§ 6.20 p.m.
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead) rose to move, That the draft order laid before the House on 17th April be approved. [19th Report from the Joint Committee.]
§ The noble Lord said: My Lords, under the provisions of the employment protection legislation currently in force employees have a right to complain to an industrial tribunal of unfair dismissal after one year's service with an employer or after two years with an employer with 20 or fewer employees. The purpose of the draft order is to standardise this qualifying period at two years for all employees. The change will not affect the qualifying period of one month in respect of unfair dismissal following suspension on medical grounds under certain health and safety regulations. Nor will it affect the right not to be dismissed unfairly at any time because of membership or non-membership of a trade union, or because of taking part in trade union activities, where no qualifying period is required.
§ Employees who work for between eight and 16 hours a week will continue as now to have a qualifying period of five years. Finally, of course, this order will have no effect on the protection afforded to employees under the sex discrimination and race relations legislation. It is intended that the order should come into force on 1st June 1985. It will apply only to employees starting to work for an employer on or after that date. We believe that in spite of the changes we have made since 1979, the employment protection legislation, and, in particular, the provisions relating to unfair dismissal still discourage many firms, especially small ones, from taking on more people.
§ The Government cannot alone create jobs. Their key contribution is to create an economic climate in which enterprise can flourish. But they can and do also provide direct help for those worst affected by unemployment; and Government can help to improve 1297 the operation of the labour market by encouraging better training, more flexibility and fewer barriers of regulation and cost. The changes introduced by this order are part of this strategy. It is important that we should take all reasonable steps to remove the barriers that might be standing in the way of new jobs being created. In this case the barrier relates to employers who want to take on more people but are afraid to do so because of their fear of being taken to industrial tribunals.
§ It is probably common ground among most of your Lordships that employees should have a right to protection against unfair dismissal after a reasonable period of service. At any rate, that is most certainly the view of the Government. I think it is also common ground that such protection should not generally be available immediately but that there should be a period of service during which time the employer has an opportunity to decide whether he or she wishes to retain a new employee. The length of this qualifying period is a matter of judgment and what is right at one particular time is not necessarily right at another. Our judgment at the present time, in the light of the paramount importance of reducing unemployment, is that two years is a reasonable period for an employer to have to decide whether an employee ought to be retained, while the position of employees who have demonstrated their commitment to an employer over such a period is also safeguarded. The change will also bring the qualifying period for unfair dismissal claims into line with the long-standing two-year qualifying periods for redundancy payments, maternity pay and the right to return because of absence owing to pregnancy.
§ We believe that the change will have an important psychological effect. Employers will be more ready to take a chance and employ people in the knowledge that they will have two years in which to see whether things work out as they wish them to, without the fear of being taken to an industrial tribunal. But I must say that the right to complain to an industrial tribunal remains and I make no apology of any kind for that. Employees who have invested two or more years of their lives with an employer are entitled to safeguards, and they will continue to be so protected. My Lords, I beg to move.
§ Moved, That the draft order laid before the House on 17th April be approved. [19th Report from the Joint Committee.]—(Lord Belstead.)
§ Lord Wedderburn of Charlton
My Lords, the Minister has explained the nature of the order, and much of the explanation we can accept. But this is far more than a technical piece of fine tuning, even if the Government believe that it might help with unemployment. The common ground between the two Front Benches is, I believe, less than the Minister suggested. The old bipartisan approach to the qualifying period for unfair dismissal was based upon the notion that you needed such a period in order that the tribunals should not be flooded with work. It is there in the literature from 1970 to 1979.
It was this Government who changed the alleged purpose of the qualifying period first in 1979, then, for a second time, in 1980, and who now, again, are increasing the qualifying period which is only a legal 1298 phrase that means, when translated, depriving workers—the Minister did not say how many—of their right to complain not of dismissal but of unfair dismissal; of what the first president of the tribunal called dismissal in less than a civilised manner.
Those of your Lordships acquainted with the many law reports on unfair dismissal—I am sure that such documents are never far from your Lordships' grasp—will see that the test of unfairness is not an unreasonably high one. We are perhaps debarring, when the order comes finally into effect—as the Government did in 1979 with their increased qualifying period—a million or more workers from protection against unfair dismissal. How many, I wonder, does the Minister think will be affected?
This is said to be done in the face of the need to cut unemployment. The need to cut unemployment could hardly divide any of your Lordships, one from another. But the method should be based rather more than upon a belief. I wanted to hear the evidence that the Minister would give that these changes in the unfair dismissal law would improve the employment prospects of workers, either those now not to be protected against unfair dismissal or, indeed, some others. There was none. Yet there is literature. What is the literature? There are three major surveys.
