§ 2.50 p.m.
§ The Secretary of State for Trade (Lord Cockfield)
My Lords, 1 beg to move the Motion in the name of my noble friend Earl Ferrers, that this Bill be read a second time. In our election manifesto we pledged ourselves to safeguard individual freedom and to uphold the rule of law. This fundamental belief in the freedom of the individual, in the protection of his liberty, in the rule of law, lies at the heart of our political philosophy. It goes to the very roots of our civilisation, our culture and our institutions. Over the centuries we have struggled to free ourselves from the domination of those who would subjugate us. Over the centuries, too, as factions or groups have become too powerful, as they have threatened the liberty of the people or the rule of law, they have been resisted and overcome. Magna Charta, John Hampden, the American War of Independence, the Reform Bill 1832 are all reminders of the steps—at times the painful steps—we have taken along this road of history: that the many should not be ruled by the few; that, in the words of Abraham Lincoln,all men everywhere should be free ".The trade unions in their day were the oppressed. It was their freedom, their liberty, which needed to be protected. The 19th century saw the legalisation of the trade unions by the Conspiracy and Protection of Property Act 1875; the 20th century, the Trade Disputes Act 1906.
The legislation of the 19th century and particularly the historic Act of 1875—which was the work of a Conservative Administration under Disraeli—were 526 essential steps in protecting the worker against the oppression of the employer. The Act of 1906, which conferred unprecedented immunities on the unions, was controversial even in its own day. But it was felt by its sponsors at the time, even if mistakenly, to be essential for the survival of trade unionism. But the Acts of 1974 and 1976 rested upon no such foundation of principle or philosophy. The trade unions had become the paymasters of the Labour Party: and that legislation was the price they exacted for their support.
Freedom and liberty carry with them responsibility. "Liberty", said George Bernard Shaw, "means responsibility". It also means accountability before the law. As Thomas Fuller said, speaking of a different tyranny in a different age:Be you never so high, the law is above you".Those words were echoed in our own election manifesto. "We are", we said,the inheritors of a long tradition of parliamentary democracy and the rule of law.And so it is, in this great and continuing tradition of liberty and freedom, of responsibility and accountability stretching back to the earliest years of our society and of our law, that the Bill before your Lordships' House today is conceived.
I need hardly remind your Lordships of the excesses which have emerged as a result of the unfettered powers conferred upon the trade unions. It is no good arguing—as indeed is the case—that the great majority of union members are decent people, most of their leaders responsible men. If the system allows full rein to the irresponsible and permits the oppressor to have his way, the system must be changed. We have seen workers sacked without compensation because they refused—as they were entitled to do—to join a union. We have seen our country arraigned before the Court of Human Rights. We have suffered the hardships and indignities of the winter of discontent—indignities and hardships which some union leaders now seem determined to inflict upon our people once again.
But it is not only in the field of human rights and liberties that excessive union power stands condemned. It has inflicted grave damage on our economy. It has destroyed jobs and created unemployment. Successive waves of excessive wage demands—in 1969, in 1974, in 1978 and in 1980—have led to high inflation, a serious loss of competitiveness and the destruction of employment. The world recession, coupled with the long-term decline in our competitive position, would have resulted in serious unemployment anyway. But it would never have been as had as it has been but for the pursuit by the unions of excessive wage increases and the conceding of those increases by employers.
The Government—the present Government—are tackling these problems and with success. They will he the first Government since the war which will end their term of office with a lower rate of inflation than they inherited. But the attack on our economic problems must be on a broad front, and the present Bill is one of the measures necessary—and an important measure—to restore our economy to health and vigour.
I referred earlier to the Act of 1906 which, as I have said, was controversial even in its own day. The Royal Commission of 1906 said this: 527That vast and powerful institutions should be permanently licensed to apply the funds they possess to do wrong to others, and by that wrong inflict upon them damage …: and yet not be liable to make redress out of those funds would be a state of things opposed to the very idea of law and order and justice ".The doubts and fears expressed by the Royal Commission have been amply confirmed by the experience of the years which have passed since then. The question of trade union immunities is, therefore, central to the Bill.
