HL Deb 08 July 1986 vol 478 cc180-270

3.48 p.m.

The Minister of State for Defence Procurement (Lord Trefgarne)

My Lords, I beg to move that this Bill be now considered on Report. In rising to move that this Report be now received, may I draw your Lordships' attention to the fact that unfortunately the Marshalled List refers to the amendments to be moved in Committee and we are of course at Report stage. I beg to move.

On Question, Motion agreed to: Report received.

Clause 1 [General restrictions on deductions made, or payments received, by employers]:

Lord Rochester moved Amendment No. 1:

Page 2, line 3, at end insert— ("(2A) The Secretary of State shall, after consultation with the Advisory, Conciliation and Arbitration Service, and prior to the date on which this section comes into force, issue a code of practice containing such guidance as he thinks fit, with the aim of ensuring that any deductions from wages are fair and reasonable and that contractual terms concerning deductions accord with good practice").

The noble Lord said: My Lords, after the discussion which has just taken place I shall endeavour to be as brief as possible in introducing this amendment and in speaking to Amendments Nos. 42 and 43, which are consequential upon it. I should first briefly remind the House of the background to these amendments. In Committee, the noble Lord, Lord Wedderburn of Charlton, moved an amendment which was aimed to ensure that deductions from wages were reasonable in amount. At the same time, I spoke to an amendment which set about the task in a rather different way. My amendment stipulated that deductions should accord with a code of practice issued by the Secretary of State after consultation with ACAS and having as its objective that deductions from wages should be fair and reasonable. In the light of the general discussion which then took place the noble Lord, Lord Wedderburn, was kind enough to withdraw his amendment in favour of my own. In response to my amendment the noble Lord, Lord Trefgarne, said that the Secretary of State had considered whether it would be appropriate for him to issue guidance on good practice in drawing up contractual terms concerning deductions, and on balance he though it would not be. What I hope to do this afternoon is to persuade your Lordships that that balance should be shifted.

The Minister assured the Committee that the Department of Employment would issue guidance on the law before Part I of the Bill came into operation. He further said that it was possible that independent organisations such as ACAS and the Institute of Personnel Management might wish to produce such guidance and that ACAS were aware of the point, but that ACAS was an independent body which was not the instrument of the Department of Employment; it was therefore not appropriate for Ministers to seek to direct ACAS in the matter. However, the noble Lord added that he would be happy to look again at the possibility that the Secretary of State might prepare a code of practice of his own.

I did not think that that went far enough in responding to the views which were expressed at Committee stage and in relation to the principle which was involved. I felt that it should be a requirement that deductions from wages be fair and reasonable, and I felt that should be written into the Bill itself. I therefore pressed my amendment to a Division and the amendment was defeated. I regret that the Committee took that decision but I must of course accept it.

The amendment now before your Lordships is accordingly much more modest. It seeks to provide that the Secretary of State, after consultation with ACAS and prior to the date when the first section of the Bill comes into force, will issue a code of practice containing guidance aimed at ensuring that deductions from wages are fair and reasonable and that contractual terms concerning deductions accord with good practice. It therefore gives the Minister the opportunity to tell us what has emerged from his re-examination of this suggestion that the Secretary of State should himself publish a code of practice on this matter.

I hope and believe that my amendment speaks largely for itself and all I therefore need do is to endeavour to anticipate any possible criticism of it. It may be claimed that a code of practice would be superfluous because it could not override the contract of employment and it would have no legal effect. However, as I said on 15th January in the debate which was initiated by the noble Lord, Lord Campbell of Alloway, in my view two great merits of seeking to extend the use of codes of practice in the industrial relations field are these.

First, before they are introduced there must, of necessity, be consultation with interested parties and a recognition of the need to obtain the widest possible measure of agreement concerning the terms of the particular code that is contemplated. In this matter of deductions from wages, a welcome measure of consensus could be achieved in this way in what would otherwise remain a contentious area. Secondly, our codes of practice in the industrial relations field could operate over a period which affords time for their provisions to be tested in such a way as to establish whether in practice they are sufficiently acceptable to employers on the one hand and to the general body of employees on the other to warrant their eventual translation into legislation.

A further possible criticism of this amendment is that since the Government have already said that the Department of Employment will be issuing guidance before Part I of the Bill comes into force, and that at least two independent bodies might wish to prepare a code of practice to facilitate the implementation of this section of the Bill, there is no need for a code to be introduced by the Secretary of State. I disagree. In my view it is up to the Government, after due consultation, to give the lead by themselves taking responsibility for affirming in this first clause of the Bill that they will issue a code of practice aimed at ensuring that arrangements for deductions from wages are fair and reasonable and that contractual terms accord with good practice. For those reasons I very much hope that the noble Lord the Minister will feel able to accept this amendment on behalf of the Government. I beg to move.

Lord Denning

My Lords, I should like to support this amendment. On Second Reading and at Committee stage I supported the general principle that the Truck Acts were out of date and needed reform. In this particular respect the new section does not go far enough. In the Truck Act of 1896 there was a provision that an employer could make deductions from wages so long as there was public notice of those deductions (in effect, a contract with an employee) and also that they were fair and reasonable in all the circumstances of the case. This Act omits the require-ment that deductions should be fair and reasonable in all the circumstances of the case.

As I read the first section, an employer can produce a printed form of his terms of contract, and he need say nothing about whether they are fair and reasonable. The employer sets out his own terms, drafted by his own lawyers or such people, and the employee has to agree to them. Time after time, in the course of my career as a judge, I have objected to these printed forms of contract which are placed before an employee to sign, or simply to read through, and to be bound by. The employee does not necessarily read them, he does not necessarily understand them, and he may sign them or not; but in the old law they were held to be binding on him. Certainly in the 19th Century they were binding on him, although he acquiesced no real consent and did not understand the terms. It was the employer who stated the terms; they were drafted by him and the employee had no option but to agree or to forgo his employment. That is why, throughout my career, I have sought to impress, both upon the courts and upon this House, that the terms of a contract should be fair and reasonable. So what are we to do? What is suggested in this amendment is about the most modest proposal you can think of; not to insert the words "fair and reasonable", as in the Truck Acts, but to say, "Please, let the Secretary of State, having taken due advice from ACAS, issue a code giving a draft contract or draft terms so as to help employers on the one hand and men on the other to see what are fair and reasonable terms."

It can be said that all that will have no legal effect; nor will it. These codes do not have legal effect, but on the other hand they will have a great persuasive effect on employers and men. I have often known cases where in decisions of the Privy Council we have said, "That is of persuasive effect; it is not binding." This code will be only of persuasive effect, but how valuable it will be to employers and men, unions and so on, because they will have something to go by and something to show as to how to draw up a contract to deal with all sorts of different cases. You can have all sorts of specimens, and this really will give persuasive guidance. It may have no effect in law, but it could have great effect when a man takes his case before the tribunal. If it turns out to be an unfair and unreason-able contract, the chairman will say, "I have got no option; I must enforce it, but this contract is most unfair and unreasonable." If the tribunal says that, it will certainly have an impact on the employer; whereas if this code comes into effect, the chairman can say, "There it is; I have adopted the code and the Secretary of State has approved it after consultation with ACAS." No one can then criticise him for saying it is not fair and reasonable. No chairman of a tribunal can say that. Not only is it of persuasive effect; it is also of guiding effect. It does no harm at all to anyone; it does not oppress the employer or the man in any way. It has a persuasive, guiding effect at the instance of the Secretary of State himself. On that simple ground I would invite your Lordships to accept this amendment.

4 p.m.

Lord Wedderburn of Charlton

My Lords, we support this amendment as a final attempt to get the agreement of the Government to recognise that something should be said about arbitrary deductions from wages, especially for those workers who are ill-organised in trade unions or isolated and vulnerable at their places of work.

There are three short points which have been clearly established during your Lordships' debates on this matter so far. First, there is a very widespread problem, even outside retail trades, in regard to arbitrary deductions from wages. The noble Lord, Lord Coleraine, said during the Committee stage on 24th June 1986, at col. 171 of the Official Report, that, the problem of deductions, although it may have a different shape now, is just as much with us as it was at the turn of the century". I am happy to adopt that summary of the real position, which I believe the Government have begun to acknowledge as our debates have gone on. During that period there was the protection of the rule of reasonableness in the Truck Acts of 1896, and so however badly it operated at least the law was there.

Secondly, I believe it to be established that the element of reasonableness has not in this area of the law, as applied, brought great uncertainty. Curiously, there have been few cases in the courts concerning that matter, as was correctly predicted in the debates of 1895 and 1896. Those cases that there are illustrate the appalling character of the practices which go on. I refer again—and no doubt we shall come back to this later—to the position disclosed in the case of Barratt v. Sealand Petroleum this year in the law reports. Your Lordships will recall that this case concerned an 18-year old on a forecourt. He was taken on after one afternoon's training, and found that sums were deducted quite arbitrarily from his wages, as the court found, in a very one-sided manner and in ways he could not check. In some weeks it amounted to his whole wage of some £55.

The third point which is established is, it seems to me, on the balance of the arguments so far that something should be done. We on these Benches acknowledge that we have not persuaded your Lordships or the Government that there should continue to be a rule in the law of reasonableness. Very well; but should there not be at least an expression of public policy in a code, giving guidance on the ways in which deductions under contractual clauses should or might not be applied?

It seems to me quite apparent that it must be accepted that contract is no defence for most of the workers of whom we are speaking. I quote the words of a citizen's advice bureau in a submission to the Government on this issue of whether the contract is enough for these individual workers: From our bureau's experience, individuals desperate for employment are only too eager to sign the contract of employment and only later when the deductions affect their living standards do they fully realise the consequences". Contract is no defence. It is what the Government pin their colours to. But the Government have pinned their colours in the White Paper on building Businesses, not Barriers, in paragraph 7.2: To the extent that legislation gives statutory support to the current practice of good employers it will command a broad degree of assent". That was their principle for when they would and would not support employment protection legislation. This is a weak form, but at least it is a form, of trying to extend the good current practice of good employers. It may not deter all bad employers merely to have a code of practice. That would be our self-criticism of the amendment. But it cannot be denied that where an employer is in doubt and says, "How shall I manage this?"—and that will happen in a far greater percentage of cases than the bad employers per se—to have a document referring to good current practice must surely be of benefit to both sides in that employment relationship.

I cannot believe that the noble Lord, Lord Trefgarne, is going to tell us that this code of practice will deter the recruitment of new employees. No doubt we shall be dealing with that point later this afternoon, but surely we shall not hear that argument used on this amendment. Surely it cannot be central to the Government's strategy that at 18 years of age Anthony Barratt should have his whole wage of £55 arbitrarily deducted in one week and another. That does not seem to be any reason why the Government should not support the current practice of good employers, as they say in their own White Paper they will do. They may say, "Yes, we have taken away the rule of reasonableness because we think it is too rigid to have in the law". There it is. We would have it; they will not.

But can they not go on to say, "When you are considering deductions from wages, upon which a household (usually a low-paid household) depends, at least take account of these matters on how you do it. And, in regard to the final pay packet, where we have given you the right to take the lot, if you put in a suitable standard clause, for goodness sake have a think about just when you take the whole wage that is for that family"? I am sure the Government, in their hearts, would want to say that, and I cannot believe that there is any doctrinal reason which would prevent them accepting this very modest amendment.

Lord Sainsbury

My Lords, I shall be very brief. I strongly support this amendment. We all accept that deductions from wages must be fair and reasonable. To help achieve this aim, a code of practice will, in my opinion, be most useful and valuable as a guide to employers, and particularly to the small employer for whom the Government express such concern; to trade unions acting on behalf of the employee; and to the individual worker, who has started, and who should be able to obtain a copy from his employer or from ACAS. I attach great importance to the fact that this amendment has the blessing of the noble and learned Lord, Lord Denning, with his vast experience of the law and of its interpretation. I also believe that this amendment should promote good industrial practices. So I hope that your Lordships in all parts of the House will support it in the Division Lobby.

Lord Campbell of Alloway

My Lords, would your Lordships allow a word or two in opposition to this amendment which is open to objection on three main grounds, all distinct and all of which go to the substance? First, the code would traduce the accepted role of a code of practice by having a persuasive effect contrary to the provisions of the statute which introduces it. Secondly, it is not within the province of the Secretary of State to issue such a code. Thirdly, with respect to the noble and learned Lord, Lord Denning, so far as this is motivated by a desire to correct a bargaining disadvantage—the man with no option, as it is put graphically—that is a matter for general legislation wholly beyond the scope of Part I of this Bill, which is concerned only with deductions. Apart from these objections, the substance of this amendment as spoken to today has already been dealt with, if any of your Lordships care to look back at Hansard, on a Division, and this is a second bite at a rather over-ripe cherry.

There are two limbs in this amendment which could either merge or remain distinct on the facts of any given case as regards deductions. The first is: what is fair and reasonable in all the circumstances?—the old Truck Act concept. The second is: what is good practice in drawing up contractual terms in the future, or perhaps in revising existing terms of contract?

The first limb—fair and reasonable—has the persuasive effect of tending to conflict with Clause 1, while the second limb can only but operate to assist in its implementation. Even if it were possible to perform the task of drawing up a code of practice to produce a fair and reasonable deduction in any particular case, which is much to be doubted, this could well resurrect the conflict with Clause 1 which was discussed at some length at Committee stage.

Apart from the fact that the noble Lord, Lord Rochester, sought to introduce this concept at Committee stage on a different type of code of practice, and now returns to the last with another code of practice in the form of this amendment, the issue involved was put to the vote and lost. One of the reasons why it was lost was that the introduction of a code of practice would have this persuasive effect to infect Clause 1 of the Bill with incertitude—this with retrogressive effect—to qualify not only statutory provisions generally, but the employment contract in particular, and even under paragraph (b) to nullify the worker's written consent.

The noble and learned Lord, Lord Denning, takes the view—which I most respectfully question, if I may—that the code would be admissible before a tribunal as in all other cases and codes. Where it is to be admissible, it is so said and written into the clause which introduces the code. But deferring to the noble and learned Lord's view on this matter, if he is right my case is stronger than I thought it was.

It is wholly unacceptable that any code, whether legally enforceable or not—and this code fights shy of saying in terms that it is not legally enforceable, but the noble Lord, Lord Rochester, has confirmed that it has no legal effect—should invite any form of conflict with the provisions of the statute which introduces it. On any analysis, a fair distinction has to be drawn between an explanatory code on law which is issued by the department; a code of good practice for the further assistance of those concerned with operating these provisions, such as could be drawn up by ACAS or by some other body or person; and a code to ensure that any deduction is fair and reasonable as proposed by this amendment. The quality of the three situations is totally different.

Apart from the question of conflict, to which reference has been made, there is no justification for imposing this administrative burden upon the Secretary of State and it is not within his province. It is within the province of consultation between employers and employees on matters of contract, as to what is fair and reasonable in the circumstances of any particular case.

In conclusion, on the question which has been raised about the exploitation of workers at a bargaining disadvantage at times of serious unemployment—the man with no option, who signs on the dotted line—is a very serious matter of great significance which we at the Bar all know has always attracted the attention of the noble and learned Lord, Lord Denning, who, on this subject—and one is indeed grateful—has at least delivered more than one dissenting judgment. It is a serious matter which warrants due investigation. But the noble and learned Lord, Lord Denning, would no doubt concede that the question of deductions is but one aspect of a much wider and more general problem—a problem which, if it deserves attention, merits in all probability primary legislation, or perhaps secondary legislation covering all aspects of the employment contract, and not mere guidance on deductions having no legal effect as proposed by this amendment. If in due course such legislation on investigation is required, so be it; but for those reasons the hope is that my noble friend the Minister will not accept this amendment.

Lord Trefgarne

My Lords, legislation or no, I hope not next Session. But as your Lordships know, we had a very full and interesting debate in Committee on the principle of whether there would be merit in the Secretary of State issuing a code of practice on what might be "reasonable" deductions from wages. Forceful arguments were put on both sides. At the conclusion of the debate we voted on the matter and by a clear majority—I think it was 24—we voted against the view that there was merit in the idea of a code. Normally, one would expect that that would be the end of the matter. I think there is room for more than one view as to whether your Lordships should be asked to consider the matter again.

The noble Lord, Lord Rochester, also referred to the undertaking that I gave that the matter would be looked at again. But of course that was in the context of the noble Lord withdrawing his amendment, which he did not do. I stand relieved from that undertaking the moment the noble Lord seeks to divide the House. I do not think the noble Lord disagrees with that. I recognise that noble Lords are striving to find some compromise that would be an improvement on the proposal that was defeated. One should approach compromises with caution. A "half-way house" may have little merit from either point of view, being neither fish nor fowl. In my opinion, that is the position here. The amendment achieves nothing in legal terms and most certainly does not meet the wishes of those who wish to see a legally enforceable "fair and reasonable" test in the Bill.

Let me develop that argument. What is meant by a code of practice? The proposal your Lordships rejected would have involved the production of a code that would have had legal status in that it could be taken into account in determining certain types of complaints concerning deductions from wages. But the so-called "code" proposed in this amendment is quite different. It would have no legal status at all. A worker who referred to the code in proceedings before tribunals or complained that a contractual term breached the code would be told that the code was of no relevance to tribunal proceedings. Surely it is quite misleading to call this document a code of practice. It is no more than informal guidance.

So the question is: is there any merit in the Secretary of State producing such guidance? My noble friend the Secretary of State has already said that he will ensure that his department publishes guidance on the law, if needs be in the languages of ethnic minority groups as well as English. This is the proper role of the Secretary of State. If your Lordships were to pass this amendment, the Secretary of State would be required, in the space of a few months, to produce some informal guidance on good practice in an area where there are considerable differences of view and differences of practice between industries and between individual employers. He would have to choose between, on the one hand, producing a vague and nebulous document to achieve broad acceptance, or, on the other, a more substantial one. In either case they would merely be an expression of his opinion with which people would be entitled to disagree. I think statements by the Secretary of State should be authoritative.

As I said in Committee, in the Government's view, independent bodies such as ACAS or the Institute of Personnel Management would be in a better position to produce this type of document. Let us leave the field free for them. But let us not saddle the Secretary of State with the requirement in the amendment to produce a document that would be of little more value than a scrap of paper.

The noble and learned Lord, Lord Denning, with respect to him, referred to the question of the effect of the code upon, for example, a tribunal. There is no evidence that codes which have no statutory effect have any great persuasive effect in an area such as this where there are wide differences of view and of practice. It is bringing the status of codes with no statutory force into disrepute to produce them in a way that the amendment proposes.

What the amendment proposes is not a code of practice; it is informal guidance. I believe that the amendment is therefore naive and misconceived, and I invite your Lordships to reject it.

Lord McCarthy

My Lords, the noble Lord says that there is no precedent for what we are suggesting. I take it that that is the thrust of what he is saying. Will he not accept it from us that the best precedent—I do not suggest there is an exact precedent—is the notes for guidance on health and safety which, it is true, are issued by the Health and Safety Executive? But they are issued by the Health and Safety Executive on the authority of the Act of Parliament. If the noble Lord says to us that he would like ACAS to issue such a code as this by authority of Act of Parliament, that would just be yet another amendment which perhaps we should bring back at Third Reading.

We have tried every possible combination and this is the most modest combination of which we can think. What the noble Lord seems to be saying is that there is no precedent for it. There is a precedent and in respect of that precedent it cannot be said, as the noble Lord recently said, that it influences nobody. It influences a very large number of people. Most people would say that the notes for guidance issued as a result of the Health and Safety at Work etc. Act are invaluable. But of course they are not legally enforce-able. Of course they are not taken into account at industrial tribunals. They are a very close analogy. If the noble Lord thinks about that perhaps he could take a different view of this amendment.

Lord Rochester

My Lords, I am grateful to all the noble Lords who have taken part in this short debate, and for the powerful support given, in particular, by the noble and learned Lord, Lord Denning.

I feel that I must make some response to the criticisms made by the noble Lord, Lord Campbell of Alloway, who said a number of things. He did not seem to feel that there was much value in persuasion. He felt that it was not within the province, as he put it, of the Secretary of State to issue guidance. I hope I have already made it plain that I dissent from both those views, feeling that it is up to the Secretary of State to give a lead by taking responsibility in these matters, and that it would be quite wrong for nothing to appear in this Bill which had to do with the need for deductions from wages being fair and reasonable.

It was claimed both by the noble Lord, Lord Campbell, as I recollect, and also by the Minister that this amendment was so similar to the one moved in Committee that in principle it perhaps should never have been moved, but certainly should not be accepted. I reject that point totally. The amendment moved in Committee would have made it a legal requirement that deductions from wages should be fair and reasonable. There is no such requirement in this amendment and it is therefore quite distinct in kind from another one.

The Minister seemed to make great play with the point that this was not really a code of practice but a code of guidance. Quite frankly, I do not much care whether it is called a code of practice or a code of guidance so long as it exercises influence upon the situation.

The noble Lord claimed also that there would be difficulty within the space of a few months, in the Secretary of State finding it possible to draw up such a code. I do not credit that. It seems to me that ACAS in particular, in whom I have great faith, would find it perfectly possible to draw up such a code within such a time limit. There would be every chance that it could be done in a way that introduced an element of consensus into the situation, having the respect both of employers and of representatives of employees.

Your Lordships will see, therefore, that I am quite unconvinced by the arguments of the noble Lord the Minister. As the noble Lord, Lord Wedderburn said, this is an exceedingly modest provision. If, as clearly seems to be the case, the Government are themselves unwilling, to my disappointment, voluntarily to accept the amendment, then I must ask the House to do its best to persuade the Government to the contrary by voting for the amendment in the Division that I now feel obliged to call.


On Question, Whether the said amendment (No 1) shall be agreed to?

Their Lordships divided Contents, 119, Not-Contents, 132.

Addington L. Leatherland, L.
Airedale, L. Llewelyn Davies of Hastoe, B.
Alport, L. Lloyd of Kilgerran, L.
Amherst, E. Lockwood, B.
Annan, L. Longford, E.
Ardwick, L. Lovell-Davis, L.
Attlee, E. McCarthy, L.
Barnett, L. McIntosh of Haringey, L.
Birk, B. Mackie of Benshie, L.
Blease, L. Mais, L.
Blyth, L. Manchester,Bp.
Blyton, L. Milford, L.
Boston of Faversham, L. Milverton, L.
Bottomley, L. Mishcon, L.
Briginshaw, L. Molloy, L.
Brockway, L. Monkswell, L.
Brooks of Tremorfa, L. Monson, L.
Bruce of Donington, L. Morton of Shuna, L.
Buckmaster, V. Mulley, L.
Caradon, L. Nicol, B.
Carmichael of Kelvingrove, L. Northfield, L.
Chandos, V. Oram, L.
Chitnis, L. Parry, L.
Cledwyn of Penrhos, L. Phillips, B.
Crawshaw of Aintree, L. Pitt of Hampstead, L.
Crowther-Hunt, L. Ponsonby of Shulbrede, L.
David, B. [Teller.]
Davies of Penrhys, L. Prys-Davies, L.
Dean of Beswick, L. Rathcreedan, L.
Denning, L. Rhodes, L.
Elwyn-Jones, L. Ritchie of Dundee, L.
Ennals, L. Robson of Kiddington, B.
Ewart-Biggs, B. Rochester, L. [Teller.]
Ezra, L. Ross of Marnock, L.
Falkender, B. Sainsbury, L.
Fisher of Rednal, B. Seear, B.
Foot, L. Seebohm, L.
Gallacher, L. Sefton of Garston, L.
Gladwyn, L. Serota, B.
Glenamara, L. Shepherd, L.
Graham of Edmonton, L. Silkin of Dulwich, L.
Grey, E. Stallard, L.
Grimond, L. Stewart of Fulham, L.
Hampton, L. Stoddart of Swindon, L.
Harris of Greenwich, L. Strabolgi, L.
Hatch of Lusby, L. Strauss, L.
Hayter, L. Taylor of Gryfe, L.
Henderson of Brompton, L. Taylor of Mansfield, L.
Heycock, L. Tordoff, L.
Hirshfield, L. Turner of Camden, B.
Houghton of Sowerby, L. Underhill, L.
Jacques, L. Wallace of Coslany, L.
Jeger, B. Wedderburn of Charlton, L.
Jenkins of Putney, L. Wells-Pestell, L.
John-Mackie, L. Whaddon, L.
Kagan, L. White, B.
Kilbracken, L. Wigoder, L.
Kilmarnock, L. Williams of Elvel, L.
Kinloss, Ly. Wilson of Langside, L.
Kirkhill, L. Wilson of Rievaulx, L.
Alexander of Tunis, E. Beloff, L.
Allerton, L. Belstead, L.
Ampthill, L. Bessborough, E.
Auckland, L. Boyd-Carpenter, L.
Bauer, L. Brabazon of Tara, L.
Beaverbrook, L. Brougham and Vaux, L.
Belhaven and Stenton, L. Broxbourne, L.
Butterworth, L. Mancroft, L.
Caccia, L. Margadale, L.
Caithness, E. Marsh, L.
Cameron of Lochbroom, L. Massereene and Ferrard, V.
Campbell of Alloway, L. Maude of Stratford-upon-
Campbell of Croy, L. Avon, L.
Carnegy of Lour, B. Melville, V.
Carnock, L. Mersey, V.
Cathcart, E. Middleton, L.
Colville of Culross, V. Monckton of Brenchley, V.
Constantine of Stanmore, L. Montgomery of Alamein, V.
Craigavon, V. Morris, L.
Cullen of Ashbourne, L. Mottistone, L.
Davidson, V. Mowbray and Stourton, L.
De Freyne, L. Moyne, L.
Denham, L. [Teller.] Munster, E.
Dilhorne, V. Murton of Lindisfarne, L.
Donegall, M. Newall, L.
Drumalbyn, L. Norrie, L.
Ellenborough, L. Nugent of Guildford, L.
Elliot of Harwood, B. O'Brien of Lothbury, L.
Elliott of Morpeth, L. Perth, E.
Elton, L. Peyton of Yeovil, L.
Enniskillen, E. Porritt, L.
Erroll of Hale, L. Portland, D.
Faithfull, B. Rankeillour, L.
Fanshawe of Richmond, L. Reay, L.
Ferrers, E. Reigate, L.
Fortescue, E. Rochdale, V.
Fraser of Kilmorack, L. Rodney, L.
Gibson-Watt, L. St. Aldwyn, E.
Glanusk, L. St. Davids, V.
Glenarthur, L. Sanderson of Bowden, L.
Gray of Contin, L. Sandford, L.
Gridley, L. Selkirk, E.
Hailsham of Saint Shannon, E.
Marylebone, L. Shaughnessy, L.
Halsbury, E. Skelmersdale, L.
Harmar-Nicholls, L. Slim, V.
Harvington, L. Somers, L.
Henley, L. Stamp, L.
Hives, L. Stodart of Leaston, L.
Home of the Hirsel, L. Strathspey, L.
Hood, V. Sudeley, L.
Hooper, B. Suffield, L.
Hunter of Newington, L. Swinton, E. [Teller.]
Hylton-Foster, B. Teviot, L.
Ingrow, L. Thomas of Swynnerton, L.
Jessel, L. Thorneycroft, L.
Kemsley, V. Thurlow, L.
Lane-Fox, B. Torrington, V.
Layton, L. Trefgarne, L.
Lindsay, E. Trenchard, V.
Lindsey and Abingdon, E. Trumpington, B.
Long, V. Vaux of Harrowden, L.
Lucas of Chilworth, L. Vivian, L.
McAlpine of Moffat, L. Whitelaw, V.
McFadzean, L. Young, B.
Macleod of Borve, B. Young of Graffham, L.
Malmesbury, E. Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.