The first was a survey of 1978, perhaps the best survey of all, by Daniel and Stilgoe, which came to clear conclusions upon a survey of 301 firms, employing 50 employees or more. Their central finding on this matter, repeated many times, was:There was very little sign in our findings that employment protection legislation was inhibiting industrial recovery or contributing to the high level of unemployment by discouraging employers from taking on new people".They added that they unequivocally rejected criticism of the employment protection laws and especially redundancy and unfair dismissal laws on that basis. In fact, only 2 per cent. of their sample—these figures are important when we come to the evidence that the Government have from this year's survey—mentioned these problems of unfair dismissal and employment protection law as a reason for not recruiting or for recruiting in smaller numbers.
I quote again:Very few managers attributed a major impact to these pieces of legislation. And there was little difference in recruitment practice or expectations between those who felt the respective measures had had a modest impact and those that felt they had had none".The second survey was an official Department of Employment survey a year later, in 1979—again a most scrupulous piece of work—by Clifton and Tatton Brown who came to conclusions which, it is generally agreed, were almost identical in the small firm area to those produced by the Daniel and Stilgoe survey. Very few firms mentioned the Employment Protection Act in respect of non-recruitment or, indeed, other labour difficulties. The figure was less than 9 per cent. Only a small number, they said, mentioned the Act or difficulties in reducing the labour force. I quote their central conclusion on the matter:Respondents were later asked specific questions about the two measures that are most likely to make it difficult to reduce their work force, the unfair dismissal provisions and the redundancy provisions".They go on:Eight per cent. mentioned a reluctance to take on new staff".1299 They develop this point to show that it is a very small number indeed.
The Government were faced with this evidence in 1980 and they had a response, and it became a sort of counterpoint, I noticed, in the speech of the noble Lord the Minister. That was to argue that maybe there is no real objective problem with the employment protection laws as surveys of comparable kind in other countries have suggested, but businessmen, especially small businessmen believe it; it is the psychological effect.
I well remember the phrase of the noble Earl, Lord Gowrie, who is not here at the moment—"the anecdotal evidence", which he pressed upon us. The first duty of Government faced with anecdotal evidence which conflicts with real evidence is to explain to people that they are wrong—not to take away workers' rights. But the response of this Government has been if anything to increase the anecdotes. Before they came to the House and to Parliament with this order they thought they ought to do a little more research. It was mainly an attitudinal survey, the survey of 1985 entitled Burdens on Business, done by seven departments—three out of seven from the Department of Trade which organised it.
There are many methodological criticisms that have been made of this document already, but quite apart from those, we find in the document, which is said to be evidence of employment protection laws inhibiting recruitment of labour, that the document does not in fact support any such proposition. In fact the document, which I am sure the noble Lord the Minister has, supports the surveys of 1978 and 1980 that the evidence is extremely slender that small businessmen even believe that these employment protection laws have a major effect on recruitment.
I pause to say this, because it is very important. If you are taking away from one million people rights albeit to slender compensation—because that is all it is; they do not get reinstatement, except for 3 per cent.—if you are taking away their right to £1,500, which is the median award, roughly, for unfair dismissal, you have to have better evidence than this.
What does the 1985 report show? First, its category of employment protection legislation is much wider than unfair dismissal. It includes redundancy laws, equal pay, equal opportunity, wages councils, the law on the disabled, and industrial training boards. So there is a much broader category. Well, does all that in the belief of small businessmen stop them hiring labour? The answer is, no, if you look at the unprompted questions. In 5 per cent. only of the unprompted answers do you get that argument at all over that whole area of labour law, let alone unfair dismissal itself. It is only when you have the prompted questions, against which the 1979 survey of the Department of Employment itself warned, that you get a different answer. The 1979 survey was very scrupulous in pointing out precisely the inconsistencies which came from prompting; and we all know the problems about prompting. We do not know exactly the prompting methods that were used in this case.
1300 When your answers are multiplied by six, so that employment protection legislation which runs a poor joint fourth with PAYE in the unprompted answers, behind local authority planning, statistical returns, and the top one, which is of course always VAT in any survey, jumps up to a nice second through a lot of prompting, that is not the kind of thing that can put aside the scrupulous evidence in all the rest of the documents, including all the rest of this document.