The Act of 1906 had conferred on trade unions virtually unlimited immunity from actions in tort—an immunity which, as the Donovan Commission pointed out, is greater than that enjoyed by any other person or organisation, greater than that enjoyed even by the Crown. In practical terms, it means that if a trade union orders one of its officials to do something unlawful, the official can be sued for an injunction or damages; but the union itself is virtually never liable and its funds always protected save in a few narrowly defined circumstances. In the Government's view the present almost total immunity is unnecessary, invidious and dangerous. As things stand at present, there is nothing to restrain a trade union from unlawful action, or to induce it to take steps to restrain its officials from acting unlawfully. It knows that its funds are not at risk.
The disparity between the position of the unions as such and the position of their officials has always been an anomaly. In recent years that anomaly has also shielded trade unions from the consequences of their own loss of authority and discipline over their members. The trade unions wield great industrial power, but they remain unaccountable at law for any unlawful acts that they or their officials commit.
I come now to the detailed provisions of the Bill. The early part of the Bill—indeed, the greater part of' the Bill—is rightly concerned with the closed shop. Clause 1 of the Bill is a direct response to the human suffering and distress caused by the Labour Government's closed shop legislation. It is not retrospective legislation, but it is retrospective justice. The clause creates no new rights or duties. It does not retrospectively declare "unfair" what the law then said was "fair". It simply provides a power to be exercised at the Secretary of State's discretion to compensate from public funds people who were sacked without possibility of redress between 1974 and 1980, but who would have been entitled to compensation if the main provisions of the 1980 Act had been in force when they lost their jobs. Clause 2 provides rights against unfair dismissal for the non-union employee in a closed shop. In particular, it reinforces the balloting requirement for new closed shops provided by the 1980 Act with a balloting requirement for all existing closed shops.
There are those who believe that we should simply declare the closed shop unlawful. In many parts of the world they are unlawful. There are strong arguments in favour of such a course. But, in the circumstances of this country and given the attitude of some employers as well as that of the unions, it would be widely evaded and largely ineffective. The closed shop was unlawful between 1971 and 1974, but it did not disappear. It simply went underground. The closed shop is too deeply entrenched in parts of British 528 industry to be legislated out of existence overnight. Our duty, therefore, is to provide effective checks on the growth of the closed shop, effective tests of support for long-established closed shops, and effective safeguards for the non-union employee.
On 25th March last year the noble Lord, Lord Harris of Greenwich, initiated a debate on Sandwell Metropolitan Council and its closed shop policy. Sandwell Council had sacked one of its employees in clear violation of her rights under the Employment Act 1980. They had done so for entirely ideological reasons. Sandwell's disgraceful example was subsequently followed by Walsall Council's sacking of four part-time school "dinner ladies" in exactly the same circumstances.
One thing became absolutely clear from these episodes. The existing rates of compensation for closed shop dismissals are too low and the cost does not fall on the right shoulders. That is why the Bill contains, first, an entirely new framework of compensation for closed shop dismissals at considerably enhanced levels. The relevant provisions appear in Clause 3 and 4. Under these provisions someone unfairly dismissed in a closed shop who asked for his job back would normally get a minimum of £12,000.
Clause 6 enables someone who is claiming unfair dismissal as a result of trade union pressure also to claim compensation directly from the union as well as from his employer. This is a recognition of the union's primary responsibility for most closed shop agreements and for the dismissals which result from them.
A closed shop is normally the result of pressure brought to bear directly on an employer by a trade union. But in recent years we have seen a rather different phenomenon: the extension of the closed shop by the back door—through "union labour only" requirements in contracts. The consultations which preceded this Bill revealed widespread concern about these practices.
Once again, it is certain Labour-controlled local authorities, motivated by political and ideological considerations, who have been most blatant in their refusal to award contracts to firms unless their workforce is 100 per cent. unionised. In some cases they have refused to allow non-union firms even to tender for contracts. The cost to the ratepayer of stifling competition and encouraging inefficiency in this way I can be considerable.
Clause 11 of the Bill declares void any term in a commercial contract which requires the use of union labour only. It makes it unlawful to exclude non-union firms from tendering lists. And it makes it unlawful to award or to terminate a contract on the ground that non-union labour will be used in performing that contract. The provisions apply equally to "union" and "non-union" requirements. These provisions would be ineffective if trade unions were free to accomplish the same results by industrial action or the threat of it. Clause 12 therefore removes immunity from anyone who puts pressure on an employer to contravene Clause 11. And it removes immunity from those who organise industrial action designed for the same purpose.
