed out that the existence of the rule book and not just the expulsion clause, together with the closed shop, creates a very strong position. Many of us who have spent our working lives in factories know that the pressure can be considerable, and that it is not easy in a closed shop situation to put forward something that a union may feel is against their interest. We still feel that and I would say to the noble Lord, Lord Hatch, that there is less likely to be disturbance, even in extremely contentedly working closed shop areas, by an automatic ballot, which we believe even unions will come to welcome as being a good way of giving backing to their authority. I hope that they will and, anyway, I hope that the House will resist this amendment.

On Question, amendment negatived.

5.44 p.m.

Viscount Trenchard moved Amendment No. 8: Page 4, line 6, at end insert— ("(7A) In any case where neither subsection (4) nor subsection (7) has the effect of displacing subsection (3) and the employee—

1. (a) holds qualifications which are relevant to the employment in question;
2. (b) is subject to a written code which governs the conduct of those persons who hold those qualifications; and
3. (c) has—
   1. (i) been expelled from a trade union for refusing to take part in a strike or other industrial action, or
   2. (ii) refused to become, or remain, a member of a trade union,
   subsection (3) shall not apply if the reason (or, if more than one, the principal reason) for his refusal was, in a case falling within paragraph (c)(i), that his taking the action in question would be in breach of the code or, in a case falling within paragraph (c)(ii), that if he became, or as the case may be remained, a member he would be required to take part in a strike, or other industrial action, which would be in breach of that code.").

The noble Viscount said: My Lords, in moving Amendment No. 8, 1 do not think I shall need to encourage the noble Earl, Lord Halsbury, or the noble Lord, Lord Howie of Troon, to speak, if they wish to do so, to Amendments Nos. 11 and 12 which are in their names. The House will remember that at the Committee stage the noble Earl and the noble Lord sought to protect the position of professionally qualified people, who might face a conflict of interest in an approved closed shop situation. I argued that we felt that the position was fully covered in the Bill and, to a degree, was supported by the 1980 Act and by a code of practice which had been issued following the 1980 Act.

In fact, the Government still believe that that is the case, but we cannot prove absolutely that that would specifically be the case on every occasion. As a result, and as a result of the noble Earl and the noble Lord pressing the point that they were not looking for a specific protection of people's opinions, consciences or firmly held convictions, but were looking for protection for people who found themselves with a conflict of interest, we have come forward with Amendment No. 8, which seeks to put in what could be called a subsection to deal with a conflict of interest, and in that way to avoid weakening the generality of subsection (4), which deals with conscience or deeply held personal convictions.

I hope that the noble Earl and the noble Lord will feel that we have met their points, and I should like to thank them both, and other Members from all quarters of the House who took part in the very interesting Committee stage discussion which we had on this subject. If accepted, this subsection will be a good demonstration of the value of the experience in which this Chamber abounds, and I couple that particularly on this occasion with the names of the noble Earl, Lord Halsbury, and the noble Lord, Lord Howie of Troon. My Lords, I beg to move.

The Earl of Halsbury

My Lords, I am extremely obliged to the noble Viscount for coming forward with this amendment in the name of the noble Earl, Lord Ferrers, on behalf of the Government, and I have no hesitation in supporting it in the form in which it now stands. It is similar to my Amendment No. 21 at the Committee stage, but, of course, I have always conceded that on a Government Bill the Government draftsmen must have the last word on the actual wording of the clause, and I accept that.

At the Committee stage, I withdrew the original amendment against a promise by the noble Viscount of sympathetic study in the interim, and I would entirely endorse what he has just said about the value of the Committee stages of these Bills as a dress rehearsal for the in-fighting which comes at Report stage, and the opportunity they give to study with good faith the various points involved. He promised to write to me and he kept his promise with commendable despatch. I have had plenty of time to study his arguments.

I came up with an alternative in response to points made by many in the Committee stage that prevention is better than cure, and that it would be better not to allow a situation to arise than have to rectify it by giving damages if it did. I succeeded in drafting an amendment which comes forward as Amendment No. 11 and which I shall not now move at this Report stage. But, of course, you have to pay a price for what you achieve, and the price I had to pay for Amendment No. 11 was that it invalidated all the closed shop agreements, unless they were amended and that gave opportunities for demanding renegotiation and so on, which might be thought a high price to pay for achieving that. Meanwhile, the noble Viscount's promise of sympathetic study was honourably kept and he has come forward with this amendment, which I have no hesitation in accepting as a fair alternative to my own. It gives me what I have been arguing for since 1971 and, if your Lordships see fit to support the Government amendment on this occasion, I shall go home this evening a very contented Member of your Lordships' House.

Lord Howie of Troon

My Lords, I want to say relatively little on this occasion, because we have discussed this matter on at least half a dozen occasions, in my experience, and many more in the experience, which goes back much longer, of the noble Earl, Lord Halsbury.

I want to begin by congratulating the noble Viscount, Lord Trenchard, and thanking him for two things. First, in the Committee stage debate he undertook to send out a letter giving the Government's attitude on this matter to the noble Earl, Lord Halsbury, and myself, and to other noble Lords who were interested, and to place a copy of it in the Library. That letter was the most clear and convincing statement of the Government's attitude on this matter which we have had in the course of the discussions over the last several years, and I thank him for it. I found it convincing. The noble Earl also found it convincing, because it gave him his points. It did not quite give me mine.

