HL Deb 16 December 1986 vol 483 cc155-60

6.27 p.m.

Viscount Long

My Lords, I beg to move that the draft Employment Protection (Variation of Limits) Order 1986 be approved.

Perhaps I may also speak to the other orders on the Order Paper, the Unfair Dismissal (Increase of Compensation Limit) Order 1986 and the Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1986. All these orders were laid before your Lordships' House on 2nd December 1986.

The draft Employment Protection (Variation of Limits) Order 1986 has been laid before your Lordships in accordance with Section 148 of the Employment Protection (Consolidation) Act 1978. Under this legislation the Secretary of State for Employment is required to review in each calendar year the upper limit that is imposed on the amount of a week's pay for calculating certain payments and awards under the employment protection legislation. These are redundancy payments, the basic and additional awards for unfair dismissal, and debts that can be paid under the insolvency provisions of the Act. My noble friend the Secretary of State is also required to review the limit on the amount of guarantee pay due to an employee in respect of any day on short time or temporary lay-off, and the duration of such payment.

In making the review the Secretary of State has to consider the general level of earnings obtaining in Great Britain at the time of the review, the national economic situation as a whole, and any other matters he considers relevant.

The Government have consulted a wide range of organisations in the course of the review. As in previous years, these consultations brought a different response from organisations representing employers and those representing employees. Employer organisations in general argued against any increase on the grounds of extra costs to industry, or suggested alternatively that any increases should be modest. Trade unions, on the other hand, argued for increases at least in line with average earnings.

Having carried out a review this year the Government therefore propose to increase the limit on the amount of a week's pay from £155 to £158—that is by 1.9 per cent. The Government propose to increase the limit on the daily amount of guarantee pay from £10.70 to £10.90, or 1.8 per cent.

There will be no increase in the other limits relating to the duration of guarantee pay. The specified number of days in the relevant period for which such payments can be made will remain at five, and the relevant period will continue to be three months. The Secretary of State laid a report at the same time as the draft order, giving his reason for the decision which is that both these limits still seem to strike a fair balance between the employers' obligations and the employees' rights.

I make no apology for restating the Government's belief that the employment protection legislation, taken as a whole, has acted as a brake on recruitment. The Government are anxious to remove the barriers facing businesses and encourage the creation of new jobs. I must make it clear that at the same time the Government recognise the need to safeguard the essential rights of employees. I believe that the proposed increases in these limits do strike a fair balance between the interests of employers and employees.

I now turn to the second draft order. This is the Unfair Dismissal (Increase of Compensation Limit) Order 1986, which has been laid before the House in accordance with Section 75(2) of the 1978 Act. It revokes the Unfair Dismissal (Increase of Compensation Limit) Order 1984, which set the limit on compensatory awards for unfair dismissal at £8,000, and raises the limit to £8,500. That represents an increase of 6.25 per cent. The limit is not subject to annual review but may be increased from time to time. It was last raised in 1984.

This award compensates the employees for the loss suffered as a result of the dismissal, including loss of earnings from the dismissal to the date of the tribunal hearing, future loss of earnings, and loss of benefits such as pension and other entitlements he would have had but for the dismissal. The limit also applies to compensation for discrimination in employment under the Sex Discrimination Act 1975 and the Race Relations Act 1976; and to compensation payable in certain cases involving unreasonable exclusion or expulsion from a trade union. As this limit was not increased last year we have increased it this time by a higher percentage than for the other limits. As with the increases proposed in the first draft order, I believe the Government have achieved a sensible balance that safeguards the essential rights of workers without overburdening employers.

I come finally to the Draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1986, which has been laid before the House in accordance with Sections 73(4B) and 75A(7) of the 1978 Act. These awards were introduced by the Employment Act 1982 and they apply to dismissal for membership or non-membership of a union. The limits are not subject to annual review, but may be reviewed from time to time.

