Enterprise and Employment

HL Deb 12 November 1985 vol 468 cc161-70

4.20 p.m.

Lord Young of Graffham

My Lords, with the leave of the House, I should like to make a Statement on new enterprise and employment measures.

Overall provision for the Department of Employment has increased by some £600 million in each of the years 1986–87 and 1987–88 compared with last year's Autumn Statement. This growth in expenditure has enabled us to increase the number of jobs available under the community programme by 100,000; to introduce the new two-year youth training programme as from April next year, which will ultimately help some 450,000 young people each year and lead to real qualifications for a working life. It will also enable us to fund a range of new measures which I am announcing today.

The cost of these new measures is of course included in my department's public expenditure plans for 1986–89 which were announced earlier today by my right honourable friend the Chancellor of the Exchequer. These and other increases in our department's spending are offset in part by a reduction in spending from the redundancy fund.

We propose to bring to an end, for all firms other than those with fewer than 10 employees, the system of sharing part of the cost of statutory redundancy payments through rebates from the redundancy fund. Our intention is that the rebate should not be payable for redundancies which take effect after 31st October 1986. We shall introduce the necessary legislation later this Session.

It is important to stress that this change does not affect employees' entitlements in any way. Employees will be entitled, as before, to redundancy payments from their employer; to go to an industrial tribunal if the employer refuses to make the required payment, and, where an employer cannot pay, to receive a payment direct from the Department of Employment.

The rebate has been steadily reduced by successive governments. It is now 35 per cent. For most employers this is no longer a significant contribution to their total redundancy costs. We believe that this public spending should no longer be used in subsidising redundancy and ought now to be put to better use.

I turn now to our further measures to stimulate enterprise and the growth of small businesses and to help long-term unemployed people find work. We have suffered in this country for many years from one of the lowest rates of self-employment and new business creation in the whole of Western Europe. That has now changed. We now have more self-employed people than for some 60 years. However, we can do still more to encourage the growth of self-employment and small business by ensuring that both advice and finance are available to the small businessman at the right time. We are therefore announcing three measures designed to further these aims.

As far as self-employment is concerned, the enterprise allowance scheme has already helped nearly 110,000 unemployed people since August 1983 to set themselves up in business. We have therefore decided to expand the scheme to a maximum of 80,000 new entrants a year in 1986–87 at an additional cost of £17.5 million—an increase of 20 per cent.

We have already assisted over £500 million of lending to small businesses through the loan guarantee scheme. In order to provide better access to finance and business advice we have now decided to extend this scheme, which was due to end in December 1985, until the end of this financial year while we consider its longer term future.

We are also increasing significantly the support given in England to local enterprise agencies, which play an important and growing role in providing business advice and practical assistance to small firms at the local level. We are making available an additional £2½ million for this purpose in 1986–87.

Besides its new responsibility for small firms, the Department of Employment now also has responsibility for tourism. The industry estimates that it is creating over 50,000 jobs a year. Last year some 14 million people visited this country, spending over £4 billion. To ensure that this growth continues we are increasing the funds available next year to the British Tourist Authority and the English Tourist Board to £40 million—an increase of about 20 per cent. in their funding. We will ensure that a substantial part of this money will benefit areas of the country which could attract more tourists and where unemployment is high.

I turn now to our measures to help the long-term unemployed. These are designed to tackle two key problems. The first is that many people who have been unemployed for a long time become demoralised about their ability to find work. The second is that the relationship of benefits to pay can reduce the attractiveness of jobs at the lower end of the wages scale. We propose therefore to introduce pilot schemes to test the effectiveness of two entirely new measures designed to combat these problems. These "pilots" will operate for six months from January 1986 in seven different areas.

First, we are asking the Manpower Services Commission to ask long-term unemployed people in the pilot areas to a counselling interview at their Jobcentre. The object will be to see whether they can be placed in suitable jobs—including jobs in the expanding community programme—or in existing training courses. In addition the MSC will be able to offer places on entirely new short training courses specifically designed for those who have been out of work for more than a year. These courses will help to assess their potential and aptitudes; to brush up their basic working skills and to improve the techniques of applying for a job. We shall ask the Manpower Services Commission to cover as many as possible of the long-term unemployed in the pilot areas with these new arrangements so that we can assess their effectiveness.

