HL Deb 28 January 1991 vol 525 cc457-88

3.18 p m.

Lord Denham

My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Statutory Sick Pay Bill, has consented to place her prerogative and interests so far as they are affected by the Bill at the disposal of Parliament for the purposes of the Bill.

Bill read a third time.

Clause 2 [Small employers' relief]:

Lord Stanley of Alderley moved Amendment No. 1:

Page 2, line 40, leave out from beginning to end of line 16 on page 3 and insert: ("be defined by regulations by reference to the aggregate of the employer's and the employee's contributions payments for any prescribed period, such aggregate to be reviewed annually having regard to the increase in earnings and the effect of any such increase on the amount of contributions payments.

(1D) Regulations shall prescribe the payments of statutory sick pay that entitle a small employer to small employer's relief in respect of any particular payment, and that entitlement shall be determined by reference to 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.

(1E) The first regulations made under this section shill prescribe that the amount of the aggregate of the employer's and the employee's contributions payments, and the number of weeks for which the employer has been liable to pay statutory sick pay in respect of the employee in question shall be in accordance with the following table:—

Aggregate contributions in the previous contributions year Number of weeks before small employers' relief applies
less than £15,000 6
less than £10,000 3
less than £5,000 0."")

The noble Lord said: My Lords, this amendment seeks to help small businesses such as corner shops or village post offices. In Committee my noble kinsman Lord Henley promised to table an amendment to help these small businesses as he fully acknowledged the need to do so. He did that at Report by tabling an amendment which is now included in the Bill. It relies on two factors: first, the amount of national insurance contributions paid by a business in one year, which my noble kinsman indicated would be £15,000; and, secondly, excluding any benefit for a period, which the Government indicated would be eight weeks.

My noble kinsman made great play of the Government's generosity, in particular regarding the suggested figure of £15,000. That was misleading since it included employees' contributions, and the Government gave no indication as to whether the figure might be uprated in the future. The amendment deals with that point, but I shall leave it to the noble Lord, Lord Carter, to explain it to your Lordships.

It is the suggested eight-week delay before the concession to a small employer comes into effect that is totally and utterly unacceptable and makes the concession useless. It is not a concession. It merely takes away what was intimated by the £15,000 limit on national insurance contributions.

If I have the courage of my convictions I should say that there are tricks in all trades except horse dealing and this offer, both of which are all tricks. Why is that so? First, as the noble Lord, Lord Carter, stated at an earlier stage, in 30 years of employing 40 employees he has had only four cases when any employee has been absent for more than eight weeks. I have farmed since 1954—I have never had such a case.

Secondly, my noble kinsman Lord Russell gave an example of all six employees being killed in a car crash. That was ridiculed by our noble kinsman Lord Henley, who missed the point. The point is this. What about the small business, farm or corner shop which employs only one person? Every time that one employee is sick the amendment of my noble kinsman Lord Russell applies, because the employer has lost all of his workforce. As a result, not only does he have to pay statutory sick pay but he also has to find someone to take the place of that one employee.

No large employer is likely to face the problem of his entire labour force being absent simultaneously or even 50 per cent. absence. However, that can and does happen frequently to the small business employing, say, two men. I repeat, when only two people are employed and one is sick that represents a 50 per cent. cut in the labour force. One man sick in a labour force of one represents a 100 per cent. cut in labour force. In both of those cases the Government's so-called concession would not apply until they had been sick for eight weeks—which, as I have already said, never happens.

It is therefore with those two points in mind—the extreme rarity of eight weeks' sickness and the likelihood of a small business having 50 per cent. to 100 per cent. of its employees off sick for less than eight weeks—that we have tabled the amendment. In doing so we have understood and sympathise with the problem that the Government face in trying to control expenditure, and we have tried to give help where help is most needed.

We have reduced the level of national insurance contribution offered by the Government to compensate for shorter periods of recoupment. At Committee stage your Lordships gave widespread support for a shorter period than eight weeks. We have therefore reduced that period to six weeks. That is a comparatively minor adjustment. However, as that limit is manifestly unfair to the smaller business whose national insurance contribution in the year is, say, only £10,000, we have reduced the waiting period before recoupment for those businesses to only three weeks. Finally, and most important of all, we have dealt with the very small businesses which pay only £5,000 in national insurance contributions by providing that for them recoupment is immediate.

To sum up, in broad terms the amendment states that those employing an average of five employees should receive full recoupment of statutory sick pay at six weeks. Those employing three people should receive it at three weeks, and those employing only one should receive full recoupment, as they do now, immediately sickness occurs.

In drawing up the amendment we have bent over backwards to recognise the Government's shortage of cash and to direct help where it is most needed. As I have explained, the smaller the business the greater the need for full recoupment of statutory sick pay.

As I did not prepare the amendment—the National Farmers Union did so—I hope that your Lordships will agree that it is ingenious and fair to both government and small employer. Moreover, if the Government can monitor a scheme relating to national insurance contributions of £ 15,000 it is just as easy, or easier, to monitor a scheme for contributions of £5,000 or £10,000. I beg to move.

The Chairman of Committees (Lord Aberdare)

My Lords, if the amendment is agreed to I cannot call Amendments Nos. 2, 3 or 4.

Lord Carter

My Lords, I am very pleased to add my name to the amendment and to support it from this side of the House. The House will be aware that we worked extremely hard at Committee and Report stages to devise a means of giving relief to the small employer which would be effective, simple to administer and would meet all of the Government's objectives and objections.

The new clause dealing with small employer relief introduced by the Government at Report stage recognised the need for the relief. However, in our view it is essential that the terms on which the small employer relief is operated is spelt out on the face of the Bill. The amendment does that.

The noble Lord, Lord Stanley, has explained admirably the purpose and effect of the amendment. It will not remove but will reduce the burden on small employers at a time of recession. It will help to reduce the possibility of small employers refusing to employ people with a sickness record or with disabilities. It also meets, but by no means fully, the concerns and objections expressed by the multitude of organisations which oppose the Bill. We have been pressed strongly to make the amendment much tougher, but we have resisted that pressure and come forward with what we believe is a very reasonable proposal.

I should like to return for a moment to the effect of the Bill as drafted on the employment of disabled people. We have been told by the Disability Alliance that their rights workers receive numerous calls for help from people who receive or who have had problems in obtaining their statutory sick pay, or, worse still, have been dismissed as a result of a long spell of illness. If those problems are already occurring when employers receive full reimbursement of the cost of administering the scheme, we can only fear what will happen and assume that the problem will become much more widespread when employers have themselves to foot a proportion of the bill. Your Lordships have increased the proportion of rebate from 80 per cent. to 91 per cent., but even at that level we feel that there could still be a problem. That is why the amendment is so important.

The flaw in the argument that we have heard from the Government at various stages of the Bill regarding the employment of disabled people is that it does not deal with the healthy or fit employee who develops a serious condition during his employment. The Disability Alliance points out that its rights service regularly comes across people who have been refused statutory sick pay or who have been dismissed during a protracted spell of illness.

We know that two out of five people with disabilities work in small firms, whose record in terms of good employment practice tends not to be very good. Therefore, in firms of that size disabled people are likely to be even more vulnerable than the average. For that reason, too, we feel that the amendment is important.