These special provisions were introduced in order to protect the individual's right to choose whether or not to join a union. They were intended as a deterrent and their real value needs to be maintained. We have decided, therefore, to increase the basic and special awards by 4.6 per cent. This means that the minimum basic award will be increased from £2,200 to £2,300.

We also propose that the limits which apply to the calculation of the special award should be increased from £11,000, £22,000 and £16,500 to £11,500, £23,000, and £17,250 respectively. I beg to move.

Moved, That the draft order laid before the House on 2nd December be approved. [4th Report from the Joint Committee.]—(Viscount Long).

Lord McCarthy

My Lords, I must thank the noble Viscount for his attempt to explain what the Government are doing this year but it does not become any more consistent as the years go by. Each year the Government advance a different Minister to deal with the Christmas updates. Last year it was the noble Lord, Lord Trefgarne. Each year the Minister tells us a different story; and each year when one looks closely at the figures one sees that the Government tend to favour their favourites and discriminate against everyone else.

I do not want to go back in detail beyond last year, although I could, but I must go back to last year because of some of the things that the noble Viscount said. Last year (at col. 938 of the Official Report of 19th December) the noble Lord, Lord Trefgarne, spoke about three orders of this kind; but they were slightly different. First of all he talked about the Employment Protection (Variation of Limits) Order about which the noble Viscount, Lord Long, has spoken tonight. The noble Lord proposed last year an increase of between 1.9 per cent. and 2 per cent., the same as the increase which is being proposed this evening.

Then the noble Lord went on to the Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order, which, as the noble Viscount told us earlier, does not have to be reviewed every year. In fact the noble Lord did so last year and he did it by the same amount as is being proposed this year. He proposed an increase of 4.5 per cent. This is at least the second year in which we have had increases under the Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order which are significantly larger than the increases which the Government propose under the Employment Protection (Variation of Limits) Order.

Then last year the noble Lord, Lord Trefgarne, went on to talk about the Pneumoconiosis etc. (Workers' Compensation) (Specified Diseases) Order. He proposed an increase of 5 per cent. There has been no mention of that one this year. I do not know whether it is coming later or whether it is not coming at all, but it was there last year and it is not here this year. I asked on that occasion, and I repeat the question: why do the Government give less than the movement in the cost of living in the case of the first order, the Employment Protection (Variation of Limits) Order, and why last year did they give no increase at all for the compensatory awards and for failure to comply with orders of reinstatement which they have introduced this year?

The answers which I received from the noble Lord, Lord Trefgarne, seemed to be similar in some ways to the answers that I have received this evening; and they are just as unsatisfactory. I was told first of all that the Employment Protection (Variation of Limits) Order, which for two years has been increased by 1.9 per cent., has been increased by that amount because it has to be borne by industry, and industry cannot afford more than 1.9 per cent. The same list of criteria was put forward this evening—the general level of earnings, the national situation and any other factor which the Government want to take into account. We are not told why the improvements in the minimum payment for unfair dismissal, the minimum payment for insolvency and the minimum redundancy payments calculation are only 1.9 per cent.; but when it comes to people being discriminated against because they refuse to belong to a trade union (and where an employer might also have to pay), the Government give an increase of 4.5 per cent.

We heard the arguments, but they are not convincing. We asked last year why there had been no increase in compensatory awards, because the last increase, as the noble Viscount admitted this evening, was in 1984. I am glad to see that the Government have turned to that one this evening, though in order to turn to that one they appear to have dropped off the Pneumoconiosis etc. (Workers' Compensation) (Specified Diseases) Order. Apparently you only get three out of four; you never get four out of four.

I turn to this year. I say once again that the full cost of living settlement for basic and special awards has been given at 4.5 per cent. for dismissal on grounds of refusing to join a union. The employers have to pay that. Why is that more than twice as much as the increase for other types of unfair dismissal? Why again the miserable 1.9 per cent. for all the categories under the Employment Protection (Variation of Limits) Order? Why this time is there nothing under the Pneumoconiosis etc. (Workers' Compensation) (Specified Diseases) Order? Does that mean that the Government are saying that you get 5 per cent. over two years, which is 2.5 per cent. a year? Will this come every other year? Why is there the re-emergence of the forgotten improvement in the compensation orders for 6.5 per cent.? I do not complain about it, but are we not going to have that for another two years?

