HL Deb 28 January 1985 vol 459 cc537-50

8.38 p.m.

Lord Rochester rose to ask Her Majesty's Government what conclusions they have reached in monitoring the action reported to have been taken by companies in introducing, maintaining and developing employee involvement in accordance with Section 1 of the Employment Act 1982.

The noble Lord, said: My Lords, I beg leave to ask the Question standing in my name and in doing so I shall try to cover as quickly as possible what is necessarily, I am afraid, rather a lot of ground. Section 1 of the Employment Act 1982 is based on an amendment to the Bill which I was privileged to move on behalf of my noble friends. Its primary aim was to improve this country's industrial relations and performance by increasing the extent to which employees participate in the activities of the companies in which they work.

The amendment was at first resisted by the Government, but after it had been agreed to by the House the Government accepted it in principle and, following consultation within industry and discussion with me, a slightly modified version was introduced by the Government and now forms Section 1 of the Act.

The section makes it a statutory requirement that in every directors' report of a United Kingdom company relating to financial years beginning on or after the 1st January 1983, where the number of employees exceeds 250, a statement is included describing the action taken during the year to introduce, maintain or develop arrangements aimed at,

  1. "(i) providing employees systematically with information on matters of concern to them as employees,
  2. (ii) consulting employees or their representatives on a regular basis so that the views of employees can be taken into account in making decisions which are likely to affect their interests,
    3. 538
  3. (iii) encouraging the involvement of employees in the company's performance through an employees' share scheme or by some other means,
  4. (iv) achieving a common awareness on the part of all employees of the financial and economic factors affecting the performance of the company".
On 21st May last, in reply to a parliamentary Question, the noble Earl, Lord Gowrie, said that Ministers would be monitoring all company annual reports to see how employee involvement was being pursued.

My purpose in asking this Question is two-fold: first, to establish broadly how companies actually reported on the subject during the year 1984 and what conclusions the Government have drawn from their reports; and, secondly—and much more important—I should like to ask what the Government think should be done next and, in so doing, to canvass a few possible courses of action.

I should make it plain from the start that I am not seeking to make any great political capital out of this discussion; the matter is far too important for that. Indeed, apart from the Liberal and Social Democratic parties, there are a great many individuals and organisations with a stake in the outcome. In another place, the honourable Member for Wyre Forest, Mr. Esmond Bulmer, made an unsuccessful attempt shortly before my amendment to the Employment Bill was moved to introduce somewhat similar legislation through a Private Member's Bill.

The Industrial Society, the Institute of Personnel Management and the Industrial Participation Association—and from now on I shall call the last two the IPM and IPA—have all demonstrated their practical support for the aims of the section. Indeed, it seems to me that the best hope of making further progress in this field is to identify as much common ground as possible on which we can move forward together.

An analysis by the IPM of 165 annual reports issued during the first six months of 1984 contained a number of interesting features. In more than half the reports—and this applied also to just those medium-sized companies employing betwen 1,000 and 10,000 people which Section 1 was particularly designed to activate—either there was reference in the relevant statements to only one or two of the four elements of employee involvement specified in the section, or there was only a very short general statement dealing with the matter.

In one large company employing more than 10,000 people and in 10 smaller ones, there was no statement at all and from their survey the institute drew the conclusion that there was clearly scope for improvement in reporting. In another analysis by the organisation known as Industrial Relations Services, of 200 statements made by companies, almost all of them large ones, it appears that the majority do not have, or if they do they failed to mention its existence, any formal consultative machinery. Over half did not issue or omitted to mention reports to employees on the company's financial results. Industrial Relations Services drew two possible conclusions: either that companies were not concerned to draw up such statements, or that voluntary arrangements are not as widespread or of as substantial a nature as sections of industry have suggested.

I do not for a moment suggest that statements of this kind provide an accurate account of what is actually happening. Some may overstate and others underplay the true position. Indeed, in a way, this may be all to the good, if it means that awkward questions are then asked, on the one hand by employees who cannot recognise the company painted in colours that are too glowing as the one for which they work; and, on the other, by shareholders anxious to know why their company is apparently so inactive in this field. In all fairness, I should add that it is plain from many of the statements made, by no means all of them coming from large companies, that much positive action is being taken, and it is, of course, action that is at the heart of the philosophy underlying Section 1.