The second new measure is a job start scheme. This is a radical new approach under which any person in the pilot areas who finds a job after being unemployed for at least 12 months will be paid a weekly allowance of £20 for the first six months of employment in addition to his or her wage. The scheme aims to make lower paid jobs more attractive to people on high rates of benefit. The allowance will be available to those who take jobs with a gross income of less than £80 a week. Full details will be announced shortly.

In the improving climate for jobs, we are determined to increase our contact with those long-term unemployed people who may have been losing hope. We have already started the expansion of job clubs, which have so far achieved remarkable success in placing the majority of people who use them. We are writing to all long-term unemployed people, inviting them to contact their Jobcentres for advice and support, and the two pilot measures announced today reinforce our determination to help long-term unemployed people back into jobs.

The range of measures that I have announced today also demonstrates our determination to intensify our efforts to promote enterprise and business growth. We are creating the conditions in which jobs will come and unemployment will be reduced. I believe that today's new measures should have the support of all parts of the House.

Lord Stoddart of Swindon

My Lords, perhaps I may first of all thank the noble Lord for making his Statement to the House today. I suppose he should really be congratulated on making two very long and major Statements in quick succession. In actual fact the Government are making him do two jobs instead of one. They are not helping the unemployment position very much by that and I hope that the noble Lord is not becoming a Jack-of-all-trades. We had expected him to bring forth a lion in his Statement but in fact he has produced a mouse. I have to say that the Opposition is very disappointed and indeed very worried about some of the measures which he has proposed today.

First of all, I should like to ask him about the changes to the redundancy payments scheme. Is the noble Lord aware that this will undoubtedly cause unease and perhaps real fear among the workforce in that people will feel far less secure about the redundancy payments scheme without proper Government backing and may very well feel that in future they will have to fight hard for their redundancy payments. Will the noble Lord say what will be the additional cost to employers? I understand that the figure could be as high as £250 million a year. If that figure is correct, will that not impose a further burden on employers and industry and push up unit costs, which is the last thing that we want at the present time; or do the Government intend to give some relief by reducing employers' national insurance contribution by an appropriate amount?

4.30 p.m.

In his Statement the Minister mentioned the self-employed. I do not know whether there really has been a growth in the number of self-employed people. I say that advisedly because I notice from the MSC labour market quarterly report that the increase in jobs includes an assumption that self-employment rose by 33,000 in the quarter from January to March 1985. Are the figures for self-employment based on assumptions or facts? I think that this House and Parliament are interested in the facts. If there has been a growth, has it been due to a lower level of training and therefore of skills? I should like the noble Lord to comment on that.

Does not the Government's total economic policy militate against small businesses through the prohibitive cost of borrowing, high interest rates and the bank loan guarantee scheme? Are not the Government by their total economic policy discouraging the growth of small businesses?

I turn to the question of counselling interviews. It all sounds very nice but it sounds to me also as though it could be sinister. Is it to be real counselling, or will pressure be put on the unemployed to take low paid, unsatisfactory and uncongenial jobs? Will they be under the threat of having benefits withdrawn or reduced at the interviews? I think that we are entitled to have an absolute assurance from the noble Lord that that will not be so and that improper pressure will not be brought to bear on the long-term unemployed in that way.

Perhaps I may now turn to the job start scheme. It is certainly a radical measure; nobody will deny that. But in my view it is designed to subsidise and encourage low wages. As the CBI pointed out in its report which we had dropped through our letterboxes last week, it wants a high-wage, high-productivity country and not a low-wage economy. What will be the position after six months when the worker loses his £20 a week if he then leaves the employment? Will he immediately revert to his original benefit, or will there be a penalty for him leaving his job after six months? Can the Minister also say whether the £20 allowance will be free of all tax or whether it will be taxable? What will there be in the scheme to stop employers taking advantage of it not to improve employment prospects and opportunities but to lower the wages bill and increase profits? Can he give us an answer on that? What safeguards will be built into the scheme to prevent fraud?