Indeed, I must say—and I mean to be critical of this report—that I think it a great pity that some of the methods used were used. I think it a pity, albeit that the attitudinal survey and the fieldwork was satisfactory in itself (it is difficult to judge), no trade unions were consulted. The only people consulted were the CBI, chambers of commerce, and departments of trade. There is extensive sociological literature on small firms or, indeed, literature that you may not call sociological. The only four documents or publications cited in the report are: one from the Centre for Policy Studies, one from the Institute of Directors, one from the Alliance of Small Firms, and one from the Adam Smith Institute. It is rather as though the Labour Government came forward with an enormous Bill to take away the rights of employers based on memoranda from the Militant Tendency and the Socialist Workers' Party. It is no good putting this kind of thing in the middle of the agony of unemployment and to pretend that we can have any confidence whatever in unemployment being affected by way of recruitment—and this has been the argument again today.
I come to the noble Lord the Minister with this question. The Government have increased the qualifying period twice on the same argument. So there should be some kind of evidence from that. I know it is very hard—indeed, none better—to judge the social effects of legal change. But they changed the law in 1979 and in 1980 to exclude more and more and more workers from their right to complain of unfair dismissal. Where is the result? Where is the result even if they say that unemployment has increased for other reasons but that this has made things slightly better? Is there any kind of evidence of that? If not, what right do the Government have to come to Parliament and say that these people shall lose their rights to small compensation when they cannot show that that is the situation in the United Kingdom, because the 1984 report Burdens on Business also includes a fascinating Appendix 8. What does that say? I shall quote it, fairly, I hope. I certainly wish to quote two or three sentences—key points:There is no evidence that regulatory burdens borne by business in our main international competitors are significantly lighter than in the United Kingdom".That includes the United States, as the next few paragraphs show. It goes on:Nor is there evidence that other advanced countries have yet achieved substantial cutbacks in the fields we have examined"—and they mention the United States. Then it goes on:But there is clear evidence of growing concern in several advanced countries about the adverse effects of regulation on employment and efficiency. And in at least three advanced countries—the United States, Germany and the Netherlands—deregulatory initiatives have received substantial political impetus".——political impetus no doubt being the Government's 1301 objective. Here it does not mention employment protection legislation. I do not know of any proposals in the Federal Republic of Germany or the Netherlands to slash the guarantees against unfair dismissal there. If the noble Lord the Minister has that evidence, perhaps he would give it to your Lordships.
What we have is a situation in which there is no evidence to show that taking away workers' rights in the industrial tribunals is even thought by businessmen, except for a very small number, to have any effect whatever on recruitment policy. As for the objective evidence, there is none. The Government have done it twice. Perhaps it is not a matter for criticism, because, as I say, it is very difficult sometimes to match legal change with social effect, but at least nothing is shown from that.
We know that the regulation of business as a whole is roughly the same here as with competitors; in some cases I would have thought perhaps slightly less burdensome for the businessmen. In other words, we are in a situation where the Government are asking us again to take as an article of faith that employment protection law is what their party called the law in its election speeches of 1978 and what some people called employment destruction law. The Government did not know then that unemployment would go so high, and they do not know now how on earth a change in these laws will improve the employment position. What they do know is that they do not like employment protection laws, they will take every opportunity to cut them back, and disqualifying workers for two years is now a suitable opportunity.
I come to a final point, which is really the whole argument so far as managers are concerned. I noticed the noble Lord said that two years, after all, is not so bad because it is there for redundancy. Of course it is there for redundancy payments for quite different reasons; and there are the maternity rights and so on, which he rightly quoted. But here it is a question of the unfairness of the deprivation of a job merely by the decision of an employer to dismiss. There is a famous manager who gave a reply to the 1978 Daniel and Stilgoe survey. He was asked about the 26 weeks' qualifying period, as it was then; the worker had to be six months in his job before he had the right to complain of the injustice of his dismissal. When this manager was asked whether he thought this was a burden he said, "If you are a manager and you can't tell within 26 weeks whether you want to keep the worker, you are not much good at your job". I suggest that the Government ought to read literature of that kind rather than inflate their beliefs in an order which, in the state of our knowledge, if I were honest I would say should be withdrawn, and which appears to represent some kind of Government tantrum. Because the Government cannot do anything about unemployment, they turn back on those matters which they know that at least many of those behind them do not like.
It is a deplorable measure and it is certainly one which we on these Benches would want to do something about as swiftly as we could get rid of a Government who appear to have no respect either for those dealt with by the order or for the social evidence upon which they appear to act.
§ Lord Sainsbury
My Lords, while thanking the Minister for explaining the order, may I say that we on these Benches do not welcome it as we do not think that a sufficient case has been made to justify weakening employees' rights to go to an industrial tribunal. As has already been said, these rights were weakened in 1979 when the Government extended the qualifying period from six months to a year.