I believe we have agreed to group all of the amendments together except the Government's and the drafting amendments. If I may, I will refer also to Amendment No. 2, the wording of which is picked up in Amendment No. 1. Amendment No. 2 would insert after "employer's contributions" the words such amount to be reviewed annually having regard to the increase in earnings and the effect of any such increase on the level of employers' contributions". The amendment deals with a very important point that we touched upon at the Report stage but did not attempt to clarify. The purpose of the amendment is to clarify the situation regarding the level of national insurance contributions used to define a small employer.

Before dealing with the amendment, perhaps I may deal with a drafting point directed at the language of the Bill. I think the Minister will welcome the chance to make this point clear. On page 2, line 46, reference is made to the amount of the employer's contributions payments for any prescribed period". The Minister has already confirmed that throughout the Bill whenever the level of national insurance contributions is referred to it shall mean the total of employers' and employees' contributions. However, I am advised that in view of the way in which the phrase in line 46 is drafted it could be taken to mean the employer's contributions only. I have followed the wording of the Bill in Amendment No. 2, but the wording in Amendment No. 1 is much clearer; it refers to the aggregate of the employer's and the employee's contributions". I ask the Minister either to explain the point for the benefit of the House or to agree that the Bill would be much clearer if it used the words: aggregate of the employer's and employee's contributions". To return to the burden of the argument on Amendment No. 2, as we know the national insurance contributions are calculated as a percentage of earnings and are paid by employer and employee. It is entirely clear that, although the percentage may not alter, the absolute amount in terms of the pounds of contributions will increase as earnings increase. Obviously, as earnings go up, even though the percentage remains the same, the total amount of employer and employee contributions paid over to the Government will increase. With an upper limit of £15,000 of small employer relief as suggested by the Government at the last stage of the Bill, or indeed the level of aggregate contributions as set out in Amendment No. 1, the Government have only to leave the limits each year where they are—£15,000 or whatever—and more and more small employers will automatically be listed above the limit as earnings increase. That is a matter of simple arithmetic.

In an ideal world the Government would undertake to uprate the limit annually, and we did consider putting down an amendment to achieve that effect. However, continuing the sweetness and reasonableness with which we have behaved throughout our deliberations on this Bill, we have put down Amendment No. 2 which we are sure the Minister will wish to accept. We ask the Government to review annually—not to uprate; and to have regard to the increase in earnings—not to take it into account. Indeed, it is the same procedure as is used on child benefit, which is reviewed annually but as we well know it is certainly not increased annually.

We believe that the Government should have the duty spelt out on the face of the Bill to look at the limit of the national insurance contributions which affects the eligibility for small employer relief. We are not requiring that they uprate it every year, but we feel that they should be asked to review it every year.

The drafting of the amendment may not be perfect because of the haste with which the Bill has been pushed through the House. I had to draft it myself without the benefit of external advice. I understand that it would be difficult for the Government if they accepted the spirit of the amendment, even though the drafting was not perfect, to amend the Bill in another place if the words were not on the face of the Bill. If the Minister agrees with the sense of the amendment, I believe that the House must accept the amendment to enable the Government, if they wish, to redraft with better wording in another place.

With those words, I should like to say that we support Amendments Nos. 1 and 2.

3.30 p m.

Earl Russell

My Lords, I am delighted that my noble kinsman Lord Stanley of Alderley, has tabled this amendment. When we debated the Bill on Report there was widespread feeling in the House that we had not yet done enough for small businesses. Though the House clearly thought that the amendment I then moved went too far, I also picked up a considerable sense that the amendment moved by the Government had not gone far enough.

The noble Lord, Lord Boyd-Carpenter, in a delightfully free translation from Horace, described it as a very small amendment. That is exactly right. I entirely agree with everything that my noble kinsman Lord Stanley of Alderley said about the eight-week limit. That will reduce the effect of the government amendment to a level which is in effect nugatory. In addition, for the National Farmers' Union, among others, the national insurance contributions will have rather less effect next year than my noble kinsman the Minister quite rightly said they will have this year. The current pay round will clearly take a number of employees from the 0.4 rate of concession to the 0.05 rate of reduction, so the national insurance reductions will be worth a great deal less.

That underlines the importance of what the noble Lord, Lord Carter, said about index-linking. It also underlines what I have said about the effect of this Bill in creating a wages stop. But I do not need to quantify the smallness of the government amendment; the Government have already done it. The first amendment with which we began in Committee was costed by the Government as likely to be worth £45 million. The amendment of my noble kinsman the Minister was costed as being worth £2 million. That is not half a loaf; it is not quite one-twenty-secondth of a loaf. Indeed, it is small enough to be not even appropriately expressed in fractions of a loaf; it would be better expressed as crumbs from a rich man's table.

I am also particularly delighted by the device of the taper in the amendment of my noble kinsman Lord Stanley of Alderley, because one of the disadvantages of any sudden cut-off point is that it could create for a rising small business a disincentive to expand. The sliding scale concession does not have that effect to anything like the same degree.

If you look at the figures of the risk of exceptional incidence of sickness, they have a taper which I think very closely matches the taper in my noble kinsman's amendment. According to the calculations of the Library in another place, the risk of double the average incidence of sickness in a business of five employees is 25 per cent.; for 10 employees it is 10 per cent.; and for 20 employees it is 5 per cent. My noble kinsman Lord Stanley of Alderley has achieved the effect of making the relief greatest where the risk is also greatest, which seems to me to be exactly what we should have been working for.

Finally, I shall quote from a letter that I received this morning from the Building Employers Confederation who are clearly following the Bill very closely. First, it agrees —I find its agreement here highly significant—with the fears expressed about the disability allowance and the effect of the Bill on the employment of disabled people. That confederation is perhaps better able to judge this matter than any of us. The letter says that: There will be a disincentive for smaller employers to take on workers with a perceived poor sickness record thus reducing the employment possibilities of the chronically sick and disabled". The building employers appreciate that this will not depend on statistics of which a great many employers may not be aware but on perceptions; and there the effect may be more unfortunate.

Finally, the confederation comments on my noble kinsman's amendment: This amendment is not in itself expensive or radical. Its modesty comes in response to the Government's determination not to make a realistic compromise with all those voices which have pointed out the dangers inherent in the Bill as it stands. It is a small measure—but it does offer some measure of security to those most vulnerable". The confederation seeks your Lordships' support for the amendment; and so, my Lords, do I.

Lord Jenkin of Roding

My Lords, I understand that the House will be considering my Amendments Nos. 3 and 4 in this group of amendments. Perhaps I may add a few words to what has already been said. I begin by thanking my noble friend for responding fully to the requests made from all sides of the House that there should be further consultations with the outside interests before this Bill reaches the statute book. My noble friend has been as good as his word. Among others, Mr. Mendham of the Forum of Private Business spent two hours with my noble friend's officials last Wednesday examining many aspects of the definitions and measurements that we are endeavouring to get right in the circumstances of this Bill for the protection of the smallest businesses. I thank my noble friend for that.

Perhaps I may just add in parenthesis that that meeting discussed an amendment put forward by Mr. Mendham and his colleagues, which does not appear on the Marshalled List. I saw it only this morning although I was telephoned over the weekend and told that it was on its way. The amendment has some attraction and—I hesitate to use the words—is user-friendly.

If I have a complaint about Amendment No. 1 in the name of my noble friend Lord Stanley of Alderley it is that although it may well be administrable by the Department of Social Security, from the point of view of small businesses to have a series of different thresholds and different rates makes it appear very complicated for them. One must bear in mind what my noble friend said about the ability of small businesses even to claim to know about the 1985 relaxation for national insurance contributions on statutory sick pay. That is a factor to which a great deal of weight must be given.