4.40 p.m.

Lord Trefgarne moved Amendment No. 2. Page 2, line 33, after first ("of") insert-("(i)")

The noble Lord said: My Lords, Clause l(5)(a) of the Bill contains a provision which excludes deductions made by employers to recover earlier overpayments of wages from the requirements of Part I. It is common practice in many organisations to make small overpayments of wages or expenses, for administrative convenience, which are then recovered from a later payment of wages. An example would be where final figures on bonus due to expenses claims are not available in the pay office when the computer is run, so a standard sum is paid and the balance paid or recovered later.

In the Government's view deductions for such reasons should not be caught by the Bill; otherwise, provision to make such deductions would have to be made explicitly in the contract of employment, with the result that vast numbers of contracts would have to be rewritten. An employer would also have to ensure that all workers liable to suffer such deductions had been given, at some point in advance of the first such deduction being made, a copy or explanation of the term of the contract providing for the deduction. In short, if such deductions were covered it would lead to the need for substantial changes in administrative and personnel practices in many companies.

The amendments are intended to close a gap in Clause l(5)(a). In some circumstances employers will seek to recover an overpayment of expenses which has been made to a worker in the course of his employment. Because expenses are not included in the definition of wages for the purposes of the Bill, they are not caught by the existing wording of Clause l(5)(a).

Let me emphasise, however, that these amendments will not affect the common law rights of workers where an employer recovers sums from wages on the grounds that he had made an earlier overpayment of expenses and the worker thinks the recovery involves a breach of contract. The Bill will not prevent workers continuing to take employers to the ordinary courts about alleged breaches of contract arising from the non-payment of expenses. Furthermore, there is no possibility that this amendment could give rise to injustice. If the worker believes the employer is deducting more than what was overpaid, he can complain to a tribunal which will determine the matter. If what is being deducted is no more than the earlier overpayment, the worker has not lost anything.

We believe that expenses should be treated in the same way as wages concerning deductions to recover earlier overpayments and I therefore commend these amendments to your Lordships. Incidentally, I hope your Lordships will agree that this explanation covers Amendments Nos. 2 and 3. I beg to move Amendment No. 2.

On Question, amendment agreed to.

Lord Trefgarne moved Amendment No. 3: Page 2, line 33, after ("wages") insert (", or (ii) any overpayment in respect of expenses incurred by the worker in carrying out his employment,") On Question, amendment agreed to.

Clause 2 [Deductions from wages of workers in retail employment on account of cash shortages etc.]:

Lord Wedderburn of Charlton moved Amendment No. 4: Page 4, line 2, leave out ("arising") and insert ("proved to have arisen by reasonably accurate measurement")

The noble Lord said: My Lords, this amendment refers to the clause which limits the amount that can be deducted from wages of a worker in retail employment to 10 per cent., except of course on his final payment for the final wage period. It accepts the debates so far by acknowledging that there can now be no further control by any test of reasonableness. However, it asks a question to which I suspect your Lordships' attention has not been drawn before: what is meant by the "cash shortage" or "stock deficiency" in respect of which the Bill sets out its limits for pay periods other than the last?

In considering the definition of "cash shortage" and "stock deficiency" one finds a definition that tells you very little because "stock deficiency" means: a stock deficiency arising in the course of retail transactions". The view on these Benches is that this leaves the whole concept rather more arbitrary than we suspect even the Government might wish. It is not a matter which has been approached from this direction hitherto. Where the contract permits deductions, with the Bill in its present state the deduction may be made merely upon the say-so of the employer as to the existence of a stock deficiency; and what I say of stock deficiency is normally applicable to cash shortage. This was the case this year, for example, in Barratt v. Sealand Petroleum where two judges criticised so forcefully the contract that was made. One reason they did so was because it allowed the employer simply to assert that a cash shortage existed where the till was checked in ways that the employee could not himself possible see, let alone check.

There is of course the question of the burden of proof in such cases. Is it right that the law should simply allow the employer to assert that there is a cash shortage or stock deficiency without doing anything at all to prove it if the contract goes that far? Should it not be that the reality of these matters is looked at a little more? In Committee reference was made to the way in which stock control, for example, is a very difficult matter in some retail shops. Goods go through many hands. There are part-time employees who are there one day and not the next. The manager cannot always supervise the flow of stock. Where there is a high turnover and low profit margin company systems notoriously cannot always cope with the flow of goods.

There is the whole question on which the Union of Shop, Distributive and Allied Workers has put forward material which I am confident the Minister has seen. If he has not, I am sure the Secretary of State has; and we are very glad to welcome him back to the proceedings on this Bill. I look forward with enthusi-asm to his contribution on this particular matter. I am sure the Secretary of State knows about notional stock losses because, with his experience, he must know that notional stock losses appear where goods are damaged, discounted or returned. It is only later, because of the late entry of the items into the computerised system that what appears to be a stock loss of one sort proves to be either no loss at all or a loss of a different character.

There are of course practices by employers which one should have thought were agreed by all to be undesirable. I am sure the Government would not support the practice of some garage chains of establishing a priori a ratio between oil sales and petrol sales and then checking only the petrol sales, deducting from the wage of the employee if the oil sale does not come to that ratio. Heron garages are well known in this respect, and there are others, I understand, which adopt practices that are not entirely dissimilar. Surely, it should be for the employer to say. "Look here the contract says I can deduct where there is a stock deficiency, and I have this piece of proof and I shall show you how that is done." There should be something more than the say-so of an employer about some notional stock loss one week or the undesirable ratio practices of some of the garages. These amendments do no more than suggest that, in referring to stock deficiency and cash shortage, there should be an objective basis and a reasonable measurement from which one can believe the shortage or deficiency exists.

It has been said of these amendments—and it may well be so—that they are not of our best because in their present form, if passed, the employer could have an increased power to deduct where a stock deficiency is not accurately proved. But that would be contrary to the spirit of the Bill and I would not expect the Government to take points of that kind which could easily be cured on Third Reading.

We are asking for the Government's response to a point not hitherto raised. Can we pass a Bill which allows in the final pay period the whole of a family's wage to be taken away and up to that point one-tenth (which is no small sum for low-wage earners, or perhaps even for higher wage earners, but I would not know about that), on the basis that that may occur not merely whenever the contract says so but whenever the employer under the contract says that a stock deficiency exists, no matter whether there is any basis in reality, experience and evidence for that statement?

Short of material misrepresentation which induced action on the part of the employee, are the Government confident that their Bill does not allow the employer falsely to assert a stock deficiency if that is what the contract clause is adequately drafted to permit? If it does not, is that so very different from the Heron Garage chain practice of an a priori ratio? I am not speaking of misrepresentation which would make the employer liable for deceit or fraud. A statement that there is a stock deficiency or cash shortage, with absolutely no evidence adduced for its existence, is hardly the basis for honourable legislation in connection with workers who will suffer thereby. I very much hope that the Government will at any rate look at the spirit of the amendment and consider whether something can be done about it either now or on Third Reading. I beg to move.

Lord Sainsbury

My Lords, we on these Benches support the amendment because we consider that it is much fairer than the provision in the Bill.

Lord Trefgarne

My Lords, as your Lordships know, Clause 2 of the Bill limits employers to making deductions of no more than 10 per cent. of gross wages where deductions are made on account of cash shortages or stock deficiencies. There is a similar control on payments made by workers to employers on account of such shortages. In the Government's view this strikes the right balance between the rights of employers to recover sums contractually due to them and the need to ensure that workers do not lose large parts of any one pay packet to meet shortages.

I have assumed that these amendments are designed to make deductions on account of cash shortages or stock deficiencies entirely unlawful if there is no "reasonably accurate measurement" of the shortage. But, as the noble Lord rightly anticipated, their actual effect is to remove deductions on account of shortages where there is no "reasonably accurate measurement" of the shortage entirely from the limitations imposed by Clause 2 (and similarly remove payments where there is no "reasonably accurate measurement" from the limitations of Clause 3). The perverse effect is that it would be in the interests of the employer not to measure the shortage accurately, as then he would not be subject to the 10 per cent. limit when deducting on account of the shortage. The amendments are therefore technically deficient.

However, let me turn to what I am sure is the intended effect of making such deductions entirely unlawful if there is no "reasonably accurate measurement". The amendment would produce the result that the tribunal would have to examine in every case involving Clauses 2 and 3 whether there had been a "reasonably accurate measurement" of stock or cash in relation to which the shortage or deficiency had arisen. What is reasonable in this context is very much a matter of opinion and the amendment would therefore create great uncertainty about what deductions were lawful. Such uncertainty would not be in the interests of either employers or workers and would be likely to encourage the bringing of unnecessary tribunal cases.

If the worker's contract says that deductions of up to 10 per cent. of wages can be made equal to shortages and the worker believes that more than the shortage has been deducted because of inaccurate measurements, he can complain to a tribunal, which will then determine the matter. I hope that I have explained the difficulties that I see in the amendments proposed by the noble Lord and that he will not therefore press them.

Lord Graham of Edmonton

My Lords, the Minister seeks to persuade the House that the Government resist the changes in the best interests of the employer and the employee. I do not speak for employers, although as director of a large retail organisation from time to time I sit in the boardroom of the Enfield and St. Alban's Co-operative Society. But the Minister can take it from me, speaking from the point of view of the employee, that USDAW and many other organisations with workers in the retail trade will deeply resent the Government's not accepting the sense of the amendment. Unfortunately, some employers, whatever the size of the organisation, will take advantage of weak systems. It is perfectly proper for an employer, as far as possible, to make sure that his business is run so efficiently that he reduces to a minimum what we call leakage.

At an earlier stage I sought to persuade the Minister and the Committee that we wanted to exclude from the provisions of this clause employees who were honest, diligent and not in default. We wanted to say that any cash shortage or stock deficiency provision should not apply where it could be proved that the employee had genuinely tried to carry out his responsibilities; he had been honest, diligent and not at fault. The Minister did not accept that.

When the retail trade operated mainly on a five-and-a-half-day week a shop would open for 44 hours a week, by and large, from 8.30 a.m. to 5.30 p.m., and there would be a statutory half-day on a Wednesday or a Saturday. The manager would be responsible for the shop whenever it was open. But now if a retail organisation opens at 8.30, it may stay open until 6.30 p.m. It is legally permitted to stay open until much later. And it is open not for five but six days. In a typical shop the doors will be open and the tills will be in operation for not less than 60 and perhaps for 65 hours a week. The manager will not work there 65 hours a week, and nor will other employees. According to their various agreements they may work 39 or 40 hours a week. The responsibility has to be shared, and so why lay upon the employee as part of his contract, at whatever level he works, that he must be responsible for stock deficiencies?

Cash deficiencies can be measured. For instance, perhaps there should be £1,000 in the till, and at the end of the day when the money is cashed up there may be only £958. The shortage can be seen immediately. But the till may be used by a number of people. The primary operator may not be there all the time.

There is the other situation, that of stock deficiencies. If the Minister was not as fully acquainted with the background to this matter as some noble Lords may be, he will have done his homework. He will realise that penalties are built into the operations of any decent, well-run company. For instance, in my boardroom, we regularly receive accounts of how the branch or department is doing. The leakage, the stock shortage or deficiency is revealed. I can assure the noble Lord that we do not need to take 10 per cent. from wages. The man responsible is looked upon as a poor manager. He will be moved or demoted. The censure of his ability does not need to be measured by how much money he loses. It can often lead to dismissal.

What kind of people is the Minister talking about? I say that they are hapless individuals who are not shown fairly to be wholly responsible. Many of them receive £80 or £90 a week in wages. The Minister says, "Too bad, hard luck. We cannot prove that you are primarily responsible." That is what we are asking: show us the colour of your money. The employees say, "Give us the evidence. Tell us precisely how you can say that we are responsible for the stock deficiency". The Minister says that an employer may not be able to do that. The employer must obtain payment from someone. The man or woman employed by the company unfortunately is the one who will be dunned for it.

The Minister knows that in 1986 the name of the game is high turnover and low profit margins. In such circumstances, matters move fast. The company must depend upon up-to-date systems. Although I hold no brief from any employer or trade union on this matter, the commercial judgment of and risk taken by the employer often causes the deficiencies or shortages because he is not managing the business properly.

I hope that even at this late stage the Minister will say that he is prepared to reflect upon his unwillingness to write into the Bill a provision which any fair- minded person would see as reasonable. When we debated Amendment No. 1 the Minister was somewhat surprised that, having disposed of an argument at one stage it kept coming back. I have news for the noble Lord. We are talking about people's livelihoods and lives. It is not a question of the Minister or myself shrugging off the loss of £10 or £20 a week. We are talking about a man or a woman going home and saying to the husband or wife, "A terrible thing has happened. I have done my best. I have been honest and diligent, but without producing any evidence, and through no fault of mine, the boss has said that he is taking £7, £8 or £9 from my wages". That is a scandal. It is unjust and unfair. It should not be tolerated.

I hope that he Minister will say something which will give some hope to people that when the Bill goes through it will be a little more fair than it is at present.

Lord Wedderburn of Charlton

My Lords, I am grateful to my noble friend Lord Graham for filling out the case with such justice that it is difficult to understand, except for one reason, why the Government will not move a little on this matter. I am also grateful to the noble Lord, Lord Sainsbury. I understand the reason. It is due to the technical deficiency of the amendments. The Minister has persuaded me that they are technically deficient, and that has so obscured your Lordships' discussion of the merits of the case that it is obviously a matter to which we must return on Third Reading, with better-devised amendments which will not obscure the points at issue as these amendments unhappily have done.

The issue has been made clear. It will be seen in your Lordships' Hansard. I must mention to the Minister two places where I think we broke through to the real points at issue. The Minister would object to an amendment such as this because it mentions the word "reasonable". It appears to have made the Secretary of State leave us again because he is not now at our discussion. The word "reasonable" is a fearsome one for the Government. They appear not to know that the law of England and indeed of Scotland is littered with the words "reasonable care" and "that which is reasonably practical". We somehow manage to live from day to day under that rule of law.

There is a more serious matter and I hope that the Minister will not mind my mentioning it. It is that he has not read the cases on the case list with regard to the matter under discussion. Had he looked at Anthony Barratt's case he would have seen an example of where an employee could not normally go to the tribunal. The Minister says that if the employee has a deduction made of an amount which is equal to the shortage, he can complain to the tribunal that there is no such thing. He may be able to do that if the contract said, or meant on its proper construction, that there had to be a shortage before the deduction could be made. That is not what any good draftsman will give to an employee in the average case.

In the Sealand Petroleum Company case the contract, if I may quote merely three lines of it, spoke of the company sustaining loss of cash, stock, tools, equipment and so on. It said: The company (A) will hold you responsible for that loss and (B) reserves the right to deduct up to the amount of the loss from your pay … The company will determine the amount to be recovered under (B) by reference to all the facts of a particular case, including the amount of cash deficiency, replacement value of missing stock, tools and equipment". Once he is there, under this Bill, the employee does not have a hope. His contract says that the company will determine the amount. Under the law that we had for 90 years, he had a hope. Someone could say that it was unreasonable under the Truck Acts, but of course the Government do not like the word "unreasonable".

We shall try to devise an amendment which puts the point without using the word "unreasonable" to see whether we get any further with the Government. I understand that in the light of the discussions that we have had the proper course for me is to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 5 not moved.]

Lord Trefgarne moved Amendment No. 6:

Page 4, line 34, after ("is") insert ("or may be").

The noble Lord said: my Lords, this is a technical amendment which has no policy effect and is introduced in the interests of clarity. Without it, it is possible that certain instances, where a bonus is reduced due to a shortage under an agreement involving discretionary payment of bonus—in the light of various factors including shortage—may escape the 10 per cent. limit. I am sure that your Lordships would not like that, and I beg to move.

On Question, amendment agreed to.

Clause 4 [Provisions supplementary to ss. 2 and 3]:

Lord Wedderburn of Charlton moved Amendment No. 7:

Page 6, line 33, after ("termination") insert ("by the worker or its lawful termination by the employer").

The noble Lord said: My Lords, whereas the last amendment would have been of overwhelming force had it been technically correctly drafted, this amendment is of such force because I believe it to be technically correct. That is partly because it has taken note of the Government's point in the face of a similar amendment moved in Committee. That amendment was not the same by any means, but in Committee the matter was rather left over.

The amendment relates to the final payment of wages and the power which the Bill gives to the employer to take the lot. As my noble friend Lord Graham has already said today, it cannot be too frequently repeated that that means taking the whole amount of a low wage for a family. This is a serious matter. Clause 4 permits that to be done where the period of pay is the last of the periods for which the worker is employed under his contract prior to its termination. Those are the words to which we address the amendment.

There are many different types of termination of a contract of employment. There may be notice from the employer or from the employee; there may be summary dismissal; there may be summary resigna-tion; or there may be a constructive dismissal where the worker treats a substantial breach of contract by the employer as a dismissal and is subsequently found justifiably to have done so. But we believe that the power to deduct the whole wage on the final payment should arise only where there is a lawful termination.

The Government pointed out in our previous discussion that we could not put that limit on the worker's side, because that would give him an advantage. They are against such advantages whether fair or unfair. But we could see, too, with them, that this would give the worker an unfair advantage. So, in this amendment, we say that the final deduction provisions and the loss of the protection of one-tenth, which is perhaps a better way to put it, should arise where the worker terminates the contract in any way, and where the employer terminates the contract lawfully—whether lawfully by way of summary dismissal or lawfully by way of notice.

There are many reasons for advancing this proposition. One happens to have been put wery well in the correspondence columns of The Times today by the director of the National Association of Citizens Advice Bureaux. Elizabeth Filkin writes: It is our experience in Citizens Advice Bureaux that there is a significant minority of unscrupulous employers who evade the protection Parliament has already given to employees against unfair deductions; indeed such deductions sometimes amount to the whole of the wage packet. We fear that unless the 10 per cent. limit also applies to the final wage packet it will be these employers who will make frequent dismissals so that they can make regular large deductions for unproven losses".

That is from the Citizens Advice Bureaux who, nationally, have extensive experience of the matter. Looking back on our discussions, some noble Lords will, I think, agree that the Government would do better to look at these matters rather more than they have. The letter asks for a different solution to the one proposed in the amendment; namely, the extension of the one-tenth limit to the final pay packet. At this stage of the Bill we have not felt able to argue that proposi-tion. We argue the smaller proposition that the employer should surely not be allowed to give himself the power to deduct all beyond the one-tenth by his own unlawful act, which is now the case under the Bill, I am persuaded. The shop assistant earning £50 or £60 per week and knowing that he has a contract that makes for deductions and knowing that these can reach £5 or £6, representing one-tenth, one week after another, suddenly has the whole pay packet taken on an unlawful dismissal, whether unlawful by reason of inadequate notice when there is entitlement to notice but the shop assistant is not given any or enough, or by reason of being unfair because a new owner has perhaps taken over the business and suddenly decides to take on part-time employees. The shop assistant, suddenly and unfairly dismissed, finds that he cannot get within the Transfer of Undertakings (Protection of Employment) Regulations, which is difficult enough as one knows.

Why, in those circumstances, should the employee be deprived, by the law as it will be under this Bill, of more than one-tenth that is otherwise there for the employer to take? It may be that the Government will say that in some of these cases the employee could go to the county court and sue for damages for loss of the notice that should have been given or that he can go to a tribunal to sue for unfair dismissal. But it is no justification to say, "Let him go to the county court or a tribunal on some other issue". It is legislation worthy of a Cabinet conducted by Marie Antoinette. It does not follow, even from the notion that he should have all the wages deducted lawfully under the Bill, that the worker can wait to get to a county court when the family has been deprived of the whole of the wages for a week.

There is a final point. It is a legal point, but also a moral point. The Government must, I feel, take it on board. The Government have repeated many a time and oft that they wish the matters within Part I of the Bill to be conducted in accordance with the law of contract. I do not know whether the Secretary of State is nodding assent or dissent. At any rate, he is with us again. The contract between the parties is what the Government wish to have as the basis of the relationship. Very well! The Bill is not in accordance with the principles of the law of contract on this point; on most of the rest it certainly is, but not on this point.

There is a principle that applies in a particular way in the law of contract that no man shall be allowed to take advantage of his own wrong. The noble and learned Lord, Lord Denning, tried to expand that in a case in 1983. He will not mind my mentioning Cheall v. APEX, the trade union case. It does not relate to this matter. But the House of Lords would not expand it. In saying "No", however, the House of Lords was in favour of a narrower proposition that the noble and learned Lord, I am sure, would also support, as he wished to expand it. Lord Diplock, speaking of the principle that no man shall be entitled to take advantage of his own wrong, put it this way: To attract the principle, whether it be one of construction or one of law, that a party to a contract is not permitted to take advantage of his own breach of duty the duty must be one that is owed to the other party under that contract".

That statement of principle applies four-square in this case. The employer and the worker owe to each other duties to terminate the contract lawfully. If they terminate the contract unlawfully, certainly where the employer terminates without notice, or terminates summarily and wrongfully, the principles of the law of contract say that he should not have the advantage of his illegal act.

I had not realised quite how serious a problem this was until being written to on the matter by those who know of these occurrences. Then, today, quite by chance, the director of the National Association of Citizens Advice Bureaux writes in respect of a different solution but nevertheless highlights the problem of some unscrupluous employers who will make frequent dismissals so that they can make regular, large deductions for unproven losses. The director would want to combat that by far more than this amendment. But the amendment at least says that, in the face of the problem, the Bill should surely apply the principles of the law of contract and say, "Yes. All right. The Government wish it. The employer can have the whole pay packet for the last period if the contract says so prior to a termination, but not where he caused the termination illegally". Where he causes the termination illegally there must, surely, be a stop. At any rate, no more than the one-tenth should apply. I put it as a matter of law, but I would have thought that the morality was even more strong. I beg to move.

Lord Rochester

My Lords, I should like to support the amendment. I may do so also, I believe, on behalf of my noble friends. It arises, as the noble Lord, Lord Wedderburn of Charlton, says, from a somewhat similar amendment that he moved in Committee and that suffered from the defect that it did not cater for the situation where it was the employee rather than the employer who gave notice of termination of the employment contract. That is remedied in this amendment which is limited to providing that recovery by the employer of the entire wage on the last pay day is inadmissible if the employment is terminated by the employer in an unlawful way. Surely that must be right in principle. As a layman, unpractised in the law, I am impressed by the argument the noble Lord has adduced that in this respect the Bill is not in accordance with a fundamental principle of the law of contract. With all this in mind, I trust that the Minister will accept the amendment.

Lord Trefgarne

My Lords, the aim of the provisions in this clause is to ensure that an employer is able, on the termination of a worker's employment, to recover outstanding amounts owed to him by that worker on account of cash shortages or stock deficiencies. This is achieved by removing the 10 per cent. limit on deductions from the final instalment of wages to the worker. This is fair to the employer as well as the worker. After all, the effect of the 10 per cent. limit is to delay the time at which the employer would otherwise be entitled to make deductions.

An earlier amendment on the same lines, but with crucial differences, was debated at Committee stage, when it was argued by the noble Lord, Lord Wedderburn, that the 10 per cent. limit on deductions for cash shortages or stock deficiencies should be disapplied from the final payment of wages of a worker only if the worker had been given lawful notice of termination. However, I pointed out then that an effect of the amendment was that a worker who hands in his notice and who owes a debt to his employer for cash shortages or stock deficiencies would have the 10 per cent. limit applied to the final payment of wages. In such a case the employer would be unable to recover any outstanding debt beyond 10 per cent. of gross wages from the final payment of wages as he would be bound by the 10 per cent. limit. This new amendment before us today deals with that latter situation and refers to lawful termination rather than termination on lawful notice but I am afraid it is still unacceptable.

If any worker feels that he has been dismissed unlawfully then he has the right to complain to the county court and may have grounds for making a complaint of unfair dismissal to an industrial tribunal. These are adequate remedies, and however reasonable the amendment may appear it is the Government's view that it is not appropriate to place a penalty on employers for terminating a contract unlawfully in this part of this Bill, when it is not concerned in any way with the consequences of unlawful termination. It was never intended to produce the result that if the contract ended before the full amount had been recovered the employer would have to take legal action in the ordinary courts to recover an amount to which he was contractually entitled. That is the effect of this amendment in the circumstances to which it is applied, and that is the idea that we resist.

We have studied this amendment very carefully but, for the reasons I have given, we do not feel able to accept it.

Lord Wedderburn of Charlton

My Lords, I thank the noble Lord, Lord Rochester, for his support It is a little difficult to know what to say. One has here a case where the Government are giving an employer by law clear new powers to deprive a family of its sustenance. On their own logic they have a choice The noble Lord the Minister has just said so; I presume that the Secretary of State also agrees. They can allow the employer to go to the county court for his debt We know the nature of this debt: the debt is what the company says it is under Anthony Barratt's contract. That would be one way round, without stopping the wages. That might be a very good idea. That may be a consequence of our amendment.

Alternatively, one can have the employer stopping all the wages and letting the worker go to the county court for his unlawful dismissal. What do the Government choose? They choose to deprive the underpaid worker's family that week of its money in toto and say, "Let them go to the county court". It is totally astonishing and disreputable for a government to put that forward. I beg to move this amendment.

5.24 p.m.

On Question, Whether the said amendment (No. 7) shall be agreed to?

Their Lordships divided: Contents, 96; Not-Contents, 131.