The later clauses of the Bill deal specifically with trade union immunities. The changes they make are 529 limited and modest. They do not affect the ability of trade unions to organise, to seek recognition from employers, to bargain collectively or to organise industrial action by their members in pursuit of improvements in their pay and conditions or in defence of their jobs. They most certainly do not take trade unions back to the situation which existed before the 1906 Act.
The changes the Bill makes to trade union immunities concern only action of a kind which would be unlawful if it were undertaken by an individual union official and which would have made that official personally liable for damages; but which, as the law stands, at present, involves the union on whose behalf he was acting in no liability at all.
Clause 13 corrects that anomaly. It brings the immunity for trade unions into line with the immunity for individuals and it defines the circumstances under which trade unions are to be liable for the unlawful acts of their officials. Clause 14 puts limits on the damages payable by a trade union in any one case. The maxima are necessarily substantial as power to award damages must be adequate and must be seen to be so. Clause 15 makes it clear that union provident funds and also political funds which are not used to finance industrial action are not at risk. It is not the purpose of this Bill to bankrupt trade unions or indeed to enable them readily to bankrupt themselves.
The most certain way for a trade union to safeguard its funds is to keep within the law—and to ensure that its officials do the same. The other main change made by this part of the Bill is the tightening up of the definition of a trade dispute in Clause 16. This clause amends the definition in four ways: to exclude disputes which are not predominantly about terms and conditions of employment or other matters listed in the statutory definition; to exclude disputes which are purely between workers and workers; to exclude disputes which are exclusively about matters overseas; and to exclude disputes which are not between an employer and his employees. These changes were urged by many people in the course of the consultations on the Bill. They have a common purpose; to protect employers and indeed very often their employees from industrial action in disputes to which they are not a party and over which they have no influence or control.
The Bill contains a fair and balanced package of measures. It is hot an attack on trade unions but a further modest and moderate step in the reform of industrial relations law. Our consultations have shown that there is general agreement that now is the right time to take another step forward and that there is very wide support for the particular changes we are proposing in this Bill.
Indeed, it has been commonly argued that the Bill does not go far enough. Our minds are by no means closed to the possibility—or indeed the need—for further reform. But this is a field where it is desirable to make haste slowly. We are facing entrenched habits of mind—often unhelpful from the point of view of economic progress and the provision of employment on a secure and lasting basis..But they are entrenched habits of mind, and it takes time to convince people of the need for change and the benefits which will flow from change. We must continue this process of education and encourage the development of economic 530 realism. But that lies in the future. For the moment, the step we now propose, modest though it is, is sufficient.
It is one of the tragedies of our time that the trade union movement which grew up to protect the working man from exploitation, should itself have become an engine of oppression.The condition upon which God hath given liberty to man is eternal vigilance ".That vigilance has been too little exercised. The results are plain to see. We must exercise that vigilance again. It is the price we have to pay to protect our liberty and our national wellbeing alike.
Legitimate union activity, conceived in a sense of responsibility and carried out with moderation and due regard to the rights of others, contributes to our national good. But pursued with disregard of the rights and interests of others, based on monopoly power or a policy of inflicting hardship and damage on the public, it is neither in the national interest nor in the interests of trade union members themselves. Tactics of this kind do not preserve jobs—although that is often their intention: they destroy them. They do not attract public sympathy; they forefeit it. The issues with which this Bill is concerned are vital to our future, to our liberty and to our national wellbeing. That is why I commend the Bill to the House. My Lords, I beg to move.
§ Moved, That the Bill be now read a second time.—(Lord Cockfield).
§ 3.15 p.m.
§ Lord McCarthy
My Lords, I should like to begin by thanking the noble Lord, Lord Cockfield, for his careful, lucid—if slightly sepulchral—exposition of a thoroughly bad case. I must say that towards the end of what he said I was particularly concerned about the way in which he appears to be making haste slowly in his seven league boots, and telling us how there may be a son of a son of this Bill still in the womb of time. But, as he rightly said, we have to consider the Bill as it is before us.
