HL Deb 22 January 1991 vol 525 cc83-220

2.54 p.m.

Report received.

Clause 1 [Reduction in the amounts recoverable by employers who have paid statutory sick pay]:

Lord Carter moved Amendment No. 1: Page 1, line 9, after ("employer") insert ("the relevant number of whose employees is defined in paragraph (aa) below")

The noble Lord said: My Lords, with the leave of the House I shall speak also to Amendments Nos. 5 and 7. I do not wish to detain the House by rehearsing all the arguments and the debates that we had on Second Reading and during the Committee stage. The amendment seeks to exempt employers who employ less than 10 people. As noble Lords will remember, there was considerable debate at Committee stage regarding small employers. This amendment is an attempt by those outside this House, with the help of the noble Lord, Lord Stanley of Alderley, to define a small employer as someone who employs fewer than 10 people. If accepted the amendment would affect about 90 per cent. of all businesses.

We have tried to produce an amendment with a system which is administratively simple. It is targeted on those who most need help. In Committee we had some debate on the amendment tabled by the noble Lord, Lord Jenkin of Roding, which suggested a limit of five people. At the time it was felt that that was too few. The amendment which we put forward at that stage would have exempted all firms with fewer than 20 people. We listened to the arguments of the Government and felt that that number was perhaps too many. We believe that 10 employees is the correct number. The reason is that there is a precedent in the Wages Act 1986 which is related to rebates on redundancy payments and which defined the matter at the 10-employee level. In the amendment we have tried to meet the various points that the Minister made in Committee. We have excluded employees below the lower earnings level, casual workers and employees engaged in a private household. This amendment provides relief for small firms, which have a widely varying pattern of sickness and sick leave. It is much harder for them to accommodate one or two people being sick as opposed to the very large firms.

Last week the Committee accepted an amendment to alter the rebate percentage from 80 per cent. to 91 per cent. to avoid adding to the burden and cost on all firms at this time of recession. It is worth pointing out that between 1985 and 1987 small businesses as defined in this amendment created over a million new jobs whereas large businesses created about 20,000 jobs. We feel that there should be a simple and monthly basis for calculation. I am sure that some noble Lords will know from their post that there is considerable support from outside this House for this approach to the Bill. I feel that the House can accept this amendment in the way that it accepted the amendments at Committee stage. This amendment will bring genuine relief to small employers. I beg to move.

Earl Russell

My Lords, I thank the noble Lord, Lord Carter, for stepping so ably into the breach. I apologise to the House for cutting my arrival so extremely fine. That was because I was otherwise occupied and, as Lord Peter Wimsey once put it, "my mind being momentarily on my job". Any of us who occasionally feel any sense of incongruity about debating this business while such momentous events are taking place elsewhere might reflect that nothing better qualifies than a Bill on social security to meet the description "business as usual". The Committee stage of this Bill operated as, in theory, a Committee stage should: it narrowed down the area of disagreement very considerably. It served, in fact, as traditional legal pleadings used to do; namely, to define the point at issue.

The Government accepted the principle that there should be relief for small businesses. For that I am extremely grateful. The argument at Committee was between a figure of five, to which the Government were prepared to show sympathy, and a figure of 20 proposed by my noble kinsman Lord Stanley of Alderley and myself. Your Lordships will have noticed that I accept that one move towards compromise deserves another. The amendment put forward by the noble Lord, Lord Carter, and I shows that the figure has retreated from 20 to 10. In fact we are asking for only half a loaf. There is still quite a significant gap between 20 and the approximate number of five implied by the Government's amendment. Ninety-six per cent. of businesses in the country would have been covered by the figure of 20 employees; only 90 per cent. by 10. Therefore, 190,000 small businesses are at stake. That is not an insignificant quantity to be arguing about. Of those 190,000 businesses, one might note, since occupational sick pay has been given as one of the Government's chief justifications, 51 per cent. of firms with fewer than 10 employees have no occupational scheme.

The reason the Government gave for accepting the principle of exempting small businesses is the risk of the statistically insignificant sample. My noble kinsman said: We have been especially impressed by the representations made about the difficulties of applying averages to employers that have very few employees".—[Official Report, 14/1/91; col. 1006.] We reach the real issue when we try to define the small employer and when we ask whether the definition of small employer the Government offer us, or at least in the amendment are promising to offer us hereafter, is sufficient. What is the size of the sample below which findings are not statistically significant?

My noble kinsman said in Committee that once we go above five employees, averages begin to bite. My noble friend Lady Seear and I expressed some surprise at that proposition. We asked my noble kinsman to write to us, which he very generously did. I cannot say that he has offered any clear reason for the proposition that above five employees averages begin to bite. We have checked this with the Library in another place. It said that the likelihood of sickness affecting 40 per cent. of the workforce—the likelihood of double the average incidence of sickness—is 25 per cent. in a business of five employees; it is 10 per cent. in a business of 10; in a business of 20 and above it is less than 5 per cent.

When my noble kinsman said that statistics begin to bite, he should have put a very heavy stress on the verb. Ten per cent. of businesses getting twice the average incidence of sickness is quite significant. I should stress that those statistics will under-rate rather than over-rate the actual risk. Illness is contagious. It has a multiplier effect so that in practice rather more than 10 per cent. of businesses of 10 people will experience an above average incidence of sickness. We take that rather seriously.

I remember another example of a statistically insignificant sample. In fact I came across one this weekend. My noble kinsman was particularly generous in making sure that I had a copy of the government amendment. He sent it to me at no fewer than three places. He sent it here, to my home and to my college. It so happens that all three of those were held up for two days or more in the first-class post. I admit that that is a sample of only three. But if one took a sample of 10 and there were no more cases that would still be an incidence of 30 per cent. failure to achieve delivery dates in a sample of 10. The Post Office assures us that the average figure is six, so what I have described can happen.

There are other defects in the government amendment which would lead me to argue that ours is preferable. By the form of its drafting the government amendment creates a pressure to lower wages. It goes by the total amount of national insurance contributions, so the less one pays one's employees, the more of them one can squeeze in under the net. That is surely an incentive for lower wages. There may be those who argue that that is a good thing; but in the end, in the form of housing benefit and family credit, the Department of Social Security will end up footing the bill. It is storing up trouble for itself.

There is a great deal of imprecision in the government amendment. A great deal is left to be defined by regulations: "small employer", they say, shall have the meaning assigned to it by regulations". Subsection (1B) of their amendment says more or less that a small employer is a small employer is a small employer. I thank my noble kinsman for explaining privately, as no doubt he will do publicly in a few minutes, a little more of the thinking behind that. However, I feel that this is a case of doing more by regulations than we should. I accept the form of words used by my noble kinsman in Committee that once the principle has been accepted, then it is proper to fill in the detail by regulations. But the question here is: what is the principle? Judging by the attitude of the Committee last week, the question of the size of the small business exemption is widely regarded as a question of principle and one proper for the decision of the House and not proper for regulations.

We should also allow for the fact that the tone in which the Government's concession is discussed inside and outside the Chamber is a little different. In this Chamber the convention that a concession is met with a concession is very strong, and I honour it. Outside there is usually rather more stress on the substance and rather less on the style. In that context, I should like, by the leave of the House, to read from a letter I received this morning from the Building Employers Confederation. It says: The Government have tabled an amendment in the name of Lord Henley providing relief for very small employers. This can only be viewed as a gesture. Very many small employers will fail to qualify for relief set at this level. The Government argue that for firms greater in size than five the average sick rate ratios are likely to apply. This is not so. In firms of seven or eight employees it is well within the realms of possibility that as many as four—50 per cent. of the employees—could be off work simultaneously with 'flu or any infectious virus". Our amendment is more appropriate to meet the problem. It is not defective in form. It does not have the unfortunate side effect of lowering wages. For all those reasons, we think it is a preferable way of solving the problem.

Lord Stanley of Alderley

My Lords, I have my name to the amendment and so I should say something about it, not that I am looking forward to doing so. I was responsible for encouraging the National Farmers Union to draft it. I am keen to see it, or something like it, accepted.

Since we tabled the amendment, the Government have tabled their amendment, albeit at the eleventh hour. At the twelfth hour—or should I say the thirteenth hour?—my noble kinsman Lord Henley went out of his way to indicate some of the Government's thinking. I am unhappy about the Government's regulatory amendment. In particular, I cannot accept the permissive power to extend the 100 per cent. reimbursement to whatever length the Government so decide. If my noble kinsman can indicate that he is prepared seriously to discuss this time period, I shall reluctantly yield to the Government by not voting for the amendment.

I believe that your Lordships have made abundantly clear to the Government the fact that this is a badly thought out Bill—I would say much worse than that. I, perhaps naively, suggest to your Lordships that we should give the Government the benefit of the doubt; that we should listen to the arguments for the proposed amendment and believe that they will suitably amend the Bill, especially as regards the point I have just made. I very much hope that the Government will live up to that trust.

Lord Henley

My Lords, in my introduction I should like to point out that I am not responsible for the Post Office. I shall of course send yet more copies of any future correspondence to my noble kinsman so as to ensure that he receives any letter which I wish to send to him.

In speaking to this amendment I shall obviously have to mention the amendment tabled in my name that I shall shortly be moving, depending on the outcome of this amendment. I believe that it would have been more helpful if these amendments had been grouped together, but that was not the wish. Therefore, I shall touch upon my amendment in dealing with Amendment No. I tabled in the name of my noble kinsman Lord Russell and moved by the noble Lord, Lord Carter, partly because the amendments deal with the same problem. I refer to the problem of small businesses, especially those with abnormal levels of sickness. The first amendment attempts to deal with the definition of a small business. We can be quite clear about the fact that we are not just dealing with the size of such businesses; we are also dealing with the definition. My noble kinsman proposes to define businesses by the number of employees. The amendment I propose will deal with the problem by reference to the level of national insurance contributions paid over the year or by reference to the number of employees.

Subsection (1C) of Amendment No. 10 provides for the definition of a "small employer" to be prescribed, as my noble kinsman said, in regulations. As the House will recognise, this is a key provision and the powers as drafted enable us to go down either of those two roads. At this stage of the proceedings I should say that we favour the national insurance contribution course.

There are a number of difficulties about relating the definition of a small employer to a specific number of employees. There is the time at which the size of the workforce is to be measured and what one does when that workforce fluctuates. There is also the question of whether all employees should be treated alike, even though some may not attract SSP liability and whether the employer with a lot of part-time as against full-time workers should be treated differently. All these points have been addressed by my noble kinsman and I pay tribute to his drafting skill. However, they make for complications.

My noble kinsman's amendment provides that to be treated as a small employer the employer should have fewer than 10 employees—I acknowledge that he has reduced this from his "less than 20" figure put forward in Committee, and I am most grateful for that fact—at the time at which the statutory sick pay is paid. This means that every time a payment of SSP is made the employer will have to be sure that he falls within this definition. Moreover, as my noble kinsman's amendment also provides for certain employees to be excluded from the calculation—and I obviously understand why—this further complicates the judgment he has to make. It should also be remembered that the employer may actually be recovering SSP from his contribution payments to the Inland Revenue some time after the payment has been made and it is at the latter time that he needs to know what rate to recover. For employers whose workforce fluctuates around the 10 mark, therefore, use of the number employees as the criterion would certainly not prove straightforward. It would also prove extremely difficult for the department to monitor as it would entail checking on the number of eligible employees in the workforce at the time individual payments of SSP were made.

We believe that a much fairer and considerably simpler scheme would be to use the level of the employer's contribution payments in the preceding tax year as the trigger in defining a small employer. This would focus the definition on an employer's actual wages bill rather than on the number of employees at a point in time and would provide for a great deal more flexibility.

Perhaps I may explain the scheme a little further. All employers are required within 14 days of the end of the tax year to complete a return to the Inland Revenue of the total amount of tax and national insurance contributions for which they are liable. The information is therefore readily available to employers. The Government's proposal is very simple. If the total contributions payable in one tax year are below a specified figure, then for the whole of the next tax year that employer will qualify to be treated as a small employer. Unlike my noble kinsman's amendment, there will be no need to make a judgment on this point every time SSP is paid and recovered. Neither will it be necessary to make special arrangements, as his amendment does, for people earning below the lower earnings level and part-time workers. The former will be automatically excluded and the reduced earnings of the latter will be taken account of in their reduced contribution liability.

The level of contributions which the Government would propose setting for 1991–92 is £15,000 per annum. The flexibility of that approach means that employers of many different sizes would be eligible to be treated as a small employer, depending on the overall level of their wages bill. Those with lower wages bills and least able to cope with protracted sickness would be eligible. Setting the level at £15,000 would benefit about 700,000 employers, ranging from an employer with four employees all earning at the upper earnings limit, currently £350 per week, to as many as 90 employees if they were earning at the lower earnings limit of £46 per week.

Of course those are extreme figures. The much greater likelihood is that there is a spread of earnings levels. Perhaps I may give the House some further examples of employers with workforces coming within that definition: 22 employees all earning £100 per week; 12 employees all earning £150 per week; nine employees all earning £175 per week (this more or less equates with my noble kinsman's amendment); six employees of whom four earn £200 per week and two £350 per week.

Alternatively, if I took average male earnings, which I understand are currently at £295 per week, that would give us a figure of five employees. If we took average female earnings of £201.50 that would allow for eight employees and if we took men and women together, where I understand the average earnings per week are £263.10, that would allow for six employees. Indeed, I could continue but I hope that I have said enough to convince the House of the range and flexibility of the method proposed.

I turn now to deal with the question posed by my noble kinsman Lord Stanley of Alderley. He referred to the issue of time. I had proposed to deal with that when speaking to my amendment but perhaps it would be useful to touch upon the second half of my amendment at this point so as to convince my noble kinsman of the virtues of Amendment No. 10.