On Wednesday an amendment was discussed which seemed to me to have the supreme merits of simplicity and user-friendliness. I have a suspicion that that amendment may well come before another place when this Bill returns there. At this stage all I ask is that my noble friend and his right honourable friend should consider it seriously and sympathetically because it seems to me to deal with many of the difficulties with which we have been wrestling. In the meantime we have to deal with the amendment tabled on Report by my noble friend, to which a number of amendments have now been put forward.

My Amendments Nos. 3 and 4 are directed to a rather different aspect of how one measures the point at which a small employer becomes entitled to 100 per cent. and not just 80 per cent. recoupment. On page 3, in subsection (1D) paragraphs (a) and (b), my noble friend has left himself two alternatives. One is to measure the threshold by reference to the sickness of one employee. Each employee is considered separately and when the employee's sickness reaches eight weeks —or, as my noble friend suggested, six weeks—that should be the trigger that gives 100 per cent. reimbursement. The alternative, in paragraph (b) at line 12, is to consider the employees in aggregate. That seems to me to be infinitely the better solution. If one bears in mind that the recompense and the reduced national insurance contribution happen anyway, and that the statutory sick pay which has to be paid out happens anyway, surely what is important is the point at which that employer finds himself well out of the average and having to pay more than is recouped by the national insurance contribution. The fact that it happens to be spread over two or perhaps three employees, or that it happens to one employee, in the last resort is surely irrelevant. As I said at Report stage, if an employee is off sick for eight weeks that triggers the relief, so from then on the employer gets 100 per cent. reimbursement. What is the difference between that and two employees being off for four weeks? All the other figures are exactly the same but it is not until one of those employees is off for eight weeks that the clause bites and the 100 per cent. rate of reimbursement applies.

In a sense this is a probing amendment because, as I said, my noble friend left himself the option to act through either the individual employee or the aggregate of the statutory sick pay paid. I intend to urge my noble friend, with all the eloquence that I can command, to agree that paragraph (b) is an infinitely preferable solution. I have adopted the mechanism of requiring that it is that paragraph which should be built into the regulations and not give him the option.

The case for my amendment is absolutely overwhelming. Indeed, I am assured that it would be perfectly workable on the forms used by small employers to calculate their net payment to the social security at the end of the month for the full contributions less the reimbursements. There is absolutely no reason why it should not be done on the basis of the aggregate. I beg my noble friend to do that. If he does not, I think that the charges that have been laid against the Front Bench will stick. The Government want to give relief to small firms but the way in which it has been done will not have that effect. It will only be minimal and in only the most exceptional cases will anybody get relief. That charge will be a true one and I shall be sorry to hear it.

There has been agreement from all sides of the House that whatever else happens to this Bill there should be an effective relief for above average sickness experienced by the employees of small employers. If my noble friend can give some reassurance on that point I, for one, will be greatly relieved.

3.45 p.m.

Lord Carter

My Lords, before the noble Lord sits down, although the point that he makes is a good one is it not the case that even if the Government were restricted under paragraph (b), all that they have to do is make the total amount for each individual employee the same as eight weeks sick pay? Surely one is then back with the same problem.

Lord Jenkin of Roding

My Lords, I did not attempt to say what the figure would be. Clearly it would be different for different numbers of employees, but that is the employer's responsibility and there is a limit for that. If it were done by reference to national insurance contributions, in the same way as for the definition of small employers, that would be a perfectly workable basis. However, it seems to me clear beyond peradventure that we cannot take the individual employee, and only when he reaches the threshold. One must consider the experience of the employer with all his employees as a whole in the relevant period.

Baroness Phillips

My Lords, I should like to support my noble friend on the first amendment and again make a plea to the Government on behalf of small shopkeepers. I mix with small shopkeepers a great deal and can assure the House that the high street is rapidly running out of shops. To start with, there is the property tax, which is an appalling imposition on small businesses. Many people, especially older people and young mothers with children, depend on small shops. I remind the Government, as I have done before, that those small shopkeepers are voters who supported the Government. They are the people who believed that the Government were going to help small businesses.

This is yet another illustration of groups of traders who will disappear from business. It is a very sad and serious affair. We plead with the Government to realise that not only will they damage many people but they will damage their hopes in the next election.

Lord Boyd-Carpenter

My Lords, I was interested and glad to hear my noble friend Lord Jenkin say that there have been discussions with the Government about ways of dealing with the acute problem of small employers. My noble friend went so far as to say that floating about somewhere is a possible amendment which might drift into another place. Obviously the possibility of that occurring must have a bearing on the way in which some of us will look at the amendments, if and when they come to a Division. I shall be grateful if my noble friend Lord Henley will confirm whether that is the situation and would tell the House what such an amendment will embody. That factor may affect our judgment and decision in respect of the amendment now before us. It is in the interests of the House and of the Government that we should be told about it. I am sure that my noble friend understands extremely well the fact that Members on all sides of the House feel strongly about the small employer.

Leaving aside the general question, to which we may come on the Motion that the Bill do now pass, in respect of increasing the costs to employers, there is the especially acute problem of small employers. I do not need to labour it because it has been emphasised so strongly. Briefly, the problem is that if one employs only one or two people and one or two go sick that is a disaster and will dislocate one's business most seriously. If in addition the Government refuse to refund what must be paid in statutory sick pay, they will really be hitting a man when he is down. That position is acute and is a real problem, particularly in the countryside. The noble Baroness, Lady Phillips, referred to small shops, but the problem applies equally to small farmers. As has already been disclosed, the National Farmers Union is among the many organisations which are distressed by the Bill, in particular by the position of the small farmer.

It is for my noble friend Lord Henley to enlighten your Lordships about the Government's intentions in this respect. I am sure that he has taken on board the fact that many Members of your Lordships' House are reluctant to leave the Bill as it stands without a firm assurance that it will be improved in another place. I shall listen with enormous interest, as always, to my noble friend's reply.

Lord Mottistone

My Lords, there are many provisions that I should have liked to see included in the Bill but in default I support the amendment tabled by my noble friend Lord Stanley of Alderley. Indeed, I like the look of the amendment tabled by my noble friend Lord Jenkin of Roding. However, it cannot be moved if Amendment No. 1 is incorporated in the Bill.

I thank my noble friend Lord Henley for having met with the representatives of the CBI and with Mr. Mendham of the Forum of Private Business to whom my noble friend Lord Jenkin referred. It appears that Mr. Mendham's scheme has not received favourable acceptance because it is not reflected on the Marshalled List. Can the Minister explain the reason for that? Is it because his officials were unable to undertake a full evaluation of the proposed scheme? Might the amendment be included at a later stage of the Bill? The general line of Mr. Mendham's proposal is better than that in the amendments now before the House. However, we might work towards it by accepting Amendment No. 1 in the meantime.

I am grateful to my noble friend for fitting in discussions with the CBI. However, there were only two or three days involved; that was hardly time for anyone to consider anything seriously. I received my brief from the CBI today. Normally I find it helpful to give my noble friend a copy of any brief so that at least his officials can advise him on how best to answer me. I did not have time to do so because the process has been rushed.