I know that he will not mind if I say that we on this side of the House are rather sorry for the absence today of the noble Earl, Lord Gowrie, who put the last Bill through this House, though I understand he may be sent for on the Committee stage. We are sorry for this for a number of reasons. First, because in the course of his Second Reading speech he managed to say a few good words in favour not simply of unions in the past, which of course the noble Lord did, but of unions in the present.
He said at one stage in the official record of 20th May, col. 749:we are aided by the immense stability of our political traditions and institutions—among which I include, of course, the great labour organisations ".Earlier, he had said:we have no quarrel—with the labour movement.Today, words of that kind, whatever they may mean to the people who say them, are welcome, but, so far as we can see at the moment, they are now not said.
Subsequently, again in the official record at col. 736, when asked if the 1980 Act might be a bit revolutionary, 531 he said that he would like to paraphrase Professor Higgins:I believe that the measures before us are workable, will stick, and that in this limited but crucial area at least ' we've got it '.He thought he had got it; by George, he had got it. But now we have got some more.
Unfortunately, of course, such views are an embarrassment to the Government. We have been ordered, to justify this Bill, to have somewhat different, less civilised views, and more moderate people of that kind are not really at home in Tothill Street today. Therefore, of course, the noble Earl, along with his chief, has been banished to the furthest limb of the outermost dependency, though, as I say, we hope that he will be allowed out in Committee.
Therefore, I have to say what we feel about the Bill that we have. I want to do two things. I want to say for one moment what I do not intend to do this afternoon, and then two things which I want to try to do. I have no desire—and I do not think it would help the House if I sought to do it—to provide a detailed reply, clause by clause, to the particular remarks that the noble Lord made about each part of this Bill. The place to do that is at the Committee stage. We shall have quite a few amendments to put down at that stage of the proceedings.
What I should like to do is to take first some of the more important clauses, as we see them, say a word about those, and then say something about how I see the relationship between this Bill and the overall economic policy of this Government, because I think there is a connection. There is a connection in some ways which we have been somewhat slow to see. If I could start with the particular clauses that I think are important in this Bill, it is worth asking ourselves why we have had three Bills now, all starting with the word "employment".
There have been an Employment and Training Bill and two Employment Bills—an Employment and Training Bill which destroyed most of the provisions for improving industrial training and ensured that we had more unemployed unskilled workers, and the 1980 Employment Bill, which ensured that virtually twice as many people could be unfairly dismissed as before and made it impossible to operate union membership agreements without breaking the law. The trade union movement had less scope and less chance of helping the, on the whole, weaker members of the trade union movement—because that is what the effect of the clauses on secondary action will have—and now we have the Employment Bill 1982, which seems, at first glance at least, to be similarly unrelated to the need to increase the number of jobs. Three employment measures, none of which directly created any jobs.
The more we look closely at the provisions in those measures the more we can see that, in the mind of the Government, there is a relationship. If we take, for example, Clauses 2, 7, 11 and 12 of this Bill—I think they are the central ones in this respect—creating barriers to effective trade union organisation in various ways, and if we look at Clauses 8, 13, 14 and 16, which are not dealing really with the creation of organisation but with ways of making life more difficult for such organisation as remains—for example, when it decides 532 to use industrial action—and if we ask, taking those two sides of the Bill (barriers to trade union organisation and barriers to the deployment of trade union strength) what is the rationale, we have then to turn to the Secretary of State. I was glad to note that the noble Lord really repeated—he did not so much elaborate, although he did perhaps develop a little—the two central arguments which the Secretary of State for Employment has used and repeated every time he defends the Bill. He said it most succinctly in the other place in February:first, to safeguard the liberty of the individual from the abuse of industrial power, and "—the noble Lord said the same—secondly, to improve the operation of the labour market ".—(Official Report, Commons, 8/2/82; col. 741.)Those are the two central defences which we are given for the Bill. Let us deal with the first, which I would argue is essentially covered by Clauses 2, 7, 11 and 12, and it is supposed to be done in two ways. The first is by creating increased levels of compensation for unfair dismissal and trade union membership, and the second is by extending ballot provisions to validate pre-1980 union membership agreements. Those are the two central, most important, ways in which the Bill is said to be designed to safeguard the liberty of the individual.