On this point, it is worthy of mention that both the Industrial Society and the IPA have already made awards affording positive recognition to organisations which have made notable progress in establishing genuine employee involvement. The IPM have, in turn, written to the 91 organisations which came within the substandard categories of their survey in the hope of stimulating them to do better in 1985.

The only specific question that I have to ask the Minister concerning the statements so far published is: what, if anything, do the Government propose to do about them? Do they think of offering any kind of general commendation where that may appear appropriate or, on the other hand, reproof where the response to the requirements of the section has evidently been inadequate, perfunctory or, in some cases, non-existent? So much for last year's report.

The question that really matters is: where do we go from here and, more particularly, what follow-up action do the Government have in mind? On this point, I should like first to refer to, and warmly to commend, the document entitled Employee Involvement and Participation: Principles and Standards of Practice, with its accompanying action guide which was drawn up jointly by the IPA and the IPM and first published in October 1983. This document was formally approved by the governing bodies of both organisations which, in the case of the IPM, included a leading employee relations practitioner, and in the case of the IPA senior management and, significantly in my view, trade union representatives.

Both organisations affirmed their belief that the document provided the most appropriate and practical approach to the development of participation in this country and one which was likely to be supported by a large section of both employers and employees. They also felt that it could form the basis for a formal code of practice, if the Government eventually decided to publish one.

The very first principle put forward in the document in relation to its general application is: Participation is relevant to all organisations in which people are employed and at all levels within them. It applies equally to commercial, service and financial institutions, manufacturing and distribution industries and public services such as education, health and local and central government, irrespective of their form of ownerships or constitution". I shall come back to that principle shortly, but first I want to ask the Minister whether the Government propose, after consultation with interested parties, to place their own imprimatur, so to speak, on the IPA-IPM code or to publish their own code, as they have in the case of, for example, closed shop arrangements and picketing.

I can see points for and against their taking that course, but if the Government's view is that on balance it is better at this stage that they should not do so, then I would ask the noble Lord, Lord Belstead, whether he would agree to pass on to his right honourable friend the Secretary of State for Employment my strongly held view, for what that is worth, that after this first year of operation of Section 1 the time is ripe for the Government to take further action. Having first sought the widest possible support for so doing, they should really go to town in seizing every opportunity—they have taken one or two already, as the Parliamentary Under-Secretary of State for Employment reminded me when he was kind enough to let me see him last week—to impress on companies the need to adhere to the principles and practices advocated in the IPA-IPM code, and particularly to the Action Guide with its check list of questions management should ask themselves.

I hope also that in acting in this way the Government will draw special attention to the section of the code which stresses that successful participation takes time to develop because it depends so much on attitudes, and that changes in attitude and the establishment of mutual trust will develop only through the experience of working together.

Section 1 was of course deliberately framed as a continuing requirement and there is therefore need for companies to have not only clearly defined short-term objectives but a long-term programme for the development of employee involvement and means by which progress in carrying it out can be measured. I trust that the Government will stress, too, the desirability of seeing either that employees all receive a copy of their company's annual report or one prepared specially for them, including particularly the information about employee involvement contained in the report issued to shareholders. It is surely anomalous that statements on this subject now have to be made to shareholders but there is no corresponding obligation to give such information to those who actually work for the company concerned. So I should be grateful if the Minister when he replies would say what the Government's view is on this point.

Another principle to which prominence is rightly given in the IPA-IPM code concerns the involvement of trade unions. I entirely support the view there expressed that, where trade unions are recognised, it is important that the co-operation and support of union representatives should be sought in developing participation arrangements and procedures. In that connection, from personal experience I would recommend joint training of managers and other employees especially in seeking to achieve the fourth, and in my view the most important, element of involvement included in Section 1; namely, a common awareness on the part of all employees of the financial and economic factors affecting the company's performance. Just how urgent is the need for that common awareness in the public sector has been amply demonstrated in recent years in the mines, on the railways, in the docks and indeed in the public services generally. The work that the Industrial Society in particular is doing to help in this area is therefore very much to be welcomed.

That brings me back to a point which I first stressed at Third Reading of the Employment Bill in 1982. It was later taken up in another place by the honourable Member for Kidderminster when, in supporting New Clause 1 as it then was, he said, at column 768 of the Official Report of 25th October 1982: I am sure that in due course the Minister will wish to address himself to a glaring omission in the Bill's approach—the exclusion of the public sector. There is a greater problem in the public sector in terms of 'us and them' than in the majority of private companies". The exclusion of the public sector was of course inevitable at that time because Section 1 had to be introduced through the vehicle of the Companies Act. But what is going to be done about it now?