Subsection (1D) enables regulations to prescribe those payments of statutory sick pay on which an employer entitled to small employers relief can qualify for 100 per cent. reimbursement. In line with the undertaking I gave in Committee, it is proposed that this will come into operation once the employer has experienced above average sickness in his workforce —that is, when the contribution reductions are less likely to cover the cost of the extra SSP costs to him.

As in the previous subsection, the legislation enables the regulations to be drafted in one of two ways. The first, at paragraph (a), is by reference to the number of weeks for which an employee has been sick; the second, at (b), is by reference to the aggregate amount of SSP so far paid for the workforce as a whole.

The second option, relating to the aggregate amount of SSP in a tax year, has been included as the result of a meeting I had with my noble friend Lord Jenkin towards the end of last week. My noble friend proposed that we look at an employer's sickness experience for all his employees and when that had reached a certain level in the tax year, then 100 per cent. reimbursement would apply to all future payments of SSP in the year. We foresee some difficulties with that approach, particularly the need to have different earnings bands for different sized employers; otherwise an employer with one employee only might never qualify for the relief, while other employers with more employees would qualify quickly. I nevertheless undertook that the Government would further examine his proposal, and that we are now doing. Unfortunately, in the short time available since I saw my noble friend, it has not been possible fully to evaluate the proposal. In the spirit of the undertaking I gave to him, therefore, we have included a provision on the face of the Bill which would enable such a scheme to be covered.

The Government prefer, however, the first of the two options. We propose setting the trigger at eight weeks. That is the figure about which my noble kinsman Lord Stanley is worried. Thus when an employee had been sick for that number of weeks, if the employer was a small employer entitled to small employers relief he could recover SSP at the rate of 100 per cent. for so long as the period of sickness lasted. Moreover, if the employee went sick again within eight weeks of returning to work, the employer would receive 100 per cent. reimbursement immediately. That is in line with the current arrangements for paying SSP. Employers already have to record the number of weeks of SSP paid, whether linked or not, and they will, therefore, know as soon as an employee has been sick for a total of eight weeks. They will then need to note those records that therafter for so long as the current period of incapacity for work continues they can recover at the rate of 100 per cent. Those arrangements specifically address the problems which an employer can experience if he has an employee who is away for a protracted period.

As I said, we prefer the figure of eight weeks. We have pitched the figure at that level because if sickness lasts that long contribution reductions are less likely to cover the additional costs of SSP. The figure which my noble kinsman proposes in a later amendment and which he suggested earlier would be doubly favourable to the small employer, and I am unable to accept that figure. As I said, we are minded to go for eight weeks, but there is nothing on the face of the Bill specifying eight weeks. If we are persuaded that that figure is too high we shall obviously draft the regulations accordingly. I must stress that doors will remain open. We shall continue the consultation in which I have been involved over the past two weeks. We shall listen to any representations on the eight weeks. However, I must emphasise that at the moment we are minded to go for eight weeks.

In conclusion, I want to stress that our proposals are not set in concrete. That is why we propose the flexible approach we have in the regulations. We are of course willing to listen to any comments which employers or their organisations may put forward on the operation of those arrangements. The Government will also be monitoring the operation of the scheme and there will be scope further to amend the arrangements in the light of experience, should that prove necessary.

I hope that what I have said convinces my noble kinsman Lord Russell that an approach based on national insurance contributions of about £15,000 is the right one. In many cases, that will exceed the figure of 10. In some cases it will be less. From an administrative point of view our approach is simpler than merely stating a figure of 10.

Lord Carter

My Lords, the House will be grateful to the Minister for that explanation, but it does not go nearly far enough. Your Lordships' Committee and the Government made it clear that they wished to help the small employer when we debated the issue last week. As the Minister said, the Government have tabled a new clause on small employer relief. The advice we have taken shows that Government Amendment No. 10 goes no way towards meeting the concerns of the CBI, the NFU, the Forum of Private Business, the National Federation of the Self-Employed and Small Businesses and all the other organisations interested in the Bill. The amendment that I moved has the support of all those bodies.

As the Minister said, we have tried to meet the Government more than half way. There was a gap of from five to 20. Half way is 12½. We settled for 10. On the number of employees, we were careful to lift the drafting from the Wages Act 1986. It is not impossible to define the number of employees.

We believe that we have met most, if not all, of the Government's requirements as set out in Committee. I mentioned all those requirements when I moved the amendment. The Government's amendment does not meet the requirements the Committee set out last week, which is why we asked for the amendment to be de-grouped so that it could be dealt with as a separate issue and we could decide once and for all how best to deal with the number of employees. We feel that 10 is the right number.

The crucial figure that the Minister omitted from his reply was the cost to the Government of this small employer relief. As I understand it, it is less than £2 million. That shows the effect the new clause will have with a £15,000 limit on national insurance contributions and the eight-week requirement.

Lord Henley

Perhaps the noble Lord will give way. I did not give any figures. I can do so now as the noble Lord has mentioned them. The cost will be between £1 million and £2 million; but the cost is not the relevant factor. The amendment is designed to meet the problem where a small business experiences considerably higher than average levels of sickness. Whether that costs £1 million, £2 million or £100 million is irrelevant. The amendment goes some way towards meeting the point.

Lord Carter

My Lords, I am afraid that that is not so. The cost to the government will show the benefit to the private sector. I shall explain why the eight weeks is wrong. I have been involved for 30 years with two businesses, each with a payroll of about 30 employees. I telephoned each of the offices this morning and asked the staff, many of whom have been with me for a number of years, to try to remember the number of employees in each of those companies who have been absent sick for more than eight weeks during that 30 years. In one case it was four and in the other five. That shows the weakness of the Government's amendment.

By relying upon eight weeks, the Government substantially reduce the cost. That is why the figure of £1 million to £2 million is important: it quantifies the benefit to the private sector. The Government amendment may be simple, but it would provide rough justice. At a time of recession a company which falls outside the £15,000 limit in one year but falls below the limit in the following year will not be eligible for small employer relief.

I said that the amendment I moved would affect some 90 per cent. of businesses. The calculation that we have been able to make in the short time that we have had available—a point that I shall deal with later —is that the Government's proposed new clause will affect firms with five employees or fewer, and so we have not moved from where we were in Committee last week on the amendment moved by the noble Lord, Lord Jenkin.

The Minister said that 700,000 employers would benefit: 700,000 will be eligible, but the number who will benefit will be very small. That is measured by the fact that the cost to the Government will be less than £2 million. The whole business of introducing this matter by regulation, in the teeth of what the Committee decided on the Henry VIII clause only last Monday, says a great deal about the considerable weakness of the Government amendment. We have no option other than to ask for the opinion of the House on Amendment No. 1.

3.28 p.m.

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

Their Lordships divided: Contents, 100; Not-Contents, 126.

Division No. 1
Acton, L. Kennet, L.
Airedale, L. Kilbracken, L.
Ardwick, L. Kinloss, Ly.
Attlee, E. Leatherland, L.
Aylestone, L. Lockwood, B.
Bancroft, L. Longford, E.
Banks, L. Lovell-Davis, L.
Blease, L. Mackie of Benshie, L.
Bonham-Carter, L. McNair, L.
Boston of Faversham, L. Mar, C.
Bottomley, L. Marsh, L.
Briginshaw, L. Mason of Barnsley, L.
Broadbridge, L. Milner of Leeds, L.
Callaghan of Cardiff, L. Molloy, L.
Campbell of Eskan, L. Monson, L.
Carmichael of Kelvingrove, L. Morris of Castle Morris, L.
Carter, L. Murray of Epping Forest, L.
Cledwyn of Penrhos, L. Nicol, B.
Clinton-Davis, L. Ogmore, L.
Cocks of Hartcliffe, L. Oram, L.
Craigavon, V. Palmer, L.
Cudlipp, L. Peston, L.
David, B. Phillips, B.
Dean of Beswick, L. Pitt of Hampstead, L.
Donaldson of Kingsbridge, L. Prys-Davies, L.
Ennals, L. Rea, L.
Ewart-Biggs, B. Ritchie of Dundee, L.
Ezra, L. Robson of Kiddington, B.
Gallacher, L. Rochester, L.
Galpern, L. Russell, E.
Gladwyn, L. Sainsbury, L.
Glenamara, L. Saltoun of Abernethy, Ly.
Graham of Edmonton, L. [Teller.] Seear, B.
Shackleton, L.
Gregson, L. Shepherd, L.
Grey, E. Stallard, L.
Grimond, L. Stedman, B.
Hampton, L. Stoddart of Swindon, L.
Harris of Greenwich, L. Taylor of Gryfe, L.
Hatch of Lusby, L. Tordoff, L. [Teller.]
Hayter, L. Turner of Camden, B.
Hirshfield, L. Underhill, L.
Hollis of Heigham, B. Wallace of Coslany, L.
Holme of Cheltenham, L. Walston, L.
Hooson, L. Whaddon, L.
Houghton of Sowerby, L. White, B.
Hunt, L. Williams of Elvel, L.
Irvine of Lairg, L. Willis, L.
Jacques, L. Winchilsea and Nottingham, E
Jay, L. Winstanley, L.
Jenkins of Putney, L.
Alexander of Tunis, E. Cavendish of Furness, L.
Allerton, L. Clanwilliam, E.
Annan, L. Clitheroe, L.
Arran, E. Cochrane of Cults, L.
Astor, V. Constantine of Stanmore, L
Belhaven and Stenton, L. Cottesloe, L.
Beloff, L. Cox, B.
Belstead, L. Craigton, L.
Bessborough, E. Dacre of Glanton, L.
Blatch, B. Davidson, V. [Teller.]
Blyth, L. Denham, L. [Teller.]
Boardman, L. Derwent, L.
Bolton, L. Dulverton, L.
Borthwick, L. Dundee, E.
Brabazon of Tara, L. Effingham, E.
Brightman, L. Elibank, L.
Brookeborough, V. Ellenborough, L.
Brougham and Vaux, L. Elliot of Harwood, B.
Caithness, E. Elton, L.
Campbell of Alloway, L. Erroll of Hale, L.
Campbell of Croy, L. Flather, B.
Carnarvon, E. Fortescue, E.
Carnegy of Lour, B. Gardner of Parkes, B.
Carnock, L. Gisborough, L.
Glenarthur, L. Oxfuird, V.
Gray, L. Pearson of Rannoch, L.
Grimston of Westbury, L. Pender, L.
Hailsham of Saint Marylebone, L. Perth, E.
Peyton of Yeovil, L.
Hardinge of Penshurst, L. Pym, L.
Harmar-Nicholls, L. Quinton, L.
Harvington, L. Rankeillour, L.
Henley, L. Reay, L.
Hesketh, L. Rodney, L.
Hives, L. Romney, E.
Hood, V. St. Albans, Bp.
Jenkin of Roding, L. St. John of Fawsley, L.
Johnston of Rockport, L. Savile, L.
Kinnaird, L. Selborne, E.
Lauderdale, E. Skelmersdale, L.
Lloyd of Hampstead, L. Slim, V.
Loch, L. Soulsby of Swaffham Prior, L.
Long, V. Strange, B.
Lucas of Chilworth, L. Strathcarron, L.
Lurgan, L. Strathclyde, L.
Lyell, L. Strathmore and Kinghorne, E.
Mackay of Clashfern, L. Strathspey, L.
Macleod of Borve, B. Swansea, L.
Mancroft, L. Teviot, L.
Manton, L. Thomas of Gwydir, L.
Margadale, L. Thorneycroft, L.
Massereene and Ferrard, V. Tranmire, L.
Merrivale, L. Trefgarne, L.
Mersey, V. Trumpington, B.
Middleton, L. Vaux of Harrowden, L.
Montgomery of Alamein, V. Waddington, L.
Mountevans, L. Wade of Chorlton, L.
Mowbray and Stourton, L. Wharton, B.
Munster, E. Whitelaw, V.
Nelson, E. Wilberforce, L.
Norfolk, D. Wolfson, L.
Norrie, L. Wynford, L.
O'Brien of Lothbury, L. Yarborough, E.
Onslow, E.

Resolved in the negative, and amendment disagreed to accordingly.

3.38 p.m.

Lord Henley moved Amendment No. 2: Page 1, line 12, leave out (""so paid"") and insert (—by making"").

The noble Lord said: My Lords, in moving Amendment No. 2 I shall speak to Amendments Nos. 3, 6 and 10 which are in my name. I understand that we shall also speak to Amendments Nos. 4 and 11 in the name of the noble Lord, Lord Carter, and Amendments Nos. 12, 13 and 14 in the name of my noble friend Lord Stanley of Alderley.

It is obvious that in my previous speech I largely dealt with all that I wish to say on the amendment and it would be idle for me to repeat it. Perhaps when I come to wind up I can deal with points made and respond to the amendments in the names of my noble friend Lord Stanley and the noble Lord, Lord Carter. Some criticism was made in our debates on a different amendment during the Committee stage as to whether dealing with the detail of the scheme in the regulations follows normal practice; but there is no question of this being a Henry VIII clause.

However, the House will have noticed that the legislation provides for the first set of regulations under these provisions to be subject to affirmative resolutions. The House will then have an opportunity to discuss the terms of regulations when they are produced. I beg to move.

Lord Jenkin of Roding

My Lords, perhaps I may briefly intervene because, as my noble friend explained, the amendment has been tabled in response to the debate on the amendment that I moved in Committee. My noble friend has been as good as his word and brought forward an amendment which, in that respect, is a good deal better than mine.

