Employment Protection (Variation of Limits) Order 1987

HL Deb 04 February 1988 vol 492 cc1247-9

7.6 p.m.

The Earl of Dundee rose to move, That the draft order laid before the House on 9th December 1987 be approved [10th Report from the Joint Committee].

The noble Earl said: My Lords, I beg to move that the draft Employment Protection (Variation of Limits) Order 1987 be approved. Perhaps I may also speak to the other order on the Order Paper, the Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1987. Both these orders were laid before your Lordships' House on 9th December 1987.

The Draft Employment Protection (Variation of Limits) Order 1987 has been laid before your Lordships in accordance with Section 148 of the Employment Protection (Consolidation) Act 1978. This legislation requires the Secretary of State for Employment to review in each calendar year the upper limit that is imposed on the amount of a week's pay for calculating certain payments and awards under the employment protection legislation. The awards in question are redundancy payments, the basic and additional awards for unfair dismissal, and debts that can be paid under the insolvency provisions of the 1978 Act. The Secretary of State is also required to review the limit on the amount of guarantee pay due to an employee in respect of any day on short time or temporary lay-off, and the duration of such payment.

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

The Government have consulted a wide range of organisations in the course of the review for their views of what changes, if any, should be made to the limits. Employer organisations were in general against any increase on the grounds of the additional costs to industry, or suggested, alternatively, that any increase should be modest. Trade unions, on the other hand, argued for increases at least in line with the increases in average earnings.

Having carried out the review the Government propose to increase the limit on the amount of a week's pay from £158 to £164 and to raise the limit on the daily amount of guarantee pay from £10.90 to £11.30. These increases are in line with the rate of inflation.

In reaching their decision the Government have had very much in mind their belief that excessive burdens on business will only tend to discourage enterprise and have an adverse effect on employment opportunities. There is evidence to support the view that the employment protection legislation has inhibited some employers from recruiting. While making every effort to encourage employment by reducing the burdens on businesses the Government are of course committed to safeguarding the essential rights of employees. It is important to establish an equitable balance between the interests of employers and employees and I believe that the proposed increases do just that.

The other limits relating to the duration of guarantee pay will not be varied. The specified number of days in the relevant period for which such payments can be made will remain at five, and the relevant period will continue to be three months. If my right honourable friend, the Secretary of State decides, as he has done, that these limits should not be varied, he is required to lay before Parliament a report giving his reasons. Such a report was laid at the same time as the laying of the draft orders we are now debating. It explains that both the limits on the duration of guarantee pay still seem to strike a fair balance between the employers' obligations and the employees' rights.

I come now to the draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1987, which has been laid before the House in accordance with Section 73(4B) and 75A(7) of the 1978 Act. These awards were introduced by the Employment Act 1982 and they apply to dismissal for trade union membership, trade union activities or non-membership of a trade union. The limits are not subject to annual review but they may be reviewed from time to time.

These special provisions were introduced in order to protect the individual's rights to choose whether or not to join a union. The Government have therefore decided, as with the other awards, to increase the basic and special awards generally in line with inflation. The minimum basic award will therefore go up from £2,300 to £2,400, and the limits which apply to the calculation of the special award will be increased from £11,500, £23,000 and £17,250 to £11,950, £23,850 and £17,900 respectively. I beg to move.

Moved, That the draft order laid before the House on 9th December 1987 be approved [10th Report from the Joint Committee].—(The Earl of Dundee.)

Baroness Turner of Camden

My Lords, I rise to thank the Minister for his explanation of these orders and to say from these Benches that we welcome any increase. On the other hand, we regret that the Government have not found it possible to up-rate the employment payments by more than the rate of inflation this year. Indeed, the increases again fail to match the increase in average earnings which I understand was 7.7 per cent. last year. In the past there has also been a failure even to meet the rate of inflation, because I understand that past increases have been of the order of 1 per cent, and 2 per cent.

The result of all that is that the statutory redundancy and unfair dismissal payments which are allied to what people have been earning while in employment are now only two-thirds of the value they would have been had there been proper up-rating in line with the average earnings since 1976. Another way of putting it is that between 1976 and 1987 average earnings increased more than three-fold, by 317 per cent., whereas the limit on redundancy pay has only been increased two-fold. This is particularly unfortunate since there is a provision under Section 148 of the Employment Protection (Consolidation) Act 1979, to which the Minister has already referred, which stipulates quite clearly that the Employment Secretary should take into account the general level of earnings.

I note that the Minister says that there has been consultation with both sides of industry on the issue of up-rating of employment benefits. However, it is my understanding that the Trades Union Congress has written to the Minister again to complain, as it has complained in the past, at the failure to up-rate in line with the wages index. I should like to ask the Minister whether, if further representations are made, these will be considered, and whether there will be an agreement to see the TUC on this question of up-rating of benefits if the matter is pressed. It is my understanding that this is not the first occasion on which this matter has been raised. There is serious concern that the employment benefits are not being up-rated in line with the wages index and with what was taken to be a provision and a promise contained in the 1979 Employment Protection (Consolidation) Act.

The Earl of Dundee

My Lords, I am grateful to the noble Baroness for her comments. On the point of whether or not the rises should be linked to average earnings or to some other criterion, in reviewing the limits on awards my right honourable friend has to assess a number of factors. To have increased the limits in line with average earnings would have put an unacceptable burden on employers and have had an adverse effect on employment opportunities and recruitment.

The noble Baroness referred to the Trades Union Congress and to further representations which my right honourable friend might possibly take into account. I assure her that he will always consider any representations and give them fair hearing. Having said that, I should say to the noble Baroness that my right honourable friend has already considered this matter very carefully before coming to his decision and in the circumstances he has judged the balance as best he can between the interests of all parties involved.

On Question, Motion agreed to.