It became apparent during the course of the discussions with the CBI last week that the Government intend to lay the regulations in the second half of February. It is almost 1st February and, therefore, we have a fortnight before the regulations are to be laid. I cannot believe that there is time for the discussions necessary in order to ensure that the best interests of the small firms to whom the amendment relates will be dealt with. Neither can I believe that the interests of companies generally will be adequately dealt with as a result of this great rush.

I should like my noble friend to answer three questions. Why have Mr. Mendham's proposed amendments not seen favour? Will they see favour at a later stage? Does my noble friend believe that between now and the middle of February he will have the time to take part in discussions with all those people who have serious advice to give?

Lord Rippon of Hexham

My Lords, I wish to follow up the point made by my noble friend Lord Mottistone. I too have received various memoranda from the National Farmers Union and the Forum of Private Business. It appears that more time is necessary for consultation. The more I have listened to the debates the more I have become convinced that the Government would have been wise to listen to my noble friend Lord Boyd-Carpenter and to withdraw the Bill. I shall say nothing about its merits, its effects upon small businesses, or its appalling timing. However, I can see no case whatever for putting before your Lordships what increasingly becomes another welter of chaotic verbiage which, if we are honest, we find great difficulty in understanding as will everyone else. It will provide yet another complexity with which small businesses must deal.

My noble friend Lord Jenkin of Roding referred to the Forum of Private Business and expressed his gratitude to the Department of Social Security for having listened to all the arguments. However, I note that in his letter to me Mr. Mendham states that he fears that the Government have had insufficient time completely to evaluate and cost our proposals. He asks me, as perhaps he has asked other noble Lords, to press the Government to keep an open mind pending the appearance of this little measure in another place. I am sure that many noble Lords agree with my noble friend Lord Boyd-Carpenter, who said that our attitude towards the amendment will depend on the Minister's response.

4 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)

My Lords, my noble friends Lord Jenkin of Roding and Lord Boyd-Carpenter have referred to a mythical additional government amendment that is floating about. There are no government amendments other than the two which appear in my name on the Marshalled List—

Lord Jenkin of Roding

My Lords, I apologise for having been so obscure as to mislead my noble friend. No one suggested that there was another government amendment. It was suggested that a proposal had been put forward by the Forum for Private Business and discussed with the Government's officials. However, as was said by my noble friend Lord Rippon, the problem is that there has been insufficient time to discuss the matter properly before today's proceedings. There is no other government amendment. I had hoped that there would be, but clearly there is not one as yet.

Lord Henley

My Lords, I had gathered that. I was going on to say that I imagined that my noble friend was referring to Mr. Mendham's amendment. I shall make a few brief comments upon that. At this stage I cannot say anything about what another place may do, but earlier in our proceedings I paid tribute to the time and effort which Mr. Mendham has expended in producing his scheme. Although it is ingenious, it would apply to all employers, which we do not believe is the right way forward. As the House will know, my officials met Mr. Mendham last week and we have examined his scheme very carefully. A number of problem areas have led us to rule it out: namely, the difficulties associated with apportioning an annual incidence of sickness on a monthly basis; the fact that the formula does not work well for employers with only one employee; and the belief that the scheme would be perceived as very complicated by many small employers.

I now turn to the amendments which we are discussing. I have listened very carefully to all that has been said. As the House will appreciate, the amendments moved by my noble friends Lord Stanley and Lord Jenkin propose opposite solutions to the method of determining small employers' relief and, hence, entitlement to 100 per cent. reimbursement. Amendment No. 1 in the name of my noble kinsman would relate eligibility to the number of weeks for which an individual employee has been sick and would rule out—I stress that—the aggregate method favoured by my noble friend Lord Jenkin. My noble friend's amendment would provide precisely the opposite. Neither group of amendments would retain the option of the alternative method. There is clearly a difference of view on the method which should be adopted, a difference which I believe extends wider than this House. I shall have more to say about that later in my speech, as I shall about the subject of consultation, because of the difference of views as to which method should be adopted.

First, I shall concentrate my remarks on Amendment No. 1. Although I do not want to make too much of this, I have to tell noble Lords that the first part of the amendment is defective and my legal advisers have informed me that it would be unworkable.

This stems from a misunderstanding by my noble kinsman as to the need to refer specifically to employees' contributions. I recall that on Report the noble Lord, Lord Carter, asked me whether the £15,000 contribution threshold incorporated both the employers' and the employees' portion of the national insurance contribution. The noble Lord will remember that I indicated by nodding that it did.

The noble Lord, Lord Carter, returned to that matter and has drawn my attention to line 46. However, again I give him the assurance as regards the reference in line 46 on page 2 that "employer's contributions" means employer's and employee's. There is no need to identify these separately because the definition of "employer's contributions payments" in the main legislation is: any payments which the employer is required to make in discharge of any liability in respect of primary or secondary Class 1 contributions". It does, therefore, encompass both the employer's and employee's elements of the contribution. The same point relates to Amendment No. 6 in the name of the noble Lord, Lord Carter. However, I appreciate the time constraints that applied in tabling amendments for consideration today and I understand the intention behind the amendment.

Amendment No. 1 would preclude the use of the number of employees as the definition of a small employer. As I made clear on Report, the Government have a strong preference for using the contribution threshold in this respect and I am delighted that in moving this amendment noble Lords have accepted that approach. But it seems only fair to ensure that the House is aware that one of the effects of this amendment would be to remove the enabling power permitting the regulations to relate the definition to the number of employees. I shall have something to say towards the end of my remarks about the Government's proposals to consult on the content of the regulations and—despite the Government's preference, which was endorsed by the House on Report—whyit might be worth while to keep all our options open in the primary legislation.

I now move on to the substantial point made by the noble Lord, Lord Carter, in relation to the annual review of the contribution threshold, which we propose should determine whether an employer falls to be treated as a small employer. In this case perhaps I may speak also to Amendment No. 2.

Of course the Government accept that the value of the £15,000 threshold—I use the figure I gave on Report—will decline in real terms unless we raise it. This is precisely one of the reasons why we are taking power to change the amount in regulations rather than in primary legislation. We do not think, however, that it would be helpful to employers to commit ourselves to increasing the limit each year mechanically in line with an index if that gives an awkward figure. It would be much more sensible for the threshold to rise when appropriate to some rounded sum; for example, a multiple of £1,000.

Another factor is that we may not necessarily want to restrict any change to the contributions threshold; it may be that there are other elements of the scheme which we shall wish to look at—something which any statutory requirement relating solely to the threshold could pre-empt us from doing. We need to keep a flexible approach.

Having said that, I was minded to accept Amendment No. 2 in the name of the noble Earl, Lord Russell, the noble Lord, Lord Carter, and my noble friend Lord Stanley of Alderley. However, I am advised that it is defective and would not achieve its intention. By relating the amendment to "such amount" it places a duty on the Government to review the amount of national insurance contributions paid by employees and employers rather than the threshold which determines whether an employer can be treated as a small employer. That is obviously not the intention. Therefore, I cannot advise the House to accept the amendment. However, as I said, I certainly undertake that the threshold will be reviewed every year.

The second subsection of Amendment No. 1 provides that the regulations should prescribe the point in time at which small employer's relief should click into operation for employers, by relating this to a prescribed number of weeks during which a particular employee has been sick. The House would not expect me to disagree with this. Clause 2 already provides for that at paragraph (1D)(a). I welcome this but, as I said earlier, it rules out the possibility of using the aggregate method based on the workforce as a whole as advocated by other amendments. In their turn, they rule out the method of relating that to the number of weeks for which a particular employee has been sick.