I warmly support the part of his amendment that would define the small employer by reference to the payment of national insurance contributions in the year. Like the noble Earl, Lord Russell, I too am grateful for having had the opportunity to study the amendment in advance. In my case the post worked and I had my three copies all delivered on time. That may say something about averages, but I am grateful.

As one is precluded from speaking on a Report stage amendment after the Minister has spoken—I think that perhaps the noble Lord, Lord Carter, has not fully hoisted that on board—may I say that the effect of the £15,000 limit that my noble friend indicated is that the number of employees covered bears a close relationship to, and follows exactly, the range of levels of pay of the employer. In the typical example of a firm that pays four people £125 a week, three people at £175, and three at £200, you find that you have a firm with 10 employees, exactly the same as in the amendment. If all are paid at a lower rate, then there would be more of them. That seems to me to be entirely right. It is a good, flexible definition. I warmly applaud my noble friend for indicating that that is the preferred test for the definition of an employer.

As to the second arm, the threshold for the move from 80 per cent. to 100 per cent., I was frankly concerned when my noble friend indicated that the Government are at present leaning towards the first of his two alternatives; namely, to take it as a threshold for each individual employee rather than the aggregate of sick pay paid by the employer in question. A simple example will perhaps explain what I mean; I appreciate that I am plucking figures out of the air.

My noble friend indicated a figure of eight weeks. If you have one employee who reaches eight weeks of sickness, that triggers the move from 80 per cent. to 100 per cent., and thereafter the employer gets the 100 per cent. reimbursement for the statutory sick pay. If you have two employees both of whom are off for four weeks, you reach exactly the same level of payment by the employer but you are still a long way short of triggering the payment at the 100 per cent. rate.

Therefore, I was pleased to see that my noble friend agreed —and I am grateful to him for having met me with the chairman of the Forum Of Private Business when we argued the case—that if you are going to go down this road it must be on the basis of the aggregate sick pay paid by the employer in the year and not related to the individual employee. Otherwise, one ends up with completely illogical and, I would have thought, indefensible distinctions between different employers depending on how many employees are ill in the year and whether they reach the threshold.

I take comfort from two points. First, my noble friend has included the power in paragraph (b) to act on the basis of the aggregate and he is also prepared to continue consulting with the interested parties to see that the best solution is achieved. I have no doubt that his figure of £1 million to £2 million, dependent on the level of the threshold taken, could well be higher if it is taken on the aggregate of all the sick pay paid in the year by an employer. I accept his point that there would have to be different thresholds for different numbers of employees, but that, I believe, is not too difficult.

I return to what I said last week in Committee. If you have average, or less than average, amounts of sickness in the firm, the effect of the proposed reduction to the national insurance contribution will leave the firm substantially better off. Therefore, I wish to suggest to my noble friend, his right honourable friend and Treasury Ministers, when they are deciding exactly what form the regulations should take, that they might be prepared to offer a modified reduction in the national insurance contribution so as to save some money there and have a far more logical and far fairer system of fixing the threshold at which you move to 100 per cent.

My noble friend has wisely left himself with the ability to take such action in the terms in which the empowering clause is drawn for the regulations. I urge with all the force I can command that he listens to those who will be pressing him in this direction and that the regulations, when they are put before the House, take that form. I am grateful that the Government have moved and that there is to be a significant small business exemption.

3.45 p.m.

Earl Russell

My Lords, I accept entirely what my noble kinsman the Minister said. This is not a Henry VIII clause. Nevertheless, it is not the only form in which occasionally this House has problems with regulations. My complaint is that we are being asked to buy a pig in a poke. My noble kinsman has frankly spelt out that the Government have not yet decided which form of definition they are using. That is a question that it might be proper for the House to decide.

The size of the exemption is another question that it would be proper for the House to decide. I accept my noble kinsman's formula that the question of principle is what is to be decided by this House, but the question of principle is, in part, a subjective question. What is to be seen as a question of principle must depend to an extent on what people are actually disagreeing about. I once defined business proper to be done in regulation as that which would empty the Chamber if it were embodied in a Bill. These issues do not seem to me to meet that test. In fact the Chamber is reasonably full.

There are also—and I must ask the Government to take this on board—special difficulties in dealing with regulations in this House because of the difficulty of having a vote on them. The concern of my noble kinsman Lord Stanley of Alderley about whether eight weeks is a sufficiently generous concession or whether it could possibly be improved, is a definite point of substance. It is the sort of issue which, if embodied in a Bill, we could properly vote on. If we allow the Government the power to act by regulation we are simply saying, "Let the Government decide. We may be satisfied, or we may not, but whatever they do we have to take it." On a question that causes so much feeling, both inside and outside the House, I am not convinced that that is entirely proper.

I understand my noble kinsman's difficulties. This was a late concession, and a late conversion. Those speaking from the Opposition Benches cannot possibly reprove the Government for a late conversion. If they do they are going to queer their own pitch very considerably. Therefore, I do not blame my noble kinsman the Minister for his late conversion. I understand the difficulty of coming up with a satisfactory decision before Report stage.

I also appreciate that there is strong pressure to avoid bringing back questions at Third Reading that we can possibly dispose of earlier in the Bill. However, since the Government, by the Minister's own confession, have not yet decided what they are going to do I wonder, rather than asking us to authorise them to make the law, they will consider withdrawing the amendment for the time being and coming back at Third Reading when they have decided what they want to do and can spell it out for the House in an amendable form.

Lord Carter

My Lords, in discussing these groups of amendments, I wish to concentrate particularly on Amendment No. 11, which is my amendment to the Government's amendment. As a general point I should say that I am sure the House will realise that we are dealing with a complex group of amendments on a complicated subject. The Government's handling of this Bill in this Chamber and in another place has been nothing short of disgraceful. In another place the Second Reading took place on Monday 26th November 1990 and the Bill was rushed through all its remaining stages on Wednesday 28th November. The Committee stage of the Bill took place in this House on Monday 14th January. We were promised a government amendment to deal with small employers. I hear what the noble Earl, Lord Russell, says about the late conversion, but that does not apply to late tabling. The amendment was tabled very late on Friday and none of the essential information that we needed was given. The information concerning the £15,000 figure and the eight-week period was not available until yesterday afternoon. Those figures are obviously crucial.

Lord Henley

My Lords, I would remind the noble Lord, that Amendment No. 1 standing in the name of the noble Lord was also tabled late. There was no necessity whatever for that lateness.

Lord Carter

My Lords, the Minister knows extremely well that that is a paving amendment for an amendment which had been on the Marshalled List for some time. As I have said, the Government's amendment, which covers two pages, was tabled late on Friday. We received the information in a very skimpy form yesterday afternoon. That left us 1 ½ hours to take advice and to draft a very complicated amendment. The Minister might care to tell us just how this House is supposed to do a proper job of work —this applies particularly to those on the Opposition Benches who do not have the support of departmental officials—when his department behaves in this way.

As has already been said in an earlier debate, we feel that the government amendment falls far short of what is required to provide relief for the small employer. I would say to the noble Lord, Lord Jenkin, that I admit immediately that using the level of the national insurance contributions is an ingenious way of dealing with the matter. I would say to the noble Lord, Lord Jenkin, that I admit the advantages of that scheme compared with other methods of tackling the matter. Will the Minister confirm that we are referring here to the total of the employers' and the employees' contributions in the £15,000 figure? The Minister nods his head in confirmation. On average, that will mean that the provision will apply to firms with five or fewer full-time employees. As I said earlier, that could lead to rough justice, particularly in times of recession, for firms which are outside the limit this year. If such a firm's resources decline as a result of recession and its number of employees falls, it will spend a whole year outside the scheme even though its national insurance contributions amount to less than £15,000. Is there a danger of a wage trap in the approach that the Government are adopting? A qualifying period of eight weeks of sickness is much too long. The weakness of the clause is shown by the fact that its provisions will cost the Government less than £2 million. I repeat that I know of two firms with a total payroll of 60 employees. Over some 30 years I cannot recall that more than three or four employees in each firm had been off sick for more than eight weeks. One of those firms was a farm where the incidence of injury is perhaps higher than in other occupations. As I have said, this period is much too long for a qualifying period.

The Minister has been pressed by his noble friend Lord Stanley of Alderley and the noble Earl, Lord Russell, on this matter. I, too, wish to press him on the issue of whether the Government are prepared to reconsider that period of eight weeks. If they are, that would have a considerable effect on the way we regard the Government's amendment. By limiting the period to eight weeks, the vast majority of absences through sickness will be excluded.

I now turn to Amendment No. 11 which stands in my name. It is an amendment to the Government's Amendment No. 10. I apologise for its apparent complexity. As I have said, it was drafted in about 1½ hours with advice. Certainly if we had had more time, we would have been able to express it in simpler terms. I certainly undertake to improve and simplify it if the House is prepared to accept the principle behind the amendment. Despite the complexity of the wording, the principle is quite simple. It proposes that 100 per cent. reimbursement of statutory sick pay to employees should be automatically triggered when the rate of sickness reaches the equivalent of two weeks' sickness for all employees per year. No small business, whether it is above or below the threshold of the number of employees, would ever be out of pocket as a result of this approach. When the net monthly cost of statutory sick pay to the employer, that is the shortfall in statutory sick pay after government reimbursement, is more than £5 multiplied by the number of employees in the company in any one month—there is a reason for that figure which I shall not explain to your Lordships as it is a technical reason—the employer is able to claim 100 per cent. reimbursement for that month. The important point is that statutory sick pay has to be dealt with on a monthly basis. The amendment, in turn, deals with reimbursement on a monthly basis.

The flexibility of this method allows the problem to be identified before it reaches crisis point. Under the Government's system an employee would have to be absent for a full eight weeks before he could qualify for 100 per cent. reimbursement. This method is easier to calculate as it can be built into the existing method of payments received from the Government. Our proposal is easier to police because it is built into existing procedures. No special measures are required for small businesses because their interests are routinely protected through the self-adjusting nature of the scheme. The system is graduated and at no point do sudden dramatic changes occur on either side of a threshold.

I know that the Minister has discussed this amendment with those who drafted it and those who support it outside the House. Is he prepared at least to consider this principle? As I have said, we have had very little time to draft the amendment but I believe the Minister understands well what lies behind it. I hope the Minister is prepared at least to say that he will consult on the principle behind the amendment, which I believe is a simple one. If that is not possible, I hope the Minister will be prepared to consult on the number of weeks which the Government will use as a trigger. The Minister's remarks will help us to decide how to deal with our amendments.

Lord Stanley of Alderley

My Lords, it may be for the convenience of the House if I speak to the amendment of my noble kinsman as well as to Amendments Nos. 12, 13 and 14 which stand in my name. The Government's statements in Committee gave us hope that they had accepted the need to protect small employers from the extra costs facing all employers as a result of this Bill. The Government's amendment, however, gives the Government such wide powers that by itself it gives no indication of what they intend. It is thus the figures that we have just been given which hold the key.

The Government's amendment refers to employers' national insurance contribution payments. The Government's figure is £15,000 a year. That is misleading because that represents the total contribution including that of the employees. It is less generous than it initially appears. Based on national average earnings, it really only means five full-time employees or fewer. However, I am reluctantly prepared to accept this provision. My only amendment to this part of the Government's amendment is a practical one. It is contained in my Amendment No. 12 which would mean that as employers remit their national insurance contributions monthly, they should do the same for statutory sick pay.

My Amendment No. 13 is one about which I feel very strongly. I am delighted to be supported by my noble friend Lord Jenkin and the noble Lord, Lord Carter. The Government's proposals largely remove any real benefit to small employers. By limiting the 100 per cent. recoupment to sickness that is prolonged after eight weeks or so—I accept that my noble friend has not been definite—the vast majority of sickness absences and small employers' statutory sick payments are excluded. That was pointed out by the noble Lord, Lord Carter.

In both Houses the Government have made great play of the benefit to employers of the reduction in employers' national insurance contributions. However, that is extremely misleading. The 0.4 per cent. reduction applies only on earnings up to £185 a week. Above that figure the reduction is only .05 per cent. This will apply to most full-time employees. In effect the 0.4 per cent. saving will apply only to part-time and juvenile employees. I shall give an instance of this. For an employee earning £200 per week, the saving on the employer's national insurance contribution is only a paltry £5.20 per year. That is the equivalent of the difference between 80 per cent. and 100 per cent. SSP recoupment for only 2½ days SSP. However, in their generosity the Government are proposing that full recoupment should not start for eight weeks. If the Government are genuine in their desire to help small employers, 100 per cent. recoupment must apply to all SSP payments. That is the reason for my Amendment No.13, to which I am now speaking, to delete Clause (1D) of the government amendment.

The Government's clause is really a mean move to give small employers something with one hand only to take it away with the other—indeed, to take more away. This clause should be removed. Bearing in mind what my noble kinsman Lord Henley said previously, I hope that this amendment will be accepted. I fully understand that it may not be possible for him to do that now, as we drafted the amendment in somewhat of a hurry—noble Lords who were involved in this know the state we have been in over the past weekend —but if he cannot accept it now perhaps he will indicate what he might be prepared to do before Third Reading, or indeed at Third Reading?

I now move briefly to Amendment No. 14. As noble Lords will see, this changes all orders to affirmative orders. It appears to be the case that the first order is affirmative and the others negative. This amendment is very important because it would remove the justifiable fears expressed by my noble kinsman Lord Russell that it is wrong to rule by statutory instrument. But provided your Lordships' amendment insisting that any change to the rate should be subject to primary legislation is upheld—the Henry VIII clause; and I am sure that constitutionally it should be and I look at the noble and learned Lord, Lord Simon —I cannot see any government being able to argue, and they would have to argue it on the floor of the House if it were an affirmative order, that the rate for small businesses be altered to their detriment without so altering the main provisions of the Bill which, subject to your Lordships' Henry VIII provision being upheld, would require primary legislation.