I think those are all relevant questions which need answers, and I hope that the noble Lord will be prepared to answer them. These measures fall far short of what is needed to make a real impression on unemployment. They are too little, completely irrelevant and much too late.

Lord Rochester

My Lords, from these Benches I should like to join in thanking the noble Lord, Lord Young, for having made the Statement, but, like the noble Lord, Lord Stoddart, I must say that we regard it as a little thin compared with the enormity of the problem that it seeks to address. It is quite a long Statement and it is not possible now for me to do more than comment on its main features.

I, too, regret the Government's decision to bring to an end for all except the smallest firms the system under which part of the costs of statutory redundancy payments is shared between the Government and employers through the redundancy fund. As the Minister will know, companies are still having to make employees redundant in considerable numbers. May I therefore ask him how he reconciles that move on the part of the Government with the need emphasised most recently by your Lordships' Select Committee on Overseas Trade for this country to remain internationally competitive?

We welcome the decision to expand the enterprise allowance scheme. That will be especially helpful to the enterprise agencies which are giving advice to people not only on how to establish new businesses but on how to extend existing ones. Can the Minister say what the increase of £2½ million to be allocated to the scheme in 1986–87 will mean in terms of the weekly allowance payable to individuals eligible for it?

The plight of the long-term unemployed is perhaps the worst of all. We shall therefore watch with the closest interest the outcome of the pilot schemes which are to operate from the beginning of next year. I wonder whether the noble Lord can tell us about the location of the areas where the interviews to which he referred are to take place.

Finally, I should like to wish the proposed new job start scheme well in its aim, as I understand it, to encourage more of the long-term unemployed to find jobs. But in the light of these two new schemes do the Government propose to increase the number of people in jobcentres who are in a position to act as counsellors; and is the Minister satisfied that they will be adequately trained for that task?

Lord Young of Graffham

My Lords, I am grateful to the noble Lord, Lord Stoddart. Let me assure him at the outset that our changes in the rules relating to redundancy payment will not affect in one single way any rights of workers. Those who, alas, are made redundant will be entitled to get the same statutory redundancy payments from their employer. In the event that the employer cannot pay, they will come to the Government as before. What we are talking about is the rebate that an employer can get from the Government—35 per cent. of the cost of redundancy. Indeed, that rebate was introduced by another Government many years ago, and we have seen it eroded and reduced. I think that the time has come when we should perhaps help employees a little more by not making it quite so easy perhaps to make them redundant.

As I said from the outset of my Statement, the expenditure of my department will be increasing by some £600 million a year over the next two years. The bulk of the department's money now goes very much towards the community programme, the youth training scheme, training programmes and helping positive employment.

We have seen a considerable growth in self-employment. The planned enhancement to the enterprise allowance scheme of some £17½ million, which will increase the number of people starting under that scheme to 80,000 a year, is good news for those individuals and others. Our surveys show that 86 per cent. of those who start under the enterprise allowance scheme are still trading 15 months after starting, and that an average of 68 new jobs are created for every 100 businesses—that is, those that have completed a year. This year we shall be spending £111 million and next year £142 million, and part of that vast increase in the growth of self-employment, which is up by 700,000 this decade, has been due to this programme.

I must tell your Lordships that I cannot in all seriousness imagine that any person who has been out of work for more than a year would seriously wish to give up the opportunity of a counselling interview or the opportunity of our giving help and assistance in finding new employment. The same applies to the programmes—which I have long wished to see the Manpower Services Commission introduce—which will restore to those who have been out of work for all this time the help and encouragement and the spark to go out and look afresh.

