Employment Protection (Variation of Limits) Order 1985 (Hansard, 19 December 1985)

§ Lord Trefgarne
My Lords, I beg to move, That the draft order laid before the House on 2nd December be approved. I hope that your Lordships will allow me to speak at the same time to the Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1985, which was also laid before your Lordships on 2nd December.
The Employment Protection (Variation of Limits) Order 1985 has been laid before your Lordships in accordance with Section 148 of the Employment Protection (Consolidation) Act 1978 which requires the Secretary of State for Employment to carry out an annual review of the level and duration of guarantee payments to workers on short-time and temporary lay-off and the weekly earnings limit for the purpose of calculating redundancy payments, the basic and additional awards for unfair dismissal and certain debts in relation to the insolvency provisions of the Act. The current weekly earnings limit is £152. The draft order provides for this limit to go up to £155, which is an increase of 2 per cent. The draft order also provides for the daily limit on guarantee pay to be 940 increased from £10.50 to £10.70, which is a 1.9 per cent. increase.
We have decided not to increase the other limits—namely, the specified number of days in any relevant period, now five days, and the length of the relevant period, which is now three months. The reason for the decision was given in the report laid at the same time as the order, and is that the maximum number of days for which payment is required to be made still seems to strike a fair balance between the employers' obligations and the employees' rights.
The second draft order, the Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1985, has been laid before the House in accordance with Sections 73(4B) and 75A(7) of the 1978 Act as subsequently amended. These limits apply to the basic and special awards for unfair dismissal for trade union activities or membership or non-membership of a union, which were introduced by the Employment Act 1982 and became effective from 1st December that year. The Government propose that the limits on the basic and special awards should be increased from £2,100, £10,500, £21,000 and £15,750 to, respectively, £2,200, £11,000, £22,000 and £16,500. My Lords, I beg to move.

§ Lord McCarthy
My Lords, the mystery deepens. The noble Lord has told us that the increase under the pneumoconiosis payment of claims regulations is 5 per cent. To my question, "Why?", he says that it has something to do with the fact that the Government take into account the ability of industry to pay. I do not regard that as a satisfactory explanation. I would have thought that it should be based on the retail price index and the movement in that index in order to ensure that the receivers of these benefits maintain the real value. Indeed, if that were the reason, the pneumoconiosis payment of claims regulations and the 5 per cent. increase might be said to be in line with requirements.
But then we come to the first order that the noble Lord has now moved—the Employment Protection (Variation of Limits) Order—where a number of increases are made. I agree when he says that some of them—at least we agree on the arithmetic—involve a rate of increase of 2 per cent. while for others the rate of increase is 1.9 per cent. I have to ask him why this is so. Why, if it depends upon the ability of industry to pay, can industry afford to pay 5 per cent. in respect of the regulations, but 2 per cent. on some of the increases and 1.9 per cent. on others in the order?
Then again let us come to the other order that is before us—the unfair dismissal basic and special awards. The noble Lord did not tell us so far as I was able to understand him—I may have missed it, but I do not think so—what was the rate of increase involved in that order. The increase that I have been able to work out is 5 per cent. So, when it is a question of the closed shop and people being dismissed unfairly from unions or jobs because they will not join unions, then industry can afford 5 per cent. If it is a question 941 of the pneumoconiosis payment of claims regulations, industry can afford 5 per cent. But if it is just the basic guaranteed pay for lay off, industry cannot afford more than 2 per cent.
And now we come to the strangest thing of all. We come to the order that failed to arrive—the dog that failed to bark in the night. The dog did not bark of course because he saw his master. I suggest that the order that has not come forward has been, in fact, murdered. I refer to the Unfair Dismissal (Increase of Compensation) Order which normally comes forward at this time of year. For most people, it is far more important than the unfair dismissal orders and the employment protection orders that we have considered today. It fixes the maximum compensation for the ordinary person who is unfairly dismissed, not the closed shop case. This is the situation in which the Government apparently do not propose to make any increase at all.
I wish that the noble Lord the Secretary of State had been here to move the orders and to answer questions. My noble friend Lord Wedderburn of Charlton asked in a Written Question published in the Official Report of 10th December, at col. 199, whether the Government intended at this time or indeed in the near future to complement these orders with the missing order, the Unfair Dismissal (Increase of Compensation) Order. The answer that the noble Lord the Secretary of State gave my noble friend was that the limit was increased by £500 to £8,000 with effect from 1st April 1985—that is to say, last year. The order was laid in December last year. The noble Lord continued: We do not consider that a further increase is justified at the present time". I regard that—I wish that the noble Lord the Secretary of State had been here because I could then have said this to him—as disingenuous. That is to suggest, and an innocent might believe, that there was no particular reason why the Government should introduce the order this year because, after all, there had been an increase in April 1985. But, as we all know, orders come in and are laid in December in this field in order to be effective in April 1986. I have to ask the House and the Minister why the Government, since 1979, have been lax and slack in increasing the limits in this particular invisible order, the Unfair Dismissal (Increase of Compensation) Order. In 1979 the limits were increased by 10.5 per cent. and in 1980 by 8.7 per cent. In 1981, there was no increase. In 1982, there was a 12 per cent. increase; in 1983, a 17.1 per cent. increase and in 1984, no increase. Last year, it was 6.7 per cent. which presumably will be needed to last for two years.
In other words, over a seven-year period there has been something like a 45 per cent. increase in a period when the RPI has moved by 67.6 per cent. I would ask the Government again what is the rationale, what are the reasons and the justification, for all these varying degrees of increase. Surely, the principle is simple. It should be to maintain the real value of the payment, not just for people who are dismissed from jobs because they will not join unions but for everyone.