Lord Harmar-Nicholls

My Lords, I am sorry that the noble Lord, Lord Carter, opened his argument with the remark about not having time and that the amendment was put down rather late. He knows, as I do, that there was plenty of time, bearing in mind the discussion and thought that had been given to the matter. That is not really the argument. It would have been better to have had a longer period so that, as he said, his own amendment could have been better thought out, but I think he weakened his argument. I am sorry that he opened what was otherwise a good argument with the sour business about it being put in too late for anything to be done.

My noble friend Lord Jenkin dealt with the matter in a much more mature way. He made it perfectly clear that the general direction shows some improvement on what we were told at Committee stage; but the improvement does not go far enough. At the Committee stage I used the argument that those of us who have day-to-day contact with small industries could produce our own evidence. I said at Committee stage that, as the position then stood, it really would be detrimental to small businesses such as those that I know, even to the point of encouraging us to dispense with labour at a time when we do not want to add to the unemployment list. My noble friend Lord Jenkin is right.

I have discussed this matter with the people who deal with the day-to-day matters of my small companies. There is the suggestion of aggregating the period for which people are off work instead of confining it to the individual, which at present would be of no help at all. The whole of our argument is that the people who need the help are the small employers. The extra burden that they will have put on to them is very real and it affects whether or not they are going to be successful, with everything that flows from that.

I agree with the noble Lord, Lord Carter, that if the saving is to be only £1 million to £2 million that is a clear indication that not much help will be given to anybody. My noble friend should take that point into account. He has given himself the powers under the supposed affirmative regulations that we have in mind to do something about this. Indeed, he could underwrite it by the time we come to Third Reading and when he replies to this short debate he could indicate that he is prepared to look at the position where he would aggregate rather than keep it to separate individuals.

I asked my people how often over the past two years we had had people off work for more than eight weeks. Staffordshire is a good healthy place to live in and over the past two years we have not had one person who has been off sick for more than eight weeks. Quite a number have been off for two, three and four weeks. I agree with the arithmetic of my noble friend Lord Jenkin that two fours make eight, and if my noble friend could indicate a figure of four that would mean something for the companies on which I can speak with some authority. It would not be absolute justice. I think they are entitled to full restitution as it is not their fault if an employee is ill.

If the Minister can indicate in his reply that the Government will look seriously and with sympathy at basing this on an aggregate, with four weeks rather than eight weeks being the figure upon which they base their regulation, they would be moving towards giving some help to those who need it; that is, the small businesses which will be affected by the Bill.

Lord Carter

My Lords, before the noble Lord sits down, as he referred to my remarks I should like to say that the point I was making was that the crucial information we needed was the £15,000 and the eight weeks. Only in that way could we decide on the quality of the Government's amendment. We received that information—and I accept that the Minister tried his hardest to get it to us, but the Department did not produce the figures—yesterday afternoon at three or four o'clock. The amendment had to be tabled by six o'clock and we had to take advice, to draft it and to table it. I do not think that was long enough.

Lord Boyd-Carpenter

My Lords, this amendment produces an improvement in the Bill, but it is a very small one and I do not share the enthusiasm for it of my noble friend Lord Jenkin of Roding.

I am grateful to my noble friend Lord Henley for giving consideration to some of the matters which were mentioned in Committee, but I do not think he is prepared to deny that this is a very small concession indeed and one which will do very little to remedy the damage which the Bill will do. On that question of damage, I should like to tell your Lordships of a communication I received this morning from a body that I had not realised was interested in this matter —the National Association of Citizens' Advice Bureaux, which is a politically wholly impartial body and one also detached from the particular interests of industry. It states: The CAB service views with considerable concern the proposals in this Bill. We fear that, by ending full reimbursement for payments under the statutory sick pay scheme, the proposals will provide employers with a positive incentive to dismiss workers who become sick". That is a very serious allegation from a highly responsible and politically impartial body. I hope that the Government will pay some attention to it.

I understood my noble friend the Minister to say that before the next stage of the Bill he would have consultations. I ask him to include in those consultations the citizens advice bureaux and, in a different way, the CBI. I believe that my noble friend knows that there is considerable ill feeling among many outside bodies that they have not been consulted properly, or at all, about a matter which affects them a great deal. I hope that my noble friend will not take the line that because he has produced this amendment that is all that he needs to do. I hope and believe that he will enter into consultations forthwith and seek to see whether further changes should not be effected at Third Reading.

On that point, consultations have not been helped by the extraordinary haste with which the Bill has been pushed through. Intervals between stages have been very short indeed. In view of the very short discussions in another place, it is to be remembered that those discussions coincided with a time of considerable political excitement on totally different matters which no doubt distracted the attention of honourable Members from the serious issues which arise on this Bill.

The amendment could mean very little. It all depends upon how, if it is put into the Bill, it is used. It is largely a regulation-making provision. My noble friend said that it is not a Henry VIII clause. I rather agree. I think that it is a Henry VII clause—it is a little weaker. However, it contains complete powers to allow the Government either to make it effective or to make it largely ineffective.

If noble Lords will look at the text of the Bill they will see from subsections (1C) and (1D) that regulations "may" do this and "may" do that. There is no provision that they must or shall do it. Equally, when one looks at the last subsection of the amendment one sees that a statutory instrument will be subject to the affirmative procedure only in relation to the first regulations made under the Bill. That is no safeguard at all. There is nothing whatever to prevent the Government from producing an innocuous and not very important set of regulations as the first regulations, going amiably through the affirmative procedure and then putting the powerful regulations which really affect matters into the next set of regulations which are subject only to the negative procedure.

Therefore I hope that one of the amendments for Third Reading which my noble friend will consider will be to take out the word "first" in that subsection and provide that all of the regulations shall be subject to the affirmative procedure. I hate to say this of a Government for whom I have a very high regard and whom I have endeavoured over many years to support as enthusiastically as I could, but I should be happier if they were firmly tied down by such safeguards.

Finally, I agree very much with the noble Lord, Lord Carter, that the figure of eight weeks is far too high. One could argue for whatever lower period one prefers. My own view would be that three or four weeks would be appropriate but that is a matter on which opinions may very well differ. However, I believe that there is very little difference of view in this House that eight weeks is a very high figure and hardly likely to be of much value.

Therefore, in thanking my noble friend for having introduced an amendment at all I hope that he will not believe that it is an impressive or substantial one. One can apply to it the old quotation:

"Parturiunt montes, nascetur ridiculus mus". For the benefit of Members of your Lordships' House on the Liberal Democrat Benches I shall translate. It means that Lord Henley has been in labour and has produced a very small result.

4.15 p.m.

Lord Renton

My Lords, before my noble friend sits down can he say from his long experience of this type of legislation whether it has become usual in the past for regulations to be used for deciding not merely the detailed incidence of particular provisions but actual amounts?

Lord Boyd-Carpenter

My Lords, my recollection goes back to the six-and-a-half years during which I was Minister of Pensions and National Insurance. I should not like to give an answer about all of the legislation over that period but it is my clear recollection that in the fixing of amounts one always put the figure into the Bill.

Lord Donaldson of Kingsbridge

My Lords, should not the noble Lord, Lord Renton, address his questions to the Front Bench?

Lord Mottistone

My Lords, I too should like to remind the Government that this amendment was produced very late in the day. At Committee stage, when it was proposed, I suggested very strongly to my noble friend that his officials should discuss the matter with the CBI and other interested parties before the amendment was produced. In the event on Friday afternoon I was telephoned—on the Isle of Wight—to be told by the CBI that the department would not say what the amendment looked like. It was not until I was able to talk to staff in my noble friend's private office, which had been instructed to tell me what the amendment looked like, that we got the department moving to tell the CBI what was proposed. That was late on Friday, with the weekend coming up. It was very restrictive and appeared almost to be deliberate and intended to prevent advice being put forward. The net result is that we have an amendment for which, until I heard them just now, I did not have the vital figures. The CBI was able to squeeze the figures out yesterday. Without those vital figures the amendment meant nothing at all.

I do not blame my noble friend and his officials for this, but inevitably the amendment is not ideal because it had to be rushed out, as did the amendments to the amendment. Whether we accept the amendment or not is not important at this stage, but it would be worth my noble friend saying that he will come back at Third Reading with an improvement on the amendment which would be discussed by interested parties tomorrow and the next day. That still gives a bit of time. That would be very helpful because, as I see the Bill, without the amendment of the noble Lord, Lord Carter —which is not a party political amendment but has been produced by the Forum of Private Business (which could not be more non-socialist) and is a sound approach to the problem the provision could not be written into it by regulation if it was not accepted—if your Lordships see what I mean.

If my noble friend does not intend to accept the amendment of the noble Lord, Lord Carter—and much the same argument applies to those of my noble friend Lord Stanley—perhaps he could say "I am interested in these amendments and I shall discuss with the people concerned, including the CBI, during the next couple of days how we can improve on the amendment we are now debating". If my noble friend would say something like that I believe that he would satisfy all of us, including even my noble friend Lord Jenkin who, although he has strongly supported the Government at every turn—I cannot quite say that I admire him for that but it is jolly good from the Government's point of view—has said that the Government's amendment could do with improvement.

Therefore, those of us who have studied the amendment—and sadly most of your Lordships have not had the opportunity to do so because you have not been kept in the picture—have only been able to do so because we managed to squeeze information out of the department over the weekend. Most of your Lordships therefore probably find much of what I have said hard to understand. The fact is that if my noble friend really wants to produce a Bill which is credible, which will work and which is fair and reasonable to small firms, I urge him strongly to say that he will produce a discussed alternative which embraces what is before us now for this House to consider at Third Reading.

Lord Simon of Glaisdale

My Lords, I respectfully agree with the noble Lord, Lord Stanley, and the noble Lord, Lord Boyd-Carpenter. It is highly desirable that regulations made under two different subsections inserted in Section 9 of the earlier Act should throughout be by affirmative resolution. I know of only one other case where the first occasion of the regulations being put was by affirmative procedure and subsequently by negative procedure, and that was in the Education (Student Loans) Bill (now Act) where the circumstances were entirely different. It seems to me that for the reasons given by the noble Lord, Lord Boyd-Carpenter, if the first regulations merit the affirmative procedure, that should be adopted throughout.

Baroness Platt of Writtle

My Lords, perhaps I may support the suggestion of my noble friend, Lord Mottistone, that there should be further consultation due to the lateness of this amendment. I understand that the Engineering Employers' Federation share the CBI's doubts about the meaning of the amendment and feel it should be clearer. At the present time, it seems to me to be very important that this should be clear. We should be encouraging employers in these important fields of manufacture to overcome the present recession.

Lord Henley

My Lords, again I should like to apologise for my amendments being somewhat late. I can assure my noble friend Lord Mottistone that it is in no way deliberate. We got them down on Friday and sent copies to as many noble Lords as possible. I think one should remember that the noble Lord, Lord Carter, and my noble friend Lord Stanley also put down a late amendment. I do not refer to the noble Earl's Amendment No. 9 but to Amendment No. 1, which was put down only yesterday and which I first saw today. It might be a purely paving amendment, but I was too polite to say earlier that it was a totally unnecessary paving amendment. Presumably it was put down for some peculiar procedural reasons. I make that comment only because, if we are being accused of putting down late amendments, I think the noble Lord, Lord Carter, also put down late amendments.

Turning to the regulations, I am not sure that I was grateful that my noble friend Lord Boyd-Carpenter referred to them as Henry VII regulations rather than Henry VIII regulations. As I remember, Henry VIII had something of a reputation for fiscal efficiency.

My noble kinsmen and others have raised the question of why we are dealing with the main provisions in regulations. As I think I have already said, it is deliberate policy on our part to provide maximum flexibility in designing the scheme. I indicated that the Government had preferences for the way in which the scheme should be designed. At this stage, we do not want to rule out other possibilities should they turn out to be more practical. For this reason, some of the powers in the more crucial areas keep our options open at this stage. Assuming that the House approves my amendments, we shall be prepared to listen in the interval between now and the laying of regulations to representations on the best way of operating the scheme. That was what I meant when I referred to the consultations in which we have engaged and in which we shall continue to engage. We shall listen to the representations of anyone who wishes to speak with us.

Lord Boyd-Carpenter

My Lords, it is important that there should be no misunderstanding here. Does that willingness to indulge in consultation also include a willingness to consider further amendments at Third Reading?

Lord Henley

My Lords, obviously I would consider further amendments at Third Reading. It is not for me to say what noble Lords should put down at Third Reading. If the noble Lord wishes to put down an amendment at Third Reading, so be it.

Lord Boyd-Carpenter

My Lords, the noble Lord has misunderstood me. I asked whether in his discussions with outside interested bodies he was prepared to listen to their suggested amendments for Third Reading.

Lord Henley

My Lords, if the noble Lord is suggesting that I should then bring forward their amendments, let me point out that what I am suggesting is that with our amendment as it stands we hope we should be able to achieve what would be desired, if we thought fit. I shall at this moment give no guarantee that I will bring forward amendments myself. The noble Lord can, as he well knows, bring forward amendments at Third Reading.

Lord Harmar-Nicholls

My Lords, in view of what my noble friend has just said, perhaps I may ask what is the point of the discussion. He says he is prepared to have discussions. Does he mean he is prepared to discuss, with the possibility that, arising from those discussions, he will think of an amendment at Third Reading?