I found it convincing, but not convincing enough—only in the sense that the letter was based on the Government's strategy which leans on the concept of fair and unfair dismissal. I know that many of the concepts which we have discussed in these debates on employment legislation are hallowed by time, but this concept of unfair and fair dismissal is hallowed only as far back as 1971. I do not regard that as terribly hallowed. It is the kind of short hallowedness which could be unhallowed in due course, and I hope that in some future Bill it will be. I want not the concept of unfair or fair dismissal, but the dismissal not to happen at all, but I do not want to push my luck too far.

Therefore, I should like to go on and give my second congratulation and thanks for this amendment which the Government have put down. It does not quite meet the point I made in earlier discussions, but I am perfectly sure that it goes as far in my direction as the Government reasonably could be expected to go. Since I had been under the impression that this Government were virtually immobile in such matters, any movement of this sort I welcome with open arms, and I hope that the House will, too.

My own amendment, Amendment No. 12, which I do not intend to move when the time comes, was based on the letter which the Minister sent out to the noble Earl and to myself and to others. I took up the point made by the Minister that paragraph 54 of the code of practice on the closed shop was the key to the question, because it had to be considered by an industrial tribunal if a case came before it. I have argued all along that this particular matter should not be in the code but should be in the appropriate Bill. That is what I sought to do in my amendment. I took the provisions of paragraph 54 of the code and put them into the Bill, because that seemed to me to be the logical, clear and, above all, simple place for them to be. When they were in the code of practice, they seemed to me to be too far removed from the point of application and too tenuous in their connection with the problem.

Although the Government cannot meet me on that, they have gone a very long way towards meeting the principle. I shall certainly look at the application of the Bill, when it becomes an Act, assuming that this amendment is accepted by the House, and see how it affects the professional engineers and other professional people about whom I have been worried. If the Government's proposals work, I shall be delighted. If it turns out that the Government's proposals do not work, I fear that I shall be required to come back to the House at some later suitable stage in order to try to press the point which I have made on a number of occasions. In the meantime, I hope the House will accept the generous proposals made by the Government.

Baroness Seear

My Lords, like the noble Lord, Lord Howie of Troon, I am very glad that the Government have been able to go this far, but regret that the question is only one of unfair dismissal and not of retention of the job. It seems to me that where the professional code or the statutory duty conflicts, this should take priority. It remains to me monstrous that a man in that position is going to lose his job, albeit he is going to be compensated.

Lord Boyd-Carpenter

My Lords, I think that somebody from these Benches should say just two things. First, may I express appreciation to the Government for their response to what was, during the Committee stage, the general feeling of the Committee and for coming forward, therefore, with this amendment. It is good to see the parliamentary system working in this way and after a certain amount of pressure Ministers coming forward to that Box with something designed, at least in part, to meet the strong feelings expressed at the Committee stage. Secondly, may I congratulate the noble Earl, Lord Halsbury, on the climax of, as I think he told us, 11 years of struggle. It is an admirable example to us all of the value of persistence. If I may add a speculation, those who have the good fortune to live in the near neighbourhood of the noble Earl may well find their sleep later tonight disturbed by the popping of corks.

Lord McCarthy

My Lords, I feel like the guardsman who was out of step and the lady who was left waiting at the church. Firstly, may I say that we agreed with the Minister. When we saw—it came at an early stage, though no doubt the Minister had his reasons—for the first time this clause (and I do not claim now to have fully explored its ramifications because it is not exactly like the one put down by the noble Earl, for it goes beyond statutory professions, for example) we wondered what were the reasons for the Minister having changed his mind, because he was extremely persuasive. As he said again today, Section 4 of the 1980 Act protects, Section 7 of the 1980 Act protects, the code of practice protects, and in the only case that is cited the professional man won his case. Yet he comes to us today and does not say that he has changed his mind. He does not say that as a result of all the correspondence and listening to all the arguments he now finds that he was wrong.

I have not read his letter. He did not send one to me, though it is no doubt in the Library. But I am told by the noble Lord behind me that that letter restated his position with even greater clarity. So I am in a bit of a maze as to why in fact he has changed from the position which I thought we shared the other night. The only thing he has told me is that he could not be sure. He could not prove, he says, that if a professional man had come in front of an industrial tribunal, the decision would have gone that way. Well, no. That is what the judicial process is all about. You cannot prove it. Nevertheless, he wants to make it clear in the legislation. Well, all right.

Let me say that we are not here today—and we were not at the Committee stage—trying to support situations in which people used closed shops to get professional men the sack. That is not what it is about. We disagree with this Bill in all kinds of ways. We disagree with what is done with union membership agreements, mainly because we believe that the way those agreements are operated in practice takes into account these problems. In addition, the Government have legislated with Section 4 of the 1980 Act, Section 7 of the 1980 Act, and so on, and now want to go further. I am not here to stop them. All I am saying is that I wish that when we put down amendments which the Government say are declaratory and which we say cannot be proved, they would be equally generous to us.

Viscount Trenchard

My Lords, I did use certain words which I hope will be clear when the noble Lord, Lord McCarthy, reads the account. I mentioned that this conflict of interest was not specifically covered. We still felt, as we expressed both in the Committee stage and in the letter, that in all probability the Bill would have covered an unfair dismissal in this situation. But we believe that, due to the particular pressure of a conflict of interests, including areas where there was statutory backing to that conflict of interests, this issue should, on reflection, be specifically covered.