I do not believe—we shall be arguing this in more detail in Committee—we have had any satisfactory explanation as to why either of those sets of measures are needed for their stated purposes after the passage of the Employment Act 1980. After all, as the noble Earl, Lord Gowrie, said, "We've got it, by Goerge, we've got it", and in a sense that is true from his point of view. Even now, within pre-1980 union membership agreement areas, anyone who develops or sprouts a deeply-held personal conviction can argue that he no longer wishes to pay union subscriptions. He does not need to have a ballot to do that. I would argue that there is no significant indication—I shall deal with the Sandwell and Walsall cases—that the absence of the levels of compensation which the Government are suggesting now provides evidence that that is what has prevented virtually any cases being brought.
My noble friend Lord Wedderburn has asked a number of Written Questions, which no doubt we shall go into in detail in Committee, but what comes out of those Written Questions is that the Government have no evidence, certainly no direct evidence, of cases being brought under the 1980 legislation by people seeking to have made available to them the levels of compensation which are at present there as a result of the 1980 Act. Therefore, we are being told, people are not bringing cases. Presumably, that is supposed to be the case in respect of the Walsall dinner ladies, and of course, in the Sandwell Metropolitan Council case, the lady did not press her case. We are told that such people do not get adequate levels of compensation and therefore we must enact unlimited compensation under the Bill. What is never explained is why those levels of compensation are adequate for all other forms of unfair dismissal, but they are not adequate when the unfair dismissal is the result of trade union membership. If anybody says, "It is because trade unions pursue people excluded and expelled from unions from job 533 to job and prevent them from rejoining a union ", I say there is no evidence of that either; it is totally contrary to my experience. I would say, therefore, that what the Government are actually doing is trying to engender resistance to the closed shop; they are trying to make it even more impossible to operate union security clauses; they are trying to create some bounty-hunters who will go after the money—not for any reason based on evidence that the sums available by way of compensation are low and should be raised. I repeat, if they are low and if they should be raised, the Government should be coming forward with general improvements in the levels of compensation for unfair dismissal.
I come to the remaining important provisions, Clauses 8, 13, 14 and 16, which affect industrial action, and again we must ask the Government the same question: What is the evidence—shortly after the clauses in the 1980 Act which limited industrial action in a whole series of serious ways—that we need further steps to be taken? Has there been an upsurge in industrial action? No, on the contrary. In another mood and at another time the Government congratulate themselves—they have sometimes even had the cheek to say it is the result of the Employment Act 1980—on the fact that whether you take the number of strikes or the number of workers involved or the number of working days lost, we now have levels of industrial action which really go back to pre-war levels. Thus, there is no great upsurge of industrial unrest.
Or is there evidence, as to some extent there was by 1974, that the provisions of the Employment Act 1980 have been taken to the courts and found not to work—for example, because of judicial interpretation, as was to some extent the case as a result of the Industrial Relations Act 1971? The answer is No. Again, there have been virtually no cases. Therefore, we do not know what all the major clauses of the Employment Act 1980 will mean when they get into the hands of the judges. Yet we are being asked to pass another set of provisions. On that, the noble Lord, Lord Cockfield, said a little as to why the Government had decided in particular not merely to increase the degree of uncertainty on lawful industrial action, but also to make trade union funds liable in those circumstances, and I shall spend a short while saying how I see the overall consequences of what the Government are doing in this field.
First, we are increasing the degree of uncertainty on the limits of lawful industrial action. We have already done that in respect of the distinction between primary and secondary action. Any lawyer who takes your money, having said he can tell you where that distinction lies, has taken your money to no good effect; you have to go through the agony of legal action to find out where the boundary of legality lies between primary and secondary action. In addition to that ambiguity, we are now having another ambiguity as to the boundary between worker-employer trade disputes and worker-worker trade disputes, and nobody can say where that boundary will eventually be drawn by the judges.
We are to have another one. We are not to know exactly, if you take the specified causes of a trade dispute listed at the moment, which are defined in terms of whether or not they are wholly or mainly 534 connected with those clauses. We are now to substitute the phrase "connected with" for "wholly or mainly". Whether "wholly or mainly" will be quite as extensive or less extensive or much less extensive than "connected with" you will have to go to law to find out.