Lord Henley

My Lords, I talked about discussions and I talked about the regulations. So far I have said we are minded to go for a £15,000 national insurance contribution threshold and eight weeks for a single employee threshold on the second part of my amendment. We shall listen to representations on those matters. I did not say that we would necessarily consider changing this amendment.

I turn now to the amendments to my amendment tabled by the noble Lord, Lord Carter, and my noble friend Lord Stanley. I should like to deal first with paving Amendment No. 4 and Amendment No. 11 to be moved by the noble Lord. Again, the noble Lord will appreciate that we have seen it only recently, but I hope we can help him. It is a far-reaching amendment which completely alters the basis on which I have suggested employers can get 100 per cent. reimbursement. Equally, it applies to all employers, although I understand that from the way the scheme has been designed it favours small employers.

As I said, the noble Lord is aware that neither I nor my officials have been able to study this in any detail. We saw it for the first time only this morning. But the noble Lord did explain that the scheme had been devised by Mr. Mendham of the Forum of Private Business. Mr. Mendham spoke to one of my officials about it only yesterday. I certainly pay tribute to Mr. Mendham for his diligence in coming forward at short notice with what at first glance appears to be a very complicated scheme. I understand that my officials will be prepared to see Mr. Mendham tomorrow to have further discussions about the scheme.

Lord Mottistone

My Lords, if that is so, is my noble friend confident that Amendment No. 11 can be incorporated in the Bill without further amendment to his amendment?

4.30 p.m.

Lord Henley

My Lords, no, because that amendment removes a large part of my amendment. But that would be a matter for the House to consider at Third Reading.

The noble Lord, Lord Carter, explained the way in which the amendment would work. I have to confess that I still remain somewhat mystified as to how it would operate so as to compensate only in cases of abnormal sickness patterns.

The amendment seems to assume that an employee can expect to have two weeks of sickness on average per year; that is, seven days of SSP would be payable in the case of workers on a five-day week, taking account of the customary three waiting days for SSP. This equals £60.90 where the lower rate of SSP is taken to be £43.50 a week. I understand that that sum per employee is then apportioned to each calendar month by dividing by 12 to arrive at an average sickness cost per month for the firm. Abnormal sickness pattern relief would fall due if in any month the gross SSP due exceeded the monthly average which the employer calculates.

I believe that is the flaw in the proposition as we understand it at the moment. It assumes that even in small firms sickness itself will be spread evenly throughout the year. At its most absurd, an employee who was sick for a total of 10 days in the year would have ten-twelfths of a day off sick each month. Clearly that is ridiculous. While it is appropriate to average costs on a monthly basis, the incidence of sickness is entirely random.

Perhaps I can illustrate that better by giving an example. In a firm of five employees using this formula the firm would qualify for abnormal sickness pattern relief if the monthly SSP payments exceeded an annual amount of £304.50 divided by 12; namely, £25.38. It will be obvious to the House that SSP in respect of less than one week's sickness for just one employee in any month would exceed that threshold. In effect, it is our belief that in those circumstances the employer would qualify for the relief in respect of virtually every spell of sickness. That is far from what could be described as abnormal. In view of that, I am not able to accept the noble Lord's amendment. However, as I said, my officials are prepared to have further discussions with Mr. Mendham about his proposals.

I turn now to the amendments of my noble friend Lord Stanley, Amendments Nos. 12, 13 and 14. I had the impression that these amendments received more support during discussions in the House than did the amendment with which I have just dealt. I start with Amendment No. 12 which sets a month as the period of contribution liability that would determine whether an employer qualified to be treated as a small employer. That contrasts with the Government's proposals which, as I have explained, would be prescribed in regulations as the preceding tax year. It is not clear from my noble friend's amendment which month would be so designated but I assume that it would be the month prior to when an SSP payment first became due. That would lead to a much more complicated system than that proposed in my amendment. It would mean that the employer could move in and out of eligibility for small employers' relief from month to month depending on the level of his contributions. This would be particularly difficult for those employers with fluctuating workforces, where there was seasonal working, overtime or part-time work; in fact whenever the wage bill varied significantly between months.

That contrasts with the simplicity of the proposals that I put forward under which once designated a small employer, the employer would so remain for the whole of the next tax year. The employer would not need to consider afresh each month whether he was still eligible to be treated as a small employer. He would know that once he had an employee who had been off sick for eight weeks he could get SSP reimbursed at the 100 per cent. rate without any further calculations on his part.

Finally, with regard to Amendment No. 12, it would be difficult for the department to monitor the correct application because the information would not be available from our own records. It would entail visiting employers and inspecting their records in every case. That is unlike our proposal whereby the information would be available in the end-of-year return that the employer already submits. For those reasons I cannot accept my noble friend's amendment.

Amendment No. 13 would remove from the Government's new clause the requirement that a specified level of sickness must have been reached before a small employer can revert to 100 per cent. reimbursement. All employers qualifying to be treated as small employers would be able to get 100 per cent. reimbursement for all the SSP paid.

On a number of occasions I have explained to the House the effects of the reductions in national insurance contributions and the fact that they are particularly weighted in favour of the small employer presuming that the small employer tends—I certainly believe that there is such a tendency—to employ the less well paid. I have given detailed examples of the way in which the additional SSP costs are more than offset by the reductions in contributions that we propose for many small employers.

My noble friend Lord Jenkin suggested that we might reduce the level of the proposed contributions. However, I must stress again that when my right honourable friend reduced the contributions he was able to do so because of the state of the fund. He saw that as in some way compensating employers for the changes that he proposed to statutory sick pay. But he was only able to do it because of the state of the fund. It is the state of the fund that has to be his consideration when making changes to the level of national insurance contributions.

I return to the matter of the reductions in contributions and the fact that they will normally more than compensate many small employers for additional SSP costs. Those figures have not been disputed. It is only when the small employer experiences protracted sickness in his workforce that he loses the benefit of the reduced national insurance contributions. That is why we came forward and why I gave the House the figure of eight weeks. We have so pitched it because we feel that that would be about the level at which small employers may begin to lose out from the national insurance contribution reductions.

I listened to what my noble friend Lord Jenkin said and to the words of my noble kinsman Lord Stanley. I must stress again that the figure of eight weeks is not set in concrete and is not on the face of the Bill. If we are persuaded that it is too high or that it might be better to go down the road of total number of employees over the year rather than the individual employee, we shall certainly take that into consideration and draft the regulations accordingly. The door will be open to all those who wish to make representations on that matter. Should my noble kinsman wish to suggest some alternative means to set the figure, we shall certainly consider it at Third Reading.

I come to my noble kinsman's third amendment in which he seeks to provide that all regulations made under these provisions should be subject to the affirmative resolution procedure. As I explained, the Government think it right that the first regulations should be affirmative. These will set the parameters for the start of the scheme and it is right that Parliament should have the opportunity to discuss the Government's plans for what in effect will be an entirely new procedure. But we felt that once the principle and initial levels for the scheme had been set, it would not seem necessary that further regulations, which may well be on very trivial matters, should come before the House.

Nevertheless, in view of representations that have been made to me quite forcefully by my noble kinsman Lord Stanley, the noble Lord, Lord Boyd-Carpenter, and the noble and learned Lord, Lord Simon of Glaisdale, we are prepared to accept the noble Lord's amendment, Amendment No. 14. I am advised that in terms of its drafting, on which I congratulate my noble kinsman, it is not defective. I reserve the right to come back at Third Reading to correct any defect that it might have, should it be necessary, which I doubt. My noble kinsman Lord Stanley is a highly skilled draftsman and probably put it in absolutely the right form.

On Question, amendment agreed to.

Lord Henley moved Amendment No. 3: Page 1, line 13, at end insert ("an amount equal to the sum of—

  1. (i) the aggregate of such of those payments as qualify for small employers' relief, and
  2. (ii)").

The noble Lord said: My Lords, I beg to move.

Lord Carter had given notice of his intention to move, as an amendment to Amendment No. 3, Amendment No. 4: Line 3, leave out ("small employers'") and insert ("abnormal sickness pattern").

The noble Lord said: My Lords, I had intended to move Amendment No. 4 but shall not do so.

[Amendment No. 4 not moved.]

On Question, Amendment No. 3 agreed to.

[Amendment No. 5 not moved.]

Lord Henley moved Amendment No. 6: Page 1, line 14, leave out ("those payments") and insert: ("such of those payments as do not so qualify, by making").

The noble Lord said: My Lords, I spoke to this amendment when moving Amendment No. 2. I beg to move.

On Question, amendment agreed to.

Lord Harmar-Nicholls

My Lords, did the House accept Amendment No. 4? There appeared to be some confusion.

Lord Henley

My Lords, the amendment was not moved by the noble Lord, Lord Carter.

Lord Harmar-Nicholls

My Lords, I had the impression that on the call for voices we approved Amendment No. 4. I am happy if the amendment was not moved.

[Amendment No. 7 not moved.]

Lord Mottistone moved Amendment No. 8: Page 1, line 24, leave out subsection (2).

The noble Lord said: My Lords, it gives me great pleasure to move an amendment in the conventional way. I shall speak also to Amendments Nos. 17 and 19. Amendment No. 8 re-introduces the safeguard to the 7 per cent. compensation for costs to industry in operating the scheme. I do not propose to repeat the full explanation that I gave in Committee. It appears in Hansard at col. 1038. However, I wish to comment on the arguments put forward by my noble friend in defence of the subsection that I now seek to delete.

I have looked at the arguments and remain as unconvinced as I was when I first heard them. In essence, my noble friend suggested that as the proportion of employers taking up the extra 7 per cent. was limited to 75 per cent., clearly it was not valued. I find that line of argument puzzling. Surely a more obvious interpretation is that if three-quarters of all those entitled to claim do so, the provision is considered well worthwhile. Indeed, with a little more publicity for the provision it may reach even more of those who are eligible. If my noble friend's department were achieving 75 per cent. take-up rates in respect of some of its other targeted benefits, it would count them as a great success.

There is a situation in which it may not be necessary for me to invite your Lordships to support the amendment. In Committee I was unaware of the fact that if the amendment that was then accepted—that is 91 per cent. instead of 80 per cent.—is left in the Bill unchanged, there would be no need for the amendment now being debated. However, your Lordships may consider that if there is a danger that, without coming back to this House, the Government will at some stage seek to alter the 91 per cent. to another figure detrimental to industry, Amendment No. 8 and its consequential amendments, Nos. 17 and 19, should be included in the Bill as a safeguard.

I am reluctant to suggest to your Lordships that the Government may be inclined to alter the figure of 91 per cent., which proved to be a firm decision when voted upon. This is no time to put an extra burden upon industry for all the reasons given in Committee by many of my noble friends, by noble Lords opposite and reiterated today in an excellent article on the subject in the business section of The Times. Indeed, as the article indicates, since Committee the attention of those in industry as well as in government has been centred on the conflict in the Gulf. It is certainly no time for the Government to be heavy-handed by further antagonising industry unnecessarily.

Before reading the article in The Times I puzzled last night about the justification given by the Government for the Bill, let alone this part of it. Reading the introductory speech made by my noble friend Lord Henley on Second Reading, especially cols. 390 and 391, gave me no help in that respect; nor did reading his winding-up speech. He merely said that the Government had looked at the SSP scheme and decided to make certain changes. He gave no real justification for those changes. However, the article in The Times explains that the extra charges to industry are intended to discipline companies into having a more systematic approach to absenteeism.

Notwithstanding that, a letter written to the Financial Times yesterday by Mr. Richard Price, Deputy Director-General of the CBI, makes it clear that the explanation, which is believed to have been thought up after appreciation of the strength of the opposition to the changes, is bogus. I commend to your Lordships the letter to the Financial Times, as indeed I commend the article today in The Times.

Before I decide what to do with my amendment it would be helpful to have an indication from my noble friend that the Government intend to retain the cost-neutral position of the 91 per cent. I beg to move.

4.45 p.m.

Earl Russell

My Lords, we in the Liberal Democrat Party warmly support the amendment. We also agree with the comments made by the noble Lord, Lord Mottistone, about the relationship between this amendment and the 91 per cent. amendment carried in Committee. I shall not develop that argument further.

I shall comment briefly and in passing on the comments made by the noble Lord about absenteeism. The idea of the Bill provoking employers to clamp down on absenteeism is the opposite side of the coin to the fear of the National Association of Citizens Advice Bureaux, which was quoted by the noble Lord, Lord Boyd-Carpenter, that it will lead employers to arbitrary dismissals. The difficulty with action such as clamping down, for which the Bill creates an incentive, is that it always ends up being directed at the wrong people. It is very difficult to get such things right. If action is taken under too much pressure, it is probable that it will be directed at the wrong people. I support the amendment.

Lord Jenkin of Roding

My Lords, my noble friend Lord Mottistone took me to task in an earlier speech. On several occasions I expressed myself as being broadly in sympathy with the Government's objectives in bringing forward this legislation. I did so not least because of the headroom given to my right honourable friend the Secretary of State in securing savings in the Bill. He was therefore able to make a number of extremely valuable improvements in some of the most sensitive areas of social services. Not least is the improvement in child benefit. It was made absolutely clear in a Statement made in another place by my right honourable friend Mr. Newton that the achievements were linked. This afternoon I was intrigued to hear a number of noble Lords calling for improvements in child benefit after having marched through the Lobbies voting against the savings that made possible such an improvement as from next April.

My noble friend Lord Mottistone is looking for reasons for the introduction of the Bill. It is nothing to do with disciplining sickness, although it may have that effect on some employers. It was introduced because of the exigencies of the public expenditure round and the need for Mr. Newton to find headroom in order to make many much-needed improvements.

