HL Deb 21 November 1985 vol 468 cc663-8

3.34 p.m.

The Secretary of State for Employment (Lord Young of Graffham) rose to move, That the draft order laid before the House on 29th October be approved. [32nd Report from the Joint Committee 1984–85.]

The noble Lord said: My Lords, I beg to move that this order be approved. The order, which is being made under powers in Section 149 of the Employment Protection (Consolidation) Act 1978, is concerned with the basis on which redundancy payments are calculated in the field of local government service. It amends the previous Redundancy Payments (Local Government) (Modification) Order which the House approved in July 1983. The need for an amending order arises because of the passing of the Local Government Act 1985, which provided for the abolition of the Greater London Council and the metropolitan county councils and the establishment of certain new bodies. I trust that I shall persuade your Lordships that, however great our differences on the main Act, this measure is a minor, uncontroversial and necessary consequence of it.

I should explain that under the provisions of Part VI of the 1978 Act an employee who is discharged as redundant after at least two years' service is entitled to be paid a redundancy payment, calculated, among other things, according to his period of continuous service with his last employer. Local authorities and related institutions are legally distinct employers, so that, on the strict basis of the statutory scheme on its own, an employee would be entitled to a payment every time he became redundant, even though he or she intended to move on to a post elsewhere in local government.

This situation would not, however, correctly reflect the realities of local government service, in which a normal career progression commonly involves moving from one authority to another, perhaps several times during working life. Local government collective agreements therefore provide for local authorities to base their redundancy payments on total aggregated service in local government. The 1983 order secures a similar effect in the statutory redundancy scheme, by replacing service with one employer with total "relevant local government service".

Because there is no convenient or comprehensive definition of what constitutes local government employment, it is necessary to list in the order all the employing authorities and bodies with whom service counts as local government service. Two lists are necessary. The first, in Schedule 1 in the 1983 order, lists those employers currently in being, by whom anyone may be made redundant. The second, in the appendix to Schedule 2 in the same order, adds to the first list former bodies which have been abolished in past reorganisations, but with which service may still be reckoned for redundancy purposes.

This amending order simply adds to the list in Schedule 1 of the 1983 order those new bodies which are set up by the Local Government Act, so as to ensure that service with them will be included when any redundancy takes place. The principal additions are the residuary bodies set up for Greater London and the other metropolitan areas to tidy up unfinished business following abolition, dispose of surplus property for the benefit of ratepayers in the areas, and make compensation payments to staff made redundant or re-employed on less favourable terms on abolition. Also included are the new joint authorities which will deal with fire, civil defence, waste disposal and passenger transport, and the newly constituted Inner London Eduaction Authority.

I should add that we have also taken the opportunity to bring in several minor bodies which were overlooked in 1983, listed at items 56 to 59, and to update the legal definition of certain schools in Scotland. The number of employees likely to be affected is minimal.

I trust I have said enough to satisfy your Lordships that these are necessary and innocuous amendments. I commend the order to your Lordships.

Moved, That the draft order laid before the House on 29th October be approved.—(Lord Young of Graffham.)

Lord McCarthy

My Lords, we have no quarrel with the order as it stands. Our questions, which are directed to the Secretary of State, relate to how far the order goes, because we want to be clear about that; to whether the order goes far enough; and to whether the order as it stands deals with many of the problems of workers being declared redundant as a result of the 1985 Act—problems which we raised in the House at the time. I should also like to ask about the way the order relates to the recent announcement of the Government that they are going to end the system of sharing the part cost of redundancies as far as the employer is concerned, from 31st October next.

The House may recall that when the 1985 Bill was before your Lordships, the noble Lords, Lord Rochester and Lord Winstanley, and myself and several others sought to persuade the Government to give equality of treatment. I mean by that not only equality of treatment for the 70 per cent—according to the noble Earl, Lord Gowrie, at col. 190 of Hansard for 21st May—who could be expected to be reemployed by the successor authorities, but also for what was termed at the time the 30 per cent., according to the noble Earl, of designated staff who would have to seek re-engagement and recruitment: those unfortunates in planning, highways and central administrative services who might be out of employment for some short time before they were able to secure reabsorption into one or other of the existing authorities carrying out the functions previously undertaken by those authorities which were abolished.