As far as the noble Baroness, Lady Seear, is concerned, I understand what she has in mind, but the Government view, I believe rightly, is that, as a Government, they can best protect people by working on the unfair dismissal and the consequences of it. A statement to say that someone must not be dismissed—or, as was suggested at Committee stage, should not be expelled—is a statement, but there is no absolute guarantee that it will be carried out. So the Government believe that, with the very strong deterrents for unfair dismissal in these cases, that is the strongest way for a Government to achieve what I believe the noble Baroness is after.

On Question, amendment agreed to.

6.1 p.m.

Lord Jenkins of Putney moved Amendment No. 9: Leave out Clause 2.

The noble Lord said: My Lords, I beg leave to move the amendment in my name. Since putting down Amendments Nos. 9 and 10, I have read the little red booklet which advises us what is proper and what is not proper. I find that Amendment No. 9 is proper because it is my intention to press this amendment, but that Amendment No. 10, as it was for the purpose of discussing the subject, is not proper at Report stage. Therefore, with the leave of your Lordships, I announce now my intention not to move Amendment No. 10, because I gather that it would be inappropriate to move an amendment that is only for debate.

I hope, however, to persuade your Lordships to accept the argument that I shall put forward in regard to Amendment No. 9. I have greater hope of doing so now than I had when I came in because the amendment which has just been not only moved but accepted by the Government indicates a degree of appreciation of the nature and complexity of the problem which has been absent hitherto. I rather hope that, during the course of this debate, that degree of appreciation will extend to the point where the Government will be able to say, "We will abandon Clause 2 altogether". I hope that when the reply comes from the Government Front Bench it will be more affirmative in character than I had expected at the beginning.

I am also encouraged in that thought by the fact that, in the course of the debate in the last session, the Government indicated that their minds were not closed. Another factor which may help the Government here is that by not moving Amendment No. 10, I am making it quite clear that it is my intention that the existing Sections 58 and 58A of the 1978 Act shall remain. Therefore, the removal of Clause 2 would simply leave in being the existing legislation; legislation which has worked and which I would have thought the Government might find reasonably satisfactory, without introducing this new business of complicated ballots which I hope to demonstrate will prove to be very difficult. I will go further than that—I believe that they are going to be quite impossible.

I rather suspect that, in drawing up these provisions in Clause 2, the model which the Government have had in mind has been the shop floor of the factory. I concede that it is just possible—although with some difficulty—that this clause could be made to apply and could work in a factory situation. But it is not the case that most people in this country work in factories. A large and important minority work in factories and I do not wish to indicate any lack of appreciation for their very great importance. But most people are not in a factory situation, and where we shall run into problems and chaos all over is in every situation which is not a factory situation. In fact, I do not know how it can be applied at all, and I wonder whether, in practice, the Government will ever bring in Clause 2 if they pause to examine the consequences of doing so. Let me illustrate one case that I know well.

To do so, I will quote, if I may, a letter from the general secretary of Equity which has been quoted already in the other place. What he wrote was this: Equity has been party to union membership agreements since the 'Thirties, and I believe that the employers and their associations have long shared our view that the maintenance of those agreements where they exist is in the interests of artists, employees and the entertainment industry in general. For example, in the theatre, this union and the managers' associations have long joined to form joint industrial Councils (the London and Provincial Theatre Councils, the first of which was established by a previous Minister of Labour). These Councils approve standard conditions of employment which provide, inter alia, that no manager may engage artists under those terms unless he is registered with the Council as an approved manager, and no artist may be so engaged unless he is similarly registered as an approved artist. Managers are approved if they belong to the appropriate trade association (or register with the Council and pay deposits to it to safeguard payment of salaries) and artists are approved if they are members of Equity. This ensures, to a great extent, not only that there are standard conditions which prevent unfair competition by undercutting, but also that those who are unlikely to be able to meet their obligations are unable to mount productions and employ artists. The Theatre Councils also require disputes to be referred to them for resolution "— in other words they are stabilising forces for good industrial relations— and Equity undertakes to those Councils that it will use that procedure before taking industrial action. In addition, there are provisions ensconced in Theatre Council agreements whereby managers may apply to Equity to use non-members and have a right of appeal to the joint Councils if there request is rejected—and the quota system in the provincial theatre itself is the major area for entry to Equity and to the profession. The system has worked well without major industrial unrest in the theatre for nearly 50 years. I will not quote the whole of the letter, but there is just one other piece that I would like to add, where the general secretary of Equity goes on to state: The proposed provisions concerning periodic review of union membership agreements cause my Council some concern. The vast majority of our members are employed or engaged on a casual basis. In films and television, employment can normally be measured in weeks if not days. In the theatre, although there are some artists engaged by the year, the vast majority are engaged for short periods or for the run of the play '. In those circumstances, it is difficult to see how any realistic ballot or periodic review could sensibly be held and how any benefit could be obtained thereby. Most of our agreements with employers are negotiated at regular intervals in any event.

If I may explain that a little further, the "agreement", which is the general agreement, is this document in my hand—the agreement for West End theatres. There are a number of others, but this is one of them. This agreement lays down the broad general conditions of employment and it applies to everyone who is employed in that area. There are similar documents in films, and similar agreements for the BBC and ITV covering television. There are also similar documents in the provincial theatre. These documents are regularly negotiated. They form the basic conditions. It is fair to say that over the years the conditions of employment have gradually been improved; it has, in other words, been a successful agreement between the two parties, without, as the letter says, any major industrial dispute. There have, of course, been minor disputes from time to time; it is natural that there should be. But I do not think any of your Lordships can remember any general stoppage in the theatre at all.