The third paragraph, the new subsection (1E), of the amendment sets out the meat of the proposals. As my noble kinsman has explained, under these proposals small employer's relief would begin to bite at different stages of an employee's sickness depending on the amount of contributions payments in the previous year. Where that figure was below £5,000 per annum, the employer would be able to recover 100 per cent. of all the SSP paid out; where it was between £5,000 and £10,000, after an employee had been sick for three weeks; and where between £10,000 and £15,000, after sickness had lasted six weeks.

I appreciate that noble Lords have sought to meet a number of the points that I made on Report by structuring the provision in this way. The intention is to assist particularly the smaller employer and the Government have made it clear that is also our intention. Indeed, subject to certain provisos which I will come to directly, we are not against a graded system of this kind if it is perceived by the small business interest generally as the best way to proceed.

My noble kinsman, my noble friend Lord Stanley and some of the organisations representing small employers have asked whether the Government are prepared to agree to a shorter number of weeks—that is, shorter than the eight weeks which I said the Government had in mind—if the contribution threshold was pitched at a level lower than £15,000. We should certainly look at any scheme put to us and, subject to financial and operational constraints, the Government do not rule out that possibility after the consultation process has taken place. Our minds are not closed to such a possibility. I may come to this when I refer to the consultation exercise later.

Turning to the probing amendments of my noble friend Lord Jenkin, I should like to give the assurance for which my noble friend asked: we have not ruled out using the aggregate payment of SSP as the determining factor. That is why the power to do just that remains in Clause 2. Indeed, we have been looking at possible schemes. I know that my noble friend appreciates that it would not simply be a matter of setting a threshold of 'x' amount of the SSP and once that had been reached the small employer would qualify for 100 per cent. reimbursement. That would be manifestly unfair. It could mean that the very small employer would have to reach an excessive number of weeks before he qualified.

Turning to the question of consultation, as I have said, there are a number of different possible approaches that we intend to pursue. That is why we intend to engage in a consultation process. During Report stage my noble kinsman Lord Russell said that the Government had not decided what we wanted to do, and he suggested that it might be better if I could come back to the House at Third Reading when we had decided. It is not that the Government are being indecisive. I have clearly stated our preferences, and I stress that they are only preferences. But it is clear that there are strong differences about which would be the best course to take. These have shown themselves in this House, with some noble Lords favouring a scheme based on number of weeks of sickness per employee, as in Amendment No. 1, and others a scheme based on the aggregate number of weeks of sickness, as in my noble friend Lord Jenkin's Amendments Nos. 3 and 4. There have also been variations suggested in other places on both schemes. A similar uncertainty is also being manifested outside the House. Some noble Lords may know that since the Report stage either I or my officials have seen a number of organisations, as I am pleased to say my noble friend Lord Jenkin stressed. We have seen the CBI, the Forum of Private Business, and the National Farmers Union, and have spoken to others on the telephone.

Although time is of the essence, as has been said many times on this Bill, which is why I fear the consultation process will be a short one, the Government feel very strongly that it would be unwise to write precise provisions in the primary legislation in the way that my noble kinsman's amendment does. We must leave it open for those to be prescribed in regulations so that we can get a system which is user-friendly—to use an expression of my noble friend Lord Jenkin—not just for the department, important though that is, but much more importantly user-friendly for the small businesses so that they can have a system that they can operate. There is no point in bringing forward a concession for small businesses if the concession is unusable by the small businesses themselves.

We have been giving careful consideration as to the representations made since the Government's proposals for small employers were announced. We have taken into consideration the arguments from all sides that there should be more consultation with the relevant organisations before the regulations are made. Therefore, the Government have decided to run what I must describe as a short consultation exercise. Our intention is to put forward alternative schemes, one based on weeks of sickness per employee and one using the aggregate sickness of the workforce as a whole. We shall be asking for comments on both preference and practicality. It is important that the scheme must be user-friendly. I stress that we want to provide, within financial and other constraints, the simplest and most practical scheme for employers to operate.

A number of your Lordships—in fact, I think I could fairly say many Members of this House—have criticised the Government for not consulting business in advance of this Bill. Both my right honourable friend the Secretary of State and I have explained why that was not possible. But we believe that there is time, albeit that such time will be very short as the regulations will need to be laid next month, to have some limited consultation on the small employer's relief scheme. I hope that the House will agree that this is the best way forward.

I have given a number of reasons why the Government cannot accept my noble kinsman's amendment or that of the noble Lord, Lord Jenkin, not least of course the decision to consult on alternative schemes which I have just announced. In the light of that I hope that my noble kinsman will feel able to withdraw his amendment.

4.15 p.m.

Lord Stanley of Alderley

My Lords, I do not think that I have ever heard in your Lordships' House such a statement from the Minister showing that he had not made up his mind and could not make up his mind. Perhaps I may deal with a few points made earlier.

First, my noble friend Lord Jenkin pointed out that he would like some form of aggregation. The snag with that is that if someone employs only one person he cannot aggregate. However, I agree with my noble friend that the Government should compensate the small employer who suffers above average sickness. As I have said, eight weeks is too high. We believe that average sickness, or excessive sickness with respect to small employers, is somewhere around three weeks.

My noble friend Lord Boyd-Carpenter mentioned the mythical amendment which we have not seen. I understand the point that he has made. My noble kinsman Lord Henley referred to it. Certainly, if the Government find in another place that this is an acceptable way forward I see no reason why they should not do that there, but at present the Government have done nothing to make your Lordships feel that they will look at this problem, apart from consulting, which so far has produced absolutely nothing, as is evident from the remarks made by my noble kinsman Lord Henley.

I entirely accept the point made by my noble friend Lord Rippon that it would have been much better if the Bill had been sent back to where it came from and redrafted so that we could have got it right, but unfortunately that is not the position. We are left here with no concession whatever to the small business. It would be irresponsible of us not to insert something to make the Government concentrate their minds in another place. I do not wish to go into my village shop having done nothing about this.

My noble kinsman brought out one or two other points, one of which concerned the defectiveness of the first part of the amendment. The noble Lord, Lord Carter, dealt with that. It can perfectly well be put right in another place, and my noble kinsman is making a mountain out of a molehill.

Finally, my noble kinsman went back to numbers. I almost cried. We suggested numbers to start with and my noble kinsman said at Committee stage, "No, we won't have numbers. We'll have National Insurance contributions". So I have to leave the farm, go off and look out my advisers, and go back to National Insurance contributions. Then my noble kinsman said today, "No, I think we might have numbers now". Really, I sometimes despair. I will not continue, because we have been on this matter for long enough, but if the Government cannot make up their mind your Lordships should make up their mind for them. They can change the amendment in another place, but let the other place have a chance to look at the problem of the small employer.

By supporting the amendment noble Lords will be helping the very small employer. We must remember the village shop, the post office and the small farmer. The village shop and the post office do more than just sell baked beans and stamps; they perform a social service to the community. If your Lordships support that, I hope that your Lordships will follow us into our Lobby. I commend the amendment to the House.

4.19 p.m.

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

Their Lordships divided: Contents, 128; Not-Contents, 84.