My first question to the Secretary of State is this: how all-embracing is this order? Will it cover merely the 70 per cent. of designated staff who can be expected to be re-employed by the successor authorities, or will it cover others who are in a sense, and as we termed them at the time, non-designated staff who have to take their chances and seek recruitment and re-employment and who may or may not be re-engaged? In general terms, and as I think the trade unions did at the time, we regard being covered by this order as being better than not being covered by it. After all, continuous service applies, and if effective redundancy occurs then redundancy pay will be that much larger. On the whole, people would rather be covered by this order than not be covered by it. Thus my first question relates to the coverage of the order.

I should also like to ask a question about the consequences of the recent announcement by the Chancellor of the Exchequer in another place, that the Government are changing the system whereby part of the costs of redundancy are shared. My first question on that issue in relation to this order is this: is that announcement likely to affect the applicability of the redundancies which arise out of the Local Government Act 1985? Is it considered that the great bulk of redundancies, the redundancy payments, the re-engagements and the transfer of jobs, will all be over before 31st October 1985? Or will there be a situation in which the authorities will not receive part of the contribution to redundancy which they would have received had it not been for the announcement on the Government's change of policy?

This is the first opportunity we have had to ask the Secretary of State a question about that policy. It extends far beyond the issue of the Local Government Act 1985. It could be that any employer, and not merely an employer by this order, facing the prospect before 31st October 1985 of the coming into effect of the new policy would have an incentive to declare workers redundant. If he declares them redundant now rather than waiting until after 31 st October 1985, he will get part contribution towards the costs of the redundancy payments. Therefore, that provision may accelerate the volume of redundancies in local government and elsewhere. Have the Government taken that into account? Do they think the provision will have that effect?

Moreover, we are afraid that after 31st October 1985 that provision may have the reverse effect. After 31st October 1985 all employers in local government and elsewhere covered by this order will know that they will be responsible for the full costs of redundancy pay. The danger then is that they will hesitate not to declare people redundant but to take people on in the first place. The whole objective of the 1965 legislation in regard to redundancy would be vitiated, because the object of that legislation was to soften the blow so that employers would not feel that redundancy would involve them in a very significant cost, because the Government would pay part of that cost. If the Government are not now going to pay part of that cost after 31st October 1985, will that not make employers less keen to take on people rather than more willing to do so?

3.45 p.m.

Lord Rochester

My Lords, I should like from these Benches to join in thanking the noble Lord the Secretary of State for the clear way in which he has explained this order to the House. Like the noble Lord, Lord McCarthy, we find the order itself unexceptionable. However—and here I shall be following one or two of the points made by the noble Lord, Lord McCarthy—when the Redundancy Payments (Local Government) (Modification) Order 1983, to which the noble Lord earlier referred, was debated in this House on 27th July of that year, the noble Lord, Lord Gray of Contin, said, at col. 1550 of Hansard, that the employer was responsible for making a payment to an employee discharged and redundant after at least two years of service but could then recover no less than 41 per cent. of the cost from the redundancy fund by way of rebate.

The noble Lord went on to say: The financial effect of the order on the redundancy fund in the long term is expected to be neutral. This is because the higher level of redundancy payments which will be payable out of the fund"— because service after that time was to be aggregated— is likely to be compensated by the lower number of claims for rebate being made".—(col. 1551.) That was because redundancies would be fewer in number.

Since then, as the noble Lord, Lord McCarthy, has already said, there have been two developments. The first was the passage of the Local Government Act 1985. A number of people now employed by the Greater London Council or a metropolitan county council may be engaged by a successor authority other than one of those listed in this order. Their conditions of employment, including their entitlement to redundancy pay, may however prove to be less favourable than those which they now enjoy because they will not come within the scope of this order. As I made plain when moving an amendment to the Local Government Bill in Committee in your Lordships' House last May, we on these Benches deplore that departure from precedent and, as we see it, from sound personnel practice.