This document covers the general conditions. But there is subject to that—and this is probably the only document that the individual actually sees, though he may refer to that one from time to time—the standard contract. Here we have a contract which the individual enters into. These contracts are being signed at different places and at different times all over the place. The details filled in in the contract are different in every case. It is subject to a minimum salary and the holiday period is provided as a minimum period, but the actual conditions of employment can vary enormously, as your Lordships will readily imagine. For example, one actor may be on something rather less than £100 a week, even substantially less than that. Another one, a star, may be on 10 times that figure and possibly a share of the profits of the production as well. So that the range of remuneration is very large indeed. But the standard conditions apply. This complex operation is held together by the existence of a union shop which is interpreted and which is achieved in the manner described to your Lordships in the letter.

So we have this complex situation, that on the one hand the general terms of the agreement are negotiated periodically, perhaps once a year, perhaps rather more. This particular agreement I am holding in my hand was negotiated in 1981, in the early part of 1981, and I know is in course of discussion, with the idea that a new document, with somewhat improved conditions, one hopes, will be available later this year. This one is dated January 1981, but the whole of this condition is negotiable.

The complexity is this. What are we talking about when we are talking about ballots? Are we to say that there shall he a ballot related to the negotiation of this general document? If so, who does one ballot? Who does one know who is going to be employed under this contract? Nobody knows. At any one moment there will be a number of people, perhaps 300 or 400, engaged under this contract. But in a year's time there may be an entirely different 300 or 400 engaged under the contract. How can one select? Is one then to ballot the entire union membership? Why? Some people will never work under a West End contract. Some people work only in films or in television, and therefore under these circumstances would be voting in respect of a contract under which they are not currently engaged and under which they are probably unlikely ever to be engaged. Therefore, one has this terribly complex situation.

If one then says "No, one does not ballot all those on this. One ballots only the small group who are currently engaged in the particular theatre", is one then to have a continual series of ballots? Is one to say to the group employed in the theatre when they sign their contracts, "You six have got to ballot as to whether you will have this particular contract or whether you will not accept the union shop clause in it?" I do not see that that is a practical proposition, when contracts are being individually signed all over the place, not on the same day, when agents are negotiating and making agreements on behalf of other people of which those people may not be precisely aware at the time because they have given their power of attorney to the agent to conclude agreements on their behalf. It seems to me that what is being proposed here is totally impracticable; it simply will not work.

Not only will it not work in the area of theatre, but there are a number of other areas where it will not work. I do not see how it is going to apply in the area of shipping. There are other areas where I think the complexities I have illustrated would equally apply. I would seriously ask the Government to look again at this whole problem, and to say that they recognise, however good the intention may have been, that this is not a practical proposition. It is not capable of universal enforcement. In these circumstances I ask them, as the amendment suggests to leave out Clause 2, and I beg to move.

Lord Davies of Leek

My Lords, very briefly, as somebody with an interest in this, I do not think the Government have thought this out in depth, both so far as seamen are concerned and certainly in regard to theatricals. I know this from within my own family, somebody trying for a contract. Person A may have no knowledge whatsoever of what is going on anywhere else. They are particularly concerned through their agents in getting a job in pantomime and so on. They may never reach the echelons of the West End or the higher echelons, they may be in small repertory theatres throughout Britain. Without going into the argument any more in depth, because it has been well covered by somebody who knows much more about it than I do, I think this should be looked at again before all this verbiage—and look at the length of it—is left here. It is not clear, it is not precise and it does not spike down exactly what the Government anticipated it would spike down.

Lord Campbell of Alloway

My Lords, at Second Reading I mentioned this problem that is being raised by the noble Lord, Lord Jenkins of Putney, and as I remember I mentioned it in relation to Equity, being wholly ignorant of his vast experience and identity with Equity. Again, if I remember aright, my noble friend Lord Mottistone mentioned the question of shipping in this context. I am not going to take up your Lordships' time, but is it not right that there are certain situations where derogations might have to be granted in the interests of fairness and practica bility? If that is so, is it not right that there should be some form of machinery to provide the requisite elasticity to make this work? There is, of course, none. Although I fully support the broad intentions of my Front Bench in this matter, I would most respectfully ask that they give serious consideration to the matters that have been raised today by the noble Lords opposite.

Lord Mottistone

My Lords, if I may intervene to explain the position with regard to the General Council of British Shipping and the National Union of Seaman, the position is not quite the same as has been explained to us by the noble Lord, Lord Jenkins. The situation is that the General Council of British Shipping and the shipping companies are reorganising the method of the employment of seamen by agreement with the union; they have started that already. As they are organised at the moment they would have the same sort of problem. All they are asking is that the Government shall delay the introduction of these clauses sufficiently to give them time to complete their reorganisation. What they have been asking for is five years and what I have been seeking in various amendments is that period. The Government are aware of this and I understand that there have been very many meetings between the general council and the Government. I imagine that Equity would have done the same type of thing. So both sides are fully aware of the problem.

In the case of the seamen, it looks as though we may get two years from the date that this Bill is enacted, and what with the lead-up time that there has been from the beginning of the Bill being laid in another place, it will work out at something not far short of a total period of three years. That is marginally all right, but it does mean accelerating a reorganisation which was already in contemplation by the shipping companies. Therefore, the situation is not so serious and it is not one which I would seek to pursue any further than I have already, except to say to the Government that I trust, indeed, that they will stick to their idea of two years rather than one year, on which I gather they have not yet quite made up their mind.