I have five questions. First, how do the Government defend the difference between the 1.9 per cent. increase and the 4.5 per cent. increase? Secondly, what do the Government propose to do about the workers' compensation update? Is it to be for two years at 2.5 per cent. a year, or shall we get it again next year? Thirdly, can the Government really say that they have done right by those who are covered by the compensatory awards; by the awards to discourage refusal to re-engage? Are they then to be paid at the rate of 3.25 per cent. a year? Are we not to have that for two years?

The fact is that since 1979 the retail price index, under this Government, has moved by 72 per cent. Since 1979 this Government have proposed improvements in the most important, widespread unfair dismissal protections worth 51.2 per cent. That includes the proposals being advanced this evening. In other words, that is two-thirds of the rate of increase in the cost of living; or the real value of those awards has been reduced by one-third. Are we to take it that that is what will happen to the compensatory awards? Are we to take it in fact that the only awards to be fully indexed against increases in the cost of living are those that relate to the closed shop? How do the Government justify that?

Lord Rochester

My Lords, from these Benches I should like to join in thanking the noble Viscount, Lord Long, for the clear way in which he introduced these orders.

I have very little to add to what the noble Lord, Lord McCarthy, has already said. However, I feel that the very small increases in the amounts of guaranteed payment that it is now proposed to make under the Employment Protection (Consolidation) Act 1978 compare most unfavourably with some of the salary increases that are currently available to many people in the private sector of the economy. It is, I suppose, too much to expect that any renewed attempt to establish agreed long-term procedures for pay determination which would have application to both the public and the private sectors of the economy will appeal to the present Government. Nevertheless, I take this opportunity once again to call for them. In my view—and here I think I speak for my noble friends on these Benches—it is only when they are introduced that it will be possible for payments such as those that are the subject of these orders to be determined in a way that will be seen to be fair and therefore generally acceptable.

I simply add that the view I have expressed in relation to the first of the three orders has equal application to the unfair dismissal orders for which our approval is now also being sought.

6.45 p.m.

Viscount Long

My Lords, I am most grateful to the noble Lords, Lord McCarthy and Lord Rochester, for the intense interest they have taken in this order. Of course, it was going in 1978 before this Government came into power and we have regularly tried to update it and upgrade it as we have gone along.

Perhaps I may say to the noble Lords that there may be some confusion as to how we reach the figures we are talking about. I do not blame the two noble Lords, or any other noble Lord in the House, because there is always a screen and one does not always understand how these figures are arrived at. However, in reply to the query, may I say that there are three different ways the matter is approached? Both noble Lords feel that there seems to be an unfairness in the awards. The weekly limit and guaranteed pay which is just under 2 per cent. is less than the rate of inflation. There is then a second consolidatory award of 6.25 per cent. and the noble Lord, Lord McCarthy, was seeking to ascertain the extent. It covers two years. Therefore, as we understand it and as my noble friend the Secretary of State understands it, it is broadly in line with inflation.

There is a third question, relating to the special award under the Employment Act 1982, which amounts to 4.6 per cent. and is above inflation because the Government attach special importance to dismissal for membership or non-membership of a union and believe awards must reflect this. My noble friend the Secretary of State is trying to get the right balance on this aspect. I have to warn the House that if he does not get the right balance and goes too far, it would create problems for the smaller firms—which the noble Lord says cannot afford to pay these redundancy moneys, and so on—and there would be a certain amount of firms with unemployment.

I have listened to both noble Lords and I think we are in agreement that something is being done, that it is not easy and that it is a sensitive area.

On Question, Motion agreed to.