Division No. 1
Acton, L. Graham of Edmonton, L.
Addington, L. [Teller.]
Airedale, L. Grey, E.
Allerton, L. Grimond, L.
Ardwick, L. Hampton, L.
Auckland, L. Hanworth, V.
Aylestone, L. Harris of Greenwich, L.
Birk, B. Hatch of Lusby, L.
Blackstone, B. Hayter, L.
Bonham-Carter, L. Henderson of Brompton, L.
Bottomley, L. Hollis of Heigham, B.
Boyd-Carpenter, L. Holme of Cheltenham, L.
Brain, L. Houghton of Sowerby, L.
Brightman, L. Hunt, L.
Broadbridge, L. Hutchinson of Lullington, L.
Bruce of Donington, L. Hylton, L.
Carter, L. Hylton-Foster, B.
Cledwyn of Penrhos, L. Jeger, B.
Clinton-Davis, L. Jenkins of Hillhead, L.
Cockfield, L. Jenkins of Putney, L.
Cocks of Hartcliffe, L. Kearton, L.
David, B. Kennet, L.
Dean of Beswick, L. Kilbracken, L.
Derwent, L. Kinloss, Ly.
Donaldson of Kingsbridge, L. Kinnaird, L.
Dormand of Easington, L. Kirkwood, L.
Ellenborough, L. Knollys, V.
Elliot of Harwood, B. Lauderdale, E.
Ennals, L. Leatherland, L.
Erne, E. Listowel, E.
Ewart-Biggs, B. Llewelyn-Davies of Hastoe, B
Ezra, L. Lloyd-George of Dwyfor, E.
Falkland, V. Longford, E.
Fisher of Rednal, B. Lovell-Davis, L.
Galpern, L. Lucas of Chilworth, L.
Malmesbury, E. Russell, E.
Margadale, L. Sainsbury, L.
Masham of Ilton, B. St. Albans, Bp.
Mason of Barnsley, L. Salisbury, M.
Mayhew, L. Saltoun of Abernethy, Ly.
Mersey, V. Serota, B.
Milverton, L. Shackleton, L.
Mishcon, L. Shaughnessy, L.
Molloy, L. Shepherd, L.
Monckton of Brenchley, V. Stallard, L.
Monson, L. Stanley of Alderley, L. [Teller.]
Morton of Shuna, L. Stedman, B.
Mottistone, L. Stoddart of Swindon, L.
Mulley, L. Strathspey, L.
Nelson, E. Taylor of Blackburn, L.
Nicol, B. Terrington, L.
Ogmore, L. Thomson of Monifieth, L.
Orr-Ewing, L. Thorneycroft, L.
Palmer, L. Thurlow, L.
Peston, L. Tordoff, L.
Phillips, B. Turner of Camden, B.
Pitt of Hampstead, L. Underhill, L.
Porritt, L. Varley, L.
Rankeillour, L. Wallace of Coslany, L.
Renton, L. Walston, L.
Richard, L. Whaddon, L.
Rippon of Hexham, L. White, B.
Rochester, L. Wilberforce, L.
Roskill, L. Williams of Elvel, L.
Ross of Newport, L.
Alexander of Tunis, E. Hives, L.
Arran, E. Hood, V.
Astor, V. Hooper, B.
Barber, L. Howe, E.
Belhaven and Stenton, L. Jenkin of Roding, L.
Beloff, L. Johnston of Rockport, L.
Belstead, L. Killearn, L.
Bessborough, E. Kimball, L.
Bethell, L. Long, V.
Blake, L. Luke, L.
Blatch, B. Lyell, L.
Blyth, L. Mackay of Clashfern, L.
Boardman, L. Macleod of Borve, B.
Borthwick, L. Mancroft, L.
Brabazon of Tara, L. Merrivale, L.
Brigstocke, B. Mountevans, L.
Brougham and Vaux, L. Mowbray and Stourton, L.
Butterworth, L. Munster, E.
Campbell of Alloway, L. Nugent of Guildford, L.
Campbell of Croy, L. Onslow, E.
Carnegy of Lour, B. Oppenheim-Barnes, B.
Carnock, L. Orkney, E.
Cavendish of Furness, L. Pearson of Rannoch, L.
Clanwilliam, E. Peyton of Yeovil, L.
Constantine of Stanmore, L. Reay, L.
Cottesloe, L. Renwick, L.
Crickhowell, L. Skelmersdale, L.
Davidson, V. [Teller.] Slim, V.
Denham, L. [Teller.] Stevens of Ludgate, L.
Eden of Winton, L. Strange, B.
Elibank, L. Strathmore and Kinghorne, E.
Elliott of Morpeth, L. Sudeley, L.
Erroll of Hale, L. Swansea, L.
Glenarthur, L. Thomas of Gwydir, L.
Gray of Contin, L. Trefgarne, L.
Grimthorpe, L. Trumpington, B.
Hailsham of Saint Marylebone, L. Ullswater, V.
Vaux of Harrowden, L.
Hankey, L. Waddington, L.
Harmsworth, L. Wade of Chorlton, L.
Haslam, L. Whitelaw, V.
Henley, L. Wolfson, L.
Hesketh, L.

Resolved in the affirmative, and amendment agreed to accordingly.

4.27 p.m.

[Amendments Nos. 2 to 4 not moved.]

Lord Henley moved Amendment No. 5:

Page 3, line 16, at end insert: ("(1E) A statutory instrument containing (whether alone or with other provisions) regulations under subsection (1C) or (1D) above shall not be made unless a draft of it has been laid before Parliament and approved by a resolution of each House."").

The noble Lord said: My Lords, in moving Amendment No. 5 I shall speak also to Amendment No. 7.

The House will recall that at Report stage my noble kinsman Lord Stanley successfully prevailed upon me to accept his amendment making all the regulations made under the powers of this section subject to the affirmative resolution procedure, instead of only the first of such regulations.

At the time I said that I reserved the right to come forward with the Government's own amendment should my noble kinsman's amendment prove defective. As I explained to him by letter, the parliamentary draftsman has advised that this is indeed the case and has redrafted the provision as Amendment No. 5. This is in substitution for my noble kinsman's amendment, which is deleted from the Bill by Amendment No.7.

I apologise to my noble kinsman but do, of course, assure him and the House that the amendment I have now brought forward meets the intentions of his amendment. I beg to move.

Baroness Turner of Camden

My Lords, I rise from these Benches to thank the Minister for presenting this amendment this afternoon. We are grateful to him for tabling the amendment, which complies with the promise that he gave to the House at Report stage.

On Question, amendment agreed to.

[Amendment No. 6 not moved.]

Lord Henley moved Amendment No. 7: Page 3, line 26, leave out subsection (4).

On Question, amendment agreed to.

4.30 p.m.

Lord Henley

My Lords, I beg to move, That the Bill do now pass.

Moved, That the Bill do now pass—(Lord Henley.)

Lord Carter

My Lords, when the Bill was introduced it was a one-clause Bill. I wonder whether the Government then imagined the kind of trouble that they were going to run into when the Bill was hastily introduced following a deal between the Chief Secretary of the Treasury and the Secretary of State for Social Security.

The Government must be congratulated. It is a feat of political skill to get the CBI, the Institute of Directors, the NFU, the National Federation of the Self-Employed and the Small Businesses, the Forum of Private Business, the Disability Alliance, the Labour Party and a substantial number of Government Back-Benchers in the same lobby against the Government. I stated at Second Reading the Bill is a bad one and that it should be withdrawn.