I am on record as having said on a number of occasions that throughout industry and in the public services it should next be made a statutory requirement that in all organisations employing more than a certain number of people there should be consultative bodies of some kind. I must ask the noble Lord, Lord Belstead, to give us the Government's view on this matter. If in their attitude they are not supportive, I fear they may later come to regret it. Apart from the pressures coming from Europe for legislation in this field that would impose on this country much heavier obligations in the form of the Vredeling and Fifth Directives, there are the pressures that are unremittingly increasing within our own society. Can it be right that it is only when people are at work that they may still be denied consultation or representation when major decisions affecting their lives are made?

There are many other matters relevant to employee participation that I barely have time now to mention. I have in mind things like the Co-operative Enterprises, for which my noble friend Lord Grimond has constantly called so cogently, the development of policies designed to provide as far and as fast as possible similar terms and conditions of employment for all employees, and the benefits that would accrue to companies from involving employees much more than is often now the case in helping to determine the structure and the content of their jobs.

In conclusion, I must reaffirm my belief that real participation will not flourish if premature attempts are made to implant it from above. It will prosper only through organic growth which starts at the bottom and works upward. In the end progress will, in my view, depend on the extent to which people generally are prepared to learn from the experience of the best practitioners, and on how they can be brought to believe that it is in their own interests to act in accordance not merely with the letter of Section 1 but with its underlying spirit and philosophy.

8.57 p.m.

Lord Kilmarnock

My Lords, I did not put my name down to speak but I have already consulted the noble Lord, Lord McCarthy, and he has graciously said that he does not mind my speaking for a couple of minutes before he does. I did not want to let this occasion pass without giving my support to the Question asked by my noble friend Lord Rochester. The truth of the matter is that I have always had a soft spot for this initiative of my noble friend, and I admired the way and the persistence with which he went about gaining consent to it, finally achieving its insertion as Section 1 of the Employment Act 1982. I think it is an important achievement.

The Government, after years of dragging their feet on the question of wider share ownership, have recently been converted to spreading capital ownership. One may legitimately wonder how far their flotation of nationalised companies will in the long run achieve that wider spread. One fears that a great many of the shares floated in this way will eventually end up back with the institutions. On the other hand, the modest proposal embodied here, particularly in Section 1(3), for encouraging the involvement of employees in the company's performance through an employees share scheme or by some other means, brings the whole question right to the heart of existing companies and how employees are to be involved with them. I am not saying that I do not attach importance to items (i), (ii) and (iv), but it is (iii) about which I really wanted to speak. The noble Lord really must be congratulated for having achieved the inclusion of this in the statute.

The relevant companies do not, of course, have to do anything, but in that case, on the face of the statute, they have to say so. If they are doing something, they have to say that, too, and they have to describe it. I have always thought that this modest measure could have extremely important effects in the sense that we would learn about a wide variety of schemes and that those which seem successful might catch on and be more widely adopted.

Therefore, the question of the information which emerges is of first importance, and I share the interest of my noble friend Lord Rochester in learning how companies have reported and whether the Government are pursuing systematic monitoring. If, as my noble friend has told us, there has been inadequate reporting by some companies, I echo him in asking whether the Government will take any steps to see that the amended Section 16 of the Companies Act, which is embodied in Section 1 of this Act, is respected and acted upon.

My noble friend talked about various forms of monitoring that have been carried out by outside bodies and various awards that are being set up. All that sounds absolutely admirable, but it seems to me that this whole initiative requires a wind in its sails from the Government if it is to get off the ground. The Government may not think that this is a particularly important matter, but in view of their collaboration with my noble friend in the final version which emerged in Section 1, that seems to be improbable. They may possibly feel that it is a waste of companies' time, but I think that anyone reflecting on the state of industrial relations in this country would not come to that conclusion, and I do not believe that the Government will, either.

I said I did not want to make a speech: I merely wanted to reinforce my noble friend in seeking to ensure that this modest but valuable measure should not just lie as a dead letter on the statute book. I hope that when he replies the noble Lord, Lord Belstead, will be able to assuage our anxieties and confirm that the Government are fully committed to the principles embodied in Section 1 of the Employment Act 1982.

9.2 p.m.