§ Lord Rochester
My Lords, from these Benches I should like to join in thanking the noble Lord, Lord 942 Trefgarne, for having explained these orders to us. I have some sympathy with one or two of the points raised by the noble Lord, Lord McCarthy, and I shall be interested to hear the Minister's response.
However, there is one other point which is relevant to these orders. I cannot let this opportunity pass without deploring once again the decision which the Government took last month to end for all but the smallest firms the system under which they at present share with employers part of the cost of statutory redundancy payments by granting employers a rebate from the redundancy fund which at the moment (I think I am right in saying) amounts to 35 per cent. of the cost.
I realise that this change will not in any way affect the employee's entitlement to redundancy payment. But companies are still having to make employees redundant in very considerable numbers, and I find it very difficult to reconcile the effect that this move by the Government will have on employers' costs with the need, emphasised most recently by your Lordships' Select Committee on Overseas Trade, for manufacturing industry in this country to remain internationally competitive.
I shall not develop this theme now, not only because this is the season of good will but because we shall have an opportunity to debate this matter more fully, I understand, when the relevant legislation comes before us later in the Session. Subject to that qualification, we on these Benches are content to approve these orders.

§ Lord Trefgarne
My Lords, perhaps I might reply to the points of the noble Lord, Lord Rochester. First, the noble Lord is quite right when he says that we shall have an opportunity to discuss the important matter which he raised when the relevant legislation comes before us later. But may I add to that the fact that for the past 20 years the rebate system has provided an element of insurance for employers needing to make people redundant. This may have been justified in the conditions of the 1960s and 1970s, when there was concern about overmanning and a need to encourage a shake-out of surplus labour, but in present circumstances there can be little to be said for a policy which amounts to the subsidising of redundancies. We therefore think that the public expenditure provision can be better allocated to direct job creation measures, leaving employers to make their own judgment about when to hire and fire people and to meet their own costs. An exception is being made for the very smallest employers, for whom the cost of redundancy may he disproportionately onerous.
Perhaps I may then turn to the points made by the noble Lord, Lord McCarthy. I think that I may have inadvertently misled him in my response to a point which he made earlier about the pneumoconiosis order. The costs there will fall upon the state and not upon employers, as I think I suggested. The fact is that the costs which fall upon the state in that order are being increased by a figure broadly in accordance with the increase in the retail price index. In the one area where we are not increasing it by that amount it is indeed the case that the costs fall to an extent, anyway, upon employers. Indeed, in the case where employers are having to lay people off or to put them on short 943 time, they are presumably less well able to meet the higher costs that might have been incurred if we were to have to increase the figures by a greater amount.
I hope that the noble Lord would agree with me that the proposition that the figures should therefore be increased by a smaller amount is an appropriate one because it means that the amounts of money which employers have to meet in a somewhat difficult situation for them are clearly rather less. However, the other figures in that order are being increased, as I made clear, by an amount broadly equivalent to the increase in the retail price index.
I hope that reassures the noble Lord, and that your Lordships will give these orders a fair wind.