However, this House has improved the Bill to some extent. The rebate in statutory sick pay has been increased from 80 per cent. to 91 per cent., which will give some help to employers. The removal of the infamous Henry VIII clause is a very satisfactory constitutional improvement. Today we have helped to concentrate the mind of the Government on small employer relief.

The Bill is a rather forlorn relic of Thatcherism, combining a lack of consultation in the early stages with ramming the Bill through both Houses at breakneck speed. I cannot understand the need for such speed. The Government's programme is not overloaded and they are looking round for things to do; yet the Bill has taken only a few days between each stage in this House, and in the other place there was one day between Second Reading and Committee. Only two to three weeks has been left for the consultation period. We should be told the reason for the breakneck speed with which the Bill has been handled. The Government could demonstrate that they have turned over a new leaf by accepting the amendments.

My strictures concerning the Bill do not extend to the noble Lord, Lord Henley. He has been courteous and helpful. Problems with the timetable and delays in producing information were not his fault. All noble Lords know, especially with the number of lawyers in this House, that any advocate can handle a good case, but it takes a very good advocate to handle a bad case. The noble Lord has borne up remarkably well considering that nearly all noble Lords, with the possible exception of the noble Lord, Lord Jenkin of Roding, have been critical of the Bill and have asked the Government to withdraw it. In our view, the Bill is a bad Bill, but it is leaving here in better shape than when it came to us.

Earl Russell

My Lords, we all know that speaking is like swimming: it is a lot easier to do it with the tide than against it. My noble kinsman the Minister throughout the passage of the Bill has been speaking against the tide. He has discharged that responsibility with distinction, grace, good humour and every merit permitted within the limits of his brief. I congratulate him.

I have been delighted to work on the Bill with my noble kinsman Lord Stanley of Alderley. I hope that my noble kinsman will not misunderstand me, but I was reminded of Adam Smith in the clerihew: who was disowned by all his kith but backed through thick and thin by all his kin. The Bill has been very considerably improved. I am pleased that the question of small businesses will be referred back to another place for further consideration. I am not convinced that any of us have got the matter right. This is the best amendment that I have seen, but I should like to see a larger exception than that which has been considered by the Government. We have given them a chance to think about that matter and I hope that they will do so.

I was delighted to see the amendment moved by the noble Lord, Lord Mottistone, in relation to increasing the amount of statutory sick pay to 91 per cent. The Government are left with a dilemma. They can either pass the Bill in a form which is acceptable to this House or they can pass the Bill in a form which achieves its original purpose. They cannot do both. It is clear what conclusion they ought to draw from that situation.

I am particularly pleased to see the amendments relating to the deletion of the Henry VIII clause. This House used to be known as the watchdog of the constitution. It is a function to which it is well suited. I hope that not only will the amendment be accepted but that we shall get fewer such clauses in the future. More thought should be given to the recommendation of the Donoughmore Scott Report, that there should be printed with the explanatory memorandum an explanation of why such a clause is necessary. Like the notices that state, "Is your journey really necessary?" one can ask: is the Henry VIII clause really needed?

I fear that I must blame my honourable friend Mr. Bellotti for the Bill. It is the result of a certain concession that was made in relation to child benefit, in order to claw back some of the spending. The chronology of the matter strongly suggests that the concession on child benefit was the result of the victory of my honourable friend Mr. Bellotti at Eastbourne. My honourable friend had the distinction of getting 1 billion pounds out of the Treasury before he had even made his maiden speech, a distinction that might make most of us green with envy and one which makes it difficult to argue that a vote for the Liberal Democrats makes no difference.

In that context, if we are victorious in relation to the amendments in another place I hope that we will not have to face this argument again in relation to another benefit. I agree with the argument that used to be put by the late Lord Seebohm, who will be much missed in this House. He stated that one of the strongest arguments for uprating child benefit is the argument for fiscal equity between those with children and those without. Therefore, the proper way to finance increases in child benefit is by taxation to the point where the concession becomes fiscally neutral, where it achieves an equitable effect between people with children and people without.

The Treasury has been much mentioned in the Bill. The Treasury represents something that is very deep in our national culture. I should like to tell the House a story in order to illustrate the point. A certain American senator, a former Rhodes Scholar and millionaire, regularly received letters from his American alumni association. He did not open them because he was a busy man, but sent them cheques for 30,000 dollars. He wondered why he never received such letters from his English college at Oxford. He finally received a letter from Oxford, reached for his chequebook and was just about to write a cheque for 30,000 dollars when he thought that he should look to see what the going rate was. He opened the letter, which was a dunning letter from the college bursar for a buttery bill of two shillings and sixpence that dated from his undergraduate days. He wrote them a cheque for thirteen pence. That is the culture from which the Treasury grows; it is penny wise, pound foolish. The Bill is a very good example of that point.

We should think about what the Bill has told us about our political system. I hesitate to say that the Bill has been carried through another place by the votes of the Conservative Party because it seems to me to offend the principles of the Conservative Party as deeply as it offends the principles of the other two parties. The noble Lord, Lord Boyd-Carpenter, speaks as eloquently for Conservative principles as anyone I know, and having listened to the noble Lord I am encouraged in that conviction. It would be more accurate to say that the Bill was carried through another place by the votes of the Court and Treasury party.

In fact, ever since the 18th century the influence of the Executive on another place, exercised through the means of patronage, has been a great deal stronger than English mythology leads us to believe. It is a Treasury Bill. The Prime Minister has taken on the job of proving that he is his own man. I wish him luck with it, but he needs to prove it, not only in relation to his predecessor but also in relation to the department in which he has served almost all his ministerial career. He needs to prove that he is not the Treasury's poodle. At some time he must do that by a dramatic gesture: what better gesture than by withdrawing this Bill?

My Lords, 1066 and All That commented on speculation about the reasons for the execution of Sir Walter Raleigh, that he was executed for being left over from the previous reign. That is what I hope the Prime Minister will do to this Bill.

4.45 p.m.

Lord Boyd-Carpenter

My Lords, I look upon this Bill at this stage more in sorrow than in anger; sorrow because to me, an enthusiastic supporter of our present Administration, it is singularly disagreeable to have to exercise a vote against one of their measures. I say that frankly. The substance of the Bill and the way the Government as a whole have handled it make it difficult for any of us to justify our support for it. Such support would seem inconsistent with our duties as a revising Chamber. The House would not have been doing its duty had it left unamended the Bill as it came to us.

I shall not bore the House by recapitulating what some of us have said at earlier stages of the Bill. However, what has emerged particularly clearly this afternoon is the complete lack of consultation with those concerned before the Bill was introduced. Indeed, my noble friend Lord Henley said that it was not practical to have consultation before then. We all know that it was introduced during the expenditure round as part of a deal between my right honourable friend the Chief Secretary to the Treasury and my right honourable friend the Secretary of State for Social Security. Having served for quite lengthy terms in both those offices, I have some understanding of their problems. However, in a desire to adjust expenditure figures—a very proper and reasonable desire—it was quite extraordinary to ignore the fact that outside organisations would be interested and would expect to be heard in advance.

The result has been—certainly as reflected in my postbag —a larger amount of criticism of the Government from a larger number of organisations than I personally have received in the 19 years I have been a Member of this House. That criticism has come from organisations as widely dispersed as the CBI, the NFU and the National Association of Citizens Advice Bureaux. All kinds of organisations have protested. While those protests owe something to the substance of the Bill, they also owe a great deal to the fact that the normal procedure of consultation before introducing a controversial Bill was not followed. I hope that what has happened to the Bill in this House will serve as a warning to my right honourable friends in another place and to my noble friend that legislation of this kind should not be introduced without prior consultation with those whom it will affect.