Lord McCarthy

My Lords, I want to do three things very quickly. First, I want to thank the noble Lord, Lord Rochester, for reminding us of this small section in the Employment Act 1982 for which he was responsible, and then I simply want to remind the House, very briefly, as to how we came to obtain this section, because it leads into the second thing I want to do, which is to obtain, if I can understand it, the Government's view of this section and to see if I can get it right. No doubt if I get it wrong the noble Lord, Lord Belstead, will tell me. Thirdly, I should like to go back to the central point of this Question and, from our point of view on these Benches, ask something about the conclusions reached by Her Majesty's Government in monitoring the actions reported, and, indeed, some questions about when we are going to get (if we are to get them) the results of that monitoring.

The noble Lord, Lord Rochester, began this little journey at the Committee stage of the 1982 Employment Bill. At that stage he was defeated, and the Government in the person of the noble Earl, Lord Ferrers, said that what the noble Lord, Lord Rochester, wanted would impose a rigid legal system on consultation.

Lord Rochester

My Lords, simply to set the record straight, may I say that at no point was the amendment defeated. The noble Lord may recall that it was simply left over from the Committee stage to the Report stage.

Lord McCarthy

My Lords, that is perfectly true. In fact, it was withdrawn in Committee and reintroduced on Report. But the Government at that stage told us why we should not pass the amendment if we had gone to a Division. They said it would impose a rigid legal system. They said that it would be unwise to rush in, pell-mell, in advance of the Vredeling proposals; but the noble Lord was not to be put off and, as he said, he brought the amendment back on Report and the Government once again said that it was rigid, inflexible and at the same time anodyne. However, the House voted for it on that occasion by 116 votes to 112 votes.

At that point the Government—and I give full credit to them—conceded to that vote, and the noble Earl, Lord Ferrers, said on 2nd August that the Government accepted the substance of the amendment. At Third Reading on 13th October the Government introduced their own amendment, which differed from the amendment originally introduced by the noble Lord in only a few minor respects, and it became embodied in the Bill. The problem at that stage, as I saw it, was—and I sought to elicit from the Government an answer, but I failed—that we had never had a statement as to why the Government had changed their minds and why what in the past had been regarded as a rigid legal system and something unwise to rush into had become intellectually acceptable to the Government.

Therefore, it would help us tonight if we could have from the Minister a clear statement as to what the Government feel about this section: whether it is merely something which they have accepted because the House expressed its wish—and all credit to them if they have—or whether (even more credit to them) they have accepted it because they think it rather a good idea.

There is some evidence that they think it is rather a good idea. There is some evidence that they have changed their minds, because we have had some small statements—not satisfactory, but small statements—from Ministers elsewhere since the passage of the Bill. The noble Lord, Lord Rochester, referred to the statement by the noble Earl, Lord Gowrie, who said, "We will monitor the Bill." That suggests that the Government are interested in the way in which the Employment Act actually comes out. But on 5th June the Secretary of State for Employment in another place (reported in column 163 of the Official Report) went a little further than that. He said: I will take a close interest in these reports"— that is, the reports of the monitoring of the Act— and will expect employers to take the opportunity offered to review and, where necessary, improve their existing arrangements for employee involvement'. I take the statement of the noble Earl. Lord Gowrie, and the statement of the Secretary of State for Employment, as I have just read it, to indicate that the Government implicitly, if not explicitly, now favour the best possible use of Section 1 of the Employment Act 1982. But the best possible use of it, as the noble Lord, Lord Rochester, said, can only be based upon information—information about where we are now and information subsequently about whether we are improving and making progress, and, if we are not making progress, then action on everybody's part, including the Government's, to try to secure that that progress is made.

So I pass to my third question. What are the Government proposing to do now to ensure, first of all, that we know where we are, and, if we are not where we want to be, that they will assist us in progressing towards the implementation of this section? What we have at the moment—and the noble Lord. Lord Rochester, has mentioned the two sources—are two imperfect but useful unofficial bits of information. We have a survey from IRRS of some 200 companies which is not representative. It is based upon the contacts that it has. It is probably skewed towards the larger firms. which on the whole do rather better in information and consultation than the smaller firms. We also have the 165 contacts of the Institute of Personnel Management. Fifty per cent. of the sample is based on its own members—again for the most part they are good firms, because on the whole it is good firms which have members in IPM—and 50 per cent. or so is based upon a random sample drawn from the columns of the Financial Times.