Certainly it is laudable that the Government have been inspired to extend the qualifying period by their concern to encourage employment and to promote the development of small businesses. We are equally concerned that the prospects for employment and the development of small businesses should be improved. We welcome all measures that will do this. However, this is not such a measure.
If a manager is unable to evaluate the suitability or performance of his staff within a year, there is little reason to suppose that he will be better able to do so within two years. The proposition becomes more ludicrous when talking of small businesses where the owner or manager is working in close daily contact with his small number of staff. As far as the large employer is concerned, he is likely to have a personnel department or officer whose function is to evaluate the suitability and performance of the firm's employees. There is nothing to suggest that the extension of the qualifying period will improve industrial relations in general, and it is for these reasons that we on these Benches do not welcome this order.
§ 6.43 p.m.
§ Lord Rochester
My Lords, briefly, I should like to support all that my noble friend Lord Sainsbury has just said. Perhaps I can best do this, and at the same time reinforce some of the strictures that have been made by the noble Lord, Lord Wedderburn, by asking the Minister a question. Is it not the case that, under existing legislation, only a very small percentage of people who have been dismissed within a year of engagement have even taken their cases to an industrial tribunal? Indeed, if he is able to, can the noble Lord tell us what the proportion has been? Do not the figures for which I have asked constitute insufficient justification for this amending legislation and, therefore, will it not be perceived for little, if any, gain as tipping employment legislation further in the direction of employers and against those whom they employ? Therefore, in that respect, as my noble friend Lord Sainsbury has just said, will it not damage rather than improve industrial relations generally in this country.
§ Lord Belstead
My Lords, I confess that I am surprised that the noble Lord, Lord Wedderburn, is affronted that, in order to find out the effect on employers' attitudes to taking on people in their businesses, both the Department of Trade and Industry, together with other departments, and the CBI should have approached employers in order to get some answers. If I may say so, I can see nothing wrong in that.
§ Lord Belstead
My Lords, as I understood it, the noble Lord was at pains and went to some length to tell your Lordships' House that only the pieces of research which the noble Lord read out, and with which I am familiar, were worthy of any notice, because they were truly independent, and all the other pieces of research were worthy of no notice because they simply asked employers for their answers. I repeat, I am surprised that the noble Lord, Lord Wedderburn, should be affronted that, in trying to find out what employers think, people should think it right to go to employers.
§ Lord Wedderburn of Charlton
My Lords, if the noble Lord will give way, in order to show on the record that we are not at odds, may I say that of course I was not objecting to attitudinal surveys of employers in order to see what they thought. That was done in all three surveys, and no one in his right mind would object to that; and even if I had lost mine, I could not do it. It is ridiculous. I object that the last survey is said to contain results which, on inspection, it does not contain; and it was the other evidence, such as that from the Adam Smith Institute and so on, which was not balanced by any kind of research in areas which might give a different attitude, or, indeed, where trade unions or others were also asked for their views on the matter.
§ Lord Belstead
My Lords, the last words of the noble Lord give the game away. I agree with the noble Lord that, when looking at research, it is desirable that there is a balance. But it is no good saying across the Floor of the House that research or attitudinal surveys are not worthy of being received because those who have been doing them have been selective in the people they have gone to see.
§ Lord Belstead
My Lords, I would prefer to be spared that explanation. If one wants to find out what it is that employers really believe in relation to this particular matter—and the vital point is what employers do believe, because it is they who are taking on the employees—then it is desirable to ask the employers for their views. If I may say so, in the academic approach which the noble Lord has taken to this matter there are two basic facts which the noble Lord has wholly neglected. The first is that, although I went out of my way at the beginning to say that the Government most certainly believe that the employment protection legislation should exist, it does not in fact create jobs. If anyone has an ounce of human compassion at the present time, it is necessary to try to see how jobs can be created.
The other matter which the noble Lord wholly neglected is that all the research of any kind which has been carried out shows that some employers are definitely deterred from recruitment because they fear subsequent unfair dismissal claims. That is a serious matter, and it cannot be argued around. Indeed, may I remind the noble Lord that findings which came out 1304 from the committee of the noble Lord, Lord Wilson of Rievaulx, on the review of the functioning of financial institutions in 1980—which was two years after the first piece of research which the noble Lord, Lord Wedderburn, mentioned—recorded that that committee was frankly surprised at the strength of feeling that was held on employment legislation by many companies.
These are serious matters. They cannot be argued away by academic arguments. They affect the livelihoods of people who are in employment. The only way of getting round them is to try to see that the employers will take on more people. If the noble Lord opposite resents what the Government are doing at the present time, may I tell the noble Lord straight across the House that I resent the sort of charges which have been put across the Box today that the Government have no compassion in this matter and are simply doing this out of political dogma. Nothing could possibly be further from the truth.