Lord McCarthy

My Lords, I am very grateful to the noble Lord, Lord Jenkins of Putney, for putting down this amendment. I do not think that I am betraying any confidence in saying that we sought at first to find, if we could, a way in which we could put down an amendment at this stage in the proceedings to deal with the special narrow problem that he has discussed with such knowledge and such eloquence tonight, but in fact we could not find one. The fact is that there is no way.

The noble Lord, Lord Mottistone, quite rightly in an attempt to deal with the problem of the shipping industry, sought to deal with it by giving them time. Fortunately, because of the reorganisation of the shipping industry, he tells us—he knows more about it than I do—that three years will do and that at the end of a three year period, it may be possible for the shipping industry to deal with what is the single most difficult problem for them; namely, to have a ballot at which they could get the requisite figures. But there is no way in the case of Equity. As the noble Lord, Lord Jenkins, has said, whether it be three years, 30 years or 300 years, they cannot have a ballot, because the people who would be balloted are constantly moving.

Therefore, there is no way and there was no way that we could find in Committee to deal with this situation. We put down a whole series of amendments. The noble Lord, Lord Jenkins, said quite reasonably afterwards that there was, in fact, no amendment which dealt with the Equity situation, because no amendment will deal with it. The only thing that will deal with it is the removal of the clause and that is why we have this amendment down today. The noble Lord, Lord Campbell, is quite right to take up this point, because this is virtually the basic reason why we have parallel organisations to union membership agreements, in professions. That is why we have them in the law; theirs is a client relationship and the only way in which we can protect a client relationship is by what in the trade union movement they would call a "union shop", but which in the professional associations they call a "register". That is the only way in which it can be done. While we have this Bill and while we have this clause, I regret to say that we have no alternative but to move against it.

Lord Glenarthur

My Lords, the noble Lord, Lord Jenkins of Putney, in moving this amendment, despite the fact that he has cloaked a lot of what he wants to say in relation to Equity, has certainly opened the opportunity for a debate on the principle that there should be ballots of existing closed shop arrangements, and perhaps on the principle that we should protect non-union members in a closed shop. I am very glad that he is not going to move Amendment No. 10, as that amendment, by repealing Section 58 of the 1978 Act, would also have removed the basic rights of employees to join trade unions and to take part in their activities. No doubt his own Front Bench would have had something to say about that.

But, leaving that matter aside, I am afraid that we do find ourselves on a fairly familiar treadmill. As your Lordships will know, Clause 2 of the Bill introduces new rights against unfair dismissal for non-membership in a closed shop. In particular, it provides that after a transitional period, dismissal for non-membership will be unfair where a closed shop has not been approved as required in a secret ballot.

I do not think that I need burden the House by responding to arguments which have been raised previously against the closed shop balloting provisions of the Bill. Most of them now look decidedly threadbare. We kept hearing, for example, that the closed shop balloting provisions were disliked by employers who feared the industrial relations consequences. It has not been raised today, but I think it is worth pointing out that there was an article in the Financial Times on Monday referring to a poll taken earlier this month among 500 senior directors in large companies. That poll showed that most regard the Employment Bill as presenting little threat to industrial relations in their companies. A fair majority—60 per cent.—thought that the Bill was "about right", compared with 20 per cent. who thought it went too far and 13 per cent. not far enough. Only 2 per cent.

thought that it would lead to a confrontation. So like so many of the other arguments which we have heard against the closed shop provisions of the Bill, the one about employers fearing the industrial relations consequences of the Bill's closed shop provisions just does not hold water.

All these provisions have received many hours of debate both in your Lordships' House and in another place. The noble Lord, Lord Jenkins, will hardly be surprised to learn that we simply cannot accept this amendment which is effectively a wrecking amendment. We firmly believe that where employees are required to work under a closed shop agreement or arrangement, they should have the opportunity peridiocally to make known their views in a secret ballot, as to whether or not they want to continue to work under a closed shop arrangement. I must emphasise that the Government—and I am sure all of us on this side of the House—find this principle wholly unexceptionable and entirely justifiable. It is saying no more than that people are entitled to say whether an arrangement which can quite clearly conflict with their individual liberty is, nevertheless, one under which they wish to work.

The noble Lord, Lord Jenkins strikes a fairly familiar note when he talks about Equity and what amounts to collectivism versus individual rights in a closed shop. He argues that the majority have rights in a closed shop and that we are wrong to seek to safeguard the individual non-member, as we do in this Bill. Of course, the majority have rights: they have the right to be union members; the right to take part in trade union activities; and the right to organise and seek recognition from their employer. But why should these rights extend to forcing the odd non-union member to join a union? By staying out of the union he is not preventing the majority from exercising their rights to be in a union, but they seek to prevent him from exercising his basic right to choose whether to join a union or not.

There is no doubt that as a Government we dislike the closed shop for precisely these reasons. We, of course, would prefer that it did not exist. If it were likely to be practical, we would seek to outlaw it, but because that it is not in our view a practical possibility, we are, instead, introducing the additional safeguard in this Bill, such as ballots, to ensure that the limitations on individual freedom, which the closed shop inevitably entails, should not be imposed on any individual unless it is quite clear that the overwhelming majority of his fellow employees are content for their freedoms to be restricted in this way.