I do not suggest that either of these two surveys is adequate. I do not think that either of the organisations would suggest that. I do not suggest that either of those two surveys is representative. Nevertheless, such as they are, they are what we have and they give us cause for concern if we are committed to carrying through the implications of Section 1 of the 1982 Employment Act.

For example, let me just refer briefly to some of the findings of the IPM sample. The IPM sought to classify the results under four headings. There were those that were satisfactory because they mentioned all four aspects of Section 1 and also adopted a positive approach to information, consultation and so on. That was the first category. It was found that only 20 per cent. of the respondents came in that category. The next category included those which, true, mentioned all four aspects of consultation, communication, information, and so on, but did not have a positive approach towards these matters: and it was found that 24 per cent. were in that category. Then there were those which referred to only two aspects—that was the third category—and it was found that 30 per cent. were in that category. Seventeen per cent. had a very short reference; and, finally, 9 per cent. made no report whatsoever.

I believe that that suggests to us—and I am not saying that it is representative, but it is all that we have—that more than 50 per cent. of the firms contacted by IPM in a very favourable sample have a level of information, communication, consultation and worker involvement which any reasonable person would say was less than satisfactory. If that is what unofficial surveys say, what would a Government survey say?

So I come to my questions. Is it not implicit in what the noble Earl, Lord Gowrie, said that the Government will monitor this? Does it not therefore follow that we can expect, and perhaps shall have from the noble Lord the Minister, a report on where we are at this moment based either on some set of categories similar to those of the IPM or on some other set—a representative or even a total report gleaned from the Registrar of Companies, who has these returns though he does not have to do anything with them, and an authoritative interpretation of these results? If we have them for this year, shall we get them for next year? Therefore shall we be able to make progress in seeing how far this part of the 1982 Employment Act is actually being carried out?

9.12 p.m.

Lord Belstead

My Lords, I very much welcome this opportunity to set out the Government's views on employee involvement and on the role of Section 1 of the 1982 Employment Act. Perhaps I may say first of all that the Government are firmly committed to the principle of management informing and consulting employees about matters which affect them. We believe, however, that successful and genuine employee involvement depends as much on a spirit of co-operation as on the existence of formal machinery, and that it is therefore best introduced on a voluntary basis.

But I must come now to Section 1. Indeed I recognise, as other noble Lords who have spoken this evening have done, that it was the noble Lord, Lord Rochester, who was instrumental in bringing this section on to the statute book. Now that it is in operation, I want first of all to answer directly the question which the noble Lord, Lord McCarthy, asked me, which was how the Government view Section 1, by saying that the Government see it as one of a number of means of serving two purposes. The first is to encourage the companies within the scope of Section 1 to develop better employee involvement arrangements by bringing the issue to the attention of directors and shareholders. The second purpose of Section 1 we see as being to help the Government to monitor the success of this voluntary approach.

May I take the first of those two purposes which I have identified on behalf of the Government: the encouragement of better employee involvement arrangements. The noble Lord, Lord Rochester, ended his speech by making the point that of course the greatest encouragement for employers and employees to do this is that it is in their own interests so to do. There is no doubt that the employees of any enterprise are an indispensable asset and the more an enterprise can involve its workforce and draw upon their full loyalty and range of talents the more I believe both it and they will prosper. This is especially true today given the opportunities, and the challenges for human ingenuity, of new technology.

But encouragement for better employee involvement also has been coming from a number of bodies representing employers, management and trade unionists active in industry. I have in mind bodies such as the CBI, the IPM, the IPA and the Industrial Society, who all speak with the authority of first-hand experience and who have in recent years—and I am very glad to recognise this on behalf of the Government—pioneered and promoted so many practical approaches to employee involvement. This valuable work, which the noble Lord mentioned in his speech, has borne fruit in many companies, as we know from the Section 1 reports that the Government have already seen.

There is also the role of Government in the encouragement of this movement. Perhaps the most important role Government have in promoting employee involvement and communication is as employers themselves. Several departments have job satisfaction projects. For example, a project at Customs and Excise's VAT Central Unit in Southend is helping to develop an in-house management development programme and is expected to make substantial savings by eliminating unnecessary procedures. Projects in the Department of Health and Social Security have contributed to improvements in service to customers. Many departments in the Government have reviewed their internal communications procedures and are continuing to seek improvements. Finally, the Government's Financial Management Initiative, which is intended to improve value for money in the public service, will itself encourage closer participation, not least by generating intensive discussion between line managers and their supervisors, and their staff, about planned results and resources for the year ahead.