As opposed to that the noble Lord, Lord Sainsbury, is a man who can forget more about employment than I realise I shall ever learn, and yet with respect to the noble Lord even the noble Lord's remarks today are not in tune with what employers who are in the field at the present time are saying.
§ Lord Belstead
My Lords, I have not come to what I was going to say. If the noble Lord would care to look at the DTI Burdens on Business scrutiny of administrative and legislative requirements, that showed that the employment protection legislation, and particularly the unfair dismissal provisions, was the second most important burden mentioned by employers.
§ Lord Sainsbury
My Lords, I was merely going to say that before I made my short speech I consulted a large employer of labour and also, as it happens, that same employer of labour has started a company with the sole aim of helping small employers starting off businesses. I took care to look at it from both ends, and regrettably I am not an academic with no qualifications.
§ Lord Belstead
My Lords, again I concede that the noble Lord has enormous experience in this matter and took great care before he came into the House to look matters up. But what the noble Lord is saying does not honestly chime in with the anecdotal evidence which the noble Lord, Lord Wedderburn, mentioned—and, for reasons which I understand, dismissed. There really is considerable anecdotal evidence coming in to my honourable and right honourable friends in the Department of Employment from employers who say that they are deterred from recruiting because of the legislation. Once again, with respect, I say a lot. I have not got the figures, but there is a great deal coming in.
§ Lord Belstead
My Lords, if the noble Lord went into a Government department and started signing the 1305 replies the noble Lord would know what I mean by "a lot".
May I come to the point which the noble Lord, Lord Rochester, put to me about how many people this would affect. The advice I have is that on the basis of a sample analysis of complaints of unfair dismissal for 1983, it is estimated that 1,650 such complaints heard by an industrial tribunal involved persons who had been employed for more than one but for less than two years. I think that that covers the point put to me by the noble Lord, Lord Wedderburn.
I hope I have made clear that I believe that this is a step in the right direction. It in fact returns the law to what it was in 1971 when unfair dismissal was originally put on the statute book. I beg to move.
§ Lord Diamond
My Lords, before the noble Lord sits down—I am sure that the noble Lord, Lord Wedderburn, was going to ask the same question, and I apologise for interfering—could he give us the positive information which we are all waiting for of the evidence the noble Lord has that moves of this kind which have taken place already have improved the situation?
§ Lord Belstead
My Lords, the evidence is to be found—the noble Lord, Lord Wedderburn, will dismiss it as being partial, and I can understand that this is approaching employers and not taking a view across the board—in the DTI survey, and also in the CBI survey which was conducted in 1984, and I repeat a very great deal of anecdotal evidence which comes into the Department of Employment.
§ Lord Wedderburn of Charlton
My Lords, before the noble Lord the Minister finally sits down, I was going to ask him whether we could clear up his misunderstanding of my speech, but I shall let Hansard do that. Instead I shall ask him a question in the same manner. In our view at any rate the only evidence on which the Government are acting is indeed what he calls, and it is common ground, the anecdotal evidence—which I do not dismiss, and never did; I said it has to be weighed for what it is—and he says that the Government have a large number of letters on which this evidence is based (although we cannot hear the anecdotes we can read that). Would the noble Lord be prepared to put in the Library at least a summary of those letters, necessarily no doubt changed in order to preserve the anonymity of the authors, in a form where an estimate of the numbers and, if preferable, an estimate from the Government of the numbers, within a range, of jobs that might be created on this specific order?
§ Lord Belstead
My Lords, I would certainly be prepared to put in the Library an estimate of the number of letters which are received on this particular subject.
§ Lord Belstead
And the number of jobs which would be created? That might be more difficult. I must confess to the House that I am thinking of the time and 1306 expense which it will take in order to quarry out these matters. The noble Lord shrugs. I do not think that the noble Lord even begins to have any idea of the expense of employing people in man-hours who are supposed to be doing other things—in this case in Government departments—in order to quarry out answers.
What would be comparatively straightforward would be to give an answer to the noble Lord—which I certainly shall use my best endeavours to do, and indeed I give an undertaking to do—to say what the volume of letters is which comes into the Department of Employment, so that the noble Lord can get some idea of what is the evidence of an anecdotal kind.
I think it will be in line with what is sometimes said in answers to Parliamentary Questions, that it would be unwarrantable public expenditure to start saying how many extra jobs would be created as a result of those letters, because the record of those letters is something which can be looked up and put into the Library, but the rest of the answer is not. My Lords, I beg leave to move this order; I believe it is a step in the right direction.
§ On Question, Motion agreed to.