Contrast this, my Lords, with the attitude of the trade union movement. The TUC's guide to the Bill, asks unions to tell their employers that the policy on the closed shop should be "business as usual", and in particular advises unions to tell employers that secret ballots should not be held on the continuation of union membership agreements ". One is forced to ask, "What is it that the TUC is so afraid of?" Can it be that if, for once, union leaders actually asked their members what they thought, they might not get the answer they wanted? Can it be that union leaders, in fact, know that the closed shop is just as unpopular with their members as it is with the public at large? Perhaps it is much safer, from their point of view, not to risk finding out. We reject this philosophy entirely. We think that individual employees have every right to make known their own views as to whether or not they want a closed shop to continue. That is what Clause 2 provides and that is why I shall ask your Lordships to reject this amendment.

The noble Lord, Lord Jenkins, spoke particularly about Equity. I understand his concern about Equity. I have to say that I think that his fears are misplaced. There is nothing in these balloting provisions which need stop closed shop agreements in the entertainment industry from continuing to operate so long as they are genuinely wanted by the employees concerned. It will not be difficult—as the noble Lord suggests—in any way for employers in the entertainments industry to hold closed shop ballots. All they will need to do is to ballot all of their employees who are in their employment on a particular day. It will be up to them to choose a suitable day, and that is why the Bill's provisions are made deliberately flexible.

My noble friend Lord Campbell made a point in connection not only with Equity but with Shipbuilding. It seems to me that he is seeking some form of exemption from the closed shop provisions for particular groups, rather like the approved closed shop provision of the 1971 Act. But there is a difference. The 1971 Act outlawed the closed shop; this Bill does not. If ballots are held, closed shops in entertainment can continue as though they were perfectly lawful.

The Secretary of State is still considering whether to bring these balloting provisions for existing closed shops into effect one or two years after Royal Assent, but he will obviously have to take into account what has been said in your Lordships' House before reaching these decisions. In the light of what I have said and the particular comments that have been made in relation to the whole principle of Clause 2 of the Bill, which the noble Lord, Lord Jenkins, seeks to remove, I trust that your Lordships will reject this amendment.

Lord Jenkins of Putney

My Lords, I think that the noble Lord, Lord Glenarthur, has been answering some other debate which took place in some other place on some other day. No doubt he was given a brief to do that in the belief that perhaps I would raise the general principle of the closed shop. As your Lordships will be aware, on this occasion I uttered no word of general condemnation about what the Government's intentions were. I do condemn them, but I did not do so on this occasion. I simply sought to deal with the question of practicability. My entire remarks were directed to the question of whether or not the clause was workable, and the reason that I asked your Lordships to reject it was not because I think it is wrong in principle—although I do—but purely because it is not practicable. It will not work; it cannot work; it will create total chaos.

The noble Lord, in the one moment when he touched on the matters which I have raised, suggested that there might be a day selected on which the ballot would take place. How does one select this day and who ballots? Everybody on that particular contract will be on a contract which already contains a closed shop clause. Who will be balloted—everybody on that particular contract at the moment? What are to be the consequences of the ballot?

There is perhaps one area in which Equity differs from some other trade unions; it is that there has never been any case whatever of any breach of contract. The negotiations that take place at Equity take place on a general proposition which operates over the whole area. That general proposition, that general agreement, is negotiated about once a year. Subject to that, the individual actor is engaged on another document which is his personal contract, The general proposition is negotiated, and if one fails on that then no personal contracts are signed. But once a personal contract is signed between a manager and an actor, it is never broken by the actor or by the manager; it operates for the duration of that contract. In those circumstances, you cannot get an effective ballot operating, because the circumstances are not those which exist in the model in theminds of the Government, which is a factory floor situation. It is a situation in which—as I said in my introductory speech—people are signing contracts at different times all over the place, and sometimes are having contracts signed on their behalf.

We have only touched on the beginnings of the complexity of the situation. I have talked about the theatre. A similar situation exists in films and television, with different kinds of contracts and different councils. But all these agreements are on the same basic principle of a general agreement which operates between the union and the managerial association and which does not at the time of its agreement concern any particular group of people. It envisages that there will be a group of people, all of whom are members of the trade union, who will come into the position which is affected by the negotiation.

I want to make one more remark before I sit down. I went through this clause trying to discover some particular amendment to it which would create a special position to provide for the particular circumstances which I have described to your Lordships. I have not been able to find it. Nor has my noble friend on the Front Bench been able to find it; nor could the noble Lord, Lord Wedderburn, find it. We could not find any way of amending the contract which would provide for a workable exception to be made for the set of circumstances which I have described to your Lordships. In those circumstances I had no alternative but to move that Clause 2 be left out, because there is no practicable way of amending it. Therefore, I have no alternative but to ask your Lordships to divide and to support my amendment that Clause 2 be omitted.

6.38 p.m.

On Question, Whether the said amendment (No. 9) shall be agreed to?

Their Lordships divided: Contents, 44; Not-Contents, 128.

DIVISION NO. 2
CONTENTS
Ardwick, L.	Bishopston, L.
Bernstein, L.	Blease, L.
Beswick, L.	Blyton, L.
Birk, B.	Briginshaw, L.