I do not cavil with the Government on that. That is the very stuff of which governments are made. It is a question of priorities. If one turns to the amendment moved by my noble friend Lord Mottistone, it is interesting to note that he is hoping to obtain a view from the Government on the defeat he inflicted on them last week. My guess is that my noble friend on the Front Bench will not be able to say anything about that.

I believe that we are well on the way to obtaining an acceptable package for the small firm. The Bill is designed to press particularly hard for the small firm. The package which has been introduced for the generality of employees—the reduction of national insurance contribution and matching the reduction from 100 per cent. to 80 per cent. for the reimbursement of statutory sick pay—deserves support, for the reasons spelt out in the leading article in the Financial Times. I may point out that Mr. Price's letter was not a very accurate response to that article, and my noble friend on the Front Bench may wish to say something about that. If my noble friend chooses to press his amendment to a Division on this occasion, once again I must make it clear that I shall be unable to support him.

Earl Russell

My Lords, the noble Lord was arguing that it is necessary to finance benefits. Can he answer the argument developed by the noble Lord, Lord Boyd-Carpenter, and others, that we would be financing benefits by killing the goose that lays the golden egg?

Lord Jenkin of Roding

My Lords, with the greatest respect to the noble Earl, I dealt with that in the Committee stage of the debate. The figure was 0.03 per cent. of the total wage bill. One is discussing a total wage bill that runs to over £300 billion a year, and we are speaking of 0.03 per cent. of that.

I do not accept the argument that for the generality of employees that imposes some intolerable hardship which justifies the very strong language used by my noble friend Lord Boyd-Carpenter and one or two other noble Lords on this side of the House in regard to this measure. They do not face the problem that Ministers face in seeking to build-in much needed and much called-for improvements in social services for which there is no other source of money.

My right honourable friend Mr. Newton has shown considerable courage and sense of priority in recognising the need for improvement in child benefit, in income support for people in residential care and nursing homes and in services for the disabled. If he is to introduce those improvements, for which many noble Lords have clamoured, he must find the savings to pay for them. That is the way in which successive governments have dealt with these matters; it is the way that he has dealt with them, and he has my support.

Lord Carter

My Lords, before the noble Lord sits down perhaps I may put a point to him. He made the same point at Committee stage last week. In fact I believe he is wrong. The Bill as originally drafted against the reduction in national insurance contributions was neutral in its effect on the cash flow of the Department of Social Security. There was £258 million on one side and £250 million on the other. He is right about the £100 million used to finance improvements in benefit. That came from the failure to uprate the levels of statutory sick pay and the failure to alter the thresholds. That was all dealt with in the uprating statement and has nothing to do with this Bill or the reduction in the employers' national insurance contribution.

Lord Jenkin of Roding

My Lords, with respect to the noble Lord, Lord Carter, who has long experience of these matters, he is leaving out of account a fact referred to by my noble friend on the last amendment. It was in response to a point I made that in terms of the management of public finance, the state of the national insurance fund and the question of public expenditure fall under different heads.

As I said earlier, I negotiated on those matters both as Chief Secretary to the Treasury and subsequently as Secretary of State for Social Services. The ordinary citizen sees this as public money coming out of the same pot. From the point of view of the control and management of public expenditure, the £250 million savings which will be secured by the Bill if the amendment is reversed—I have no knowledge of what the Government may be hoping in that regard—will help to finance much needed and much called-for improvements in other areas of the social services where there is no other source of income.

Lord Boyd-Carpenter

My Lords, I am sorry that my noble friend Lord Jenkin of Roding seeks to revive discussions which took place on Second Reading and at Committee stage on the general merits or demerits of the Bill. Even at this late stage he declines to face the real objection to the Bill; that is, that at a time of some degree of recession in the economy it is a mistake to add arbitrarily to the costs of industry.

It is no defence to say that it is the traditional defence of the young bastard; that is, it is only a little one. For some companies it is a considerable increase in costs, while at the same time the Government, and I am sure my noble friend, are doing their best to beg industry and the trade unions to keep down their costs. If it is so small an amount that it does not matter, the counter argument is that it will not be a large enough amount to support the great improvements that my noble friend foresees in the social services. He cannot have the argument both ways.

Like my noble friend, I sat on both sides of the table on these issues; I think I am right in saying that I sat rather longer than he did. He knows that our social services can properly ask for improvements right across the field. It is good that they should. But it is another matter to say that they should do so only by a measure which deliberately concentrates on raising the costs of industry. At this time to do so is rash. To do so in the face of criticism from every organisation representing industry that one has heard of, is unwise. I am afraid that the Government will regret it.

Baroness Turner of Camden

My Lords, I rise from these Benches to support the amendment moved by the noble Lord, Lord Mottistone. We supported it when the Bill was in Committee and do so again. Once again I support it from the standpoint of an employee. We have heard a great deal about the burdens of employers. However, as was pointed out by the noble Lord, Lord Boyd-Carpenter, burdens on employees are also involved.

If one has a situation in which further costs are seen to be imposed on employers, particularly small employers, that would inevitably affect employees. It affects the kind of benefits employees can hope to receive in the future. It affects whether or not better occupational schemes can be obtained or even introduced.

For that reason, as well as all the reasons adduced by other noble Lords on this side of the House, I support the amendment. Of course we do not want to see further burdens on employers, even large employers, at this stage. Burdens on large employers are implicit in the Bill, indeed in the whole package. If one is to vary the rates of sick pay so that a larger amount will be payable by those employers if they are making up sick pay to full pay, then such employers will have to make more funds available to cope with their existing occupational schemes. Therefore that is a further burden on the large employers as well as on the small ones.

For all those reasons I hope that the Government will at least give some assurance this afternoon on what they intend to do regarding the amendments passed in Committee. I agree with what the noble Lord, Lord Mottistone, said. If we can obtain some assurance in that respect it will not be necessary to press as far as the 7 per cent. amendment is concerned. Apart from that I support what has been said.

Lord Henley

My Lords, I do not intend to rehearse the arguments I put forward against the amendment at Committee stage. As my noble friend Lord Mottistone reminded us, he was successful in moving an amendment at Committee stage to change the figure of 80 per cent. to 91 per cent. My noble friend said that that was designed to achieve a cost neutrality.

My noble friend now seeks to include 7 per cent. He said that he will not press that if I can give him an assurance as to what will happen in another place. My noble friend knows full well that I cannot give that assurance. It would not be right for me to do so at this stage. It is for the Government to consider their position and for another place to decide. I cannot give him the assurance that he seeks. This House has agreed to the 91 per cent. amendment, if I can call it that, because of the alleged cost neutrality. It would be illogical to accept another amendment relating to 7 per cent.

My noble friend then referred to an alleged argument about disciplining employers in order to encourage them to take greater note of the level of sickness that their employees claim. We have never said that or claimed it as justification for the Bill. That is pure press speculation. I thank my noble friend Lord Jenkin for stressing why we have produced this Bill. Having stressed savings, I stress the increases that we have been able to make to, for example, child benefits, which we discussed today at Question Time, and also income support for those in residential care and nursing homes.

I wish to comment briefly on the letter from the CBI published in yesterday's Financial Times to which my noble friend Lord Mottistone referred. I refer to it only to correct one glaring mistake which is to be regretted. In the third paragraph, Mr. Price, the Deputy Director General of the CBI, stresses: Statutory sick pay is financed entirely through employers' and employees' national insurance contributions. It is an insured scheme, and contributors are entitled to claim". That is not so. The contributory principle holds that people should receive entitlement to certain benefits if a requisite amount or number of national insurance contributions have been paid. The requirement refers to sickness benefit and all the other contributory benefits, but not to statutory sick pay which is administered by employers. It is sufficient that a sick person should be employed and earning above the lower earnings' limit for national insurance contributions. Someone who has just begun work and has not built up a record of contributions can get SSP. Even married women who have opted out of national insurance and who are on the lower rate and do not qualify for other state contributory benefits can still get SSP.

I remind the House that in recognising the status of SSP as a non-contributory benefit, the Social Security Act 1990 has placed its funding firmly on general taxation rather than on national insurance income as had formerly been the case. I do not think that I can say any more at this moment. As I said, my noble friend sought an assurance from me. I cannot give it. I hope that he will not try to persuade the House to accept the illogical argument he put forward for the previous amendment which was successful at Committee stage and now move away from what he alleged was cost neutrality towards a positive bonus to the employers.

Lord Mottistone

My Lords, that is disappointing. I do not accept the argument that my noble friend cannot be more reassuring about what might happen in another place. What happens there is entirely for the Government to decide. There is no reason to suppose that the House will take a different view. It can be made quite clear that the Government appreciate that this is an unpopular Bill which has been created without any discussion at all. Even at this late stage we are still being deprived of discussion. Where discussion has taken place it has been on a take-it-or-leave-it basis. It is the first time that that has happened in relation to the SSP since it started at the beginning of the 1980s. It is thoroughly unsatisfactory to force people to adopt this kind of approach. I cannot accept that this cost-neutral situation is going to be retained. In order to safeguard at least some of the provision I invite your Lordships to join me in the Lobby to see if we can win Amendment No. 8.

5.5 p.m.

On Question, Whether the said amendment (No. 8) shall be agreed to?

Their Lordships divided: Contents, 104; Not-Contents, 111.

Division No. 2
Airedale, L. Kilbracken, L.
Aldington, L. Kilmarnock, L.
Ardwick, L. Kirkhill, L.
Attlee, E. Lockwood, B.
Aylestone, L. Lovell-Davis, L.
Balfour of Inchrye, L. Mackie of Benshie, L.
Birkett, L. Masham of Ilton, B.
Blackstone, B. Mason of Barnsley, L.
Blease, L. Milner of Leeds, L.
Bonham-Carter, L. Mishcon, L.
Boston of Faversham, L. Monson, L.
Boyd-Carpenter, L. Montagu of Beaulieu, L.
Broadbridge, L. Morris of Castle Morris, L.
Brooks of Tremorfa, L. Mottistone, L. [Teller.]
Buckmaster, V. Mulley, L.
Campbell of Eskan, L. Murray of Epping Forest, L.
Carmichael of Kelvingrove, L. Nicol, B.
Carter, L. Ogmore, L.
Cledwyn of Penrhos, L. Oram, L.
Cocks of Hartcliffe, L. Palmer, L.
Cudlipp, L. Phillips, B.
Darcy (de Knayth), B. Pitt of Hampstead, L.
David, B. Prys-Davies, L.
Dean of Beswick, L. Rea, L.
Dormand of Easington, L. Renton, L.
Elliot of Harwood, B. Richard, L.
Ennals, L. Ritchie of Dundee, L.
Falkland, V. Robson of Kiddington, B.
Fisher of Rednal, B. Rochester, L.
Gainsborough, E. Russell, E.
Gallacher, L. [Teller.] Sainsbury, L.
Galpern, L. Saltoun of Abernethy, Ly.
Gisborough, L. Seear, B.
Gladwyn, L. Shackleton, L.
Glenamara, L. Shepherd, L.
Graham of Edmonton, L. Stedman, B.
Greenway, L. Stoddart of Swindon, L.
Gregson, L. Strathcarron, L.
Grey, E. Taylor of Blackburn, L.
Grimond, L. Taylor of Gryfe, L.
Harvington, L. Terrington, L.
Hatch of Lusby, L. Thomson of Monifieth, L.
Hirshfield, L. Tordoff, L.
Hollis of Heigham, B. Turner of Camden, B.
Hughes, L. Wallace of Coslany, L.
Hunt, L. Whaddon, L.
Jacques, L. White, B.
Jay, L. Wigoder, L.
Jeger, B. Williams of Elvel, L.
Jenkins of Hillhead, L. Willis, L.
Jenkins of Putney, L. Wilson of Rievaulx, L.
Kearton, L. Winstanley, L.
Alexander of Tunis, E. Boardman, L.
Allenby of Megiddo, V. Borthwick, L.
Allerton, L. Brabazon of Tara, L.
Arran, E. Bridgeman, V.
Ashbourne, L. Brigstocke, B.
Astor, V. Brookeborough, V.
Belhaven and Stenton, L. Brougham and Vaux, L.
Belstead, L. Butterworth, L.
Birdwood, L. Caithness, E.
Blatch, B. Campbell of Alloway, L.
Blyth, L. Campbell of Croy, L.
Carnarvon, E. Lyell, L.
Carnock, L. Mackay of Clashfern, L.
Cavendish of Furness, L. Macleod of Borve, B.
Chelmer, L. Mancroft, L.
Clitheroe, L. Manton, L.
Cochrane of Cults, L. Margadale, L.
Coleraine, L. Massereene and Ferrard, V.
Constantine of Stanmore, L. Merrivale, L.
Cottesloe, L. Mersey, V.
Crickhowell, L. Montgomery of Alamein, V.
Cumberlege, B. Mountevans, L.
Davidson, V. [Teller.] Mowbray and Stourton, L.
Denham, L. Munster, E.
Derwent, L. Nelson, E.
Dundee, E. Northesk, E.
Eccles of Moulton, B. Onslow, E.
Elibank, L. Oppenheim-Barnes, B.
Elphinstone, L. Orkney, E.
Elton, L. Park of Monmouth, B.
Fanshawe of Richmond, L. Pearson of Rannoch, L.
Flather, B. Peyton of Yeovil, L.
Fortescue, E. Quinton, L.
Gardner of Parkes, B. Rankeillour, L.
Geddes, L. Reay, L.
Glenarthur, L. Rees, L.
Gray, L. Rodney, L.
Grimston of Westbury, L. Romney, E.
Hailsham of Saint Marylebone, L. Sanderson of Bowden, L.
Selborne, E.
Hardinge of Penshurst, L. Skelmersdale, L.
Hemphill, L. Soulsby of Swaffham Prior, L
Henley, L. Strange, B.
Hesketh, L. Strathclyde, L.
Hives, L. Strathcona and Mount Royal L.
Hood, V.
Howe, E. Strathmore and Kinghorne, E
Ingrow, L. Swansea, L.
Jeffreys, L. Tranmire, L.
Jenkin of Roding, L. Trumpington, B.
Johnston of Rockport, L. Vaux of Harrowden, L.
King of Wartnaby, L. Waddington, L.
Knollys, V. Wade of Chorlton, L.
Liverpool, E. Wyatt of Weeford, L.
Lloyd of Hampstead, L. Wynford, L.
Long, V. [Teller.] Young, B.
Lurgan, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.14 p.m.