In moving this short debate the noble Lord asked about employee involvement in the public sector. On behalf of the Government, I entirely accept that the principles of good employee involvement practice apply to all organisations, whether they are in the public or the private sector, regardless of the constraints which there were on bringing Section 1 into the 1982 Act. The Government seek to set an example as direct employers, as I have just endeavoured to argue, and we encourage managements elsewhere in the public sector to develop arrangements best suited to their own circumstances. There are indeed a variety of existing arrangements in the public sector. I think that the noble Lord, Lord McCarthy, with all his experience, and the other two noble Lords, with their knowledge, will know a great deal more about those arrangements than I do.

However, may I say that the Government are more concerned to encourage the development of these arrangements in the public sector in practice, rather than seeking to alter the formal scope of Section 1. In other words, we are more interested in the spirit with which the public sector recognises that Section 1 is there, even though it technically stands outside it, rather than with worrying about whether we ought to try to change the law.

The Government also have a role so far as encouragement is concerned. I know your Lordships are aware of the dramatic increase in employee share schemes, attracting tax relief, that have occurred in recent years. The noble Lord, Lord Kilmarnock, devoted a good deal of his remarks to these schemes. I really do believe, if I may say so, that the increase in these schemes encourages that understanding of a company's prospects that leads to good industrial relations and increased productivity. I would also claim that the Government have been giving direct encouragement. Speaking at an Industrial Participation Association awards ceremony—the sort of awards to which the noble Lord, Lord Rochester, was referring—on 28th November, my right honourable friend the Secretary of State for Employment said: The law … cannot … bring about good relations at shop floor level between managers and their employees. That can only be achieved by the voluntary effort of managers to improve communication with their employees and to involve employees more in the success of their companies". In short, I am arguing that the Government have consistently urged companies to develop employee involvement arrangements appropriate to their particular circumstances. I give an assurance that we shall continue to do so at every possible opportunity. When the noble Lord, Lord Rochester, asks what the Government intend to do and asks essentially, "Is it the carrot or the stick that we should resort to in trying to get more action in the future?" I am very clear that the Government believe that encouragement is more effective than reproof. That is the road down which we prefer to go.

Section 1 is complementary to this approach. It ensures that the issue of employee involvement is constantly in the mind of top management. It provides an opportunity for the better practitioners to report what they have achieved and gives a stimulus to others to do better. I should therefore turn to the second purpose that I suggest is served by Section 1 that of monitoring the success of the voluntary policy. The noble Lord, in his Question, asks about the conclusions we have reached from monitoring company reports. It is, I think, a little premature to talk of conclusions. Section 1 only applies, after all, to annual reports covering periods beginning on or after 1st January 1983. Some companies will only have quite recently finished their first reporting year to which the requirement applies. Many more will not have yet published their reports for that year. So we are far from having a complete picture.

Nevertheless, we can, I think, say that we have gained two main impressions from what we have seen so far. First, the reports reveal the extent and great variety of employee involvement schemes that are already under way. The Government have no doubt that to attempt to impose a restrictive legislative framework upon such schemes would only damage the worthy efforts already being made. Secondly, although we must be wary of assuming that a cursory report necessarily means an unsatisfactory situation in practice, it seems likely that many firms have still a long way to go before they can reap the benefits of better employee involvement practices. The Government fully intend to keep on encouraging them to do better, but real improvement, we believe, can only be achieved voluntarily by firms seeing the benefits that they can gain by doing better.

This picture is, I think, confirmed by a variety of other evidence. I think it would be fair to say that those other bodies, such as the Institute of Personnel Management, which have been monitoring Section 1 reports, have drawn tentative initial conclusions broadly similar to our own. However, going wider than Section 1, I draw your Lordships' attention to a few examples of relevant research results. Results from a survey of industrial relations in over 2,000 establishments published by the Department of Employment in 1983 showed that formal consultative arrangements existed in almost three-quarters of firms with 1,000 or more employees and that such arrangements were spreading. I regard that figure as accurate. It is consistent with the somewhat lower proportion of Section 1 company reports making a specific mention of formal consultative arrangements quoted by the noble Lord. Over half of the respondents in a British Institute of Management survey of its membership conducted about a year ago believed that participation in their companies had improved in the preceding three years. A recent Urwick Group employee relations survey showed that over two-thirds of the companies covered introduced refinements to their employee involvement methods during 1982. There are indications that the trend for growth in employee involvement has continued since those encouraging results were produced.