I hope that the short training courses we shall offer will revitalise them and give them confidence again and will help with interviewing techniques. I hope that there will be places on the community programme, and I very much hope that no person who has been out of work for a long time will voluntarily refuse any opportunity of coming for an interview. But if they were to do so, the position would be no different from that with any other person who is long-term unemployed: he is entitled to his benefit as long as he is available for work. The standard tests will apply. There is no new coercion—far from it. This is something that we are introducing to help the long-term unemployed, nothing else. Indeed, the job start scheme, which is there in a pilot form, is something for the Jobcentre staff to offer.

If I may deal with some of the points which the noble Lord, Lord Rochester has made, if six people apply for a job and one has been out of work for more than a year, I am afraid, human nature being what it is, that employers will tend to overlook that one individual. We have seen that the longer anybody is out of work the harder it is for them to get back into work. We have also seen that the number of long-term unemployed, at about 1.4 million, is becoming a fairly firm figure. There are many who are unemployed for shorter periods—the difference between that 1.4 and the 3.2 million fluctuates—but I am greatly affeared that we shall continue to see too many people being unemployed for too long.

The job start scheme will help those who have been out of work for a long time to come back into employment. It is true that it gives an inducement to employers to take them on, but I hope very much that during the six months those employers will discover their abilities. They will be back in work and I hope that the employer's will make up the difference in their income. Even if that does not happen, those long-term unemployed will have current work experience, an up-to-date reference, and they will be back in the labour market. That is surely something we will all want.

The noble Lord, Lord Rochester, referred to the £2½ million for local enterprise agencies. This is an amount of money which we shall give and details will be announced to help this new phenomena, over 300 of which are now open up and down the land. We are devising ways in which we can give support to help them flourish in order to encourage many new businesses to start. It is important that we help this activity, with which I have been concerned for some time, and I hope very much that this department will be playing a positive role.

Lord Somers

My Lords, I shall not keep your Lordships long because we want to get on with the debate. But I wonder whether the noble Lord will answer one question. I have no doubt that the noble Lord is aware of the tendency of urban local governments today to invite enormous supermarkets into their areas and that that has a very deleterious effect on employment. I do not know whether the noble Lord has ever penetrated one of these ghastly places, but if he has he will realise that the chief feature about them is that there is never anybody about if one wants to ask a question or get what one wants. That is very bad for employment. They are also driving out the small shopkeepers who provide a very much better service. I hope that local government authorities will be dissuaded from encouraging that kind of tendency.

Lord Young of Graffham

My Lords, I wish at the moment I had on occasion the opportunity to investigate the new supermarkets. However, I know that if they continue to provide a worse service than the local shop the local shop will prosper and they will not. That is the law, I am afraid, of shops. I suspect that we are seeing the spread of many of these supermarkets because they offer services and conditions with which some local shops cannot compete. But the evidence on employment is not perhaps as clear as it may be. They might even be the source of increased employment.

Lord Cledwyn of Penrhos

My Lords, the Statement of the noble Lord refers to increased funding for the British Tourist Authority and the English Tourist Board. Can the House assume that a share of this funding will go to the Welsh Tourist Board and the Scottish Tourist Authority?

Lord Young of Graffham

My Lords, I am dealing with the English Tourist Board and the British Tourist Agency. But I shall hopefully get correction of that if I am wrong.

Lord Cledwyn of Penrhos

My Lords, I am very grateful to the noble Lord. It is important in view of the fact that he directs our attention to the needs of areas of high unemployment, and both Scotland and Wales are included in these areas.

Lord Young of Graffham

My Lords, I appreciate that I have an expanded department with increased responsibilities. But those two particular matters are matters for the Secretary of State for Wales and the Secretary of State for Scotland, and over those borders I dare not march.

Lord Cledwyn of Penrhos

My Lords, then can we expect statements from them on this subject?

Lord Young of Graffham

My Lords, I have little doubt.