Brockway, L.	McCarthy, L.
Brooks of Tremorfa, L.	Molloy, L.
Bruce of Donington, L.	Oram, L.
Cledwyn of Penrhos, L.	Parry, L.
Collison, L.	Peart, L.
David, B.	Ponsonby of Shulbrede, L. [Teller]
Davies of Leek, L.
Elwyn-Jones, L.	Ross of Marnock, L.
Ewart-Biggs, B.	Stewart of Alvechurch, B.
Glenamara, L.	Stewart of Fulham, L.
Hatch of Lusby, L.	Stone, L.
Houghton of Sowerby, L.	Strabolgi, L.
Jacques, L.	Taylor of Mansfield, L.
Jeger, B.	Underhill, L.
Jenkins of Putney, L.	Wallace of Coslany, L.
John-Mackie, L.	White, B.
Llewelyn-Davies of Hastoe, B. [Teller]	Willis, L.
	Wynne-Jones, L.
Lovell-Davis, L.

NOT-CONTENTS
Airey of Abingdon, B.	Kinloss, Ly.
Alexander of Tunis, E.	Kinnoull, E.
Auckland, L.	Lane-Fox, B.
Avon, E.	Lauderdale, E.
Aylestone, L.	Lloyd of Kilgerran, L.
Balerno, L.	Long, V.
Bellwin, L.	Lyell, L.
Beloff, L.	Mackay of Clashfern, L.
Belstead, L.	McNair, L.
Bessborough, E.	Mais, L.
Burton of Coventry, B.	Mansfield, E.
Caccia, L.	Margadale, L.
Caithness, E.	Marley, L.
Campbell of Alloway, L.	Massereene and Ferrard, V.
Cathcart, E.	Mersey, V.
Clifford of Chudleigh, L.	Milverton, L.
Cockfield, L.	Mottistone, L.
Colwyn, L.	Mountevans, L.
Constantine of Stanmore, L.	Moyne, L.
Cork and Orrery, E.	Murton of Lindisfarne, L.
Craigavon, V.	Napier and Ettrick, L.
Craigmyle, L.	Newall, L.
Cullen of Ashbourne, L.	O'Neill of the Maine, L.
Davidson, V.	Orkney, E.
De La Warr, E.	Pender, L.
Denham, L. [Teller]	Penrhyn, L.
Diamond, L.	Platt of Writtie, B.
Eccles, V.	Rankeillour, L.
Ellenborough, L.	Renton, L.
Elles, B.	Rochdale, V.
Elliot of Harwood, B.	Rochester, L.
Elton, L.	Romney, E.
Evans of Claughton, L.	St. John of Bletso, L.
Ferrers, E.	Sandford, L.
Ferrier, L.	Sandys, L. [Teller]
Fortescue, E.	Seear, B.
Fraser of Kilmorack, L.	Selkirk, E.
Gainford, L.	Shannon, E.
Gardner of Parkes, B.	Sharples, B.
Glenarthur, L.	Skelmersdale, L.
Glenkinglas, L.	Spens, L.
Gowrie, E.	Stamp, L.
Gridley, L.	Stedman, B.
Halsbury, E.	Sudeley, L.
Hampton, L.	Swansea, L.
Harmar-Nicholls, L.	Swinfen, L.
Harris of Greenwich, L.	Tanlaw, L.
Hayter, L.	Taylor of Gryfe, L.
Henley, L.	Terrington, L.
Hives, L.	Teviot, L.
Holderness, L.	Thomas of Swynnerton, L.
Home of the Hirsel, L.	Tordoff, L.
Hornsby-Smith, B.	Tranmire, L.
Hylton-Foster, B.	Trefgarne, L.
Ironside, L.	Trenchard, V.
Kennet, L.	Trumpington, B.
Killearn, L.	Tryon, L.
Kilmany, L.	Tweedsmuir, L.
Kilmarnock, L.	Vaux of Harrowden, L.
Kimberley, E.	Vickers, B.

Vivian, L.	Whaddon, L.
Wade, L.	Windlesham, L.
Wakefield of Kendal, L.	Young, B.
Walston, L.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendments Nos. 10, 11 and 12 not moved.]

Clause 3 [Basic Award]:

6.46 p.m.

Lord McCarthy moved Amendment No.13: Page 6, line 33, leave out ("by virtue of section 58 or 59(a)")

The noble Lord said: My Lords, I beg to move Amendment No. 13 and should like to bring in Amendment No. 15. We return now to the issues in the Committee concerning the basic award for unfair dismissal. We argued there that we did not accept the distinction between dismissals on grounds of the reason for dismissal. We were arguing that we thought that, for example, dismissal on grounds of discrimination for sex, or race discrimination, or for incapacity without due notice, or for so-called insubordination without taking into account the circumstances, all situations in which a tribunal might well decide that there was a case of unfair dismissal—either that the true reason was an unfair reason or because the employer had acted unreasonable according to the provisions of the unfair dismissal legislation—there was no basis on which to make a distinction so that all those cases would carry with them a lower level of award of compensation, a lower maximum of compensation, and to set them on one side and on the other side to set up, as it were, dismissal on grounds of union membership.

We never could see, and we cannot see today, the basis on which the Government make their three tier approach to unfair dismissals. It seems to us that in practice any unfair dismissal on any grounds could be, in principle or in practice, either less, or more, serious to the individual concerned than any other dismissal in any other grounds. Whether a dismissal is serious or not depends on the period out of work, whether you can immediately get another job and as good a job, the type of job you eventually obtain, and whether the dismissal itself—I suppose this is the argument that the Government used on Committee stage—was given on a ground which made it more difficult, if the cause and grounds were known, for the individual to get a job somewhere else.