Addington, L. Glenamara, L.
Alport, L. Graham of Edmonton, L.
Ardwick, L. Grey, E.
Attlee, E. Grimond, L.
Barnett, L. Hampton, L.
Birk, B. Hams of Greenwich, L.
Blease, L. Hatch of Lusby, L.
Blyton, L. Hayter, L.
Boston of Faversham, L. Heycock, L.
Bottomley, L. Houghton of Sowerby, L.
Briginshaw, L. Howie of Troon, L.
Brockway, L. Hunt, L.
Brooks of Tremorfa, L. Jacques, L.
Bruce of Donington, L. Jeger, B.
Caradon, L. Jenkins of Putney, L.
Carmichael of Kelvingrove, L. John-Mackie, L.
Chitnis, L. Kilbracken, L.
Cledwyn of Penrhos, L. Kilmarnock, L.
Crawshaw of Aintree, L. Kirkhill, L.
David, B. Llewelyn-Davies of Hastoe, B.
Davies of Penrhys, L. Lloyd of Kilgerran, L.
Dean of Beswick, L. Longford, E.
Elwyn-Jones, L. Lovell-Davis, L.
Ennals, L. McCarthy, L.
Ewart-Biggs, B. McIntosh of Haringey, L.
Ezra, L. Mackie of Benshie, L.
Falkender, B. McNair, L.
Fisher of Rednal, B. [Teller.] Mais, L.
Foot, L. Manchester, Bp.
Gallacher, L. Milford, L.
Gifford, L. Mishcon, L.
Gladwyn, L. Molloy, L.
Monkswell, L. Stewart of Fulham, L.
Morton of Shuna, L. Stoddart of Swindon, L.
Nicol, B. [Teller.]
Oram, L. Taylor of Gryfe, L.
Parry, L. Taylor of Mansfield, L.
Phillips, B. Tordoff, L.
Pitt of Hampstead, L. Turner of Camden, B.
Prys-Davies, L. Underhill, L.
Rhodes, L. Wallace of Coslany, L.
Rochester, L. Wedderburn of Charlton, L.
Ross of Marnock, L. Wells-Pestell, L.
Sainsbury, L. Whaddon, L.
Seear, B. Wigoder, L.
Sefton of Garston, L. Williams of Elvel, L.
Serota, B. Wilson of Langside, L.
Shepherd, L. Wilson of Rievaulx, L.
Stallard, L. Winterbottom, L.
Abercorn, D. Hylton-Foster, B.
Ailesbury, M. Ingrow, L.
Airey of Abingdon, B. Kimball, L.
Allerton, L. Kinnoull, E.
Ampthill, L. Lane-Fox, B.
Atholl, D. Layton, L.
Auckland, L. Lindsay, E.
Bauer, L. Lindsey and Abingdon, E.
Belhaven and Stenton, L. Long, V.
Beloff, L. Lucas of Chilworth, L.
Belstead, L. McAlpine of Moffat, L.
Bessborough, E. McFadzean, L.
Boyd-Carpenter, L. MacLehose of Beoch, L.
Brabazon of Tara, L. Macleod of Borve, B.
Brougham and Vaux, L. Malmesbury, E.
Broxbourne, L. Mancroft, L.
Butterworth, L. Margadale, L.
Buxton of Alsa, L. Massereene and Ferrard, V.
Caithness, E. Maude of Stratford-upon-
Cameron of Lochbroom, L. Avon, L.
Campbell of Alloway, L. Melville, V.
Campbell of Cray, L. Mersey, V.
Carnegy of Lour, B. Middleton, L.
Carnock, L. Milverton, L.
Cathcart, E. Monckton of Brenchley, V.
Colwyn, L. Monson, L.
Constantine of Stanmore, L. Montgomery of Alamein, V.
Craigavon, V. Morris, L.
Craigmyle, L. Mottistone, L.
Cullen of Ashbourne, L. Moyne, L.
Davidson, V. Murton of Lindisfarne, L.
De Freyne, L. Nathan, L.
Denning, L. Newall, L.
Dilhorne, V. Nugent of Guildford, L.
Donegall, M. Pender, L.
Drumalbyn, L. Peyton of Yeovil, L.
Dundee, E. Plummer of St Marylebone,
Ellenborough, L. L.
Elliot of Harwood, B. Rankeillour, L.
Elliott of Morpeth, L. Reay, L.
Elton, L. Reigate, L.
Enniskillen, E. Renton, L.
Faithfull, B. Rochdale, V.
Fanshawe of Richmond, L. Rodney, L.
Ferrers, E. St. Aldwyn, E.
Fortescue, E. St. Davids, V.
Fraser of Kilmorack, L. Sanderson of Bowden, L.
Gibson-Watt, L. Sandford, L.
Glanusk, L. Seebohm, L.
Glenarthur, L. Sharples, B.
Gray of Contin, L. Skelmersdale, L. [Teller.]
Greenway, L. Slim, V.
Gridley, L. Somers, L.
Hailsham of Saint Stamp, L.
Marylebone, L. Stodart of Leaston, L.
Halsbury, E. Strathspey, L.
Harmar-Nicholls, L. Sudeley, L.
Harvington, L. Suffield, L.
Henley, L. Swinton, E.[Teller.]
Hives, L. Teviot, L.
Home of the Hirsel, L. Thomas of Swynnerton, L.
Hooper, B. Thurlow, L.
Trefgarne, L. Vivian, L.
Trenchard, V. Whitelaw, V.
Trumpington, B. Young, B.
Tryon, L. Young of Graffham, L.
Vaux of Harrowden, L. Zouche of Haryngworth, L.

Lord Trefgarne moved Amendment No. 14: Page 10, line 29, leave out ("that") and insert ("the 1978"). On Question, amendment agreed to.

5.34 p.m.

Lord Trefgarne moved Amendment No. 8: Page 7, line 16, leave out ("receive any amount from the worker on account") and insert ("recover an amount from the worker in respect")

The noble Lord said: My Lords, Amendments Nos. 8 and 9 are technical amendments. Their effect is to make clear that in proceedings by employers to recover amounts from workers a court is required to limit the rate at which it orders the worker to make payments, so that the 10 per cent. limit is not broken if the amount which the employer is entitled to recover is in respect of a cash shortage or stock deficiency with its wider meaning—that is, embracing deductions and payments on account of conduct leading to a shortage or deficiency. I beg to move.

Lord Trefgarne moved Amendment No. 9:

Page 7, line 38, at end insert ("; and references in this Part to the recovery from a worker of an amount in respect of a cash shortage or stock deficiency accordingly include references to the recovery from him of an amount in respect of any such conduct or event as is mentioned in paragraph (a) or (b).")

The noble Lord said: My Lords, Amendment No. 9 is consequential upon Amendment No. 8. I beg to move.

Clause 6 [Supplementary provisions relating to complaints]:

Lord Trefgarne moved Amendment No. 10: Page 10, line 7, after ("of) insert ("any provision of this Part")

The noble Lord said: My Lords, this amendment will have the effect of ensuring that any provision in an agreement which purports to exclude or limit the operation of any provision of Part I will be void. This extends the existing provision in Clause 6 which makes void any provision in an agreement which purports to exclude or limit the operation of or preclude any person from presenting a complaint under Clause 5. I beg to move.

Lord Wedderburn of Charlton

My Lords, we wish to welcome this addition to the Bill, which we pressed upon the Government in Committee. Indeed, the Government have done even better than the amendment which we then moved. When the Government are in the wrong they have no stronger critics than those from these Benches. When the Government see the light and repent, however limited the repentance, they have no warmer friends—at least for that moment.

Lord Trefgarne

My Lords, before I am tempted to withdraw the amendment, perhaps I may remind your Lordships that this was one of the lollipops which we offered at an earlier stage.

Lord McCarthy moved Amendment No. 11: After Clause 6, insert the following new clause:

("Unfair dismissal.

  1. .—(1) The dismissal of an employee shall be regarded as unfair for the purposes of Part V of the 1978 Act if the reason (or if more than one. the principal reason) for it is that the employee has brought, or proposes to bring, a complaint under this Part of this Act.
  2. (2) An employee shall have the right not to have action (short of dismissal) taken against him as an individual by his employer for the purpose of preventing or deterring him from making, or proposing to make, a complaint under this Part of the Act.
  3. (3) Sections 24 to 26 of the 1978 Act shall apply to action which contravenes subsection (4) above as they apply to section 23 of that Act.").

The noble Lord said: My Lords, we can only hope that the sweet bag is now open for the evening and perhaps something more may be coming along. I think that the noble Lord the Secretary of State will remember this amendment because it was at this moment that he entered the Chamber on the first day of the Committee stage, although he took no part in the debate. We hope that he will take part this evening. I wish that we had pressed that debate to a Division because then the noble Lord would have had an opportunity to vote for his own Bill. However, the noble Lord has done that today.

On that occasion I argued that, if a worker was dismissed for trying to stop an unlawful deduction by going to a tribunal, there should be a right of protection against unfair dismissal or action short of dismissal. At that time I was told by the noble Lord, Lord Trefgarne, not that an employer should be free to dismiss in such circumstances, not that the Government thought that unfair dismissal was not a concept to be introduced at this stage, but that we should be rejected because in our amendment we had demanded that there should be no qualifying period, as in the case of dismissal on grounds of trade unionism or non-unionism, race, sex and so on, and because we had asked in the case of dismissal on grounds of trade unionism that there should be a special compensation award.

However, at col. 260 of the official record for 24th June the Minister certainly seemed to us to be saying that, in effect, he would not be against the principle of a right of protection for unfair dismissal in the circumstances covered by the amendment, because he said: The effect of this new clause would be that workers, irrespective of age, length of service or hours of work, would have new rights to complain to an industrial tribunal either on the grounds that they had been dismissed or that action short of dismissal had been taken against them".

We accept that.

The Minister then said: This new clause would apply some of the special compensation provisions which apply to dismissal, and action short of dismissal related to trade union membership, to dismissal for making a complaint under Part I of the Bill".

The Minister then went on to say: However, the provision of the Wages Bill do not concern fundamental rights such as those I have just mentioned or the right not to be discriminated against on the grounds of race or sex".

The noble Lord then said: We do not believe that there is any justification for special provisions of the sort advocated by the noble Lord. I hope, therefore, that he will not press the amendment".

At col. 261 I replied: But suppose we were to come back and say that we will take out the special compensation and take out the two-year rule from the amendment, what would his attitude be to that? I ask that because I thought that the third point he made was that he was in favour of special provision and that he did not want to leave this to chance. That is the real cutting edge of what we are saying—that he did not wish to leave it to the chance that industrial tribunals might or might not get it in under, for example, some other substantial reason", or for some other reason that they might find. Unfortunately, the noble Lord then replied: I replied to the amendment which appears on the Marshalled List If the noble Lord, having heard the shortcomings of that amendment, wishes to table another one at a latter stage shall consider that too To that remark I replied: In those circumstances and in the hope of a better tomorrow, I shall withdraw the amendment and come back. That is what we are doing—wo are coming back.

The argument then is simple, and in general terms we thought that the Government had accepted it. If someone is dismissed for the quite legitimate purpose of trying to go to a tribunal in order to bring a complaint under this part of the Bill, is that a fair or an unfair dismissal? Surely the Government would say that it would be an unfair dismissal. If a man was not promoted, or was moved off bonus work, or was constructively dismissed after taking a case to a tribunal whether he won or not, surely the Government would say that that would be an unfair dismissal. We cannot leave it to chance. We cannot leave it to some other substantial reason, or to the vagaries of the conduct test. Surely we should put this much into the Bill. I beg to move.

Lord Rochester

My Lords, as the noble Lord. Lord McCarthy, has said, this again is an amendment modified to take account of the response made by the Minister to a rather wider amendment moved by the noble Lord, Lord McCarthy, in Committee, dealing with the same principle. We support this amendment. Many of the people we are here considering, as we have said throughout this Bill on a number of issues, are unorganised, they are without protection from trade unions, and they work in occupations where labour turnover is high.

If they have the courage, in these times of high unemployment, to take a complaint relating to deductions from wages, or for that matter anything else affected by this Bill, to an industrial tribunal there is at present nothing to stop an unscrupulous employer from sacking them, and they will have no protection against unfair dismissal. In my view and that of my noble friends, they should have, and I hope that the Minister will agree.

Lord Somers

My Lords, I should be the last one to support any unfair dismissal of any employee, but I have sometimes felt that the employer should be given a little more power to control employees who perhaps are giving bad work either through laziness or possibly through just sheer inefficiency. I am not saying that such examples are frequent, but it is not unknown, particularly in these days, for a man to accept a job purely because of the money he is going to get from it without any willingness to fulfil the job that he has been given.

In such cases the employer ought to be given a little more power in order to keep the efficiency of his own business up to standard. I cannot make out from the wording of this amendment whether that is implied or not, but I hope that the Government will look at that.

Lord Trefgarne

My Lords, let me start by saying, if I may, that the remarks I made at Committee stage did not remotely imply any support for the concept that dismissal for complaint under the Bill's provisions should be automatically unfair. I merely declined to deal with an amendment that was not before the Committee during that stage in our considerations.

The effect of this new clause would be that workers would be accorded new rights to complain to an industrial tribunal either on the grounds that they had been dismissed, or that action short of dismissal had been taken against them, for bringing complaints under the provisions of Part I of the Bill. An additional and possibly unintended effect would be that there would be no qualifying period in the case of action short of dismissal, while the qualifying period would remain in the case of dismissal itself. This would create an anomalous situation which I am sure none of your Lordships would wish to see.

Turning to the main thrust of the amendment, I assure your Lordships that we have looked hard at this issue since we debated the similar, though more far-reaching amendment tabled in Committee. However, I am afraid that I shall again have to disappoint noble Lords opposite—no lollipops just now. Part I is intended to give workers a more straightforward and cheaper avenue of complaint against unlawful deductions from their wages. This new right of complaint to a tribunal is comparable to existing rights of complaint in the employment field, such as rights of complaint against non-receipt of an itemised pay statement or a written statement of main terms and conditions of employment. None of those rights of complaint to industrial tribunals attracts the kind of protection sought by the amendment when an employer dismisses an employee for exercising that right.

Those rights of complaint to industrial tribunals are very important—I think we would all agree about that—but they cannot be classed among the fundamental human rights, such as the right not to be discriminated against on grounds of race or sex, or the right to belong or not to belong to a trade union. It is only in those cases that individuals have a remedy before an industrial tribunal without a qualifying period, and only in the case of dismissal for a trade union membership reason that dismissal is automatically unfair.

We do not believe that exercising the right to make a complaint to an industrial tribunal should attract any of those special protections. It may, however, be helpful if I say that if the reason for a dismissal was that a worker had complained to a tribunal under Part I, or indeed that he had complained to a tribunal on any of the other grounds open to him, it is hardly conceivable that a tribunal would find dismissal on that ground to be fair. In the light of those difficulties, I hope that the noble Lord will not wish to press his amendment.

5.45 p.m.

Lord McCarthy

My Lords, I see that the sweet bag has been put away. May I first deal with the point made by the noble Lord, Lord Somers. We are not trying to say in this amendment that any of the criteria which exist in the present unfair dismissal legislation under which the tribunals can decide whether someone is fairly or unfairly dismissed shall be changed. Therefore, the kinds of situations the noble Lord was talking about could easily be found, before a tribunal, to be a fair dismissal.

The kind of thing that the noble Lord was talking about was either a question of misconduct on the part of the man or the woman concerned, or a question of capacity. They had not got the capacity to do the job. If it was not conduct or capacity, it may have been some other substantial reason which, given the circumstances of the case, the tribunal might have said was a perfectly fair dismissal.

Therefore, the circumstances in which it is decided in the law of this country whether or not there should be a fair, or an unfair, dismissal in general terms is not changed by this amendment. What we are trying to do is to make specific—not special—the situation in which someone goes to an industrial tribunal to bring a complaint under this part of the Bill, and a complaint that this Bill creates. This Bill creates the right to complain over a deduction under this part of the Bill—a wrongful or unlawful deduction. One can go to a tribunal.

What we say is that if a man or a woman goes to a tribunal to complain of an unlawful deduction—a right that this Bill has put into the hands of working men and women—and if as a result he or she is dismissed simply for taking advantage of his or her legal rights, and dismissed whether the person wins or loses before the tribunal, in those circumstances that should be an unfair dismissal.

It is difficult to say what tribunals would say. If the noble Lord had come along and said to me, as he often does, "This amendment is not necessary because the tribunals would never do a thing of this kind", that is an argument. I would then say, "Why not make sure, as some tribunals do different things?" But if I may turn to what the noble Lord said, he does not seem to be saying that either. He seems to be saying a whole series of different things.

First, the noble Lord is quite wrong to say that this new clause would resurrect the kind of things that we undoubtedly put in our version of this amendment at the Committee stage. At the Committee stage we carefully said that the two-year rule should be set aside. We do not say that this time. At the Committee stage we very carefully said that the special compensation levels, the special award and so on which apply to unfair dismissal on grounds of trade union membership should apply. We do not say this now.

Therefore in our submission all we are doing is creating an additional specified form of dismissal, but not a form of dismissal which has the kind of non-exceptions that dismissal on grounds of sex, race or trade union membership undoubtedly now has. If the noble Lord had come to me and said, "Yes, I accept this, but I am afraid that I think the way you've written it the two-year rule might get back in again or the non-two-year rule might get back in again", we would have accepted that and said, "Very well, we'll take it away and we will come back or you can come back with an amendment on Third Reading which specifically says that those special provisions do not apply". In fact they do not apply on the face of the clause.

Finally the Minister says to me that there is some kind of analogy with the position whereby people can go to industrial tribunals to complain about itemised pay statements. He says that there is no amendment from this side of the House and no provision in the Bill to make that unfair dismissal. He does not seriously want us to believe that the Government cannot see the difference. No employer will dismiss a man because he wants itemised pay statements. In fact if a man wants itemised pay statements, he probably will get itemised pay statements, but if someone goes to an industrial tribunal and gets the employer for making unlawful deductions, we are suggesting that it is much more likely not so much that the man or woman will be dismissed, but that a form of constructive dismissal will take place. It is to protect the worker above all against constructive dismissal in such circumstances, which is quite different from itemised pay statements, that we have moved this amendment. I see that we shall not move the Government. We do not intend to divide the House and therefore I withdraw the amendment.

Baroness Seear

My Lords, may I put to the noble Lord the Minister a more general point? The Minister is an honourable man. Does he not accept that if an individual has a legal right to protect himself in a particular way, as is laid down in this clause, he cannot be penalised for doing what the law of the land specifically has allowed him to do? It is a more general point than just whether the individual can go to a tribunal. It is said on the one hand that there is a legal right and on the other that he will not be protected at all if he makes use of that right. What does the Minister say?

Amendment, by leave, withdrawn.

Clause 7 [Meaning of "wages"]:

Lord Trefgarne moved Amendment No. 12: Page 10, line 25, leave out ("section 121(2)") and insert ("paragraphs (a) to (d) of section 122(4)").

The noble Lord said: My Lords, with your Lordships' permission I should like to speak to this amendment and at the same time to Amendments Nos. 13 and 14. These amendments update certain references in the Bill that have been changed by other legislation. There is no policy implication in any of them. I beg to move.

Lord Wedderburn of Charlton

My Lords, the noble Lord the Minister has moved this as a technical matter, but in our submission the Government's amendment raises a question of some importance. It was our fault perhaps that we did not appreciate the importance of the old Section 121(2) of the 1978 Act having become Section 122(4) through the amendments to the Insolvency Act 1985. In not so appreciating we perhaps failed at Committee stage to do what the Government's own amendments now do to bring out the important point revealed. Here the Government's Bill defines the wages in respect of which deductions are to be made and defines that range of payments described in Clause 7 as, guarantee payments and other statutory payments in lieu of wages". There are five such payments and the Minister's amendment brings out the fifth. As I understand it, the five types of payments are guarantee payments, payments in respect of medical suspensions, payments for time off for trade union activities, pay due under a protective award, and statutory sick pay. It is the fifth in that list that is brought out in Amendment No. 13—part of this bundle of amendments which we agree go together. That list is drawn up in respect of matters which an employee may proceed for in the case of an employer's insolvency. As such they make good sense. When the employer goes insolvent the procedures of the 1978 Act allow him to recover in respect of wages and these other payments which are in the same area of his employment—guarantee payments, payments due for time off, and statutory sick pay.

But when the list is used as the definition of that from which deductions may be made in accordance with the conditions of the Bill, the new perspective may give pause for thought. We ask the Government whether they should not really reconsider the fifth item; that is, statutory sick pay. Is statutory sick pay, as this Bill would have it and as this amendment would now make even clearer, a payment in lieu of wages or of that character as such that deductions by the employer should be allowed? We submit that that is not so.

It may be that the employee will be allowed to proceed with it in an insolvency; that is another matter. But it is not a payment in respect of which the employer should be allowed to make deductions. Indeed, we suspect that but for the provisions—is the noble Lord the Minister suggesting that I am on the wrong point? If he is not suggesting that, we are at one. He is receiving help from the Secretary of State, I understand. We are glad to have the Secretary of State with us again.

The nature of statutory sick pay in our submission, if it is suitable for the insolvency provision, is not suitable for the deduction provision. We say that because were it not for this Bill, we do not think that there would be power to deduct from statutory sick pay. I add, to make myself quite clear on this point, that I am speaking of statutory sick pay, not of contractual sick pay, although the two overlap in the new dispensation of sick pay arrangements now that sickness benefit has been overtaken by statutory sick pay. It is well recognised in the law that statutory sick payments are not of that character.

I shall quote merely one statement from the courts, concerning the case of Palfrey v. Greater London Council in 1985, Industrial Cases Reports at 443. I must quote this because it is rather critical to the case. The learned judge said: I do not think that any valid distinction can be drawn between unemployment benefit, supplementary benefit, sickness benefit, industrial injury benefit and so on". He continued: [Counsel] submits … that statutory sick pay is in a different category because it is paid by the employer who is then reimbursed in full by the state and so … the employer gains. It seems to me that the procedure of the employer making a payment and then reclaiming it is simply a convenient way of paying the benefit. In principle there seems to be no difference between this method and the payment of the benefit through a Department of Health and Social Security office or through the Post Office". Later the judge said: It is pointed out to me that the employer may well have, as indeed this employer had, a contractual sick pay scheme. Under the … Acts, even though he is contractually obliged to pay a certain amount to his employee he can recover that amount back, up to the limits of statutory sick pay, and … that really is a windfall for him. That is true". The categorisation of statutory sick pay in that passage is clearly that of a social benefit administered through the employer. It is not in the category of a payment within the range of wages of the kind that guarantee payments, payments for time off and protective awards can arguably be for this purpose; for insolvency, yes, but for this purpose, no. I ask this question. Is it not the case that this Bill as drafted would actually help to give the permission to deduct from statutory sick pay which otherwise would not be allowed? It is a very different matter from some of the other payments; so that in fact this Bill is facilitating, if it stays in this form, a deduction from a social security benefit merely because, as the judge said, it is administered through the employer.

It cannot be right to have statutory sick pay in this category for this purpose. If there be an obscurity as to whether deductions are possible under statutory sick pay if they are not wages, then that must be a matter to which the Government turn their mind; but now that we have this chance to revise and reconsider the legislation calmly it surely cannot be right to make deductions from a social security benefit, statutory sick pay, under the guise that it is a deduction from something like wages. It is something like wages for the purposes of insolvency and for some other purposes; and so are a lot of other things. But it is not like wages in respect of deductions from wages and in respect of a Bill of this kind.

I earnestly ask the Minister whether he will have another look at this matter and, indeed, if he does not feel fit to look at this matter, whether he will set out in full, either in reply to my criticisms or in the Library, the precise manner in which statutory sick pay is to be lawfully deducted under the provisions of this Bill and other arrangements so that we can see just how far, under cover of this Bill, deductions are being permitted from social security benefit.

It is a very serious and straightforward point. It is not in any way meant to attack the Government in one sense, because it is my honest belief that this matter has not really been fully appreciated in the transfer of the list from the old Sections 121 and 122 into this Bill. I hope that I am right in that. I believe that I am. I think that perhaps there has been one of those transfers of payments like wages which one so often makes in legislation by reference and that one extra, statutory sick pay, has got transferred. Somebody has noticed it and has said, "We'd better state that separately". I am grateful that they did so because it brought it to the light of day and has given rise to my question to the Minister, which I think is on a serious matter.

Lord Rochester

My Lords, in the light of what the noble Lord, Lord Wedderburn, has said, I hope that the Minister will agree to look at this again.

6 p.m.

Lord Trefgarne

My Lords, may I say at the outset that the purpose of this provision is to help the worker and not to hinder. That is what I believe to be the effect of the amendments that I have proposed. However, if the noble Lord, Lord Wedderburn, thinks otherwise that is something that I should very much like to consider because he and I are clearly at one in that point of view. If your Lordships will therefore be good enough to agree these amendments, I shall certainly undertake to respond to Lord Wedderburn's request to reply to him in detail on the way that we see these provisions working. Having done that, I shall he happy to copy my letter to other noble Lords—and in particular the noble Lord, Lord Rochester—who have taken an interest.

Clause 8 [General interpretation of Part I]:

Lord Wedderburn of Charlton moved Amendment No. 15: Page 12, line 28, at end insert— ("( ) Nothing in this Part shall affect the operation of the Unfair Contract Terms Act 1977 ")

The noble Lord said: My Lords, I apprehend some confidence in believing that the Government could easily accept this amendment for a very simple reason. The issue of the relationship of this Bill with the Unfair Contract Terms Act has been around for some time. We even had an amendment down in Committee that referred to it but, because it was technically not perfect, we did not move it. So the Government have their own notice, and they have been put on notice by us, that there is a relationship.

The reason I believe the Government may find it not difficult to accept the amendment is that I think the Government do not wish the Bill they are moving to affect the Unfair Contract Terms Act. Otherwise the Government would have said so. So, if they have not said the opposite, then they must intend that it shall not affect the operation of the Unfair Contract Terms Act. That seems very reasonable and it would be better said. All that this amendment says is that it would be better said. And it would be better said because there are some areas in which the Unfair Contract Terms Act might make a difference.

The Unfair Contract Terms Act has some complex-ities but, like most complex statutes when attacked vigorously, it can be made very simple. At the risk of some inaccuracy, I may put it to your Lordships in this way. There are two parts of the Unfair Contract Terms Act 1977 which can affect the employment area that is relevant to this Bill. The 1977 Act introduced a most important area of novelty to the law of contract over many areas: that is, to give the courts a wider power to control the terms of the contract by reference to what is reasonable. I say that only sotto voce because I know how little the Government think of that kind of test.

But there are two areas where we are dealing with a contract where one person is dealing with another as a consumer or on the other's standard terms and where the other relies upon an exemption clause to exclude his liability totally to perform or to perform below that which would be reasonably expected of him. That is in Section 3. In Section 4, he relies upon an indemnity clause in respect of negligence and breach of contract.