Earl Russell moved Amendment No. 9: Page 2, line 14, at end insert: ("(4A) The Secretary of State shall lay before Parliament during the year 1992 a report on the effects of the provisions of this Act on the employment practices of employers.").

The noble Earl said: My Lords, this amendment is designed to call attention to the possible effect of the Bill on employees. We have been hearing a good deal about the effect of the Bill on employers; but we on the Liberal Democrat Benches are equally concerned about the Bill having a number of undesirable effects on employees. The interests of employers and employees are obviously capable of conflicting, and on occasion do, but we on these Benches are also very well aware that there is between them a large element of common interest. The key to that element of common interest is that they both have an interest in belonging to a profitable firm. We believe that the Bill will threaten that common interest and will have a bad effect on employees as well as on employers. However, because this bad effect on employees will be secondary it has in many ways been most effectively addressed through trying to ease the pressure of the Bill on employers. It is nevertheless a matter of considerable concern to us in its own right.

I have drawn attention already to the fact that the Bill will create a wages stop at £184.50. Above that amount the employers have to pay the reimbursement at the higher rate. Below that they do not. The Bill will therefore tend to keep down wages. That will wipe out some of the department's precious savings in the form of housing benefit and family credit. It is extremely difficult to quantify that, but it is a consideration. I also think that the Bill will intensify the drive towards part-time work. That is creating a range of social problems in this country which we are only just beginning to address. We have a higher number of part-time workers than any other country in the EC except for the Netherlands. A great many of them are below the level at which they pay national insurance. The Bill will put more below that level. Those people are also very often without occupational sick pay schemes and without occupational pension schemes and are on the way to becoming an underclass. The Bill may tend to worsen that effect.

Ever since the Bill had its Second Reading in another place concern has been expressed about its effect on the disabled. I entirely accept the point made by Ministers that the disabled do not have a higher rate of absence through illness than other people, but we are not dealing here with what is true in fact. We are dealing with what employers will expect to be fact. It is well known that this is an area in which people are capable of a great deal of unjustified fear. Ministers' assurances that the disabled do not have an above average level of absence through illness may be quite compatible with employers employing fewer of them because they wrongly fear that they will have a higher than average level of sickness. In fact, statements that the level of sickness of the disabled is not above average need the maximum possible amount of publicity. But even that may not be enough.

The problem of dismissals has been briefly addressed several times. It is clearly linked with the pressure to encourage employers to clamp down on absenteeism. My noble kinsman said that that was not the Government's intention. Nevertheless, that will be the effect of the measure. It means that a high amount of sickness will cost employers more money. A nearly bankrupt employer is more liable to become a ruthless employer than one who has some spare money in his pocket. We think it will cause increased pressure towards dismissals. This measure is an extremely blunt instrument.

It may perfectly well be that a number of people are claiming days of absence on the ground of sickness but are not justified in doing so. I do not see any reason to suppose that those who are likely to be dismissed because their employer cannot afford their statutory sick pay are in any way likely to coincide with those who may perhaps be skiving. In fact, any connection between the two groups will be purely coincidental. If that effect is desired I do not think it will be achieved. I believe that instead we shall see the dismissal of people who are genuinely ill. That once again will mean more costs falling on the Department of Social Security.

We shall also see more cases of what the citizens advice bureaux have found already—refusals to pay statutory sick pay. A North London citizens advice bureau had a case of an employee who was told nothing about any procedure for claiming statutory sick pay and was then refused it on the ground that she had not claimed within seven days. I know that an employer has to give reasons in writing for refusing to pay statutory sick pay. That has to be done in "a reasonable time", which is not a precise phrase. It was a phrase used in 1628, the King claiming that he might imprison people without trial for a reasonable time. John Selden remarked: At this little gap, all our liberties may slip out".

At this little gap, a good many people's statutory sick pay may slip out. Will my noble kinsman consider a more precise definition of "a reasonable time"; for example, perhaps it could be a week.

There is also the risk that such changes will mean fewer occupational sick pay schemes. I entirely agree with my noble kinsman in his admiration for such schemes. However, an employer facing business uncertainty is concerned to keep down his costs. Therefore he may be less sure than he was before that he can risk entering such a scheme.

Similarly, there will be further trouble with things which are already happening; for example, failure to provide an itemised payslip, which makes it difficult to calculate any entitlement, and failure to pay national insurance contributions. The Government are losing a considerable sum of money in that respect. If they are not worried about the situation, I believe that they should be. I beg to move.

Baroness Seear

My Lords, I should like to add a few remarks to those made by my noble friend and to expand slightly on a point which I attempted to raise—without, I admit, giving the Minister notice—in Committee. I refer to the implications of what we are doing as regards ethnic minorities. It is well understood—indeed there is no argument about the fact—that lower-paid workers run the risk of receiving smaller amounts of sick pay than they did before because of the raising of the level. That brings forward the issue of the ethnic minorities being overrepresented among the lower paid and therefore more likely to suffer from this reduction of sick pay than other groups of people.

Since the Committee stage, I have tried to obtain precise figures about the representation of ethnic minorities among the low paid. But, although I have contacted all the likely sources, no such figures exist. I believe that that tells us something about the lack of attention which we pay to the problem. However, there is no questioning the fact that the ethnic minorities are disproportionately highly represented among the unemployed, among those with no training and qualifications and among the unskilled.

There is not much doubt that people who have the lowest level of qualifications and who are disproportionately represented among the unskilled will also be over-represented among the low-paid workers. Indeed those people make up the low-paid group.

I am fully aware that, in introducing the Bill, the Government had no intention that it should have an adverse effect disproportionately on members of ethnic minority groups. However, if my argument is correct—I believe it is—the fact remains that this could be a case of indirect discrimination. The proposed change will affect one ethnic group more than others because of its over-representation among the low paid. That being so, it is possible that this could lead to a case in the European Court of Justice. Therefore if the Government accept the amendment, I ask them to ensure that there will be a full report to Parliament at the end of the year on the impact of this legislation. Such a report should include information about how the changes have affected ethnic minority groups in employment in this country.

Lord Carter

My Lords, I have very little to add to the powerful arguments which have been put forward by those who have attached their names to this amendment. During the progress of the Bill, we have learnt that we do not know enough about employment practices. We also know that the Government are relying upon just one survey carried out by IFF Research Ltd. I believe that that survey was to some extent misleading because it was geared towards larger firms.

In my view, a report such as that suggested in the amendment would be a great help. There is real concern about the likely effects of the Bill. If the Government were to accept the amendment, I believe that it would help to allay some of those fears.

Lord Henley

My Lords, many suggestions have been made by those who have spoken as to the likely effect of the Bill on employees. Indeed we had the example of part-time workers, the suggestion that many people will suffer a wages stop at £184.50 per week, and mention was made of disabled workers. I was slightly confused by what my noble kinsman said about the effect of assurances from government Ministers that the disabled do not have a higher than average level of sickness. However, it is possible that I misunderstood what he said. He made allegations about possible increased pressure to dismiss workers and about increased refusals to pay statutory sick pay. He also suggested that a precise definition of "a reasonable period of time" should be laid down.

The noble Baroness, Lady Seear, spoke about ethnic minorities and said that there was a risk that we might be challenged in the European Court of Justice. I dealt with that matter in Committee when I said that I would certainly look at any evidence which was put before us.

I do not wish to respond to all those points at this stage. Instead, I should like to respond to the gist of the amendment that there should be a statutory report from the Secretary of State during 1992, on the effects of the provisions of this Act on the employment practices of employers". I hope that I shall be able to give my noble kinsman sufficient assurances that we shall, nevertheless, be undertaking appropriate monitoring. Of course, he is right to say that there should be some check on the way in which the Bill's provisions, or those of any Bill for that matter, operate. I can assure him that the Government will certainly want to know about this and that we shall be monitoring the effects of the changes.

My noble kinsman may well remember that at an earlier stage of the Bill's proceedings in another place my right honourable friend the Minister for Social Security and Disabled People said that monitoring would be etched on his heart just as Calais was etched on the heart of Queen Mary. Since that time I have discussed the matter with my right honourable friend. As I am sure my noble kinsman will agree, it would not be sensible to draw any firm conclusions about the effects of the changes on employers' practice in, for example, the provision of statutory sick pay, or occupational sick pay, until the new arrangements have been in place for some time. But, as I said, we shall be looking to monitor the proposals in the Bill both in the course of the compliance visits carried out by the department's inspectors and by other means, such as the feedback we receive from employers, employees and employer and employee organisations.

The Government would need to consider whether the results of our monitoring warranted a report being laid before Parliament. It would indeed be an unusual step to take in this type of social security legislation and I have to tell my noble kinsman that I think it extremely unlikely that this would be deemed necessary. Nevertheless we would of course ensure that the results of the monitoring action were available to the House on request and should it be considered that a statement, either by written reply or orally, was necessary this could certainly be arranged. I am sure that with his customary ingenuity my noble kinsman would find ways of further questioning the Government about this, should he consider it necessary.

With those assurances, I trust that he will feel able to withdraw his amendment.

Earl Russell

My Lords, I thank my noble kinsman for that reply. When his right honourable friend Mr. Scott referred to such monitoring being graven on his heart, as Calais was graven on Queen Mary's, I think that he led with his chin. I say that because the reason Calais was graven on Queen Mary's heart was because it was a failure. When considering monitoring, I hope that my noble kinsman and his right honourable friends will bear that factor in mind. Nevertheless, I believe that I have been given everything that I could reasonably expect. Accordingly, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Lord Henley moved Amendment No. 10: After Clause 1, insert the following new clause:

Small employers' relief

.—(1) In section 9 of the Social Security and Housing Benefits Act 1982, before subsection (2) (meaning of "contributions payments") there shall be inserted—

"(1B) For the purposes of this section, a payment of statutory sick pay which an employer is liable to make to an employee for any day qualifies for small employers' relief if the employer is a small employer who has before that day been liable to make such payments of statutory sick pay as entitle him to relief in respect of that payment.

(1C) For the purposes of this section, "small employer" shall have the meaning assigned to it by regulations, and, without prejudice to the generality of the foregoing, any such regulations may in that connection make provision—

  1. (a) for that expression to be defined by reference to—
    1. (i) the number, or average number, of employees of the employer during a prescribed period; or
    2. (ii) the amount of the employer's contributions payments for any prescribed period;
  2. (b) for the amount of the employer's contributions payments for any prescribed period to be adjusted, estimated or otherwise attributed to him by reference to their amount in any other prescribed period.

(1D) Regulations shall prescribe the payments of statutory sick pay that entitle a small employer to small employers' relief in respect of any particular payment; and any such regulations may provide for that entitlement to be determined by reference to—

  1. (a) the number of weeks for which the employer has been liable to pay statutory sick pay in respect of the employee in question in a prescribed period; or
  2. (b) the total amount from time to time of the statutory sick pay which the employer has been liable to pay in respect of each of his employees in a prescribed period which includes the day for which he is liable to make the payment in question."

(2) In subsection (2) of that section (meaning of "contributions payments" in subsections (1) (a) and (1A)) for the words "and subsection (1A)" there shall be substituted the words "and subsection (1C)".

(3) In Part II of Schedule 5 to the Social Security Act 1986 (questions for the Secretary of State) in paragraph (b), after sub-paragraph (v) there shall be inserted the words "or

(vi) the amount of an employer's contributions payments for any period for the purposes of regulations under section 9(1C) of that Act."

(4) A statutory instrument containing (whether alone or with other provisions) the first regulations made under that section by virtue of this section shall not be made unless a draft of the instrument has been laid before Parliament and approved by a resolution of each House.").

The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.

Lord Carter moved, as an amendment to Amendment No. 10, Amendment No. 11:

After Clause 1, Line 7, leave out from second ("for") to end of line 52 and insert ("abnormal sickness pattern relief if the payment was made for sickness in a month in respect of which the sum payable by way of reimbursement of statutory sick pay to that employer but for such relief exceeds a figure calculated by multiplying the sum of the average number of employees employed by that employer in that month by the sum of one-twelfth of 7 days' statutory sick pay paid at the lowest level then applicable.").

The noble Lord said: My Lords, in moving this amendment perhaps I may apologise to the House for the confusion which arose at an earlier stage over Amendment No. 4. Such confusion was entirely my fault and I apologise accordingly. I do not propose to deal with the amendment all over again because it has already been discussed. However, I should like the Minister to make absolutely clear what he means by "the consultations" to which he referred in an earlier response.

As the Minister is aware, the House has asked the Minister to consult the various bodies interested in the Bill and, if necessary, to amend his new clause before Third Reading. He said that the department was minded to consider the eight-week period for sickness. I understand that that will be during the consultations on the regulations. He also helpfully said that he was prepared to enter into discussions with Mr. Mendham of the Forum of Private Business about the exact implications of the scheme enshrined in Amendment No. II. It would be helpful if the Minister could explain to the House how those discussions will take place, what he would hope to do if the department were convinced of the merits of the scheme, and whether an amendment would be brought forward to the new clause on Third Reading or whether the issue would be covered by regulations?