Each of your Lordships has asked: how can further progress be made? An important contribution, which the noble Lord, Lord Rochester, mentioned, is being made by the code of practice on employee involvement produced jointly by the Industrial Participation Association and the Institute of Personnel Management. I am grateful that the noble Lord gives me the opportunity to say a word in reply on this code, because it undoubtedly provides an admirable guide to the many and varied ways forward in these matters. The code derives a great deal of its authority from the fact that it is produced by bodies which represent employees and trade unionists as well as employers and managers. I am not sure that there is any better authority in these matters.

The noble Lord asked whether the Government would give some sort of formal stamp of Government approval to this very valuable code. I must say I am not convinced—the Government are not convinced—that the code would be made any more effective by doing this. Of course, there are certain problems, as the noble Lord knows very well, about adopting a code unless it has originated either from an ACAS draft or a draft from the Secretary of State. But the point I should like to make in reply, if I may, is that the Government have gladly commended that code. I am endeavouring to do so again this evening, and we shall certainly go on doing so. I am not convinced, if I may say so on behalf of the Government—if I may repeat it—that by giving in some way some official stamp it would make this code more effective, but I shall of course respond to what the noble Lord asked me and certainly draw my right honourable friend's attention to the view of the noble Lord, Lord Rochester, on this particular point.

It is, I suggest, the will to move forward voluntarily on these matters that should be the absolutely crucial issue here. We do not believe that compulsion, whether by domestic legislation or in the shape of European Community proposals such as Vredeling, can succeed if there is not freely-given co-operation. Such measures also fail to recognise the great variety of existing schemes which is demonstrated by the Section 1 reports. The noble Lord, Lord Kilmarnock, expressed the hope that Section 1 would be leading to the discovery of valuable different methods of employee involvement. My advice is that this has happened. The Institute of Personnel Management's survey of 165 annual reports, published last September, to which both the noble Lord, Lord Rochester, and the noble Lord, Lord McCarthy, referred, recorded a specific reference to at least 20 different methods of employee involvement practised by those companies. In most cases, including, for example, profit-sharing schemes and consultation mechanisms, each method was specifically mentioned in a substantial number of reports. There is, as the IPA/IPM code recognises, no single ideal solution which one can hold up and say, "This is the way to apply employee involvement". Different circumstances require different solutions.

If It may say so also, I think that it is right to remember that Section 1 is a means to an end and not an end in itself, and so shareholders ought to be interested in better employee involvement because it can make a real contribution to the success of their company. Shareholders are a group whose potential influence has often been neglected up to now. I think the noble Lord, Lord Rochester, mentioned them specifically. I should say, on behalf of the Government, that I hope they will take the opportunity which Section 1 gives them to play their part in encouraging the development of further employee involvement.

But despite all that, at the end of the day real and effective employee involvement on the ground means more than any number of words spoken or written in a report. The Government see Section 1 as a means of helping boards of directors to review their employee involvement arrangements, rather than as a narrow reporting requirement. Similarly, the straitjacket that prescriptive legislation would impose would hinder rather than assist the developments which we all wish to see made.

We should be under no illusions, however, about the difficulties that industry faces in attempting to involve more of its employees. We also understand that there is a temptation to give insufficient priority to matters of long-term importance such as this, under the pressure of everyday events. But equally the Government are in no doubt that the more a firm pulls together the minds and ideas of all its employees the better it will respond to the challenge of economic and technological change, and the better it will succeed. Section 1 is valuable in encouraging that. For that reason I am most grateful for the debate which the noble Lord has initiated this evening in your Lordships' House.

Lord McCarthy

My Lords, before the noble Lord sits down, will he confirm that I have understood him correctly? Will he confirm that the Government have no intention of publishing the results of their monitoring exercise? Is that what the noble Lord is saying? We all know about the 1983 workshop survey: it had no questions about Section 1. The noble Lord says that he is monitoring the results. Will he publish the results of that monitoring?

Lord Belstead

My Lords, there is no secret about what the Government have discovered from their monitoring. I should have thought that I had been very forthcoming at considerable length this evening. Therefore, I should have thought that the noble Lord would have been satisfied, not only with my reply but also with the information which the Government are giving as we proceed with this particular matter.

House adjourned at twenty-eight minutes before ten o'clock.