I think that there will be a lot of cases where employment contracts will be touched by the Act, although opinions differ; but there certainly could be some. Where, for example, the employer is obliged to pay a wage and is relying upon a clause allowing him not to perform in full, it could be that Section 3 would apply; or where the employer deducts the final wage in full under a document which represents written consent of the worker but which is not in the contract.

Those who have followed the Bill carefully will know that that is a Clause 1(1)(b) and not a Clause l(1)(a) situation. In a Clause 1(1)(6) situation, it is quite easy to imagine that the employee may be able to challenge a deduction or a series of deductions or a final deduction under the Unfair Contract Terms Act. I take it that the Government wish to allow that possibility to continue. There are some who say that the employee is not someone who deals as a consumer. There is a definition in Section 12 of the Act. I shall not read that out but I shall read the effect of it in Chitty on Contracts, vol. II, page 669, at Note 54, where the learned authors state: It would seem clear from the definition of that concept in s. 12 of the Act that an employee 'deals as consumer' with his employer in relation to his contract of employment". That quotation can be matched a dozen times from other authorities.

So it seems that the employee will often be dealing as a consumer and therefore within the Act, and Section 3 might apply to a number of situations. Indeed, the county court decisions that there have been have accepted that the 1977 Act can apply to some situations. By "apply" I mean that thereby the court has within its grasp the ability to control to some extent (only to a limited extent) the reasonableness of the total non-performance. I suspect that it may be within the area of final payment non-performance, where perhaps the employer has not been advised by lawyers good enough to draft the contract well enough; because the matter still has to be tested against its terms. Nevertheless, there will be some cases where one can foresee that it might apply.

Since that is so, and since it is normal practice where there is doubt in respect of overlapping statutory enactments to state the position and not to have any doubt about it, I hope that the Government, since they have not dealt with the matter at all and have not wished to amend the Unfair Contract Terms Act which must be their policy, will see fit to accept the amendment. I beg to move.

Lord Trefgarne

My Lords, I must begin by saying that the Unfair Contract Terms Act 1977 is an enactment dealing almost exclusively with rights under consumer contracts and that in the Government's view it was never intended that it should influence employment law. There is one minor exception to that in paragraph 4 of Schedule 1 to the 1977 Act which makes it clear that parts of Section 2, which prevent the exclusion of liability for negligence, apply to contracts of employment to the extent that they favour the employee. The Act contains a similar exception in its application to Scotland, though it is achieved in a rather different way. This Bill in no way affects those minor exceptions.

I am aware that some commentators hold the view that Section 3 of the 1977 Act applies to contracts of employment. I am not sure whether the noble Lord, Lord Wedderburn, regards himself as a commentator, but that view has certainly been expressed. However, I have to say that the Government do not share that view; nor are the Government aware of any cases in which that section has been held to apply to such contracts. If the noble Lord has any information to the contrary, I should of course be glad to know of it. I am not certain whether, in the course of his remarks, he indicated some view to the contrary. If he did, I shall certainly study them; but in the absence of such information the Government's views are that the amendment would imply that the Bill would or at least could affect the operation of the 1977 Act. Since the Government do not believe that the Bill affects the operation of the 1977 Act in any way, I believe that the amendment is both unnecessary and confusing. I therefore ask the noble Lord not to press it. Having said that, when I am able to do so, I shall carefully study in Hansard the words that he used this afternoon.

Lord Wedderburn of Charlton

My Lords, I am encouraged to ask leave to withdraw this amendment, because I have a nasty feeling that when the Government realise the position they may want to add something to the Bill. I merely say to the Minister that my information is, from secondary sources, that there are various county court decisions, including one in the Brentford County Court in December of 1983, which confirm a view which is held, not simply by some commentators, but rather, I believe, by any writer who has ever written upon this Act. If I may quote from Professor W. Rogers' commentary of the original Act, he states that a contract of employment is one where the employee "deals as a consumer".

The reasons he deals as a consumer is the definition in Section 12 which I was going to read but which I will send to the Minister if he cannot obtain it otherwise. That contains a wide definition of the words, "deals as a consumer", and it covers an employee, where the employer is dealing in the course of his business. Perhaps it was not intended but such appears to be the law. Of course, I was not referring to Section 2, which is dealt with by the Schedule that the Minister quoted. This has nothing to do with Section 2 but rather with Section 3.I suggest that it applies especially in Section 3, and I suspect that the answer, which is quite astonishing to me, is that the Government think this 1977 Act will have no effect on the position at all. Since it might work to the advantage of a few poor workers in county courts in the future, I certainly beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.15 p.m.

Clause 12 [Continued existence of wages councils after repeal of Wages Councils Act 1979]:

Lord Dean of Beswick moved Amendment No. 16:

Page 14, line 5, after ("effect") insert ("other than in relation to the clothing industry").

The noble Lord said: My Lords, I did, as some noble Lords will recall, speak to this amendment during the previous stages. I said then that I would study Hansard to see what the Minister had actually said. I am not by any means convinced, having read what he did say, that he answered the points as I put them.

Because of the pressure on time for this Bill, I do not intend to speak for very long. However, the Minister, in his reply, said: They showed that the majority of employers and employers' organisations favoured retention and reform of the system. I acknowledge that most employers in the clothing industry favoured retention with minimal change."—[Official Report, 26/6/86; col. 425.]

The minimal change which they wanted and sought in response to the Government's consultative paper of the major clothing employers' body, the British Clothing Industry Association, was not any reduction in the powers of wages councils but an institutional change of the removal of the independent members to create a statutory joint industrial council. The Wages Bill makes the creation of a statutory joint industrial council impossible. The Federation of Merchant Tailors wanted no change at all. It therefore seems that this is being forced not only on the employees but on the employers as well.

I drew attention, as the noble Lords present at the time will remember and as is recorded in Hansard, to the fact that the removal of these wages councils could have a serious effect on people, some of whom are very poorly paid and working in very poor conditions. I am glad to see that the Secretary of State is here because I have a copy of a speech that he made to the London Business School, I believe on 28th April. In that speech the Secretary of State referred to his first ventures into the industry which was in those days known as the rag trade. That was, as he says, with a subsidiary of the Great Universal Stores. Although the clothing industry has never been noted for its high pay, I have no doubt that would have been in a factory where the employer recognised the dignity of the workers and gave them perhaps the best possible conditions.

My point in wanting to take the clothing industry out of this Bill, as I said in my previous address, is that I am convinced it will place in jeopardy and have adverse effects upon people in the smaller and not so desirable rag trade factories. Although the wages councils are not responsible for such things as fire precautions and regulations, this industry does have a sad history of fatalities, in some cases because of bad working conditions. In 1983, four women died in a fire in a rag trade factory in London. Some years ago, when I still lived in Manchester, in 1976 or 1977, I recall walking past a factory just outside Piccadilly Station. In that building, seven floors up, seven women died, most of them young mothers trying to earn money to give their families a better life. Those 11 deaths were among people who were working for employers who took very little care of their employees and did not by any means fulfil their obligations to employ them in safe and hygenic conditions. That type of factory is unfortunately still in existence, whether we like it or not.

As I have said, one cannot blame the wages councils for things like fire precautions which are not observed, but I think that the fact that such tragedies have taken place clearly indicates that there are still many employers who have no regard for the minimal decencies of employment and who will exploit their employees. This particular trade has a history of this sort of thing. Over the last few years advances have been made and conditions and rates of pay are better than they were and there are an overwhelming number of what I call good employers within that particular industry. That is true because those shops are, in the main, unionised, but there are still in existence literally hundreds of factories, certainly in the centres of the big cities and particularly in the centre of London, where people are being exploited.

I would hope that the noble Lord will listen sympathetically to what I have said. I do not think I am in any way exaggerating the case or making it sound any more adverse than it is. I know that in a lot of these factories are immigrant people who in some cases do not fully understand the language of this country: some are not very well Anglicised. I can only say that there are hundreds of such individuals and they are the type of person whom these small rag trade factories attract. Having said that, I can only see the removal of the wages council having an adverse effect on some of the lowest paid people in any industry in this country. I beg to move.

The Lord Bishop of Manchester

My Lords, I should like to support the noble Lord, Lord Dean of Beswick, in this amendment. I appreciate that we are at the Report stage and that long speeches are not welcome or necessary at this stage. However, there are a number of things in the Bill as a whole about which I am unhappy. In regard to the clothing industry and textile workers, I am remided of a recent visit to India and of going round a textile factory there. Many Indian workers exist in appalling conditions in these small factories. Speaking to the employer at the end, I asked him about the sitution as regards unions so far as his workers were concerned. He lifted his eyes to heaven and said, "Thank God we have no unions in this factory". It seemed to me then that one could see in the textile factories of India very much what things must have been like in Manchester, Salford and other cities where much of Britain's wealth was created in this industry back in the 19th century.

What alarms many of us, I think, is any tendency to step back in that direction, because low-paid workers in those sorts of industries need not less protection, but more. I appreciate that what is proposed affects workers under 21; but if you look at the textile industry a great deal of what I have read about it indicates that about a quarter of its workers are young workers and many need the kind of protection which the wages councils give.

It might be relevant to remember that when the Social and Industrial Affairs Committee of the Church of England made comments on this Bill last year, one of the things it said was this: A job-at-any-price policy might well produce a situation in which the alternative to poverty caused by joblessness became poverty through low wages". It may be asked: why should workers in the textile industry be excepted when there are others in the hotel and catering industries who are also low paid and need this kind of protection? I think the textile industry has a strong claim to being a special case. Looking, for instance, at Greater Manchester, I see that very large numbers of workers come from ethnic minorities. There are many girls employed there, and I believe they need the kind of protection which wages councils can give. So I would support the amendment of the noble Lord, Lord Dean of Beswick.

Lord Teviot

My Lords, I also have a lot of sympathy with this amendment. The noble Lord, Lord Dean, has naturally concentrated on the Clothing Manufacturing Wages Council, which covers nearly 200,000 workers. The other three wages councils which are included in the clothing industry each cover only a few thousand workers. I intend to concentrate on perhaps the largest of these, the Retail Bespoke Tailoring Wages Council, as I have received represent-ations from both the Federation of Merchant Tailors and the National Union of Tailors and Garment Workers. I may say that both their briefs have been most caring, sincere and moderate. Retail bespoke tailoring is a craft industry where the tailor makes the garment individually to fit each customer. The garment is generally sewn by hand, rather than by machine. Those of your Lordships who may be fortunate enough to be wearing suits bought in Savile Row or similar streets will almost certainly have been customers of members of the Federation of Merchant Tailors and will be enjoying the benefits of the craftsmanship of members of the National Union of Tailors and Garment Workers.

The Federation of Merchant Tailors is an organisation of small employers. As such, their views ought to have been taken seriously by the Government. Unfortunately, it appears that the Government, as the noble Lord, Lord Dean, has pointed out, have ignored their wishes so far. I hope that my noble friend the Minister will be able to give us some joy on this. In putting forward the opinions of the Federation of Merchant Tailors, I cannot do better than quote from a letter I have received from the honorary secretary of the federation, Mr. Robert Bright. He writes:

tail Bespoke Tailoring Wages Council has served both the industry and the workers of our industry very well indeed. We have spent two years simplifying the wages council order and would have simplified it still further but for the impositions of the Department of Employment lawyers. I may add that, if the Department of Employment lawyers, who are responsible for the new Clauses 17 and 18 (which the Government introduced in Committee at a very late stage), are also drafting the provisions of wages council orders, it is not surprising if the federation has not been able to simplify the wages council order as much as it would like.

Mr. Bright continues: The Retail Bespoke Tailoring Wages Council deals with a highly-skilled industry and sets rates for different skills It also sets rates for trainees This is particularly important as the industry is contributing more and more money towards the trainee and has in fact linked trainees' rates to particular modules of learning as specified by the Clothing and Allied Products Industry Training Board". Mr. Bright goes on to point out that the Retail Bespoke Tailoring Wages Council fixes rates not according to age but on the basis of skill and experience, and that it takes all of five years for a worker to qualify as a craft worker.

Although retail bespoke tailoring is a craft industry, it is an industry where exploitation can occur. Work can be contracted out, though that there is contracting out does not necessarily mean that there is exploitation There is a tradition of craft workers in the West End of London setting themselves up in their own premises as self-employed craftsmen. Many of these outworkers are members of the National Union of Tailors and Garment Workers and, as well as being covered by the wages council, their terms of employment are regulated by collective bargaining between the union and the federation. Elsewhere where workers are not union members, exploitation can occur. This is a matter of great concern to the Federation of Merchant Tailors, which wishes to maintain the industry's image as a good employer and also does not wish to face unfair competition Indeed, the federation is already concerned that the wages council order is not being adequately enforced. Mr. Bright again writes: We are already seeing the re-emergence of sweat shop labour, something which the original Wages Council Act sought to defeat and remove". He goes on to complain about the lack of wages inspectors and the inadequacy of the wages inspectors' lists of establishments.

As I indicated in the Second Reading debate, I am not opposed to the Bill as a whole, but I think it can be improved to take account of the different circumstances of the clothing industry and the different views of employers in the industry.

Lord Harmar-Nicholls

My Lords, I hope the Minister will resist this amendment. If there is any merit in the wages councils as they have operated, then they ought to have been able to deal with all the industries. I think they have interfered with full employment and I believe their interference in carrying out their job has, in many instances done a great deal of harm. I am not saying that on specific occasions they cannot perhaps right a grievous wrong in an individual case, but the overall interference we have had is, I think, on the debit side rather than on the credit side as regards wanting to help the revival of our industrial strength.

And where do you stop? If one accepts the arguments we have heard from the noble Lord who moved the amendment, from the Bishops' Benches and from my noble friend, they are very meagre arguments. If they are acceptable in order to remove the clothing industry from the effects of this, then you are opening the door and you would have to be prepared to accept arguments, if you are prepared to accept those frail ones, in an extended area.

I was rather disturbed by the comments from the Bishops' Bench, which were a good example of what I have in mind. When the right reverend Prelate was talking about the clothing industry, he said that in that industry, as well as in the hotel and restaurant industry, people are poorly paid and implied that they were covered by the arguments. I know something about that industry. For the whole of my life I have been connected with it and I do not think it justifies the sort of implication there was in the speech of the right reverend Prelate. If that sort of frail argument is accepted in the case of clothing, it will be extended to other industries.

I believe that the Bill is on the right road. I think that the Minister's arguments have been well based in playing a small part in reviving the sort of virility that we want in our industries, if we are to get back to anything like our previous level, and that is the only way in which we can deal with the ogre of unemployment.

6.30 p.m.

Lord Young of Graffham

My Lords, may I say at the outset that I have been touched by the interest and evident concern expressed about my whereabouts by the noble Lord, Lord McCarthy, and the noble Lord, Lord Wedderburn of Charlton. They said, "The noble Lord the Secretary of State enters the Chamber". When I leave they will say, "The noble Lord the Secretary of State leaves the Chamber". I wish to assure them that I am here now and I intend to remain here. That will, no doubt, put their minds at rest.

Our proposals for reform of the wages council system are based on the responses received to the consultative exercise we conducted last year. These showed that most employers and unions in the industries concerned wanted the system to be retained in some form. The majority of employers favoured the reforms put forward in the consultative paper. We accept that the major employer body in the clothing industry favoured retention with minimal change, but it remains the case, however, that employers overall wanted reform and this is what we have provided.

I am grateful to the right reverend Prelate the Bishop of Manchester for his comments, but I have no doubt that the clothing industry in India is a very different industry indeed. But the conditions of work which the noble Lord, Lord Dean of Beswick, raised are matters which should be settled by those concerned with conditions of work—the Health and Safety Executive and those involved with fire. Those matters are of great concern to my department and we must ensure that people work in conditions of safety and comfort. That is something we must seek. Should the noble Lord have any instances at all of where requirements on proper conditions are not being complied with, I should be more than happy to take them up on his behalf. But that is an entirely different matter from pay.

It would clearly be administratively burdensome to maintain two different sets of statutory wage-fixing machinery—one for clothing manufacture and one for the other wages council industries—quite apart from the separate machinery for statutory wage fixing in agriculture, of which mention has been made by noble Lords opposite in Committee. Nevertheless, we have considered very carefully the argument that the clothing industry should be treated differently from other wages council industries. We are not convinced, however, that a case for exceptional treatment has been made out. I therefore ask noble Lords to resist the amendment.

Lord Dean of Beswick

My Lords, I can only express my absolute disappointment at the emptiness of the reply. I think that the noble Lord who spoke from the Government Back-Benches made a miniature Second Reading speech, rather than a speech in reply to what I said on moving the amendment. I made the point—and I think I made it quite clearly—that we are dealing with people at the very lowest end of the wage scale, working in some of the poorest conditions. I am convinced that to remove the wages councils and the protection that they give will only exacerbate that situation. When I was talking about the 11 people who had died, I said I was aware that it was not a wages council responsibility, and I was using that as an example to indicate the type of conditions for some of those people in their so-called workshops.

However, time is pressing and I realise that there is very little prospect of carrying the amendment. All I can say is that I think the Secretary of State will carry a very heavy responsibility, when some of the bad employers at the bottom end of the scale start to victimise still further their employees, which is what I think will be the end result of this legislation which is now going through. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 2 [Constitution etc. of wages councils]:

Lord McCarthy moved Amendment No. 17:

Page 36, line 26, leave out ("5") and insert ("3").

The noble Lord said: My Lords, I am very pleased to see that the Secretary of State is not only here but is taking part in the debate, because this is an amendment which particularly concerns him. I am moving Amendment No. 17 and I shall speak also to Amendment No. 18. We return here to the situation that we were in at the Committee stage, when at the very last moment—and not before—we found in the Marshalled List that the Government were proposing to change the composition of the independent element on the wages councils and to increase it from three members to five.

As I said then, no consultation has taken place on doing this. The CBI was not told, the TUC was not told, it was not in the consultative document, it was not mentioned in the other place, it was not mentioned on Second Reading, and it was not mentioned on the first day of Committee. But we suddenly found on the second day of Committee that there was down an amendment in the Government's name, changing the number from three to five. The object of our amendment is to go back to three, and in addition to that to provide, at page 37, line 27, a reserve power for the Secretary of State to dismiss any one of the three. If anyone fails to attend for more than two successive meetings, we say that the Secretary of State may cancel the appointment and appoint a replacement.

We put the amendment in that form because of the debate in Committee, and because of the statements made by the noble Lord, Lord Trefgarne (who has now been relieved) who denied that it was anything to do with all the rather unfortunate suggestions and implications that we were making. For example, we suggested that this change was rooted in debates in another place in Standing Committee K, where the Government Back-Benchers moved to restrict the composition of the new wages councils and to get rid of those old pluralists on the wages councils, such as Sir John Wood and others. The Minister said that that was not the reason.

He said that he was not doing it in order to put in small businessmen, dwarf businessmen or businessmen who knew something about small businessmen, which was suggested in Committee in another place. He said that he had no desire to get rid of the present amalgam of lawyers, academics and the odd surviving trade unionist. He said that it was not at variance with the remarks which Mr. Trippier made on 15th April, at col. 604 of the Official Report, in turning down all those amendments: We have difficulty in finding people who are prepared to devote time to the wages councils … It is not easy to get such people whatever the fees may be". I can tell him that the fees are £64 a day.

Above all, the Government stressed in Committee that they were not trying to pack the wages councils. They were not trying to create jobs for Sir Alfred Sharman, Professor Patrick Minford or, before he produced his report, Professor Peacock. They were not trying to put in people who agreed with them. They wanted to see the wages councils retain their indepen-dence. That is what they said. Despite the few letters and the few complaints which were mentioned at the Committee stage, the noble Lord, Lord Trefgarne, said that the reason was that with three independent members on the present wages councils, there are at present some who have occasionally had difficulty in attending all the meetings of the council and the Government wish to ensure that they are not put to undue inconvenience. Noble Lords can see, I hope, why we have moved the second amendment in my name on the Marshalled List.

Subsequently the Minister asserted that the change from three to five arose from the joint approach of both sides of the Retail Wages Council and that it was sponsored by the employers and supported by the Union of Shop, Distributive and Allied Workers; or, at least, he said, by the trade union in the Retail Wages Council. Naturally enough, I have looked into that and I am authorised to say that that is not the view taken by USDAW. It says that it did see the Minister; it says that it did say that it would accept a move to five (or, rather, that it would go along with the move to five which was desired by the employers) but that i t would do so only if the extra two could be appointed in some balanced way, and that it did not approve of the unrestricted and straightforward amendment as it stands.

But, more importantly, because of the passage of time, I have been able to look further into this last-minute change. It is curiouser and curiouser. What I was not aware of at the time was that at the Committee stage in another place a change was made in the composition of the independents on the wages councils so far as their period of office is concerned. At the Committee stage in the other place the Labour Members supported a Conservative initiative to change the period of office from five years to three years. That was because it was said that there was a problem of availability, although, of course, as it had been done in that way it meant that the Secretary of State in the future would have had to create rather more members of wages councils.

The average number of appointments to wages councils which the Secretary of State has to make if it is a five-year period of office is some 15.6 a year. But despite the fact that he finds it difficult to find them, as a result of the amendments that had been passed in the other place he will now have to find 26 new members of wages councils next year. As a result of the amendment which the Government put down he will have to find another 52 members. In other words there will be 68 appointments next year, compared with an average of 16 appointments allowed under the 1979 Act. That is despite the fact that they are hard t0 find and despite the fact that Mr. Trippier said: We have diffculty in finding people who are prepared to devote time to the wages councils. It is not easy to get people whatever the fees may be".

Despite that, the Government have proposed and passed an amendment which will multiply by a factor of four the number of people the Secretary of State has to find to run wages councils.

So we must return, I am afraid, to the questions that we asked in Committee. Can we have assurances that these people will not be used to change the composition of the wages councils? Can we be assured that, for example, the Secretary of State will not be terminating the appointment, as I suppose he might have to, of those who have served for four years on wages councils and who will now find that they are one year, as it were, out of time? That would increase the number even more.

Why cannot the Secretary of State accept our amendment? Our amendment says that you can go back to having three members rather than five. You reduce the period in which they are going to operate but if you find that an individual member of a wages council is not turning up and is not doing the job, if the evidence shows that he fails to attend for more than two successive meetings, it will be easy enough for the Secretary of State to cancel his appointment. Of course, if he has a good excuse, you do not have to cancel his appointment. That is a residual power left in the hands of the Secretary of State. But surely, rather than multiply by four the number of appointments of people who are very difficult to find, the Secretary of State should accept our amendment. I beg to move

6.45 p.m.

Lord Rochester

My Lords, in Committee my noble friend Lord Sainsbury and I opposed the government amendment that the number of independent people on wages councils should be increased from a maximum of three to no more than five. We did so largely because the amendment had been made available to us, as the noble Lord, Lord McCarthy, has just said, only a few hours before we were required to take a decision on it and also because what the noble Lord, Lord Trefgarne, said in its support in Committee appeared, at first sight at least, to be somewhat at variance with what the Under-Secretary of State had said in Standing Committee in another place.

There it was stated that in the consultation process the Department of Employment had received few letters about the composition of wages councils, that there did not seem to be dissatisfaction with their composition and that that in itself was compelling. Having since then had time to consider the question further, I must say for my part that I now have rather a more open mind about the Government's proposal. But we—I think I can speak for my noble friends as well—certainly need more information from the Secretary of State before we can reach a conclusion.

Practically all that the noble Lord, Lord Trefgarne, told us in Committee was that the independent members should be increased from three to five because some of the three there are at present have occasionally had difficulty in attending every council meeting: There are a number of possible ways of resolving that problem. One is the course adopted by the Government. Another is that just proposed by the noble Lord, Lord McCarthy. I was once chairman of a district manpower committee, which, like a wages council, was composed of representatives of employers and employees. It also had some independent members. Under its constitution there was a rule that, if a member failed to attend more than a certain number of meetings over a specified period, his or her membership could be terminated. That principle could also be applied in this case.

A further possibility, a further way of resolving this problem, would be some modification by having alternate independent members so that out of a total of five people any three who were available could attend a meeting. At present, there is an unknown factor in the equation—the number of people the Secretary of State will appoint (for it is in his power to appoint them) to represent employers and workers respectively on a wages council. I am sorry to have to say this, but unfortunately the Government seemed to us to act in this matter at an earlier stage in such a way as to raise doubts as to their motives. I am deliberately couching my remarks in moderate words. It might help to allay suspicions if the Secretary of State could now give us some indication, at any rate, as to how many people are likely to be appointed as representatives respectively of employers and employees. We would then have a better idea of the numerical relationship between the five independent people and the others who comprise a wages council.

Finally, and here I may have to part company with the noble Lord, Lord McCarthy, I hope that the Secretary of State when he replies will be able to say that if two more independent people are in the event to be appointed, then at least one of them will have practical experience of industry and that due regard will be paid to the fact that in the industries that are covered by wages councils there will be a rather higher proportion of small businesses than there is in industry generally.

In summary, the Government need to tell the House a good deal more about what it is that they have in mind than they have done so far, and that may help to make up the minds of my noble friends and myself.

Lord Young of Graffham

My Lords, an amendment to increase the maximum number of independent members from three to five was adopted by your Lordships in Committee, and the noble Lords and the noble Baroness are now seeking to reinstate the position that obtains in current legislation. I may stress that the amendment adopted in Committee carries no implication of criticism of the independent members of a wages council. It is inevitable that there will be difficulties in finding a date and time convenient for the very large number of people involved in the operation of a major wages council.

To reply to the noble Lord, Lord Rochester, it is technically possible for there to be up to 30 people on each side of a wages council, not including the independent members. On occasions, there would also be last-minute absences through sicknesses or other circumstances beyond the control of the individuals concerned. Increasing the number of independent members that can be drawn upon will make it easier to achieve a fuller presence at meetings which have to decide questions that may be vital to the industry concerned.

I assure noble Lords that there is no intention on the part of the Government to pack the ranks of indepen-dent members with their supporters. Our aim is to avoid criticisms made in the past, particularly by the retail industry, that important questions are left to be decided with the assistance of only one or, at best, two independent members. My noble friend Lord Trefgarne disabused the noble Lord of that idea when it was raised in Committee, and I am surprised to hear the noble Lord repeat it.

The discussions in Standing Committee K centred on the need for independent members to have relevant business experience, the period of their appointment, and on how many councils they should sit. The number of independent members was not, as I understand it, brought into question.

Amendment No. 18 is simply unnecessary. Paragraph 8(1) of Schedule 2 to the 1979 Act provides: A member of a wages council… shall hold and vacate office in accordance with the terms of his appointment". Paragraph 8(1) of Schedule 2 to the Bill repeats that wording. The current instrument of appointment of independent members states: If a member appointed by the Secretary of State fails to attend one-half of the total meetings of a wages council in any period of 12 months, or, should only one meeting to be held in any 12 months, two consecutive meetings, the Secretary of State may, after giving the member an opportunity to be heard, determine his appointment". Certainly in recent years neither I nor my predecessor has had occasion to terminate the appointment of a member on those grounds.