Secondly, as the noble Lord, Lord Young, said in his Statement to the House last week, the Government, having earlier reduced the rebate payable to employers from the redundancy fund to 35 per cent., now propose to eliminate it altogether from firms employing fewer than 10 people. We are opposed to that development also, as I maintained when responding to the Statement last week. Companies are still having to make employees redundant in considerable numbers and we cannot understand how the Government's decision can be reconciled with the need for this country to become more competitive.

It may be said that those points are not strictly relevant to the order before the House—in the first place because after the passage of the Local Government Act it is a matter of water already under the bridge; and, secondly, because that aspect is to be covered by legislation to be introduced later in this Session and we shall have an opportunity to debate it then. To that potential criticism I can only say that we on these Benches feel so strongly about both the points to which I have referred concerning redundancy payments that I did not feel we could allow this order to be approved without referring to them as I have done.

I make one further comment in relation to the speech of the noble Lord, Lord McCarthy. I think, if I may say so, that he inadvertently at one or two points in his later remarks referred to the operative date from which rebates to employers would cease as being 31 st October 1985. I think I am right in saying that it should be 31st October 1986, and no doubt the noble Lord will correct that if I am right.

Lord Young of Graffham

My Lords, I am grateful to the noble Lord, Lord McCarthy, for his comments, and may I immediately agree with the noble Lord, Lord Rochester, that the date is, of couse, October 1986. Indeed, it is because it is October 1986 that the abolition of redundancy rebates as such will not affect local government reorganisation, since by then such redundancies as will have arisen in local authorities should have taken place.

To answer the other principal point made by the noble Lord, Lord McCarthy, in fact the order does affect those who would otherwise be carrying on, because those who are leaving local authority will get their redundancy payments but those who are transferring from one authority to another in the normal event will not, as a result of this order, become entitled to a redundancy payment in addition to any other payment they receive.

Both the noble Lord, Lord McCarthy, and the noble Lord, Lord Rochester, referred to the abolition of redundancy rebates. That is, of course, entirely another matter, and it is a subject which we shall have an opportunity to debate in due course. What we are proposing is that, in the fullness of time, the money which the Government otherwise spend to facilitate redundancies will in fact be spent, in essence, on helping long-term unemployed and other unemployed people back into the market. A long process which started some 20 years ago, at a time when there was a shortage of people and a real problem (as we had over-employment in this country), was designed to facilitate the transfer of people. It is curious that it should have lasted 20 years during a period when we have had exactly the opposite.

The whole original purpose of redundancy rebates was to help companies shed unnecessary labour. I would not say for one moment that the Government wish to persuade employers to keep unnecessary labour, but we felt that the time had come when priorities should be readjusted and that we should be dealing more and more with the long-term unemployed. However, I have no doubt that we shall have an opportunity to discuss and debate this matter on another occasion.

Lord McCarthy

My Lords, before the noble Lord concludes, may I ask him to be absolutely clear? Is he telling the House that there is no need to shed additional unnecessary labour and, therefore, no need for the Redundancy Payments Act?

Lord Young of Graffham

No, my Lords; I am saying that the Government are never interested in persuading employers—particularly employers in manufacturing—to keep unnecessary labour. Indeed, the whole thrust of the Government's activity is to promote efficiency and productivity. I was pointing out that the purpose of the redundancy payments when introduced in 1965 was to persuade employers to dispense with unnecessary labour. It would be curious at a time when unemployment is at the top of all our priorities if the Government continued in a small measure with helping to facilitate additional redundancies.

There is one further point which I should make absolutely clear. None of the proposals affects the rights of anyone made redundant: they merely refer to the rights of employers to recover a small proportion of redundancy payments.

On Question, Motion agreed to.