Therefore, what the Government are doing is creating a penumbra of uncertainty around the limits of lawful industrial action, and then they are threatening trade union officials--and trade union funds—if they transgress those limits. In order to find ways of not transgressing the limits the trade unions have to do a whole further series of very uncertain things. If they believe that one of their authorised officials has transgressed one of the limits, they must refuse to authorise or endorse him; or if they have authorised or endorsed him, they must repudiate him; and if they repudiate him, they must inform him without unnecessary delay. If they do all of that, they must not act inconsistently in the meantime.
If anybody says that any lawyer will tell you what all these phrases mean without legal cases, I say that they are taking your money under false pretences. The only safe thing—well there are two things. The safe and honest thing, I presume, is to urge no industrial action in any circumstances; and I suppose that is what the Government want. The second thing, of course, is not to answer the telephone, and let the members do it themselves; and that I am afraid is what a great number of trade union officials will be forced to do. One must assume that that is in fact what the Government expect. This is not being done because we have a rash of industrial action. It is being done because the Government's economic policy has got itself into a position where it posits no industrial action at all.
That brings me to the second reason given by the Secretary of State—to improve the operation of the labour market. If one tries to make sense of this view, it must be that the Government have been captured by the notion of the natural rate of unemployment. They have in fact been teetering on the edge of it for some time, and they have now finally been captured by the Institute of Economic Affairs. They now believe that there is an underlying rate of unemployment which is incapable of being lowered by any action on the demand side, or indeed any action by Government, other than the action in Bills of this kind, including, for example, job creation, and that one can raise the level of employment only by driving down the price of labour. In some of the things that he said the noble Lord, Lord Cockfield, seemed to be saying as much.
I know that one just does not do that by destroying union monopoly power. According to this particular theory, one has to demolish all kinds of other obstacles to the working of a free market. But then if we look at other aspects of the Government's economic policy, we see that already, without saying so, at least without saying so specifically, a whole range of things are happening which can be explained only if the Government in fact subscribe to the notion of the natural rate of unemployment.
As I say, during the period of the 1980 Employment Act the Government doubled the number of people who will be unable to qualify for unfair dismissal, 535 and the reason that they have given is that it might induce a few employers to take on a few more. The Government have phased out the earnings-related benefit. They have failed fully to index unemployment support. They have introduced the Young Workers' Scheme, which is a way of subsiding cheap labour. They are to wind up the Community Enterprise Scheme, and replace it with the Community Work Scheme. They are to reject the Manpower Services Commission's plan for industrial traineeships; they are to introduce them at something like the supplementary benefit rate; and they are threatening to deny supplementary benefit to trainees who will not go on the courses. Now they are threatening to abolish wages councils and fair wage resolution legislation, despite our commitments to the ILO Convention.
Together with this constant attack on trade union rights, with this assault on trade union privileges, and the imposition of ever-increasing liabilities, this must mean that the Government have decided that pricing people into jobs by reducing the level of wages is the only policy for raising employment which is left to them.
One must admit that if people, and once people, fully subscribe to what the noble Lord, Lord Balogh, once called neo-Walrasian moonshine of this kind, there is nothing much to be done. No facts will help. It is no good pointing out that the Government's own studies show that there is no significant effect on employment protection policy and vacancies. It is no good pointing out that independent surveys and their own surveys show that wages councils are abolished with no beneficial effect on employment. It is no good showing that the level of employment support in real terms has been falling since the late 'seventies. It is no good saying that the CBI believes that no employer will take one of the Secretary of State's conscripts. Once one is in the grips of the natural rate of unemployment and the doctrine of pricing people into jobs, no facts will make any impact. Even facts linked to theory will make no impact. It is no good pointing out that no decent empirical labour economist believes that price adjusts to supply and demand in the labour market in the way that this theory assumes.
Nevertheless, in. the meantime those of us who do not subscribe to this theory need not subscribe to this Bill. Those of us who see it for what it is, not as an attempt to rescue people who are imprisoned by illiberal trade unions, but as an attempt to carry through what is left of the Government's economic policy, can reject it. Just because the Government have lost faith in their medium-term monetary strategy, and see that they have no alternative but to try to push trade unions into the ground, there is no reason why we should subscribe to it. This is a policy which cannot work. This is the phoenix theory of economics. The phoenix, your Lordships will remember, was a mythical bird which sat in the desert for 50 years until she finally got off the ground. The economy cannot wait that long, we cannot wait that long, and in the meantime we can reject the Bill.