Lord McCarthy

My Lords, I am sorry that the Secretary of State should take that line. I am glad that he said that there is no implication of criticism even of those members who do not turn up. I am glad that he says also that he does not want to change the composition, although he did not actually say that he would not put small businessmen on the councils. That point was put very strongly in another place at the Committee stage. The point that surprises me is that the Secretary of State now says that there is no real problem, because it would be perfectly possible by the existing rules to put on the councils people who would come.

We thought that because those were the existing rules, perhaps there were two tests: that one had to fail to attend half the meetings and, in addition, to fail to attend two successive meetings; and that it might be better to drop the rule about failing to attend for half the meetings and say that if a member did not attend two successive meetings that would give the Secretary of State the additional power. However, the noble Lord said that he has another power, but that he has never dismissed anybody for bad attendance and has no wish to do so. I fail to see therefore why the noble Lord needs his amendment. It all looks very suspicious. However, we shall not divide the House, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 18 not moved.]

Clause 14 [Wages orders]:

Lord McCarthy moved Amendment No. 19: Page 16, line 10, at end insert— ("( ) fixing appropriate premia payments other than overtime rates in respect of time worked in excess of basic hours where there is evidence that the abolition of orders fixing such payments has been followed by their general disappearance among the workers to whom they applied.").

The noble Lord said: My Lords, in this amendment we are trying to persuade the Government to return to the issue of fixing appropriate premia payments. The House will remember that at Committee stage we went through a whole series of amendments in which we sought to persuade the Government to put back into the Bill various elements that they had taken out of the 1977 wages council legislation.

As a result of the present Bill, the only matter that the wages councils will be able to fix is a single rate and a single overtime rate. We particularly sought to reinstate various kinds of premia payments: occupational rates, Sunday overtime rates, piecework guaranteed earnings rates, annual holidays, and so on. They were all rejected by the noble Lord, Lord Trefgarne, in a variety of ways.

He rejected them for example at col. 457 of the Official Report for 26th June, because of the length and complexity of existing wages councils' orders; or, at the same place, because of the unnecessary burden that the kind of provision we were suggesting would impose, giving businessmen less time to run their businesses; or, at col. 460, because of frequent complaints of the minima set for Sunday work in the retail trade. Finally, the Minister rejected our proposals at col. 469 because of the need to sweep away the inordinate detail made possible by the 1979 Act.

Nevertheless, after that debate, in retrospect and in contemplation, and after reading Hansard, we noticed that the Minister had not argued that premia rates were in themselves bad and that individual workers should not be paid overtime rate on Sunday, or that they were not entitled to shift allowances, to holiday premia, to extra pay for unsocial hours, to dirt money, or to extra payment for working at night. His argument was rather that such matters were the subject of collective bargaining or for individual contract negotiations.

He told the Committee not to be faint-hearted; that such excellent provisions would survive. In particular, at col. 457, when speaking about occupational differentials, he said: The Bill does not remove workers' rights to differential pay rates. The majority of workers are likely to continue to be entitled to their current rates under the terms of their contract of employment.".

In other words, if the Minister was speaking for the Government—and I take it that he was—he was telling us at that point that the Government do not envisage (and I take it would not want to see) the majority of workers working without overtime premium, shift allowances, holidays, and so on. The Government are confident that despite the fact that there is no legal regulation, matters would continue much the same; the rate of increase in wages may decline but the premium payments, which have nothing to do with the rate of increase in wages, which are merely proportionate to what that rate of increase is, will remain.

That brings us to the amendment. It only comes into operation if it turns out that in their wisdom the Government are wrong. The amendment states that: the abolition of orders fixing such payments"— that is to say, premia payments other than overtime— has been followed by their general disappearance among the workers to whom they applied".

So the amendment only comes into operation if it is clear within a wages council that, as we fear—and we are no more certain than the Government can be—the removal of statutory regulations of premia payments may lead to the erosion certainly, for example, of double time for Sunday. That is the one we are most bothered about, or the removal of premia payments for public holidays—that kind of premium. The regulations imposed by the amendment, if passed, would operate only if we were right and the Government were wrong. In that respect I see no reason why the Government cannot accept the amendment.

7 p.m.

Lord Young of Graffham

My Lords, this amendment is designed to enable wages councils to fix premium rates notwithstanding the fact that they may already have fixed an overtime rate if there is evidence that, in general, the demise of the present wages orders has resulted in employers no longer continuing to pay those premium rates.

Not only would this result in giving wages councils additional powers—something which this Govern-ment have made clear they simply cannot contemplate —but it would lead to more bureaucracy because no council could exercise its power to set premium rates unless there was evidence that the rates contained in the current wages orders were no longer being paid. We should need to make yet more inquiries of employers as to their practices and they would have to provide information on their pay structures. The Government are determined to reduce the burden on employers, not to increase it.

The clear message from the consultative exercise was that the wages council system was in urgent need of fundamental overhaul, and if this could not be achieved then the system should be abolished. Perhaps the noble Lords opposite would do well to listen to what businesses are saying about unnecessary red tape instead of seeking to tie businesses hand and foot so that every conceivable term and condition is the subject of detailed statutory prescription. Employers must be allowed the freedom, within the constraints imposed by Part II of this Bill, to run their businesses free from constricting bureaucracy. The Bill achieves that objective but still maintains a basic wage floor. Premium rates of the kind which the noble Lord opposite seeks are for agreement between parties and not for wages councils to fix. The amendment would run counter to the Government's objectives and I must therefore ask your Lordships to reject it.

Lord McCarthy

My Lords, I am not surprised at what the Minister said. Obviously we have nothing left in the sweetie bag tonight. However, I have to comment on some of what he said.

The noble Lord says that this amendment could not possibly be accepted because it would give extra powers to the wages councils. That is like saying, "I have cut off your legs, I have cut off your arms and now you want your left foot back." Of course, if you take away virtually all the powers and someone then asks for a tiny residual addition to the powers that are left, you can always say that that means extra powers. It only means a slight addition—extra powers from the point to which the wages councils have been reduced. So we do not think much of that reply.

The Secretary of State says the amendment could not possibly be accepted because there would have to be evidence. I know that the Government—and my noble friend Lord Wedderburn has accepted it—do not like reason. We are not supposed to talk about reason and now we are not supposed to talk about evidence or anything which requires evidence and reason. Unreason and prejudice is fine, but anything which requires you to go out and look at the evidence to see whether, in fact, the poor devils are getting any payments of premia is bureaucracy. We know the answer. The Government say, "We do not need evidence. We hate evidence because, on the whole, it is against us". I shall endeavour to show this in the next amendment.

Thirdly, the noble Lord says that we must listen to business. Here there is a little evidence. It is appalling, of course, and appallingly conducted. It is a small sample which would be a disgrace to any social scientist. Nevertheless, the Government did a tiny survey with their paper, Burdens on Business. In general terms it showed that wages councils did not bother businessmen. Very few of them mentioned the councils. They were much more concerned about VAT, and so on, than about wages councils. That is not what the CBI and many other businessmen were saying to the Government, but we are being told to listen to the businessmen.

The Government have never actually published the results of the consultative document. They make general statements about how everyone wanted most of the system taken away. They have never published the document and I challenge the Government, even now, to publish what businessmen said. We know what trade unionists said. The trade union evidence has been published. The TUC published what it said. The TUC is against any change in the present system, but the Government say we must not listen to the trade unionists, that we must not have the evidence but should listen to the Government telling us what businessmen say to the Government.

We see no reason why we should accept any of this but we do not propose to divide the House and therefore I ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McCarthy moved Amendment No. 20: Page 16, line 10, at end insert— ("( ) fixing a minimum period of annual holidays.")

The noble Lord said: My Lords, we once again return to an earlier debate, and I must admit that I am in a slight difficulty. I fully accept what the Secretary of State was suggesting or implying. We have been complaining or, rather, drawing attention to the fact that the noble Lord, Lord Trefgarne, was conducting this debate for the Government and now that the Secretary of State is conducting the debate for the Government I find, unfortunately, that all my quotations come from speeches made by the noble Lord, Lord Trefgarne. Therefore, it is possible for the Secretary of State to say that he is not quite certain whether he would have said all that. Nevertheless, we must do our best.

This amendment arises from the Labour opposition, with the assistance of the noble Lord, Lord Rochester, and the noble Baroness, Lady Seear, pressing the Minister in regard to Amendment No. 87, which we tabled in Committee to give back to wages councils the power to decide, first, minimum annual holiday rates and, secondly, minimum annual holidays. In his opposition to our amendment the noble Lord, Lord Trefgarne, focused almost exclusively on the second half of our amendment. I regret that he is not here now because I have to quote what he said. On 26th June, reported in col. 467 of Hansard, he said: If this amendment were accepted it would enable wages councils to continue setting the complex rules about holidays and payment for holidays which bedevil the present wages orders. We strongly believe that this is a matter which should be left for agreement between employers and workers, and that it is indefensible for such matters to continue to be the subject of detailed statutory prescription. Again, we have these general assertions with no evidence. The Government do not like evidence. The noble Lord continued: There was almost universal support among employers"— no percentages— for the view that the wages council system must be drastically reformed if it is to remain. Many of the underpayments which occur are attributable to misunderstanding, and miscalulation and payment for holidays figure prominently among these underpayments. The noble Lord subsequently amplified this in col. 469. He said: The detail has been such that even large firms have had difficulties sometimes"— no names— in understanding the orders and a number of errors have inadvertently occurred. It is this inordinate detail"— whether it is time-and-a-fifth or time-and-a-half, even Sainsbury's cannot do it, we are told— that we do not think should stand between an employer and employee and that we seek to sweep away by this measure. This amendment would prevent us doing so. I invite the Committee to reject it. It seemed to us, and to the Alliance, that this is all very well for premium payments. We accepted that in principle they could be complicated. But surely nothing was complicated, nothing was subject to miscalculation, nothing needed inordinate detail, and nothing led to inadvertent error about awarding people four week's holiday. Therefore, at col. 468, I said: Almost everything that the Minister said dealt with the second half of the amendment. The noble Lord dealt with the complexity of remuneration. He spoke about the poor, small employer and so on. I continued: Let us suppose that the amendment was to stop at fixing a minimum period of annual holidays. Would the Government object to that? … We would be willing to remove the amendment and to come back on Report with another that dealt with fixing a minimum period of annual holidays—full stop, end of message. If we did that, can the Minister say whether the Government would oppose it?". Unfortunately, the Government could not say.

If we read Hansard carefully we find in the noble Lord's speech a single reference which I take to be relevant to the second half of the amendment. At col. 467 of Hansard the noble Lord said: We really cannot continue to put businesses in a straitjacket in which they are breaking the law if, for instance, they pay a higher rate than that fixed by a wages order in exchange for fewer holidays than the order requires". I suggest to the Secretary of State at ten past seven at night that that is not a serious objection.

The Government cannot wish to facilitate a situation in which workers exchange statutory protection for money; in which employers are free to say that they can have time and a half if they ignore safety standards and they can have double time if they ignore the Factory Acts. If employers can suggest such things, there should be laws to stop them doing it. If pay is raised above the wages council rate and protection against unfair dismissal and sex or race discrimination is ignored, something is essentially wrong and the Government must admit that it is essentially wrong. The same principle applies.

If there is no question of complexity, interpretation or taking time—if the tiniest, most incompetent employer who can hardly read can understand that the worker is entitled to four weeks' pay—surely the Government can let that provision stand in the Bill. None of the substantial arguments that they have used can possibly be prayed against the amendment. I beg to move.

Lord Rochester

My Lords, I support the amendment; indeed, I am a signatory to it. In Committee the government case against permitting a wages council to fix a minimum period for annual holidays and minimum pay for such holidays was that that would enable wages councils to continue to make complex orders, which is a point already referred to by the noble Lord, Lord McCarthy, more particularly in relation to remuneration. There is certainly nothing complex about this amendment which would enable wages councils to fix only a minimum period of annual holiday.

The argument adduced by the Minister in Committee that it would be indefensible for such matters to continue to be subject to detailed statutory prescription falls to the ground. So does the argument that the amendment would place an intolerable burden on business. Like the noble Lord. Lord McCarthy, I found it particularly galling in Committee to be told that the matter should be left for agreement between employers and workers. As we constantly say, many of those working in industries covered by wages councils have no protection against unscrupulous employers other than that provided by council orders. The United Kingdom is almost alone among European countries in not providing an overall, statutory holiday entitlement.

As I said in Committee, far from creating new jobs, which is what in the Government's view this part of the Bill is about, the abolition of the holiday provision may even produce a net job loss in industries covered by wages councils by encouraging employers to make do with fewer people on their payroll. Again the noble Lord, Lord McCarthy, referred to that.

In resisting the amendment that was moved in Committee the Minister said that there was almost universal support among employers for the view that the wages council system should be drastically reformed. In degree I have some sympathy for that view, I suppose coloured by my own experience. I have first-hand knowledge of the frustration caused by the unnecessary detail and duplication and the differences between one set of wages orders and another.

But this is the key point. I do not for a moment believe that it follows that employers generally would wish to deny people working in industries covered by wages councils the right to a minimum period of annual holiday. If the Government do not accept the amendment, the House should see to it that that right is upheld.

7.15 p.m.

Lord Young of Graffham

My Lords, the noble Lord, Lord McCarthy, is always dissatisfied. When he has my noble friend Lord Trefgarne he wants me; when he has me, he wants my noble friend back again. I fear that his dissatisfaction will continue on this amendment. He seeks to persuade the House that there can be no case at all for failing to empower wages councils to require employers to provide holidays if those employers are not to be required also to provide holiday pay.

I ask your Lordships not to be beguiled by such a proposal and not to lose sight of the essential purpose of this Bill. As we have said before on many occasions, the measure we have put before the House is part of our drive to deregulate the labour market wherever possible in order to free employers to concentrate on the task of running a successful business. The briefest of all wages orders, the sack and bag, contains 11 pages. Of those 11 pages no fewer than six are concerned with the regulation of holidays. We shall never succeed in our efforts if at every turn we are pursuaded to backtrack, make concessions and re-impose complexities.

I have to say yet again that the clear wish of those employers who have to battle with the wages councils system was that it should be reduced, if it was to survive, to a basic role of providing a wage floor for the industry. We have acknowledged the case for a minimum overtime rate and we have recognised the special circumstances of workers in the catering trade, for whom the provision of accommodation is an integral part of the job. We do not intend to go further and to re-impose holiday requirements. There is no compelling reason why all businesses within a wages council trade need to be tied to giving their workers the same amount of holidays without regard to the widely different circumstances of those businesses. I ask the House to reject the amendment.

Lord McCarthy

My Lords, it is not true to say I am always dissatisfied. I am well satisfied if anybody gives me a concession. The trouble is that nobody does. The Minister is right. It does not matter which noble Lord replies. They are equally difficult, intransigent, obstinate and bigoted. Neither gives an inch. The sack and bag wages council order does not have six pages that deal with holidays. Most of the complexities concern premium payments and rates of those payments. Four weeks' holiday is not a complicated provision. It is simple. It is a provision that is universally operated in a wages council industry. I do not believe that the great majority of employers in those industries at the moment are not observing minimum holiday periods. Everybody knows what the minimum period is. The evasions of wages council provisions with which the inspectorate is now much too small to deal for the most part relate to pay. They arise partly because, I admit, premia can sometimes be complicated and because many employers do not want to pay the minimum rate. Most of the people, most of the time, will observe what the holidays are. It is generally known in the particular wages council industry what the holidays are. There is no complex-ity.

No one is saying that the holiday has to be the same. The final argument that the Secretary of State used against us was that we were trying to insist that everybody gave the same amount of holidays. The wages council system is a minimum system. In principle it is possible to give more than four weeks. It is possible to give five or six weeks. I have no doubt that people give six weeks' holiday to their executives; nevertheless there should be a minimum amount of time laid down as regards ordinary people. That is really all that we are saying—that a minimum period should be laid down for ordinary people.

I do not suppose that we shall convince the Government. I do not suppose that we shall win. We have won a few votes on sex discrimination. That was partly because the Labour Peers had a party at the time. I understand that the Conservative Peers had a party at the time; but they are well represented in the House. Nevertheless, we intend to divide on this amendment.

7.21 p.m.

On Question, Whether the said amendment (No. 20) shall be agreed to?

Their Lordships divided: Contents, 72; Not-Contents, 113.

Airedale, L. Mackie of Benshie, L.
Ardwick, L. McNair, L.
Barnett, L. Manchester, Bp.
Birk, B. Mishcon, L.
Blease, L. Molloy, L.
Boston of Faversham, L. Monkswell, L.
Carmichael of Kelvingrove, L. Morton of Shuna, L.
Chitnis, L. Mountevans, L.
Cledwyn of Penrhos, L. Nicol, B.
David, B. Parry, B.
Dean of Beswick, L. Phillips, B.
Elwyn-Jones, L. Pitt of Hampstead, L.
Ennals, L. Ponsonby of Shulbrede, L.
Ewart-Biggs, B. [Teller.]
Ezra, L. Prys-Davies, L.
Falkender, B. Rea, L.
Gallacher, L. Rhodes, L.
Glenamara, L. Ritchie of Dundee, L.
Graham of Edmonton, L. Rochester, L. [Teller.]
Grey, E. Ross of Marnock, L.
Hampton, L. Sainsbury, L.
Hanworth, V. Seear, B.
Hatch of Lusby, L. Serota, B.
Hayter, L. Shackleton, L.
Heycock, L. Stewart of Fulham, L.
Houghton of Sowerby, L. Stoddart of Swindon, L.
Howie of Troon, L. Taylor of Gryfe, L.
Irving of Dartford, L. Taylor of Mansfield, L.
Jeger, B. Tordoff, L.
John-Mackie, L. Turner of Camden, B.
Kagan, L. Underhill, L.
Kilmarnock, L. Walston, L.
Kirkhill, L. Wedderburn of Charlton, L.
Llewelyn-Davies of Hastoe, B. White, B.
Lockwood, B. Wigoder, L.
Longford, E. Wilson of Rievaulx, L.
McCarthy, L.
Ampthill, L. Buckinghamshire, E.
Auckland, L. Butterworth, L.
Bathurst, E. Caithness, E.
Bauer, L. Cameron of Lochbroom, L.
Beaverbrook, L. Campbell of Alloway, L.
Belhaven and Stenton, L. Campbell of Croy, L.
Beloff, L. Carnegy of Lour, B.
Belstead, L. Cathcart, E.
Bessborough, E. Coleraine, L.
Boardman, L. Colville of Culross, V.
Boyd-Carpenter, L. Constantine of Stanmore, L.
Brabazon of Tara, L. Craigavon, V.
Brougham and Vaux, L. Craigmyle, L.
Broxbourne, L. Cullen of Ashbourne, L.
Davidson, V. Maude of Stratford-upon- Avon, L.
De Freyne, L.
Denham, L. [Teller.] Mersey, V.
Dilhorne, V. Milverton, L.
Donegall, M. Morris, L.
Drumalbyn, L. Mottistone, L.
Dundee, E. Moyne, L.
Elliot of Harwood, B. Munster, E.
Elton. L. Murton of Lindisfarne, L.
Enniskillen, E. Napier and Ettrick, L.
Faithfull, B. Nelson of Stafford, L.
Fortescue, E. Newall, L.
Gainford, L. Pender, L.
Gardner of Parkes, B. Peyton of Yeovil, L.
Gibson-Watt, L. Platt of Writtle, B.
Glenarthur, L. Plummer of St. Marylebone,
Gray of Contin, L. L.
Greenway, L. Rankeillour, L.
Gridley, L. Reay, L.
Grimston of Westbury, L. Reigate, L.
Hailsham of Saint Renton, L.
Marylebone, L. Rochdale, V.
Harmar-Nicholls, L. Rodney, L.
Harvington, L. Sanderson of Bowden, L.
Henley, L. Sandford, L.
Hives, L. Selkirk, E.
Home of the Hirsel, L. Sharpies, B.
Hooper, B. Skelmersdale, L.
Howe, E. Stodart of Leaston, L.
Ingrow, L. Swinton, E.
Kimball, L. Teviot, L.
King of Wartnaby, L. Thomas of Swynnerton, L.
Kinloss, Ly. Thorneycroft, L.
Kinnaird, L. Tranmire, L.
Lane-Fox, B. Trefgarne, L.
Lauderdale, E. Trumpington, B.
Layton, L. Vaux of Harrowden, L.
Lindsay, E. Vickers, B.
Lindsey and Abingdon, E. Vinson, L.
Long, V.[Teller.] Whitelaw, V.
McFadzean, L. Wise, L.
Macleod of Borve, B. Young, B.
Margadale, L. Young of Graffham, L.
Massereene and Ferrard, V. Ypres, E.

Resolved in the negative, and amendment disagreed to accordingly.

Lord Skelmersdale

My Lords, I beg to move that the House do now adjourn during pleasure until 8.30 p.m.

Moved accordingly, and on Question, Motion agreed to.

[The Sitting was suspended from 7.30 until 8.30 p.m.]

The Deputy Speaker (Lord Hayter)

My Lords, I have to tell the House that if Amendment No. 21 is agreed to, I cannot call Amendment No. 22.

Lord McCarthy moved Amendment No. 21: Page 17, line 9, leave out from beginning to ("and") in line 13 and insert— ("(a) any evidence which suggests that a given variation in an existing rate is likely to result in a variation in unit labour costs sufficient to induce a significant variation in the level of employment among the workers to whom it will apply").

The noble Lord said: My Lords, in moving this amendment I wish to speak also to Amendment No. 23. The aim of both amendments is to replace the criteria in Clause 14(6) with a more balanced criteria. The Bill says that wages councils should, in the future, have regard to the effect of any increase awarded on employment levels. That is what one might call the first limb of subsection (6). But the Bill then goes on to say that this should particularly be the case where existing wages are below the national level for such workers. That is what might be termed the second limb of subsection (6).

We argued in Committee that the second limb of the subsection was contradictory and that if it was not contradictory and if it was reinforcing the first limb, it was objectionable because it assumed that only the low paid could price themselves out of jobs and that the higher paid had to be bribed into work. We thought that we had got an understanding from the Government spokesman at the time that the two limbs of subsection (6) are reinforcing rather than contradictory. If that is the case, we shall argue it out again on the next amendment to be moved by my noble friend Lady Turner. Nevertheless, we felt that these two criteria together are too vague, too general and too contradictory, and that there is a need for rather more balanced criteria. The amendment that I am moving, in association with Amendment No. 23, is an attempt to replace the present criteria with more balanced criteria.

The two amendments together vary from the present subsection (6) in two ways. First, we focus in our amendment on evidence. There should be evidence, we say, that a given variation in the existing rate is likely to result in a variation in unit labour costs. There has to be evidence, and the evidence is directed to a change in unit labour costs. If there is evidence of a variation in unit labour costs, and this is sufficient to induce a significant variation in the level of employment, the wages councils should take it into account.

But, just as important, we want the wages councils to look beyond merely the effect on employment. If there are to be specific criteria set out for wages councils, the criteria should be balanced. This is where Amendment No. 23 comes in. In that amendment we are saying that they should not just take into account the employment effect. They should also take into account such things as the effect on the quality and supply of labour, and this should be given equal weight in the minds of wages councils and not left to the general clause as it is on the present face of the Bill.

That is the substance of the amendment. I would put three arguments to the House in favour of the amendment. First, the criteria of our amendment approximates to the dictates of what the noble Lord, Lord Trefgarne, called at Committee stage common sense. It is a commonsensical way of looking at the problem. Secondly, the criteria approximates to the results of research. We feel that the Government should have some regard to the results of research if only because most of the relevant research was commissioned by the Government. Thirdly, we say that all independent and balanced observers who have studied the research do not as a whole support what the Government are seeking to do. They could not be said to support the face of the Bill as it stands.

As to the sensible criteria of our amendment, if one wants to discuss sensibly the impact of wages, and increases or reductions in wages, on the level of employment, one has to begin by asking what needs to happen if wages are to be positively related to employment. First, as wage costs fall, there has to be a shift to more labour-intensive methods of production; or, as wage costs rise, there has to be a shift away from labour-intensive methods of production. The assumption is that in that way more people are employed. That is the first way in which there might be a positive employment effect.

Secondly, as wage costs fall, prices might fall. And if prices fall enough, demand will rise and more people will be employed; or, again, if wage costs rise, demand may fall, and fewer people will be employed. These are the two ways in which, on common sense grounds, one might expect there to be a positive employment effect. It is clear that the Government, in subsection (6), take this to be self-evident. Indeed, it has been said. It was said on 6th June at col. 1241 by the noble Lord, Lord Trefgarne. When challenged by my noble friend Lord Graham to say what evidence there was for what the Government wanted to do, the noble Lord said: My Lords, the doctrine that I ask your Lordships to accept is the doctrine of common sense, which is that if employers are obliged to pay young people wages that are higher than necessary then they will employ fewer of them. I should have thought that stood to reason".

Again, at col. 433, on 26th June, the noble Lord said: If research did not exist, common sense would surely tell us the same thing".

I shall come in a moment to what research says. The point now is that common sense, of course, says nothing of the sort. Common sense suggests that there is a multiplicity of factors which, in the real world, can erode, offset and positively reverse this positive wage employment effect. I do not want to delay the House for too long, so I shall give five to be going on with. There could be no shift away from capital intensive methods to labour intensive methods. New products and technology could require accelerated rates of capital substitution whatever happens to wages. A reduction in labour costs could be used to maintain profits or raise dividends, and there would be no employment effect. There could be no reduction in prices because the employer believes—and he could be right—that the market for the product is inelastic. The employer could assume that the market is inelastic, could reduce prices and could be wrong, and there would be no increase in sales. Or—and this is very apparent in the evidence—the employer could have made a prior decision, because of the unsettled state of the market, not to expand to a point where it is necessary to increase labour supply until there is strong evidence of a sustained and independent rise in a product demand that has nothing to do with the relative factor prices.

On all these common sense grounds the common sense doctrine that a fall in wages means an increase in demand and, therefore, an increase in employment might fall down, and, in the real world, does. The evidence can be found in most of the studies. Most of the studies in most countries suggest that if there is a positive wage employment effect, it is a weak one. It requires a disproportionate reduction in wages to produce a minute increase in employment.