Here again we thought that there could be just as many cases where people could be known to be unfairly dismissed on grounds of certain heart conditions, for example, or because they were thought to be unsuitable in various ways. Although it may be known that unfair dismissal on those grounds had been corrected in that compensation had been given, nevertheless the knowledge would follow people around from place to place and they could be hit just as hard—even more so—in certain circumstances as individuals dismissed because they would not join a union. We pointed in particular in Committee to the case of middle managers, say, who were earning substantial sums and who therefore could look forward to maximum compensation, perhaps of 50 per cent. of annual salary.

But the Government would have none of it and the noble Earl, Lord Gowrie, said—reported at cols. 12 and 13 of Hansard of 12th July—that none of it was appropriate because the Government were seeking to create an effective deterrent and were responding to deep public concern. Because of those two things—and he quoted very few examples of deep public concern or the possible effects of the deterrent—the Government were justified in what they were doing, he said. There was no answer to our point, yet unfair dismissals continue at much the same rate outside the area of union membership. If one wants to practise a deterrent, why not practise it there? If one wants to deter unfair dismissals, why not increase the value of the compensation all round and deter by that means? Why instead do what the Government have done and abolish the old basic award and remove more than one million people from the effective protection of unfair dismissal? That cannot be justified as the result of any fall in the number of unfair dismissals.

We have therefore tabled another amendment which does not attempt to spread the £2,000 on the basic award or the special compensation award to everyone. Instead, it seeks to return to the position as it was previously; that is, to go back to the old-fashioned basic award of two weeks—that is the effect of Amendments Nos. 13 and 15—and thereby to return to a universal situation in which compensation maxima are the same for all, so that all are equally having available to them the two weeks' minimum basic award.

6.53 p.m.

The Minister of State, Northern Ireland Office (The Earl of Gowrie)

My Lords, a similar amendment was moved in Committee, and the noble Lord, Lord McCarthy, acknowledged that. Noble Lords opposite made the point then, as the noble Lord has now, that all unfair dismissals are to be equally condemned and that if limits for awards of compensation are to be raised at all, they should be raised for all cases. I agree that all unfair dismissals are to be regretted, and there is no difference between me and Lord McCarthy on that. As I pointed out in Committee, we believe that certain kinds of unfair dismissal merit the substantially enhanced levels of compensation which the Bill provides, and the reasons are simple. First, we are dealing not with dismissals which have been carried out because of some altercation between employer and employee or vice versa, but with dismissals which have been carried out in open defiance of rights specifically and recently passed by Parliament, and that is something we wish to deter very emphatically.

Secondly—this answers the substantive argument adduced by the noble Lord, Lord McCarthy—it is surely the case that those who find themselves unfairly dismissed in these circumstances (in the closed shop circumstances) are likely to suffer considerably more as a result of their unfair dismissals than is the case in the generality of other unfair dismissals. That is one of the evils of the closed shop; it can frighten people as to the possibility of their not being employed in the future at all.

I do not want to detain the House by repeating in detail the very black histories I outlined on earlier occasions, which I even outlined in some detail on the passing of the 1980 Act—the Walsall and Sandwell dismissals. The point there was that the dismissals were made by employers in direct violation of recently enacted statutory rights and in the knowledge that the employers would be liable to pay compensation. So they were not cases where an employer was acting, as he thought, fairly but subsequently found that a dismissal was unfair. The employers knew perfectly well that they were acting unfairly, and they were acting unfairly as a deliberate political act in outright defiance of statutory rights provided by Parliament. It was particularly lamentable that those renegade employers were supposedly responsible members of public authorities.

I have made it quite clear that we want to deter such employers very fiercely, but the second reason is probably the reason which should commend itself more closely even to the noble Lord, Lord McCarthy. It is surely self-evident that persons dismissed for non-membership of a union in a closed shop may find it difficult, if not impossible, to get another job in the same industry or locality, particularly where pre-entry closed shop arrangements are widespread. We firmly believe there is an urgent need for the enhanced compensation which the Bill provides in the case of unfair closed shop dismissals. The amendment would defeat that intention. There is a clear difference of view between ourselves and the Opposition on this score and I must therefore ask that the amendment be rejected.

Lord McCarthy

I am not surprised at that reply, my Lords, and I wish to take up only one point the noble Earl made because he was right to say that we have been round this matter a number of times. We have given examples of cases where we believe people could—in fact do—suffer as badly, if not worse, outside closed shop areas. However, I wish to take up one point he made because it has been made repeatedly in these debates and this may be the last opportunity to answer it. It is the point that there was something uniquely reprehensible in the conduct of Walsall and Sandwell Councils in the sense that they defied the Act.

There is nothing unusual in an employer deciding to dismiss someone and pay the compensation. It is not a criminal offence; he has decided to pay the compensation, and I make no criticism. One of the first things solicitors say to employers when they are called in on unfair dismissal cases is, "Of course, you can always pay your way out. The average award is only £750", and it is perfectly fair for them to say that because that is the legal position. We have carefully not given people a right of reinstatement, and if people are not given such a right, then of course it is always possible for any employer, public or private—it is no better and no worse whether he is public or private—to decide that he wants this particular man out because, whatever an unfair dismissal tribunal may say, he thinks he is a rotten workman, is lazy, is no good and he has just had enough. That is the state of the law. It happens every day and it is no good the noble Earl looking shocked.

On Question, amendment negatived.

Lord Glenarthur

My Lords, I think that it might be for your Lordships convenience if we now took a break. Therefore, I beg to move that consideration on Report be now adjourned until eight o'clock.

Moved accordingly, and, on Question, Motion agreed to.