5.30 p.m.

Lord Henley

My Lords, my understanding is that that would be possible. I repeat again that my understanding is that my officials are seeing Mr. Mendham tomorrow to discuss his scheme. We shall then discover more about how it works, what our feelings are and what the problems are.

Lord Carter

My Lords, that is helpful, and with that assurance I beg leave to withdraw the amendment.

Amendment No. 11, as an amendment to Amendment No. 10, by leave, withdrawn.

[Amendment No. 12, as an amendment to Amendment No. 10, not moved.]

Lord Stanley of Alderley had given notice of his intention to move Amendment No. 13, as an amendment to Amendment No. 10: After Clause 1, Leave out lines 27 to 39.

The noble Lord said: My Lords, I reply to the remarks of my noble kinsman Lord Henley on the intended eight-week threshold. We have been over this course well and truly. I am supported by my noble friend Lord Boyd-Carpenter: it is essential to have a reduction in the proposed, or intended —I am not sure what my noble kinsman said—eight-week threshold. I shall return to this point on Third Reading. I fear that I may have to return with a stick rather than a carrot.

[Amendment No. 13, as an amendment to Amendment No. 10, not moved.]

Lord Stanley of Alderley moved, as an amendment to Amendment No. 10: Amendment No. 14.

After Clause 1, Line 49, leave out from ("instrument") to ("made") in line 50.

The noble Lord said: My Lords, I understand that my noble kinsman intends to accept the amendment. I beg to move.

Lord Henley

My Lords, we are prepared to accept the amendment, but, to protect my position, if it turns out to be drafted incorrectly, I reserve the right to bring forward an amendment to it on Third Reading.

Lord Stanley of Alderley

My Lords, I am most grateful to my noble kinsman.

On Question, amendment agreed to.

Amendment No. 10, as amended, agreed to.

Baroness Turner of Camden moved Amendment No. 15:

After Clause 1, insert the following new clause:

("Extent: payments condition

. The provisions of this Act, insofar as they amend section 9 of the Social Security and Housing Benefits Act 1982 (recovery by employers of amounts paid by way of statutory sick pay), shall only have effect to the extent of the amount paid by an employer in respect of statutory sick pay paid to an employee during the first three weeks.").

The noble Baroness said: My Lords, we tabled a similar amendment in Committee but said that we would not move it because we would wait to see what transpired and consider our position. There have been some movements with the acceptance of the Government's amendment this afternoon. However, I believe that it is still worth speaking to the amendment we tabled originally because it refers to the three-week period. The Government have said in support of the Bill on a number of occasions that on average employees are sick for three weeks. They have used that argument to try to convince employers, especially small employers, that they will not lose by the Bill. This afternoon there has been talk of eight weeks which is far too long.

Some people are sick for longer than three weeks, and some suffer accidents which involve long absences. As the organisations representing the small businesses have said—it has been repeated in the House this afternoon—longer absences can often be coped with well by large organisations but small organisations are less able to do so, and usually have to take on temporary staff to fill the vacancy. Not surprisingly therefore there has been widespread opposition to the Bill.

The amendment would leave untouched the principle that this side of the House so dislikes, and the SSP would still cease to be the genuine state scheme that we support. However, there would at least be a restriction in relation to long-term sickness. After three weeks, there would be full reimbursement, and that is the objective of the amendment. We are concerned, as is the noble Earl, Lord Russell, with the position, in particular, of the disabled. The Government have said on a number of occasions that the disabled generally have a very much better health record than many people who are not registered disabled; but that, I am afraid, is not the view of the Disability Alliance.

The Disability Alliance claims that the disabled start with many disadvantages in the labour market in the first place; and if employers are encouraged, through the measures contained in the Bill, to look more carefully at the health records of those whom they are recruiting, such people will have even greater difficulty in obtaining employment and in retaining it. The amendment contains an ameliorating measure. It is important to put the arguments for it on record. The eight weeks, to which reference has been made in earlier debates, is far too long; three weeks is much more appropriate. I beg to move.

Earl Russell

My Lords, we on the Liberal Democrat Benches support the amendment. It is concerned, like a number of other amendments, with minimising the risk to a business suffering an exceptional incidence of sickness. Below three weeks, any losses suffered by the employer may be significant; they are unlikely to be crippling unless the margins are very tight indeed. However, when people have much longer absences from work—without breaching the eight weeks that we have been discussing earlier today—the losses may be severe. There may be a small business employing six people who may all be hurt in one car crash. In that case, the employer will have a severe burden of statutory sick pay in addition to having its whole workforce off sick and having to take on a new one. In such a case we could have an unnecessary bankruptcy. The amendment would help to protect us against that clearly undesirable situation. For that reason, among many others, we support it.

Lord Henley

My Lords, I listened to the example given by my noble kinsman of all the employees being injured in the same car crash. It is an extreme example, but the small extra cost of SSP would be the least of the employer's problems if all his employees were off for eight weeks. I am sure that my noble kinsman will accept that point.

I listened with great care to what the noble Baroness, Lady Turner, said as to her reasons for introducing this new clause. As she will appreciate, the Government's own amendment, which we discussed earlier this afternoon, would go a considerable way towards meeting the anxieties which she has expressed and is seeking to redress in the new clause. I recognise that the regulations to be made under the Government's amendment will not go so far as the new clause, which applies to all employers regardless of size. Neither do I agree that three weeks is the appropriate length of sickness on which to focus. But nevertheless I hope that she will accept that the Government's proposals will cover those employers most at risk should their employees have protracted periods of sickness.

The noble Baroness said that she wanted to repeat and put on record the fact that as a result of the proposals contained in the Bill, employers would be less likely to employ disabled people or those who suffer from poor health. If that were true, it would be cause for concern; but I strongly believe that that will not be the case. I gave an assurance earlier that we will be monitoring the implementation of the proposal. Several charges were made when SSP was first introduced, and later when it was extended to 28 weeks; but the fears expressed then proved to be groundless. The Government do not believe the result will be any different on this occasion.

I am sure many noble Lords are aware—and I wish to repeat the assurance I gave earlier and which other ministerial colleagues have given on many occasions—that any suggestion that people with disabilities make bad employees is very far from the truth. Quite the reverse seems to be the case. During Second Reading I gave some figures about the attendance records of disabled people and they bear repeating now. The very comprehensive report, Employment and Handicap, published only six months ago, indicated that half the people in work with disabilities took less than five days a year off work for sickness or treatment. Over a five-year period half had not had a single spell of sickness or treatment which lasted as long as a month. The House will agree that there is certainly nothing in these figures to deter an employer from taking on a disabled person. There would be no extra SSP costs for the employer.

I turn now more specifically to the proposed new clause. The important point I wish to make concerns the cost. I have to tell the House that setting the level at which any employer would get 100 per cent. reimbursement on SSP spells lasting more than three weeks and applying the provision to all employers would have an estimated cost on the Bill of £40 million in 1991–92. This would seriously affect the overall public expenditure savings from the Bill and is not a change which the Government could contemplate.

As I said, the noble Baroness's new clause goes further than the Government's proposals. I have explained to the House on previous occasions the offsetting savings which the reductions in national insurance contributions will bring for employers. The Government have come forward with proposals for small employers for whom the effects of these reductions are largely negated because of protracted sickness within their workforce. As I explained, the powers in the Bill have deliberately been kept very flexible to enable us to come up with the most practicable schemes. I have to tell the noble Baroness that I cannot go further than that. I hope, therefore, that she will feel able to withdraw her amendment.

Baroness Turner of Camden

My Lords, I thank the Minister for his explanation. However, although what he says about the sickness records of disabled people is incontrovertible, we are talking about general perceptions. That was referred to earlier by the noble Earl, Lord Russell. This is the view of the Disability Alliance which is concerned about the Bill. That is why I and other noble Lords have made constant reference in discussions on the Bill to the position of disabled people.

Nevertheless, it is not my intention at this time to press the amendment, though I still hold the view that there are strong arguments for it. Although it would apply to all employers, if the House takes the government statement that the average length of absence is three weeks, I assume that there would still be some savings because the reimbursement would not become payable for anybody until after the three-week period. As I said, however, it is not my intention to press the amendment this evening. I therefore beg leave to withdraw it.

Amendment, by leave, withdrawn.

5.45 p.m.

Baroness Turner of Camden moved Amendment No. 16:

After Clause 1, insert the following new clause:

("Extent: sick pay condition

. The provisions of this Act, in so far as they amend section 9 of the Social Security and Housing Benefits Act 1982 (recovery by employers of amounts paid by way of statutory sick pay), shall only have effect on employers offering occupational sick pay schemes to their employees.").

The noble Baroness said: My Lords, this is another amendment which we considered at Committee stage and then decided not to move because we wished to see the effects of the other amendments. Nevertheless, it is worth moving it now because part of the Government's case for the introduction of the Bill has been the growth in the number of occupational sick pay schemes. As we know, the figure of 91 per cent. has often been quoted from, I believe, a survey conducted by ITF Research Limited. This research, however, was oriented very much in the direction of larger employers and as we have often said on this side of the House, that does not mean that 91 per cent. of all employees are covered. It simply means that 91 per cent. of employers claim to operate some form of top-up sick pay arrangements.

The Government's argument is apparently that because these schemes are already in existence, in some cases paying up to full pay for a considerable time—but these are in the minority; the good schemes—the financial burden will not be as great as almost everyone in this House and a number of important organisations outside such as the CBI, the IOD, the IPM, the TUC and everybody else have been saying. The Government say that all those people are wrong and that it will not be such a burden.

Whether or not that argument is valid, it is nevertheless true that substantial numbers of employees are in employment where there are no such schemes. In the main, these employees are among the low paid—among those manual workers who may go from job to job as in the construction industry; among women who tend to make up the bulk of the really low paid; and of course part-time employees.

There is also evidence from citizens advice bureaux that such people have experienced difficulty under present arrangements in obtaining their statutory sick pay. Often they have had difficulty in getting the job in the first place and have been reluctant to pursue their rights in case they do not maintain the job. There have also been instances of dismissal of staff when sick. Without the employment qualification, such individuals cannot take their cases to industrial tribunals.

It is our belief that these cases are likely to multiply if the employer cannot claim reimbursement. What is therefore suggested in the amendment is that the new provisions in the Bill should apply only where there is in force an occupational sick pay scheme. By that, we mean a real scheme, a contractual obligation, not a situation in which the employer decides at his discretion to top up statutory sick pay.

For the remaining businesses—most of them small—which do not have contractual arrangements the present situation of 100 per cent. reimbursement should continue to apply. Only in this way will it be possible to ensure proper protection for the low paid, the disabled and those generally disadvantaged in the labour market. Even so, there will still be problems, as the evidence from CABs suggests. There will still be employers who seek to renege on their obligations to sick and injured employees. However, at least the situation will be no worse than it is at present for such people. I beg to move.

Lord Henley

My Lords, I do not wish to go over all the figures again but I must correct the noble Baroness on one—91 per cent. In one way or another that figure has come up a great deal in the Bill. I never said that it was 91 per cent. of employees. The noble Baroness just said that it is 91 per cent. of employers. In fact 91 per cent. of employees work for an employer who has some such scheme, though there may or may not be exclusion clauses. I listened with enormous care to what the noble Baroness said in moving the new clause but I am afraid that I remain deeply confused as to the reasoning behind it.

I appreciate that retaining 100 per cent. reimbursement for firms without occupational sick pay schemes could be of particular benefit to many smaller firms because a great many of those do not have such a scheme. However, it would be unlikely to assist the employees of those firms. To tie reimbursement rates to whether or not the employer has an occupational sick pay scheme could result in a serious disincentive for such employers to develop sick pay schemes. There would be a danger that the welcome growth of such schemes—and there has been a welcome growth, as I am sure the noble Baroness accepts—would be brought to a halt. This would not only be contrary to good employment practice and the encouragement of such schemes, but would be to the detriment of the employees concerned. I am sure that the noble Baroness does not want that.

It is certainly true that there has been a widespread growth in schemes and the Government welcome that. We feel that it indicates an acceptance by employers of a much greater responsibility to cover short-term sickness among their employees. However, the Government do not consider that it would be right to reward those employers who do not provide such cover by enabling them to continue to receive 100 per cent. reimbursement while their fellow employers who have taken on the extra cost of providing occupational cover can only recover a reduced reimbursement rate. That would be a very strange logic indeed. Bearing that in mind, I hope that the noble Baroness will feel able to withdraw her amendment.

Baroness Turner of Camden

My Lords, I listened with some interest to what the noble Minister had to say, and I think there is something in what he had to say. We put this amendment down with small businesses in mind. We were often accused on this side of the House of not being in favour of small businesses, and I have to say that that is not so.

The amendment in respect of occupational schemes that we are now discussing was one submitted to us by the National Federation of the Self-Employed and Small Businesses. They were out to try to help small businesses who did not have their own occupational schemes and who were relying entirely on statutory sick pay to cover their employees when they were sick. It was to assist them that we put down the amendment in the first place. However, I note what the Minister has said. To that extent the amendment has some flaws in it, but it gave an opportunity to stress again the problems faced by small businesses without such occupational schemes. Having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Schedule [Repeals]:

[Amendment No. 17 not moved]

Lord Henley moved Amendment No. 18: Page 4, line 6, column 3, leave out paragraph (b).

On Question, amendment agreed to.

[Amendment No. 19 not moved]

Lord Henley moved Amendment No. 20:

Page 4, line 21, column 3, at end insert:
("In Schedule 5, Part II, paragraph (b), the word "or" at the end of subparagraph (iv).")

On Question, amendment agreed to.

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