Large number of workers already in employment have to accept severe reductions in their standard of living in order to generate small amounts of employment outside, unless they are part of the general expansion of the economy where other factors can come in. The evidence also suggests that the purchase of this tiny element can be at much too high a price, not in social terms—I am not talking about social terms today—but in terms of a fall in labour efficiency, in terms of a decline in morale and productivity, in terms of high rates of turnover, and so on

Noble Lords may say that that is what the noble Lord said and the the noble Lord would say that. We therefore turn to the result of research. Let me ask first: what are the Government's claims for research? The Government are systematically delphic in what they claim about research. The noble Lord, Lord, Trefgarne, said in Committee on 26th June, at col. 433 of Hansard: I have been asked about the number of jobs that would be created by these arrangements. The Committee will understand that there can be no certain answer to such questions. Pay is not the only matter which determines the level of employment, and we have never maintained or supposed that it was. I can only repeat to the Committee that research has shown that pay is a significant factor although estimates of its effect vary widely.

Again, at col. 1240, at Second Reading, he said: All the studies which have been undertaken on the possible effects of abolishing the system point firmly to job gains and clearly the Government's reforms must go some way down the road". Finally, at col. 433 on 26th June, he said: Evidence can be found in all the studies"— I repeat— in all the studies on the effects of wages councils that they have inhibited employment prospects. We believe in wages council industries employment of young people has been inhibited by rates set far too high".

I would submit to the House that if research generally showed that pay was a significant factor, if all the studies pointed to job gains, if there was evidence that the wages councils inhibited employment in all the cases, there would be no case for our amendment. But what is the position? Because of the lateness of the hour I give merely eight outstanding examples of contrary evidence, and I summarise them.

First, there is the series of studies in 1979 done by Craig and Wilkinson of Cambridge Department of Economic Affairs for the Department of Employment. These are studies which are particularly interesting because they looked at the abolition of wages councils in paper, jute, cutlery, and so on. They found that declining wages were met by declining employment and no reversal of the trend and no positive employment effect.

Secondly, there is Makeham's 1980 Study for the DoE—Youth Differentials and Employment—which said: I could not detect any significant effect of relative youth pay upon unemployment". There is Craig's 1982 general study, also for the Department of Employment: The Relationship of Low Pay, Regulation and Industrial Organisation. That had the same conclusions. So positive was it that it ended up by saying: Unregulated low-wage competition destabilises product markets, increases uncertainty and risk, slows down the rate of scrapping of outdated equipment, and consequently reduces the level of new investment in the high wage firms". In 1983, a similar study by Wells produced conflicting results for boys and girls, and concluded: Undoubtedly the biggest factor is the general level of employment".

In May 1986, most embarrassing of all—the Department of Employment's own goal—there was Craig and Wilkinson's delayed research paper 51 on wages councils and employment in four retail trades. That says that there is, no strong presumption that the retail wages councils have had an important and independent employment effect". They interviewed 81 per cent. independent businessmen and 90 per cent. of the multiples that they interviewed said they had no intention of taking on any more labour until there was a general revival of the product market.

Of course, these own goals were paid for by the Department of Employment. We have to add the Ministry of Agriculture study on minimum wage regulation for farm workers. The Secretary of State said earlier that he could not possibly countenance the situation in which we had two systems of statutory wage regulation. But the Government have introduced two systems of statutory wage regulation because they are going to leave the agricultural wages board alone. The Ministry of Agriculture upheld the agricultural wages board and it will continue.

There is the ACAS study of hairdressing wages councils and the investigation of the Auld Committee, neither of which proposed the abolition of wages councils to promote employment but both of which feared that in this country at this time the abolition of wages councils, or the cutting back of wages councils, would lead to declining wages without increasing employment.

To be fair, it is true that there are very few studies which are not so sceptical as are the majority of these studies. But without exception they all have serious methodological drawbacks. The latest with the finest set of methodological drawbacks was the internally based EMRU DoE study by Morgan on the clothing wages councils which was published at the same time as the retail wages council study in an effort to show that the retail wages study was not the only one. It was an internally based study which stopped short at 1981 and left out of account the effect of the collapse of exports, ignored the position in relation to women who constitute 75 per cent. of the wages force (because the model did not fit) and who above all, and most importantly, did not do field studies comparable to the studies done in the retail study. After all this it could only manage to bring out a perhaps small but nevertheless clear (if not to the naked eye) negative influence on employment.

There is of course our old friend the Chancellor's methodological disgrace on the relationship between employment and wages. I would make only two points about that study because it is the study that the Government in the end have to rely on. It asserted a positive employment effect of between 5 per cent. and 1 per cent. In other words, in each 1 per cent. change in real wages—said this study—we get 175,000 new jobs. The first point to make is that this was denounced in New Society on 28th February by the two economists on which that prognosis was based—Messrs. Metcalf and Nickell. In any case, if one recalculates those figures for this Bill one produces a result of about 3,500 jobs. There is therefore no set of figures, no set of studies which the Government can find which supports what they are saying.

It is not only me who is saying this. If one turns to the views of the independent observers who are faced with all this evidence, who have read all this evidence and used their own common sense, they come to much the same conclusions. That is why the CBI—which did its own study—came to much more sceptical conclusions than the Government. That is why the IPM—which asked its members—came to much more sceptical conclusions. That is why the NEDO working party group said this: The idea that the present wage rates are substantially reducing unemployment of the young is largely an unproven assertion".

Above all, and most remarkable of all, that is why the Conservative-controlled Employment Committee in another place looked at all this evidence, read all these research papers—most of which were produced by the Government—and said: The highest estimate we could advance for total abolition would be 25,000 jobs".

Once again, for this Bill that would mean 3,500 young workers. For all this the Government will depress living standards of all the young workers. For just this the Government will instruct the wages councils, on the face of the Bill, to focus centrally on the employment effect irrespective of size, evidence. and the other factors that they should take into account, which we ask them to take into account as a result of our amendment. We say that on evidence like this which is now available to the Government no doctor would operate, no businessman would invest, no jury would convict, and no housewife would purchase a bar of soap. We beg them even now to accept the more reasonable and balanced criteria contained in our amendment. I beg to move

Lord Young of Graffham

My Lords, I am grateful to the noble Lord, Lord McCarthy, for what I can only describe as his annual Dimbleby Lecture on all the research and wages councils. However, I should like to turn to Amendments Nos. 21 and 23 which at least concern the subject which we are discussing. It seems to me that we are getting into the field of unintended and quite unnecessary complications. Let me stress that we are not in the business of giving the wages councils complicated and detailed instructions on how they are to do their job.

The reason for this subsection of the Bill is quite simple and I ask your Lordships to look at it in a simple light. The facts are, first, that it has been represented to us on many occasions in the past few years that wages councils see their role as setting "going" rather than "minimum" rates, and secondly that the size of their awards has on some past occasions raised doubts in our minds as to whether the councils have given any thought to the possible effects of those awards on employment. I can speak only from my own experience during my time at the Manpower Services Commission when minimum rates in the distributive trade were set above, for example, the young workers scheme which made the employment of young people at the age of 17 much less likely.

The drafting of Clause 14(6) simply reflects our desire to ensure that wages councils take account of the possible employment consequences of their actions, and that they understand that their function is to provide a floor to pay in their industries. We have in no way suggested that they should not take other factors into account—indeed Clause 14(6)(b) invites them to consider whatever other matters they think appropriate.

If a wages council is to set a wages floor for the trade in question, it must, I submit, bear in mind pay variations between one part of the country and another. It must also take note of the fact that the effect of that floor may differ in one part of the country and another. To take an obvious example, living and working costs in a large urban area like London may mean that employers there have to pitch their wage rates at a higher level. If a wages council were to gear its thinking to pay levels obtaining in London, it might, by inadvertance, establish a minimum which would not be appropriate—and indeed might have disemployment effects—in a remote rural area.

Clearly, where we have a situation in which councils are to set only a single minimum, it is important that they understand that the function of that minimum is to provide a floor that is appropriate nationally in terms of the impact on jobs, not one which is geared only to an area like London. There really is nothing more to the subsection than that, and attempts to pick out and emphasise particular concepts such as unit labour costs—important though they are—are merely likely to confuse and complicate the issue.

Concerning Amendment No. 23,I submit that it is the business of employers to decide the level of pay which will recruit and retain the right kind of worker. A statutory minimum rate is a minimum rate. There is nothing to prevent an employer negotiating a higher rate if he considers that it is to the advantage of his business to do so. I ask your Lordships to resist these amendments.

Lord McCarthy

My Lords, the Minister made three or four remarks, none of which was to the point. He says that our argument is complicated and muddled; but he does not say the precise way in which it is complicated and muddled. I say that his Bill is partisan and bigoted, and I have spent a long time saying why. The noble Lord says that I have given a Dimbleby Lecture, but he does not contradict any of the figures. That is the trouble with this lot—they never contradict the figures; they ignore the figures, but they told us earlier that they do not like evidence.

The noble Lord says that he wants the wages councils to take into account what they think is appropriate, and I accept that that is on the face of the Bill. The point we are making is that it is residual; it is something that is included in the Bill after the Government have, first, charged them to take into account the employment effect and, secondly, charged them to do something in particular about the employment effect where wages are unduly low, and then the Government throw them the bone of taking into account whatever they think is appropriate. If the Government want to say what those other matters are, if they want to give those other matters anything like the weight that they give to the matters which they specify in the Bill, then they would be coming forward with some such amendment as this.

The noble Lord then said that the second limb was something to do with regional differentials. I do not think we are suggesting anything to do with regional differentials. I am afraid that that is just a total misunderstanding of the substance of the amendment. There is no help in them; there is no improvement for them. We withdraw this amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden moved Amendment No. 22: Page 17, line 10, leave out from ("and") to end of line 13.

The noble Baroness said: My Lords, I rise to move Amendment No. 22 in the names of my noble friends. During the course of the debate in Committee we put down an amendment to delete the words, "national average remuneration" and to insert "general level". The reason for that was that "national average" did not convey a very precise meaning in this context, whereas "general level" did. After all, it was the term used in Schedule 11, which is now repealed, of the Employment Protection Act, and the Central Arbitration Committee, of which I am a member, adjudicated on issues which at that time were referred to it and had no difficulty at all in dealing with that as a concept and producing findings which were usually acceptable to both sides.

However, when we put down this amendment in Committee, the Government rejected our argument at that time, and we are now concerned with the Bill as it stands, because we believe that the clause now before your Lordships is certainly very obscure and not the kind of clause which will enable wages councils to have any real guidance at all. Does it mean that wages which are already low can be further depressed? Is it intended, when looking at the rates in a particular area, to take note of those which are already in the lowest categories? The national average for such workers could not presumably be below the rate set by the wages councils, and if it was, would it not be illegal? In fact the whole of paragraph (a), and particu-larly in view of the response of the Minister to the previous amendment, seems to us to be designed to drive low wages still lower. From these Benches we are saying—and we have been saying it throughout this debate—that further to depress low pay is not the key to the unemployment problem. It is not right or proper that the wages councils that remain after this Bill reaches the statute book should have the impression that their main objective is to drive low pay lower.

As we have often said, poor people with few marketable skills will work for very little. They are vulnerable to exploitation and that is why they need the protection of Parliament. It seems to us that in this Bill the Government are driving down the level of wages of the poorest paid who are of course—and we have repeatedly said this—not in a position to negotiate their own terms and conditions to the advantage of anyone but the employer because the Government believe that in this way they will be priced into employment. That is why the Government have denounced the ILO minimum wages convention—and we are the only industrialised country to do so—at a time when Japan, whose economy is so often quoted as a model, has recently decided to adopt it.

We should not burden the wages councils with a formula that is virtually meaningless and which could well compel them to act as an agent for pricing people into low paid jobs. When our previous amendment was before your Lordships in Committee we tried to argue this point and I believe that at that time the Minister felt that we had some arguments on our side, but we did not press the matter. However, we are putting this before the House this evening because we want to improve the Bill. We do not want to burden the wages councils that remain with criteria that will be very difficult for them to operate, and in particular we do not want wages councils left with the function and the feeling that it is their job to drive down wages and further to depress the wages of very low-paid people. On those bases I move the amendment before your Lordships.

9 p.m.

Lord Young of Graffham

My Lords, as I have said in speaking to the previous amendments, councils have been the subject of much criticism for setting minimum rates which reflect what is often called the "going rate" instead of providing a safety-net or "floor" below which no worker's basic pay should fall. The introduction of a specific obligation on councils to consider the link between the rate they fix and the level of employment in their trade in all areas is designed to meet these criticisms.

It is simply there to serve as a reminder to councils that their function is to set only a basic minimum and that, in setting this minimum, they should not focus upon areas of the country like London and the South-East—where earnings costs are higher and employers have to pay higher rates—but direct their attention to the effect the rate they fix would have on lower-paying areas where employers could not afford to pay such a high rate.

In short, the Government's object is not to reduce the rates for the lowest paid, as the noble Baroness has argued, but merely to prevent the minimum rate which employers must pay being increased to the extent that many workers will be likely to lose their jobs. Surely the best protection we can give to any worker is a job itself. I therefore ask noble Lords to resist this amendment.

Lord Graham of Edmonton

My Lords, I wonder how the Minister can justify, at a time when the average industrial wage is in excess of £150 a week, the suggestion that shop workers are apparently in danger of pricing themselves out of a job when the rate under the wages council is less than £80 a week? Where is the logic? If there were a surfeit of workers queueing up to take work at less than £80 a week, that would be a different matter.

The Minister spoke in terms of a floor and a safety net. The Minister is unable to produce any evidence for this whatsoever. He constantly says, "We have been advised", or "We have been told". There is not an authoritative body of opinion in industry which is prepared to say that the negotiated rates under the wages councils are not looked upon as the going rate. And quite frankly the going rate is very modest indeed. We are talking in terms of 16 and 17 year-olds with a wage of less than £50. We are talking in terms of employers who, given the opportunity, will pay as modest a rate as possible.

The Minister, with his experience, ought to be ashamed of himself coming to the House and speaking in terms of employers who not only are not prepared to pay the going rate but will seek to keep it modest. The Minister must know that a vast number of workers are part of collective agreements. I can speak of the retail trade, where there are provincial A, provincial B, and metropolitan bands. There already exists, for the vast majority of workers, a means whereby they are able to have built into their minimum rate some reflection of the kind of rates which have to be paid in those areas.

The Minister is in grave danger of allowing this Bill to go on to the statute book with very few friends in the trade union movement, and not only those who enjoy the protection of trade unionism but the millions of people who are unorganised. It is to the credit of the trade union movement that they are concerned not only about the lot of their members but also about the millions of people—particularly women, and particularly part-time workers—for whom a wages council rate is their lifeline. The Government and the Minister should be thoroughly ashamed of themselves.

Lord McCarthy

My Lords, may I ask the Minister to explore what he said? I want to understand it. I apologise if I misrepresented him earlier this afternoon in saying that he did not believe that the poor could produce wealth. However, he seems to be saving something rather strange today, and we ought to try to understand it.

He does not say that they cannot produce wealth, but that the problem is that they are in danger of getting more than their fair share; whereas the danger with the rich, he seems to say, is the reverse. They must get more or they might, in effect, withdraw their labour, or withdraw what Mr. Winston Churchill called their "utmost endeavours". Therefore, the poor can be priced into work, but the rich must be bribed into work.

It seems to me that in effect—and I do not want to misrepresent him—he said that again when he replied to the noble Baroness. I think I have it right that he said that the object of the second limb of subsection (6) is to take into account the fact that, within a given industry, there are some areas where wages are lower than they are generally, and it is in those areas of an industry where wages are lower than they are generally that there is most danger of people being priced out of work, and that is what the wages councils must take into account.

They must not be affected by the fact that there are, let us say, parts of the country where the hairdressers' wages council could afford an increase as high as the cost of living, because it might be that on the north-east coast, if you gave a 5 per cent. increase, hairdressers would be priced out of work. Therefore, they must give 3 per cent., so that on the north-east coast they remain in work, and that is unfortunate but at least we maintain employment.

This is the most bizarre economic doctrine. It does not follow that because people are at the lower end of a distribution scale that they are about to be priced out of work. It is just as likely that people at the top end are near the margin of tolerance, and that if they get another 5 per cent. they will be priced out of work. It is just as likely that the higher paid are in much greater danger from reductions in the level of employment than the lower paid.

This is one of our central arguments, but the Secretary of State continues to argue that the rich must get richer unless we are to have them not working as hard as they do. They must be motivated. They must have incentive schemes. There is no risk at all that they will be priced out of work; only the poor can be priced out of work. It is a strange and bizarre economic theory. Adam Smith would have none of it.

Baroness Turner of Camden

My Lords, I take it that the Minister does not feel disposed to accept our amendment. I regret to hear what he said. It has largely been replied to by my noble friend Lord McCarthy. I remind the House, as has been mentioned by my noble friends, that we are considering rates of pay that are already extremely low. The rates for wages councils range between £50 and £78 a week. There are certain industries where for young people in particular the rates are extraordinarily low. This is especially true for part-time employees, large numbers of whom are women. For these reasons it seems to me that it is essential that we have criteria that do not give wages councils the impression that it is their job to drive low wages lower still and to price people into employment in the way that has already been described by my noble friend.

I regret that the Government seem to be set on this course which can only demonstrate to the world at large that we are set upon creating a low-wage economy in this country—something which we have opposed on these Benches and which we shall continue to oppose for as long as we possibly can. We think it is an outrageous concept for a highly industrialised country. While I very much regret what the Minister had to say, in view of the lateness of the hour I shall not press the amendment. But, frankly, I think the reaction of the Government to these very reasonable amendments is in all the circumstances quite deplorable.

On Question, amendment negatived.

[Amendment No. 23 not moved.]

Clause 17 [Computation of remuneration]:

Lord Young of Graffham moved Amendment Nos. 24 to 29:

Page 20, line 24, after ("expenditure") insert ("consists of payments to persons other than the employer,")

Page 20, line 33, at end insert—

("( ) any deduction in respect of the worker's necessary expenditure in connection with his employment to the extent that the deduction is attributable to the week in question;")

Page 21, line 4, at end insert—

("( ) any payment in respect of the worker's necessary expenditure in connection with this employment to the extent that the payment is attributable to the week in question;")

Page 21, line 5, leave out ("made by the worker to the employer") and insert ("due from the worker in that week")

Page 21, line 10, leave out ("made by the worker to the employer") and insert ("due from the worker in that week")

Page 21, leave out lines 16 and 17.

The noble Lord said: My Lords, with the leave of the House I should like to take Amendment Nos. 24 to 29 together. This is a group of Government amendments to Clause 17 which deals with the method of calculating the remuneration paid to a worker for the purpose of comparison with the statutory minimum due under the wages order. The clause is lengthy and somewhat complex because it has to ensure that the calculation is properly made in all circumstances. The amendments improve the drafting and make the Government's intentions clearer.

Amendments Nos. 24 to 26 do not change the substance of the clause, but they state more logically how a worker's necessary expenditure in connection with his employment is to be taken into account, distinguishing between payments made by a worker to a person other than the employer, deductions made by the employers and payments made by the worker to the employer.

Amendments Nos. 27 to 29 are consequential on Amendments Nos. 24 to 26. The first two replace the line omitted by the third. The combined effect is to ensure that the amounts to which subsection (3) refers are to be taken into account in the week the payment is due from the worker, once they have been received by the employer as in subsection (l)(ii). I beg to move.

Lord McCarthy

My Lords, this is the first chance we have had to debate Clause 17 with full notice because the House will know that it was presented in Committee at a very late stage. This is the very first chance we have had to consider it with the benefit of the Notes on Clauses which the noble Lord, Lord Trefgarne, promised to send us at the Committee stage. I should like to thank him for doing so. Bearing in mind the new amendments that the Government have introduced and looking at the clause again we feel that it is still a most dreadfully written and complicated clause. It still shows no sign of having been written by Sir Humphrey, but it is better than it was and two of the three points that we want to make about it will be made at another time.

We want to make a point that we make in one of our amendments, Amendment No. 30, taking it with Amendment No. 31, which will be spoken to by my noble friend Lord Wedderburn later. It is not for me to mention it now. We shall have something to say later about Amendment No. 32 which the noble Lord is not taking in this group. I do not wish to say anything about that at the moment. On Amendments Nos. 24 to 29, we wish to thank the Government for meeting the substance of the point that we sought to make in our Amendment No. 99B in Committee, and finally eliminating, as I am sure they always intended to do, all elements of truck.

On Question, amendments agreed to.

Lord Wedderburn of Charlton moved Amendment No. 30:

Page 21, line 21, leave out ("event") insert ("default")

The noble Lord said: My Lords, this amendment relates to the same clause to which my noble friend spoke. It is a difficult clause but made slightly easier by the explanatory notes sent by the noble Lord, Lord Trefgarne, for which I should like to join my noble friend in thanking him. These amendments really represent a question to the Government. In computing the remuneration, one takes under this clause the money payments with the advantage of certain-deductions in the worker's favour. But in subsection (4) one comes to matters where the worker is deprived of advantage. It is therefore clear that in the light of what is coming in Amendment No. 32, one must look—and clearly the Government have looked—with very great care at this amendment to see that it is not unfair and that it does what it sets out to do.

Amendment No. 30, which I am moving and with which I associated Amendment No. 31, asks the question of whether paragraph (a) really achieves what it sets out to do. That is to say, as I understand it, it means to deprive the worker of advantage in respect of deductions for conduct or events in respect of which he has contractual liability.

Most of those, I suppose, would be covered by Part I of this Bill, but that might not be so. The point which is raised by the two amendments together is simply this. It is plainly the Government's objective that a deduction to avoid paying the minimum rate must not be included because obviously that would defeat the whole object of the Bill. I take that to be common ground.

The Government, as I understand it, believe that they have achieved that objective by the words, any conduct of the worker or of any other event in respect of which he … has contractual liability".

It seems to us that that might not be so in the sense that a contract which stated that an agreed deduction of a particular amount say, up to 10 per cent. in retail employment, could be made in the event of certain stock deficiencies or in the event that the wage to be paid exceeded a certain amount, might well be construed by the courts, since both would be "events", to fall within a different compass from that which I believe is the common objective in this clause. It therefore raises the issue of whether the Government would look again at the word "event". In the first line of paragraph (a) and, in connection with that, the second half of our question, perhaps it could be made clear that, if "event" were to be retained, that did not include the event of a wage which exceeded a particular amount giving rise to a liability for deduction or repayment. I beg to move.

9.15 p.m.

Lord Young of Graffham

My Lords, Amendment No. 30 seeks to narrow the application of subsection (4)(a), and in doing so is likely to raise difficulties about the meaning of the word "default" in this context. The purpose of subsection (4)(a) is to ensure that amounts relating to the worker's conduct or events in respect of which he has contractual liability do not affect the calculation of remuneration paid when comparing this with the statutory minimum due. The use of the word "event" facilitates interpretation. It simply means that if no event occurs in respect of which the worker has a contractual liability, any deduction under this part of subsection 4(a) would not be allowable. As Part I of the Bill demonstrates, it is the Government's view that there is no reason why employers and workers should not be left to decide the circumstances in which deductions may be made without statutory interference.

The effect of this amendment is contrary to that policy because it has the result that in wages councils' industries a deduction for an event where there was no default on the part of the worker, but for which he had accepted contractual responsibility, would have to be set against the remuneration taken into account in deciding whether the statutory minimum had been paid. This could negative the effects of making the deduction in the first place. The Government believe that these matters should be left for the parties to resolve according to the contractual terms they have agreed to be bound by. For that reason the Government do not find this amendment acceptable.

Lord Wedderburn of Charlton

My Lords, I feel that I must add a word or two. The last sentence of the Secretary of State's reply I feel that he will want to reconsider because this is not an area where we leave matters to the parties to resolve. We are setting down a rule about what would be an allowable deduction and what would not. When the noble Lord says that as the clause stands—I think I have him right; and he will correct me if not—if no event occurs in respect of which the worker has contractual liability then, of course, there will be no deduction to his disadvantage. That is self-evidently true. The whole point of our amendment is to ask whether a liability under a contract cunningly devised which arose in respect of an amount that would be paid as the wage meant in effect that if the wage on all the other computations comes to £60, the worker has a contractual liability in that event to repay £5 or have a deduction of X number of pounds. That seems to us a possible interpretation and if the noble Lord is confident that the High Court could not put that interpretation on his Bill then he will keep his words. For once we are trying to be helpful because for once the interests of the noble Lord the Secretary of State coincide with the interests of the workers. On those occasions of course we are always willing to be helpful. I beg leave to withdraw this amendment, but I very much hope that over a strong black coffee further thought will be given to the words.

Amendment, by leave, withdrawn.

[Amendment No. 31 not moved.]

Lord Young of Graffham moved Amendment No. 32:

Page 21, line 26, leave out from ("employer") to the second (", or") in line 27 and insert ("with the worker's prior agreement or consent")

The noble Lord said: My Lords, Amendment No. 32 makes it clear that deductions or payments made for the supply of goods and services by the employer are not allowable unless the worker has given prior agreement or consent. It reflects the concern expressed at the Committee stage that the present wording of subsection (4)(c) did not make this sufficiently clear. I beg to move.

Lord McCarthy

My Lords, I was going to say there was once again need here for strong black coffee; but I am not sure that is right. When one reads the face of the Bill in the light of what the noble Lord, the Secretary of State, has said, he is quite right in saying that this does seem to give us the substance of what we want. I suppose that if we had written this amendment ourselves it would have read "written consent" or "contractual consent" and it would then have been perfect, but this is a very long way forward and we thank the noble Lord for it.

On Question, amendment agreed to.

Clause 19 [Obligation to keep records etc.]

Lord Young of Graffham moved Amendment No. 33:

Page 24, line 6, at end insert—

("(2A) Where any such workers are homeworkers, the employer shall notify them in the prescribed manner of the matters mentioned in subsection (2).")

The noble Lord said: My Lords—

Lord McCarthy

My Lords, I gave notice that we wanted to say something about Clause 18.

The Deputy Speaker (Baroness White)

My Lords, we are at Report stage, so the clause is not put to stand part at this stage.

Lord McCarthy

My Lords, it was said at Committee stage that this was the first opportunity we had to discuss Clause 18 and it was admitted at that stage that in fact, since we could not discuss Clause 18, an opportunity would be given to us to do it at Report stage. However, if I am told it cannot be done, it cannot be done.

The Deputy Speaker

My Lords, I have no amendments before the House on Clause 18. I think we must continue with Clause 19, Amendment No. 33.

Lord Young of Graffham

My Lords, during discussion in Committee on Amendment No. 101 my noble friend Lord Trefgarne expressed the Government's sympathy with the amendment standing in the name of the noble Lords, Lord McCarthy, Lord Wedderburn and Lord Stoddart. He asked that no vote be taken on the amendment but gave the noble Baroness, Lady Turner, who moved the amendment, an undertaking that he would bring forward for your Lordships' consideration at Report stage a suitable amendment designed to achieve the object of the original amendment. I am happy to have been able to fulfil that commitment. By this amendment employers who make use of the services of homeworkers will be required, once the legislation takes effect, to notify those homeworkers in the prescribed manner of the contents of wages councils' notices of proposals and orders which affect them and of any other matters which may be prescribed.