Lord Lloyd of Kilgerran

My Lords, may I also welcome, as did my noble friend Lord Rochester, that part of the Minister's Statement dealing with small businesses, in relation to the financial aspects. We welcome very much indeed an increase in the financial allowance schemes and in the setting up of enterprise agencies. I find that very welcome. Part of my activities is as chairman of an advisory panel in relation to inventors. It is the duty of this panel to try to seek places for exploiting inventions, thereby creating more employment. I should like to ask the Minister this specific question. I am referring to small businesses. I define small businesses as those that do not employ more than 10 or 12 people. Has the Minister in mind any steps to reduce the bureaucratic stranglehold upon these small businesses arising out of the necessity for dealing with audits and such matters? Has he any assurances to give to small businesses that the bureaucratic necessities for filling in forms, and the usual things which one would expect from very large firms but not from small firms, will be reduced?

Lord Young of Graffham

My Lords, I am grateful to the noble Lord. It is my dearest wish that we reduce bureaucratic pressures on all businesses. We must do it with safety. We must reduce the bureaucracy without taking away the necessary protection. To my knowledge there is a consultative process which is looking at the needs for independent audits for small businesses. I suspect that the small businesses in question are mostly the ones which are owned by the directors. It is a complex point. It is one of which we are apprised. It is one on which I suspect that we have a long way further to go. And it is a matter on which I, for one, will not give up.

Lord Pitt of Hampstead

My Lords, with regard to this question of small businesses, members of the black community have great difficulty starting up in business. Can the Minister say what plans the Government have for helping that section of the community to start up in business?

Lord Young of Graffham

My Lords, yes. I am aware that it is even more difficult for a member of the black community to start a small business. It is often said that it is far more difficult to obtain credit from our financial institutions. I am concerned, as I think are many of my colleagues, with some of the occurrences in the urban areas. I am looking at ways in which we can revitalise the urban areas. These are areas in which the black, Asian and many ethnic communities live, and I hope work. We shall be looking at that. At the moment I cannot give any immediate conclusion.

Lord Silkin of Dulwich

My Lords, the noble Lord in reply to my noble friend on the Front Bench explained the job start scheme as an inducement to employers to take on the long-term unemployed. If that is the function of the job start scheme, does it not necessarily follow that employers will be induced by paying less than the going rate for the job? Is that the intention of the job start scheme? Is it not odd that that should be put into effect at the very time when the Government are proposing to castrate the powers of the wages councils?

Lord Young of Graffham

No, my Lords. The job start scheme is a pilot scheme which is to take place in seven areas. The purpose of a pilot scheme is to determine what the effects of the scheme will be. The purpose of the scheme is to assist the long-term unemployed back into employment. The pilot scheme is to determine whether or not the scheme will succeed. I think that it will do so; I hope that it will, but we shall only learn from experience. I hope that your Lordships will not see this as any part of an effort to undermine the rights of individuals; it is an effort to bring back into employment those who have been out of work for some time and those whom, if we are not careful, any increase in employment may leave behind.

Lord Stoddart of Swindon

My Lords, I am sorry to come back on this matter but I shall be very brief. I thank the noble Lord for his absolute assurance that there will be no coercion in relation to the job counselling scheme. I appreciate that I asked the noble Lord a large number of questions about the job start scheme which I suppose he could not be expected to answer today. However, will the noble Lord write to me with some answers? The questions which I asked were relevant and important. Finally, will he also let me have an answer to the question about the cost to employers of the revised job redundancy arrangements? Will it be £250 million, which is the estimate that I have received? Will there be any rebate to them at all?

Lord Young of Graffham

My Lords, the withdrawal of redundancy rebates does not come into effect, subject to legislation, until October 1986. However, within the accounting period the figure will amount to in excess of £200 million. The levels of national insurance charges have yet to be set for that corresponding period, but no doubt it will all come through in due course. I shall certainly let the noble Lord have details of the job start scheme when the details are finally issued, and of the areas in which the pilot schemes are to be established. Of the seven areas, I very much hope that one will be in Wales, one in Scotland and five in England. I should hate to think that our Welsh and Scottish friends would not wish to take part in the experiment.

As regards the counselling service, I repeat that there is no question of any undue coercion. The normal rules applying to benefit will apply—just the normal rules.