The exact means by which employers are to meet this obligation—that is, in the words of the amendment, "in the prescribed manner"—is something which is more appropriately dealt with in subordinate legislation and not on the face of the Bill. I hope your Lordships will accept my assurance that the regulations which require Parliament's approval will be specific on this matter. I commend the amendment to your Lordships.

Baroness Turner of Camden

My Lords, I rise on behalf of these Benches to thank the noble Minister for the concession which we were promised in Committee and which we are now glad to see placed before your Lordships in the shape of Amendment No. 33. We are very glad indeed that the arguments we were about to put to the House have been accepted by the Government. Homeworkers are a particularly vulnerable set of people. We are very glad that the Government have acknowledged that and intend to write this into legislation. We are very grateful.

On Question, amendment agreed to.

Baroness Turner of Camden moved Amendment No. 34:

Page 24, line 12, leave out ("may appoint") and insert— ("shall appoint an adequate number of")

The noble Baroness said: My Lords, I rise on behalf of these Benches to move Amendment No. 34. It is clear from the arguments advanced from our side during the passage of this Bill in Committee that we are not at all happy with it. We regard it as a lowering of standards for the least fortunate, the most vulnerable, the least organised and often the least skilled members in society.

The mark of a civilised society is that it seeks to protect such people. The arguments advanced indicate that there will be inadequate protection if the Bill passes unamended. We ought to be able to ensure that no one is forced to work for a wage that is below decent minimum standards. A basic framework of legal protection is an essential aspect of this. Nevertheless, as a result of this Bill, we now have a framework of sorts. It is not good enough, but even that needs to be enforced. We have often heard during the debates on this Bill about the burdens upon industry and the burdens upon the small businessman. But what about the burdens on the employee who has to take whatever job he—or more often she—can get and is not in a position to bargain about a decent salary and decent conditions? Indeed, so far as burdens on business are concerned, it has been frequently stated from our side that burdens on business are not so much wages council requirements but rather VAT and, I would add, the high cost of borrowing money to enable businesses to continue.

Some of the people who are subject at the moment to wages council orders are, as people have already said, among the poorest and most vulnerable in our society. The Low Pay Unit has done a great deal of research in this area and, if I may, I should like to quote from one individual. She says this: Being home in time for the children and flexibility of hours are often the most important factors to a woman looking for a job. I get very angry when I think of how I am being exploited.

This is from a woman who knows she is being illegally underpaid under the present system. She goes on: But I need the job and there is not a lot I can do about it. Jobs in this area are very hard to find for a woman, so anything is better than nothing.

The object of the amendment is to ensure that there are enough inspectors to prevent such illegalities from occurring. This is not an argument for lifting the burdens on business: it is an argument for making sure that the law—even the inadequate law we think this is—is properly enforced. Already the resources available to the Wages Inspectorate have been cut. Since 1979 the number of posts in the inspectorate has been reduced to 120; a cut of nearly one-third. As a consequence, there are now fewer inspections directly made by the inspectorate. There were 26,545 in 1984, as against 34,807 in 1979: a drop of almost one-quarter. There has been a corresponding increase from 6,970 to 9,599 in the number of complaints made by individual workers.

Many more employers are now flouting their legal obligations—35.6 percent. in 1984 as against 31.5 per cent. in 1979. It has been estimated by the Trades Union Congress that if the proportion of underpaying establishments—that is the 35.6 per cent. to which I have already referred—was applied to the total number of establishments on the wages council register, which I gather is 376,301, then it is likely that some 134,000 employers are illegally underpaying their employees at the present time. While this may be an over-simplification, it serves to illustrate the magnitude of the proportion of illegal underpayment. That is why we need increased resources and staffing for this inspectorate and a vigorous policy of enforce-ment. If we really want to ensure that poor and vulnerable people are protected, we have to ensure that there is an enforcement arm, and that enforce-ment arm is the inspectorate.

For those reasons I commend the amendment to your Lordships. We have already referred in discussion to the fact that the Government have denounced the ILO convention. We on these Benches think it is a great pity and a great shame that that has been done. But if we are to have any kind of legislation at all in the wages area, even the emasculated legislation that we now have, we must have an adequate system of enforcement. That is what this amendment seeks to do and I commend it to your Lordships. I beg to move.

9.30 p.m.

Lord Sainsbury

My Lords, we on these Benches strongly support this amendment. We were told in your Lordships' House only last week, in answer to a question, that 6 per cent. of the people covered by wages councils were being paid under wages council rates, largely because the number of the Wages Inspectorate was inadequate and, in fact, had been reduced recently.

Lord Young of Graffham

My Lords, if I may put that in another way, about 94 per cent. of the workers whose pay is checked by inspectors are being paid at least the legal minimum fixed by wages councils, and the changes which this Bill seeks to introduce will undoubtedly result in a higher general level of compliance. The exclusion of under 21s will reduce the number of workers covered by about half a million. Employers and workers will find it much easier to understand wages orders which will set only a single basic hourly rate and a single overtime rate. There will be none of the present complexities which have been such a common cause of underpayment. The simplicity of wages orders will also enable increased use to be made of postal questionnaires for initial inquiries.

Those who consider that some of the present wages council orders are complex—and perhaps the noble Lord will do me the courtesy of listening—should appreciate that the Unlicensed Places of Refreshment Wages Council wages order alone is 34 pages long and sets no fewer than 144 different rates of pay. That is surely not something which is easy to police. Other methods of checking which do not require visits by inspectors will continue to be used and developed. The policy of the inspectorate will be to reduce the number of visits made to firms which are unlikely to be underpaying. Many of these visits are unnecessary and place an additional burden on the employers concerned.

As fewer inspection visits will be carried out and as checking will be easier and quicker, there can be no justification for maintaining the present number of inspectors. Having carefully assessed what our future requirements will be, it was decided that the number of inspectors should be reduced from 120 to 71 and the number of indoor support staff from 104 to 68.

I should like to make it quite clear that the reduction is the result of an assessment of the future operational requirements of the Wages Inspectorate and is not in any way an indication of any lack of will on the part of Government to ensure compliance by employers. For the reasons I have mentioned I confidently expect compliance under the simplified provisions in the Bill to be higher than the present relatively high level of 94 per cent. and I believe that the number of inspectors we propose to appoint for enforcement will prove adequate for the task.

Amendment No. 34 seeks to make two changes to Clause 20(1). First, the substitution of the words "shall appoint" for "may appoint" would require the Government to appoint officers whatever the circumstances; and, secondly, the insertion of the words "an adequate number of before "officers" would result in endless debate about what constituted "adequate". "Adequate" is not a word appropriate for use in primary legislation in this context. Indeed, its inclusion would replace Ministers' views of what is adequate with that of the courts. This would be inappropriate in what is essentially an administrative decision. The phrase "may appoint officers" which the clause at present uses has been in all wages councils legislation since 1909 and I can see no justification for changing it at this time. I therefore ask your Lordships to resist the amendment.

Lord McCarthy

My Lords, what the Secretary of State says is quite amazing. I ask the House to give the noble Lord leave subsequently to tell us what he means when he says that some of the visits are unnecessary. Unnecessary, in God's name, from whose point of view? Is it unnecessary if the wages inspector goes there and finds that the man is actually paying the wage? I do not call that unnecessary. That is necessary to ensure a reasonably high level of compliance. I hope that the Secretary of State will tell us what he means by "unnecessary".

Many of the facts have been placed before the House by my noble friend Lady Turner, but there are others. The attitude of the Secretary of State forces me to mention some of those other facts. There are now going to be 71 out-of-door inspectors. We now have only 120 out-of-door inspectors. I do not make that a reduction of 40 per cent. Those 120 out-of-door inspectors have to police 500,000 firms—in other words, one inspector to about 4,000 firms. We are now going to have one inspector to 12,000 firms. We are told that they can visit only 7 per cent. of registered firms at the moment. Of course we do not know how many unregistered firms there are. We are told that the firms they visit—the 7 per cent.—they can now visit only once in every 14 years. If the Secretary of State is to cut the number from 120 to 71, presumably they will visit firms once every 28 years. But it must not be unnecessary, must it?

The Secretary of State knows that already one-third of the visits are by telephone or by postal question-naire. Is it the case that all the visits in future will be by telephone or by postal questionnaire? Unless we are to have one to 12,000 and visits every 28 years, a very substantial number must be by telephone and by postal questionnaire. Are they less necessary if they are done by telephone and postal questionnaire? Is this the form which the Secretary of State implied in his speech is going to be better and is going to be more effective—never actually knocking on the door; always to do it by telephone; always to do it by postal questionnaire? Will that reverse the trend? I doubt it.

What about the contrasts with other inspectorates? The factory inspectorate has had similar cuts; the railway inspectorate has had similar cuts; the tax inspectorate has had similar cuts; but not the social services fraud squad. The social services fraud squad has recently been increased by 20 per cent. It has six times as many chasers per potential defaulter and nine times as many people to do it. So enforcement must become worse, must it not?

The noble Lord, Lord Sainsbury, says that on the last test 6 per cent. were underpaid. That, we are told, is the result of 34.6 per cent. of firms visited underpaying. How does it come about that there is 6 per cent. underpayment in 34.6 per cent. of firms? It is because it is the small firms that underpay; it is the small businessman who underpays. That is why we have underpayment. I cannot accept the argument that because we are going down to single rates we are necessarily going to save all these people. They have still to deal with the complaints. They have still to find whether people are covered. They have now to discover how old they are. They have still to deal with all the problems of evasion, whether it is a single rate or whether it is six rates, because until you go to the firm, telephone the firm, or send a prima facie form to the firm, you have no way of telling whether it is underpaying or paying whatever the rate may be.

I cannot see any reason why there should be substantial changes in the demands made on the factory inspectors—and we are now told there are going to be 71 of them. It is an absolute disgrace.

Lord Young of Graffham

My Lords, with the leave of the House, I think that I ought to put at least some part of the record straight. The noble Lord, Lord McCarthy, runs riot with figures, and, although I have restrained myself with commendable fortitude this evening, I must come back on some of his points.

The aim of our wages council legislation has been to check 10 per cent. of establishments covered by wages councils each year. That is the checking that ran for many years, up until 1978. The Opposition increased it at that time for a year or two, but since then it has been running at 10 per cent. At that level of 10 per cent., approximately 40,000 establishments are checked each year, and during the past four years wages inspectors have checked the pay of nearly half of the 2\ million workers covered by the legislation.

That is an immense simplification of the checking that has to be done. Lest the noble Lord opposite feels that the whole situation is deteriorating, I should tell him that in 1982, 10,000 complaints were received, but last year the figure was 8,000 and it is going down. As regards those employers who we found to be underpaying, there has year by year been a reduction in their number. That shows that we are concerned not about unnecessary bureaucracy but about ensuring that we have adequate and proper policing of the wages councils, which I suspect and suggest we do, at a level that has been complied with for many years. The new level of postings will ensure that that will continue to be true.

Baroness Turner of Camden

My Lords, I take it from the Minister's reply that he does not feel disposed to accept our amendment. I am rather surprised because it is such an innocuous amendment. It simply requires that the Secretary of State, shall appoint an adequate number of inspectors. I would have expected from a Government who are concerned with law enforcement, as are the present Government, that they would have wanted an adequate number of inspectors to enforce the law.

I am appalled to learn that the number of inspectors is cut from 120 to 71.I do not see how that number of inspectors can possible perform the functions that they will be expected to perform under this Bill if minimum standards are to be enforced. I still do not understand, either, from the Minister's reply why some of the people who are performing that function are regarded as having an unnecessary function. It is a very necessary function, because if one has a law then one wants to see it enforced. For that reason, I intend to divide the House. Enforcement is an important matter and I wish to test the feelings of the House on the amendment.

9.43 p.m.

On Question, Whether the said amendment (No. 34) shall be agreed to?

Their Lordships divided: Contents, 29; Not-Contents, 53.

Airedale, L. Phillips, B.
Ardwick, L. Ritchie of Dundee, L.
Blease, L. Rochester, L.
David, B. [Teller.] Sainsbury, L.
Dean of Beswick, L. Seear, B.
Elwyn-Jones, L. Stoddart of Swindon, L.
Ezra, L. Taylor of Gryfe, L.
Falkender, B. Tordoff, L. [Teller.]
Gallacher, L. Turner of Camden, B.
Hacking, L. Underhill, L.
Hanworth, V. Wedderburn of Charlton, L.
Kagan, L. White, B.
McCarthy, L. Wigoder, L.
McNair, L. Wilson of Rievaulx, L.
Molloy, L.
Ailesbury, M. Hooper, B.
Ampthill, L. Ingrow, L.
Beloff, L. Kimball, L.
Belstead, L. Layton, L.
Brabazon of Tara, L. Lindsey and Abingdon, E.
Brougham and Vaux, L. Long, V.
Buckinghamshire, E. Lucas of Chilworth, L.
Butterworth, L. Margadale, L.
Caithness, E. Massereene and Ferrard, V.
Cameron of Lochbroom, L. Mottistone, L.
Carnegy of Lour, B. Moyne, L.
Cullen of Ashbourne, L. Murton of Lindisfarne, L.
Davidson, V. Orkney, E.
Denham, L. [Teller.] Rankeillour, L.
Donegall, M. Rochdale, V.
Elliot of Harwood, B. Sanderson of Bowden, L.
Elliott of Morpeth, L. Sandford, L.
Enniskillen, E. Skelmersdale, L. [Teller.]
Gainford, L. Strathclyde, L.
Gibson-Watt, L. Teviot, L.
Greenway, L. Trumpington, B.
Gridley, L. Vaux of Harrowden, L.
Grimston of Westbury, L. Whitelaw, V.
Harvington, L. Wise, L.
Henley, L. Young, B.
Hives, L. Young of Graffham, L.
Home of the Hirsel, L.

Resolved in the negative, and amendment disagreed to accordingly.

9.50 p.m.

Lord Wedderburn of Charlton moved Amendment No. 35:

After Clause 21, insert the following new clause:

(" Unfair dismissal after complaints.

  1. .—(1) The dismissal of an employee to whose remuneration a wages council order relates shall be regarded as unfair for the purposes of Part V of the 1978 Act if the reason for it (or if more than one, the principal reason) is that the employee has made, or proposes to make, a complaint or other communication to an officer appointed under section 20 of this Act.
  2. (2) Section 64( 1 )(a) (qualifying period) of the 197 8 Act shall not apply to a dismissal to which subsection (1) above applies.
  3. (3) An employee shall have the right not to have action (short of dismissal) taken against him as an individual by his employer if the reason (or if more than one, the principal reason) falls within subsection (1) above.
  4. (4) Sections 24 to 26 of the 1978 Act shall apply to action which contravenes subsection (3) above as they apply to section 23 of that act.")

The noble Lord said: My Lords, the amendment proposes that where a worker is dismissed because he or she has made a complaint or communication 10 the inspectorate in a wages council industry, that dismissal should be regarded as unfair, and disciplinary action short of dismissal should be in parallel manner unlawful in regard to the provisions of the Employment Protection (Consolidation) Act 1978.

I do not believe that it would be difficult to obtain broad agreement that it is wrong for an employer to victimise an employee in wages council employment in that manner. Nor is it difficult to find parallels in other legislation for such unfair dismissal provisions. To go to other statutes, the Sex Discrimination Act and the Race Relations Act provide for similar remedies in cases of victimisation of a worker who dares to complain within the province of the statute. Nor would it be true to say that, without a provision of the kind that the amendment offers, a worker so dismissed could in any way go to a tribunal. A tribunal might regard such a dismissal as unfair, but the qualification which the Government have enlarged to all employment beginning after 1985 of two years' employment might disbar an approach to the tribunal for many of the workers of whom we are speaking, and in particular a large number of part-time workers and therefore a large number of women workers, quite apart form the £25 charge that the Government are about to propose as a fee for going to a tribunal.

There is a much more fundamental point in relation to the amendment. It can best be made by summoning to its aid the arguments of the noble Lord. Lord Trefgarne, earlier this afternoon in opposition to the amendment moved by my noble friend Lord McCarthy, which attempted to give unfair dismissal rights in other respects under Part I of the Bill

The noble Lord argued that that amendment did not enter the area of basic human rights which necessarily demands a right to complain to an industrial tribunal. I take my stand within the compass of his argument. He said that in matters of discrimination on grounds of sex, race or trade union membership, the right to go to a tribunal must be allowed in terms of human rights. The case raised by Amendment No. 35 comes within that province, and that is why we feel that it is so strong. That is why we say that the qualifying period is not and should not be required, just as it is not required in those other areas of human rights—sex and race discrimination and dismissal on trade union grounds.

The Government must know why they kept wages councils rather than abolish them. I sometimes feel that the Secretary of State has been provided with arguments which are more appropriate to the abolition of wages councils than to their emasculation. The Government kept wages councils after considerable thought. In doing so, they necesssarily accepted the reason for their existence. They kept them because workers within those industries do not have the great measure of protection that trade unionism normally provides through collective bargaining. One of the ancient, honourable and essential actions of a wages council is that it should wind itself up when collective bargaining can get in. If there is a criticism of some wages councils, it is that both sides of the table have not taken steps in that direction.

Workers within wages councils industries have the protection of the wages councils to a great measure in substitution for that which trade unionism and collective bargaining would normally provide. Each worker within those wages council industries, be they clothing, retail, or whatever, is entitled to his or her human rights. The Government should remind themselves that however small the employer and however small the employer's resources, the worker is smaller and in need of protection. That is why the Government kept the wages councils.

There is an analogy with dismissal for discrimi-nation, particularly on union grounds, which the noble Lord, Lord Trefgarne, rightly described as a central human right. In Committee the Government seemed to object to the proposals for enhanced compensation which would logically follow the pattern of the legislation. As we are always moderate in these matters and take account of what the Government say, we have not included enhanced compensation in the amendment because it might be argued that there are special considerations relating to special awards. We do not much like the special awards and we do not want to get into that argument.

We insist that the worker in the wages council industry who is dismissed for attempting to enforce his or her rights is entitled to an action for unfair dismissal whether or not they have satisfied the qualifying period. That is fundamental. To insist on the qualifying period would be a charade. In order to enforce their rights under the amendment the workers will communicate with or complain to an inspector. I suppose we must add, "When they can find one, in the next few years." There will be 71 inspectors next year. How many will there be a few years later? It all reads like a brief for abolition rather than emasculation.

While the councils exist the dismissal or penalising of the worker who begins to attempt to enforce his or her right to what is left of the wages council order-the statutory minimum rate-should surely be visited with the right of an appeal to an industrial tribunal. It is not a right which gains a high percentage of success under any of the jurisdictions. We all know that actions for unfair dismissal do not lead to many successes in the tribunals. If we look at the evidence, we all also know that that does not bother employers very much. It does not deter recruitment. I hope that the noble Lord the Secretary of State will not suggest that this right, put forward for the protection of the rights of the individual worker in wages council industries, will be a major barrier to the recruitment of labour. None of those arguments are valid with regard to the argument about the rights of workers in unfair dismissal cases.

If it is said that the amendment is a bit late and that it might have been more logical to include rights for wages council workers in the legislation in the 1970s, I would say yes to that. I would have no hesitation in saying that workers in wages council industries have the right to resist discrimination of this kind, in terms that the noble Lord, Lord Trefgarne, used of other forms of discrimination-that it should have been in the legislation earlier-and that it would be logical and not difficult for the Government to accept the amendment. 1 beg to move.

10 p.m.

Lord Rochester

My Lords, after what the noble Lord, Lord Wedderburn of Charlton, has said, I do not believe that there is much of substance that I have to add. What there is I said largely in offering support to the noble Lord, Lord McCarthy, when he moved a somewhat similar amendment, Amendment No. 11, relating to Part I of the Bill. I should not, however, like this moment to pass without indicating to the House that the amendment enjoys the support of those on these Benches.

Baroness Seear

My Lords, I should like to ask the Secretary of State to comment on the point that I made to the noble Lord, Lord Trefgarne, but made, I agree, somewhat out of order, because the Motion had been withdrawn. It seems to me that it raises a much more general point. The noble Lord will surely agree that if an individual has a legal right to do something and that is embodied in the law of the land-never mind, for the moment, the extent to which it refers to this Bill-it is not proper that he should be penalised by any other person for using that legal right which the law has given him.

It is for that reason that I ask the noble Lord the Secretary of State to look at what he is doing in denying the right to use powers that the law has given. It is a strange way of interpreting the law of the land if you pass a law and then say that when someone takes advantage of it, he can be seriously penalised for doing so. I would ask the noble Lord to consider what would be the effect if granting of this kind of right was extended to other areas of the life of this country.

Lord Young of Graffham

My Lords, as the noble Lord, Lord Wedderburn, has correctly stated, my noble friend Lord Trefgarne expressed some sympathy with the amendment when it was moved in Committee. I well understand the reasons why he did so. However, as he has since indicated to the noble Lord, Lord McCarthy, in the event we do not find ourselves able to make any concession in this area. Lest this be thought simple bloodymindedness on the part of the Government, I should like to explain why we are maintaining our stance of opposition to the amendment. I should also like to explain the position to the noble Baroness, Lady Seear.

I realise that there is no right to complain of unfair dismissal if the qualifying period is not satisfied, but the fact is that the only case in which dismissal is automatically unfair and there is no qualifying period is where dismissal is for membership or non-membership of a trade union. Dismissal on the grounds of sex or race is another special case because it is contrary to the Sex Discrimination and Race Relations Acts which have no qualifying period.

It is worth noting that dismissals relating to trade union membership have been treated in this special way ever since 1971 when the remedy of unfair dismissal was first introduced in the Industrial Relations Act. Equally, there has never been any qualifying period for bringing complaints of sex or race discrimination. It is clear therefore that there has been a substantial measure of agreement between governments of different persuasions that dismissals for these reasons deserve special treatment.

Why should this be? I believe it is because the rights not to be forced to join or not join a trade union and not to be discriminated against because of one's sex or race are fundamental and therefore different in kind from all other rights. The Government do not believe that dismissal for complaining to a wages inspector is that kind of fundamental right. The extension of similar special treatment to dismissal for making such a complaint therefore raises the question: if the protection applies to this right, why not to all other statutory employment rights-for example, the rights to an itemised pay statement, and the rights to time off for public duties.

It may be that the Opposition's policy is indeed to extend this special treatment to all statutory employment rights but whatever their position may be it cannot be denied that such a change raises major questions of policy and would be a departure from past practice. What is clear is that such special treatment cannot sensibly be applied only to the rights contained in this Bill.

The Government's view is therefore that this Bill is not the vehicle in which to make this departure in principle from past practice. To apply the special treatment asked for in the amendment simply to dismissals for complaining to a wages inspector or for using the rights in Part I would produce an anomalous and logically indefensible result.

I ask your Lordships to bear in mind that in the case of this particular amendment we are dealing with a situation in which workers have the benefit of an inspectorate to assist them. I note that questions were raised in Committee about workers' knowledge of the existence of the wages inspectorate. I can assure the House that the Bill enables us to require employers to display notices of minimum rates as does present legislation, and we shall also see to it, as at present, that these notices carry information about the availability of the inspectorate to investigate workers' complaints, in confidence if requested. The Government consider that these facilities offer sufficient protection. I ask the House to reject this amendment.

Baroness Seear

My Lords, I cannot accept that the noble Lord has answered my point. He quoted the fact that people have a right to ask for time off. Certain activities which are laid down in the Act give people a right to time off. That is not in this Act but in the Employment Protection Act. I think the noble Lord implied that if they asked for that right, and then were sacked because they had done so, that was a perfectly proper way to behave. My point is the general one that if an individual is protected by the law of the land, and is allowed by the law of the land to take certain action, it is not proper that he should be penalised because he took advantage of what the law allows him to do. I do not see that the Secretary of State has answered my point.

Lord Young of Graffham

My Lords, with the leave of the House, I much regret that the noble Baroness believes that. I think that I have answered the point, and I do not think that I can move from that.

Lord Wedderburn of Charlton

My Lords, I am very disappointed in the Secretary of State. I shall explain why in a moment. This is a very serious matter.

I accept what the noble Baroness, Lady Seear, says, and indeed would like to press that point on another occasion. But I think that that general argument cuts across the character of this amendment. It is the kind of argument which my noble friend Lord McCarthy was putting in his earlier amendment on unfair dismissal. I agree with the sentiment of the noble Baroness, but I would not wish that matter to allow the Government to escape this point that we are pressing with this amendment.

The Secretary of State rightly says-indeed, we have both said it-that there is a right to complain of unfair dismissal before the tribunal, without the qualification of continuous employment, in cases of sex discrimi-nation, race discrimination and (he says) discrimi-nation on grounds of trade union membership-the right to join or not to join-and that there is no parallel here. I could contend against that proposition, but I shall not do so, because the Minister's argument left out a very important part of the law which he was describing. There is also the right not to be discrimi-nated against-which the noble Lord, Lord Trefgarne, described, as I remember, as a central human right, on grounds of trade union membership or trade union activities. It is not just a question of joining or not joining.

Every civilised country, certainly every country in western Europe-for longer than we have-has had a corpus of law which tries to protect workers in respect of dismissal, and penalties short of dismissal in most cases, with regard to trade union membership and trade union activities. They are couched in different forms but the nub of the matter is the same. This was wholly omitted from the Secretary of State's descrip-tion. Once you include it, the analogy is made for you, because complaint to an inspector is indeed a central form of trade union activity, or the analogous form of activity, in a wages council industry. That is what it is all about. No wonder the Secretary of State omitted it, because that is where the analogy lies.

Therefore, when the noble Lord says that the Government's objection is not based on simple bloody-mindedness, I fully accept that; it is based on complex bloody-mindedness, leaving out half the formula with which we are making our analogy.

When the noble Lord says that the logic of our argument presses us to say that everyone must have a right to go to the tribunal to complain about each and every statutory right, I say to that what I said in respect of the argument of the noble Baroness, Lady Seear— there is indeed a case for that, but I am not arguing it at the moment. If the noble Lord wants to know why itemised pay statements are different from the right to join and to take part in the activities of a trade union, he should ask his noble friend Lord Trefgarne, because the noble Lord, Lord Trefgarne, described it earlier this afternoon. The noble Lord said that matters like itemised pay statements are on one side but matters like racial discrimination, sex discrimination and discrimination on grounds of union membership and activity are central human rights. That is what it is all about.

Then the Minister says that this is not the Bill in which to do this. However, this is the Bill about wages councils, and they still exist—they have not yet gone. The Minister still has them and therefore he has the logic of them, and the logic of them is that the workers who are protected through their machinery have central human rights to use that machinery. "Ah", says the Minister, "dismissal simply because a worker complains to an inspector should not give a special right to go to the tribunal". Dismissal simply because of that is still dismissal for the worker—the job has gone.

I say that dismissal simply for that reason is self-evidently a central cause why someone should be given the right to go to the tribunal. I appreciate that there will be notices telling workers how to get in touch with inspectors, such as they are. However, if they cannot get to the inspector without threat of dismissal, what use is that to them? The boss can say or intimate, or perhaps more likely the foreman on the floor in a hot situation can say (because that is often what it is) "You do that, and you'll see what happens". Most workers are very realistic; they know how much the right is worth to go to a tribunal; they know that the compensation is low and that the chance of success is low, but still it is there. As a trade union leader once said to me when students were criticising him for supporting unfair dismissal legislation which got in the way of trade union activity, "If that legislation gives £100 to one of my members next week who would not have had it on his dismissal, then I shall support it". Workers are very realistic about this. They know that the chances are low.

However, for the Government not to allow a worker who is dismissed simply because he complains to an inspector, or threatens to do so, to go to a tribunal really surpasses the imagination of this complex type of objection which the Government have made to this amendment. It is a pity that the amendment cannot be put to a proper vote. I beg the noble Lord the Secretary of State to read the argument which his noble friend Lord Trefgarne put forward earlier this afternoon; indeed, I think that the noble Lord was present when the noble Lord, Lord Trefgarne, made it. If we look at that together after this debate, I suspect that the Minister will find that the objections he has made now have been torpedoed, not by me but by his noble friend. With that, I have no alternative at this stage but to beg leave to withdraw the amendment.

Lord Young of Graffham

My Lords, with the leave of the House, perhaps I might just correct one point made by the noble Lord. I think that he misheard me. I did not say that we should compare the right to itemised pay statements or time off for public duties with the same right to join a trade union. The argument I was developing is that there comes a point at which, if we say that this right should have that, then what other one should not? I believe there will come a time when all employment protection law will be covered at this point, and that is why the Government decided that we must stop here.

Lord Wedderburn of Charlton

My Lords, with leave, may I say that I wish to withdraw any wrong description of the noble Lord's argument. That is a case which no doubt we can debate on some other occasion. There still remains the central thrust of our arguments which I am sure the noble Lord will look at.

Amendment, by leave, withdrawn.

10.15 p.m.

Clause 26 [Interpretation of Part II]:

Lord Young of Graffham moved Amendments Nos. 36 to 38:

Page 29, line 4, leave out ("under his contract").

Page 29, line 9, at end insert ("and "employed", in relation to a worker, accordingly means employed under his contract;").

Page 30, line 23, leave out subsections (3) and (4) and insert— (" () Notwithstanding section 14(3)—

  1. (a) where a worker is employed partly for the purposes of his employer's business and partly not, nothing in any order under section 14 shall apply to the worker in his employment otherwise than for the purposes of that business, and
  2. (b) where a worker is employed for the purposes of his employer's business both in an employment to which an order under section 14 applies and in one to which that order does not apply, nothing in that order shall apply to the worker in the second of those employments.").

The noble Lord said: My Lords, with the leave of the House I should like to take Amendments Nos. 36, 37 and 38 together. These amendments are designed to bring the definitions of "employer" and "employment" in Parts I and II of the Bill into line with one another. I hope your Lordships will accept my assurance that no change of substance is involved which could affect anything in Part II of the Bill.

The purpose of Amendment No. 38 is to take account of the inclusion of Clause 18, which deals with the method of apportioning the remuneration paid in cases where a worker is employed on work only part of which is covered by a wages order. As presently drafted, subsections (3) and (4) include the phrase "nothing in this Part shall be construed as applying". The amendent replaces this with "nothing in any order under section 14 shall apply". These changes will enable Clauses 17 and 18 to be applied in cases where apportionment is appropriate.

The amendment also qualifies Clause 14(3), which would otherwise have the effect of making wages orders applicable to workers whether they were employed either fully or partly on work to which the order applied, or, to put it another way, the wages order would apply to work done which is outside its scope. That, of course, would be quite contrary to the Government's intentions. The opportunity has been taken to merge subsections (3) and (4) into one subsection and to simplify the working generally. I commend the amendments to your Lordships. I beg to move.

Lord McCarthy

My Lords, the only part of the trilogy of amendments that the noble Lord has moved on which I want to comment is Amendment No. 38. Amendment No. 38 embodies, for the purposes of that part of the Bill, the principle introduced into Clause 18. That was the clause on which we could not speak because we had neglected to put down an amendment. The new Clause 18 simply re-enacted in a somewhat harsher form the principles laid down in the old Section 18 of the 1979 Act. The principle is the principle of apportionment according to the time spent on the work that is covered by a wages council. This was made clear by the Notes on Clauses which the noble Lord, Lord Trefgarne, gave to us on Clause 18, which were also intended to cover Amendment No. 38.

We think that it is time that this principle of apportionment according to the time spent on work of each type was changed. It means, as the example set out in the Notes on Clauses made clear, that if part-time cleaners are working in a shop which is covered by a wages council, they may be earning as much as £2 an hour while working in the shop but if they go upstairs to work in the owner's flat, because that part of the job is not covered by a wages council, they may be earning £1.50 or so an hour.

All they would be entitled to for the purposes of the calculation of their minimum entitlement under the wages council order is the minimum hourly rate for the time spent within the wages council area. We believe that that is anomalous. We believe it is arbitrary. We believe it means that the minimum amount is dependent upon the accident of whether a wages council applies to that particular part of an individual employer's trade which happens to be covered by wages councils.

One of the central defects of the wages council system—and I would agree with the noble Lord, Lord Wedderburn, if we want to confess past sins, that one of the sins of my own party when in office is that we never dealt with this—is that they apply in a most arbitrary way. Groups of workers covered by wages councils work alongside groups of workers doing similar, analogous or, in some cases, identical work, and are not covered by wages councils at all. We have a retail wages council that does not cover butchers' shops, florists' shops, chemists' shops or record shops. Therefore any group of workers who might work for an employer, and there are many, whose interests in the retail trade cover some of these occupations will find that for part- of the week they receive the wage council rate and for part of the week they get less than the wage council rate. The principle of apportionment governs the proportion of their rate which qualifies for minimum wage regulation.

It is just the same in the hotel trade. We have a wages council for the hotel trade that does not cover commercial hotels or boarding-houses. We consider that the anomalies which have existed in the wages councils for a long time could be met in a number of ways. If we had had time and if we had thought about it we could have put down various ways in which it might be done. I suppose I am asking the Secretary of State whether he will think about how the Government might react to various ways in which the apportionment principle might be modified.

It could be modified by saying in the simplest way that any worker who works for the majority of time under a wages council should be paid for the whole of his time by the rate of the wages council under which he worked for the majority of the time. It could be done by payment by function—a rather more complicated principle—where part time under a wages council would qualify someone for a full-time rate if he were doing similar work for the same employer outside the wages council area. There are many ways that we could move, without any great cost, away from the anomalous and unjust principle of apportionment. It is that aspect of Amendment No. 38 that I object to tonight.

On Question, amendments agreed to.

Clause 27 [Restriction of redundancy rebates to employers with less than ten employees]:

Lord Wedderburn of Charlton moved Amendment No. 39:

Page 31, line 33, leave out from ("at") to end of line 36 and insert—

("the appropriate date the employer is party to an employment and training scheme approved by, or is pursuing policies approved as equivalent thereto by, the Secretary of State

  1. (1A) The Secretary of State may, in consultation with the Manpower Services Commission, at any time, whether before or after an application for a redundancy rebate, approve either a scheme submitted by an employer as an employment and training scheme, or policies submitted by an employer as equivalent thereto, within subsection (1) above, having regard to the effect of that scheme or those policies upon—
    1. (a) the employment or re-employment of any persons by any employer;
    2. (b) the training or retraining of any person by the employer making the payment or by any associated employer of his; and
    3. (c) the consultation or negotiation conducted by that employer with any trade union recognised by him concerning the redundancy giving rise to the payment.
  2. (1B) The Secretary of State shall, in consultation with the Manpower Services Commission, publish a Code of Guidance setting out the considerations which he will take into account in granting approval under subsection (1A) above and may make regulations by statutory instrument establishing the criteria for the approval of schemes or policies within that subsection." ").

The noble Lord said: My Lords, I do not know whether this amendment will leave the Secretary of State speechless, as my noble friend seemed to do, but it is an adventurous amendment and I have to put it in this way.

We now approach Part III of the Bill, on which remarkably little has been said, as I read, either in another place or here. It is the part of the Bill that brings to an end the insurance arrangement, as the noble Lord, Lord Trefgarne, described it, as I would describe it and as the noble Baroness, Lady Seear, described it in our previous debates in Committee, whereby employers and employees contribute to the redundancy fund and the employee dismissed by reason of redundancy receives the statutory payment and employers have, over the years, received a rebate which has fluctuated in its percentage amount.

The Bill does not kill off the insurance or the fund entirely within that context. Some money will still be used for these insurance purposes for the benefit of certain employers. The noble Lord, Lord Trefgarne, set out the arguments for the Government's Bill, which may be loosely described as retaining redundancy rebates for those employers who employ nine employees or fewer.

He said (at col. 522 on 26th June) that an exception was to be made, because we recognise that the cost of redundancy payments can bear relatively heavily on employers running very small businesses".

He also said that any change—a change upwards, at any rate—in the number of the cut-off point would have the consequence of, a considerable increase in public expenditure. This increased cost would need to be found from within current allocations and could only be found by making savings elsewhere".

There is a point which emerges from that debate, as so often these points emerge later on; but that does mean that the Government have a notion of the amount of expenditure which is to be afforded. Indeed, the noble Lord, Lord Trefgarne, said in the same column that: the threshold that we have chosen concentrates the relief we are able to afford on the employers who most need help from the fund".

I do not think that the Government have ever given a clear indication of what that amount is or how much they expect the expenditure to be in very broad terms. It would be useful, I think, for many purposes if some indication could be given either this evening or at Third Reading.

Whatever it is, the principle of insurance has been jettisoned. Most employers are not to get the rebate. The question arises, accepting all those premises of the Government, of what way the amount which the Government say they can afford—whatever that is—should be distributed. On what principles should it be distributed?

And, of course, in a sense, we fell into the same trap that we now think that perhaps the Government have fallen into in looking for a cut-off figure of employees. I say in parenthesis that it will be an odd situation for employers who employ 10 or 11 employees not merely because of the abitrary nature of the line—any line is to some extent arbitrary, although it is difficult to feel that this is not, if anything can be, very arbitrary—but also because if the employer makes the 10 employees, or a number of them, redundant, he gets no rebate, but if he goes bankrupt, the redundancy fund will pay the redundancy payments. That is how, as I understand it, it will work, and it will be a rather bizarre situation.

If I may return to the Government's principles of what I might call distributive justice, firms with nine workers get the money and firms with 10 do not. I understand another remark of the noble Lord, Lord Trefgarne, in Committee when he said what I think any Government are likely to say when faced with this kind of Bill: Whatever threshold or cut-off we had chosen, someone would have been calling for a higher figure". I understand how, to any Minister, Opposition cries for higher figures must seem like a crowd of Oliver Twists, whatever number the Government put in the Bill.

But what this amendment is saying is this. Is that the sensible way to approach the problem? Do we need to fix some arbitrary line of employees? Is it self-evidently true that the employer with eight employees necessarily has the burden of redundancy payments bear more heavily upon him—whatever that means, unless it be a straight financial calculation? Is it obvious that he suffers more heavily than the middle-sized or even the larger company or company group? In what way are we assessing that, and how does it relate to the number of nine?

I think that we have been led (and the Government have been led) to look for an easy way. I quite see the Government's problem. They want a small amount of money distributed as rebates, without too much trouble, and, as the noble Lord the Secretary of State would assure us, without complexity. They have found something which is not complex, but surely it cannot be right. There is surely a better direction in which to look.

I make only a modest claim for this amendment, but it tries to look in a different direction. It tries to look at tests which are not quantitative but which require some qualitative assessment. What if only some of those employers who have contributed to the insurance fund are to be paid a rebate? The noble Baroness, Lady Seear, raised in Committee the issue of the morality of doing it in quite this way; I leave that to the Minister to answer as he wishes. But if that is to be done, why not distribute it to those employers who are making contributions in respect of training or job creation or the like in the job market?

Without applying this to any particular side of the House, I believe that it is because we are peculiarly insular that we are not able to appreciate the slightly bizarre choice of distribution according to numbers. If we look at France or Italy, we find institutions (which are by no means perfect) such as solidarity contracts. There are many different forms of solidarity contract, but they are essentially arrangements between employers, trade unions and the Government in order to achieve efficient re-organisation of work and working time with adjustments of pay, in many types of solidarity contracts, in order to achieve the greatest maintenance of jobs, whether it be by reduction of hours, early retirement, taking on workers in new ways, or association between full time and part time workers. The objectives are there and the public expenditure is determined accordingly. The noble Lord the Secretary of State will no doubt say that the Government spend a lot of money, which is just as good, although they do not happen to be solidarity contracts, but concerning this, why are we not spending it in the same way?

The criteria in this amendment deliberately give the Secretary of State very wide discretion. The primary criteria in deciding upon payment of a redundancy rebate would relate to the contribution of any employer to the creation of new jobs, to the contribution of an employer concerned in the redundancy and his group of companies to the training and retraining of workers, and to consultation with the appropriate trade unions and the involvement of workers generally. Within that broad area, the Secretary of State would have power to establish guidelines and procedures. There have been and are occasions when employing companies cannot avoid dismissals for redundancy, but whatever the responsibility of the Government for these situations, surely the Government have a responsibility to distribute such percentage of the rebates as they say they can afford to those employers who are doing what they can to promote job creation or training, or, if they wish, giving it to those who are promoting training and retraining.

The Secretary of State, the noble Lord, Lord Trefgarne and Government spokesmen in another place have said that this is a Bill to promote employment. We have disagreed with them on Parts I and II. However, if they believe that, why not put the same principle to work on Part III? Rebates distributed on an arbitrary test of 9 or 10 or any other figure cannot really do a great deal to achieve that aim. If our amendment is defective in that respect, we shall be happy to see it replaced by a better one, but rebates which are linked to that aim and which assert the principle that rebates on redundancy will be paid to those doing their best to do the work the Government say has to be done surely make a great deal of sense.

The Government are not going to jettison the redundancy rebate principle altogether and we move in this amendment that they think again about the figures and take on the responsibility of saying to employers that rebates (very modest sums indeed) will be paid to those who meet the following criteria, in the broad terms, under the guidance which is issued in accordance with these proposals. I beg to move.

Lord Rochester

My Lords, I sympathise with the principle underlying this amendment. In Committee I opposed Part III of the Bill on the grounds that people continue to be made redundant in large numbers and that the effect of this part of the Bill must be either to make overall redundancy payments smaller or add to costs.

My noble friend Lady Seear asked the noble Lord, Lord Trefgarne, in Committee what justification there could be for denying an employer who had paid contributions to the redundancy fund the right to draw from it when he was faced with the very circumstances for which the fund had been created. In response, the noble Lord, Lord Trefgarne, said he was not sure what the position was regarding past contributions but that he would look into the matter. I therefore hope that the Secretary of State, in his reply shortly to this amendment, will give the House the answer to my noble friend's question. Those are general points concerning Part III of the Bill, which are not directly related to this amendment.

As to the amendment itself, it seems to me to be imaginative in proposing that if redundancy rebates are in future to be withheld from all but the smallest employers, at least let exceptions be made (if I have got it right) in the case of firms carrying out policies which are designed by means of such matters as redeployment, retraining and prior consultation for negotiation to minimise the impact on their employees of redundancies.

One may question the drafting at certain points of this amendment. For example, in paragraph (c) there should surely be reference to consultation with employee representatives generally, at any rate as we on these Benches would see it, rather than exclusively with trade unions. But at least the amendment introduces into a clause which as it stands at present is wholly negative, a positive element which is aimed at improving the general employment position. If only for that reason it deserves some encouragement, and I hope that is what it will get rather than the rebuff which on past form amendments put forward from this side of the House have received from the Government.

Baroness Seear

My Lords, I too would like to ask the Secretary of State to look at this amendment and to look again at his present suggestion that payment should go to firms where there are nine or fewer (or is it 10?) employees. What is the logic of limiting it in this way? We know the Secretary of State is deeply fascina-ted by smallness, but surely it does not logically follow that the undertakings which employ a very small number of people are necessarily in the worst position financially. If you have a capital-intensive small business, in which labour costs are a very small proportion of your total costs, you are a great deal better off than if you are in a labour-intensive business in which labour costs are a high percentage of your total costs and you are employing perhaps 50 or 60 people. I totally fail to see that capacity to pay is automatically linked to the number of employees.

Lord Young of Graffham

My Lords, I understand perfectly well the purpose of this rather complicated amendment, and I congratulate noble Lords opposite on their ingenuity and the intention they are displaying to use a continuation of the redundancy rebate as a subsidy for employers who follow approved policies on employment, training and industrial relations.

However, I must oppose the amendment for a number of reasons. In opposing it, perhaps I may say that at times it is interesting to look back and see why redundancy rebates were created in the first place. It was at a time of shortage of people, and it was done in an endeavour to persuade employers to shed labour, so that those who would therefore lose their job would quickly be employed by other employers. It seemed to me for a long time to be one of the most inconsistent parts of our society that, at a time of high unemployment, we should go around actively persuading employers, making it easy for employers, to shed labour and to give up people's jobs.

The proposal here is for something different. It is for a new regime in which the Secretary of State and the Manpower Services Commission give a seal of approval to the employment, training and industrial relations policies of individual employers, based on regulations to be made in statutory instruments. 1 have to say—and it will come as no great surprise—that we are not in the business of inventing fresh regulations for employers to struggle with; we are about deregulation, safety, lifting the burden from employers, and ensuring that people have liberty, but not of course a licence to abuse their fellow man.

It has been argued that the amendment is about turning what has been a subsidy for putting people out of work into a subsidy for positive policies. We have already redirected the public expenditure involved here into employment generation and training programmes; but I think rather more effective and creative ones than the regulatory approach suggested in this amendment. Restricting redundancy rebates to very small firms will save over £200 million a year and we have taken up that saving in helping to finance additional community programme places, an extended enterprise allowance scheme, the restart programme which has just gone national and all the other measures that we announced last November and in the Budget.

It seems to me appropriate that we focus this expenditure on those people who need it most, those who have been out of work for over a year, and to a smaller degree those who were previously unemployed but who wish to work for themselves. I do not believe that the noble Lord opposite, or anyone in your Lordships' House, would wish us to go back on all that.

Indeed, if I may supply some information for which I was asked, the saving of £200 million a year would be increased by a further £10 million a year if we abolish it entirely; in other words, the cost of under 10 employees is about £10 million a year. But I do not believe anyone here would wish us to go back on our policies to help the long-term unemployed, and if the noble Lord does not wish us to do that, then to go down the path suggested in this amendment would require another very large allocation of public expenditure. But we would have to consider whether that would be a sensible way to spend that money, against all the competing other claims.

In the Committee stage debate, the noble Lord, Lord Wedderburn, pressed for a further explanation of the "fewer than 10 employees" qualification, and it may be that this amendment is simply intended to press us again to justify nine. The noble Baroness, Lady Seear, said, quite rightly, that I am obsessed by small firms. Of course I am. All the surveys show that employment starts with small firms. What we must do is to create more small firms. Small firms grow into medium-sized firms and encourage the growth of employment, and the growth of employment must be the first priority in all that we attempt in this field in government.

We chose nine because we wanted to include the very smallest employers who were likely to have to make statutory redundancy payments. It is perfectly possible that you could find a very cash-rich employer employing fewer than nine people; and you could find a very poor employer, in that sense, employing many more. But, as a general rule, I have little doubt that those who employ fewer than 10 people are more likely to be in need of the rebate, in terms of the proportion of assets to their size, than the larger ones.

A survey in 1981 by the Institute of Manpower Studies showed that around 5 per cent. of the rebate claims sent to the department were from employers with fewer than nine employees. The noble Lord asked in the Committee stage how many workers were involved and reported academic estimates that around 1.5 million people are in firms of this size. The labour force survey shows that in 1981 about 1.8 million people, or about 8½ per cent. of employees in employment, were involved in establishments of this size. Allowing for multiple retail shops this more or less agrees with the noble Lord's figure, although there may well have been changes during the intervening period, and the past four, five or six years has seen a considerable growth in smaller firms. However, the number of employees eligible for statutory redundancy payments is lower because of the two year service qualification which is less often met in very small firms. The fact is that whatever figure we had chosen for small firms in this context, whether nine, 19 or indeed 199 as the noble Lord's earlier amendment would have had it, one could still argue that the cut-off point was arbitrary and should be much higher.

Perhaps I can take this opportunity to reply to a question raised by the noble Baroness, Lady Seear, in that same debate. She asked what was, the legal justification for denying employers the right to draw out of the fund into which they have paid, when they are faced with the circumstances for which the fund was created". The legal position is that, notwithstanding an employer's previous contributions, Parliament is entitled to abolish his prospective right to receive a redundancy rebate in events which have not happened. (Rights which have already accrued are preserved by the transitional provisions—so there is no question of any retrospection).

In other words, if the redundancy has already occurred, that payment will be due. This is for future redundancies. A redundancy rebate is a payment governed by statute made by Parliament. It is not a matter of contract like a normal insurance policy. In those circumstances, I ask noble Lords to resist the amendment.

Lord Wedderburn of Charlton

My Lords, I welcome the Secretary of State's lengthy statement which included the first figures we have ever had on this matter. I thank the noble Lord very much for that, even at this late stage of the Bill, Would that he had given this information to us earlier. There is a considerable number of figures there at which my noble friends and I will wish to look very carefully. Of course one knows when one is congratulated, at least when one is in England, on putting forward a complicated amendment full of ingenuity that it is going to be resisted because it is clever. In Scotland and Wales, one gets points for being clever, but in England it is a very dangerous quality indeed.

With great respect, we do not think that the Secretary of State's defence is all that clever. All the other schemes of community enterprise are put forward, which we understand, and to which some of the money that is not going on rebates will be put. That seemed an irrelevant point because the money not going on rebates no doubt will be put to good use. But it is the money that is going on rebates that we want to be put to better use.

It seemed to us that the noble Lord totally failed to answer the point that was put with great precision by the noble Baroness, Lady Seear, when she said, "How can you possibly say that the small firm is necessarily one where you have the highest and heaviest burden financially of redundancy?" The small computer software enterprise, which no doubt is dear to the noble Lord's heart, may be in every way less deserving than the middle size enterprise. Unless the noble Lord wants to see firms above 10 employees disappear from the economy, one would have thought that it is just in regard to those firms, where his market principles, taking him on his own premises of small firms creating employment, do not appear to work, that the prod might produce some result and one could assist the natural development with some artificial stimulus.

To sum up, while we are very grateful to the noble Lord for his information, what we take to be his reply is that he will not put his signature where his mouth is. He will not sign the guidance to those who ought to get the rebate because they are doing the right thing. We feel very strongly on this matter and we aim to press this amendment.

10.49 p.m.

On Question, Whether the said amendment (No. 39) shall be agreed to?

Their Lordships divided: Contents, 17; Not-Contents, 31.

Boston of Faversham, L. Ponsonby of Shulbrede, L
David, B. [Teller.]
Dean of Beswick, L. Rochester, L.
Hacking, L. Seear, B.
Harris of Greenwich, L. Tordoff, L. [Teller.]
Kagan, L. Turner of Camden, B.
McCarthy, L. Wedderburn of Charlton, L.
McNair, L. White, B.
Molloy, L. Wilson of Rievaulx, L.
Ailesbury, M. Ingrow, L.
Belstead, L. Kimball, L.
Brabazon of Tara, L. Layton, L.
Butterworth. L. Lindsey and Abingdon, E.
Caithness, E. Long, V. [Teller]
Cameron of Lochbroom, L. Lucas of Chilworth, L.
Carnegy of Lour, B. Margadale, L.
Crathorne, L. Mottistone, L.
Davidson, V. Renton, L.
Denham, L. [Teller.] Skelmersdale, L.
Donegall, M. Strathclyde, L.
Elliot of Harwood, B. Trumpington, B.
Geddes, L. Vaux of Harrowden, L.
Gibson-Watt, L. Whitelaw, V.
Hives, L. Young of Graffham, L.
Hooper, B.

Resolved in the negative, and amendment disagreed to accordingly.

10.57 p.m.

Schedule 5 [Repeals]:

Lord Young of Graffham moved Amendment No. 40:

Page 42, line 34, at end insert—

("1982 c. 24. Social Security and Housing Section 23A(2).") Benefits Act 1982.

The noble Lord said: My Lords, this is a straight-forward amendment, which I believe should cause no difficulties. Section 23A(2) of the Social Security and Housing Benefits Act 1982, inserted by paragraph 8 of Schedule 7 to the Health and Social Security Act 1984, applies the Truck Act 1896 to agreements to make deductions from statutory sick pay. As statutory sick pay is within the definition of wages in Clause 7 of the Bill, the provisions on deductions in Part I of the Bill would apply to it; and as the Bill repeals the Truck Act 1896 the Truck Acts will no longer apply to agreements to make deductions from statutory sick pay. Section 23A(2) is therefore redundant and can be repealed, and that is achieved by the amendment.

I am aware that in an earlier debate today the noble Lord, Lord Wedderburn, raised some questions about deductions from statutory sick pay, and my noble friend Lord Trefgarne agreed to consider those. I repeat that commitment. If your Lordships agree to this amendment we shall look closely at the points raised by the noble Lord. I beg to move.

On Question, amendment agreed to.

Lord Young of Graffham moved Amendment No. 41:

Page 42, leave out lines 35 and 36.

The noble Lord said: My Lords, this amendment, which removes paragraph 1 of Schedule 14 to the Building Societies Bill from the list of provisions to be repealed by the Wages Bill is necessary because it now appears likely that the Wages Bill will receive the Royal Assent before the Building Societies Bill. It is therefore proposed that the Building Societies Bill itself will provide for an amendment that makes the Payment of Wages Act 1960 cease to have effect when Part I of the Wages Bill comes into force. There is therefore no need to refer to the Building Societies Bill in this Bill. In the light of that explanation, I ask your Lordships to accept this amendment.

On Question, amendment agreed to.

Clause 33 [Short title, commencement and extent]:

[Amendments Nos. 42 and 43 not moved.]