Of course in the end the Government must make a decision. They can ignore the views of those who have been consulted, but it is clear that if one simply fails to consult and launches a measure of this kind upon an unwitting world, one generates more ill feeling and opposition than otherwise would be the case. I hope my noble friend Lord Henley will take back that lesson to discuss with his colleagues. I acquit him at once of any involvement in the matter because, as I have said, we know the history of it only too well.

My basic objection to the Bill, apart from the hardship it will cause in some cases, is that it will increase the costs of employers and of industry. That is beyond dispute. The only argument has been on the degree of increase that will be involved. It has been said already—I will say it once again—that this is the worst time to introduce such an increase in the costs of industry. Whether we are technically in recession or not I do not know, but there has been, understand-ably, some downturn in economic activity. To choose this very moment to increase the costs of industry is an extraordinarily unwise thing to do and flies right in the face of what the Government are doing to industry.

I am only consoled by the fact that the Government as a whole do not apparently share the view expressed by this Bill. Noble Lords may recall that last Wednesday my noble friend Lord Strathmore and Kinghorne answered questions from the noble Lord, Lord Dormand of Easington, about unemployment. I put a supplementary question which produced an interesting reply from my noble friend. I asked: My Lords, do not these figures indicate, however, the importance that nothing should be done to increase industrial costs, either by way of trade union action or legislation?" My noble friend replied most satisfactorily: My Lords, I can only agree with what my noble friend says". —[Official Report, 23/1/91; col. 222.] So at least one member of the Government does not believe in increasing industrial costs; and, if I may say so, it is greatly to his credit.

Having said that, I agree with the noble Lord, Lord Carter, about the way in which my noble friend Lord Henley has handled this difficult Bill. The House knows that he had nothing whatever to do with its origination but he has handled it with a patience, a skill and a physical stamina which have excited the admiration of all noble Lords. I say to my noble friend that if I were to be charged with a criminal offence of which I was plainly guilty, I would rather be represented by him than by anybody else.

Lord Simon of Glaisdale

My Lords, as noble Lords who preceded me have pointed out, the Bill has been substantially improved both in its social and economic impact and its constitutional aspect. I merely venture to add that that emphasises the importance of your Lordships' constitutional role as a Chamber of Parliament. It is also worth remarking apropos the Henry VIII clause that the amendments which have been agreed could not have been made if the measure had been carried through by regulation, as of course was the effect of the Henry VIII clause.

In many ways the discussion on this Bill has been unsatisfactory. I say that because, as has been pointed out, it really involves a shift of resources in the social security budget; that is, a trade-off between child benefit on the one side and statutory sick pay on the other. However, it is only the latter that we have been able to discuss.

I was pleased that the noble Lord, Lord Jenkin of Roding, reminded us that the social goods are almost infinite but that the funds available to satisfy them are definitely finite. Nevertheless, I did not feel that there was any satisfactory answer given to the noble Lord, Lord Boyd-Carpenter, who said that, whatever the merits of the shift in funds might be at other times, this was an extremely bad time to do it, adding as it does to the costs of industry and commerce.

There is another important factor. In dealing with only one side of the matter—the debit side, so to speak —the noble Lord in charge of the Bill was placed in an extraordinarily difficult position. He was left in solitary command, as it were, of the sullied end of the stick while other noble Lords, quite happily, tugged in succession on the clean end. I am glad that tributes have been paid to the patience shown by the noble Lord.

Perhaps I may say a few words about the constitutional aspect of the Bill. I shall deal first with the Henry VIII clause. It was highly objectionable in itself, all the more so in view of what lay behind it. During the time between the publication of the Donoughmore Report in 1932 and two Sessions ago, there was no attempt to reintroduce Henry VIII provisions. However, suddenly, two Sessions ago Henry VIII provisions were reintroduced in three Bills. These came under strong attack from Lord Elwyn-Jones during discussion of the Children Bill. My noble and learned friend the Lord Chancellor hastened to make concessions. Nevertheless, during the following Session the Courts and Legal Services Bill was introduced and was full of Henry VIII provisions. Again, the Government were forced to make concessions. The two most objectionable provisions were removed and the others were acceptably modified. It is most important to remember what my noble and learned friend said during the proceedings on that Bill. He said that the Government certainly took fully into account the Donoughmore Committee's recommendations.

Under those circumstances, it is extraordinary that such a provision should have reappeared. I hope that what has taken place will be registered and that we shall see no more of these objectionable provisions. Like the affirmative/negative resolution provisions which have also fallen under scrutiny, they represent a tendency to minimise parliamentary control of legislation. I should add that parliamentary counsel should not be blamed for the provisions. The Minister in charge of a Bill is responsible for the Bill, both as regards content and form. I cannot conceive of the Henry VIII provision in this Bill having been introduced, as it was, unless it appeared in heads of instructions to the draftsman.

I should also like to mention the contrast between the negative and the affirmative resolutions. There, again, persistent attempts have been made to minimise parliamentary control. At any rate, the Bill has drawn attention to the recommendations of the Joint Select Committee on Delegated Legislation of 1972 and 1973, which were accepted by the government at the time. I trust that we shall not see those recommendations flouted again in future legislation.

Having said all that, it merely remains for me to say how beneficial and enjoyable it has been for one sitting on the Cross Benches to hear a highly technical Bill of this kind so skilfully debated by experts in the field of social and economic endeavour.

Lord Jenkin of Roding

My Lords, I venture to differ from the noble and learned Lord, Lord Simon of Glaisdale; I do so with the utmost diffidence. I must point out that a Henry VIII clause was introduced in 1965. The then Minister of Power was Fred Lee, who later became Lord Lee of Newton. He introduced a Bill which contained such a clause. As a very new Member of Parliament sitting on the Back Benches, I protested and quoted the Donoughmore Committee's recommendations. Unfortunately, Mr. Lee thought that I was referring to His Majesty's matrimonial affairs, as the Hansard report of the proceedings in Committee records. However, if I remember rightly, we managed to effect a change in the legislation and the Government made a concession.

As the third former Treasury Minister to speak in succession, I should like to take up a point made by the noble Earl, Lord Russell. I am not much given to forecasting, but I think that I can safely say that the noble Earl is most unlikely ever to become a Treasury Minister—Mr. Bellotti notwithstanding. I have but two points to make in this respect, the first of which is an obvious one. Treasury Ministers must ensure that the sums add up. During discussions on earlier legislation in this Chamber there has been much criticism of Treasury intransigence, Treasury limits and the effects of cash limits. However, at the end of the day, it has to be said, as has been recognised on all sides of the House, that the Treasury has somehow to make the books balance. It has to determine the amount of debt which the Government need to repay or the amount that they can afford to borrow. As I have already made clear, I believe that the Government were justified in looking for savings from the social security budget. My noble friend Lord Boyd-Carpenter assured the House that he would not rehearse all the arguments. That is also my intention; but, unlike him, I really will not do so.

I move straight to my second point, which is that we have become accustomed—it is something which is now increasingly challenged—to the concept of Budget secrecy. That secrecy stems originally from the days when the Budget's primary interest was increases or reductions in the rates of indirect taxation and the need to prevent people pre-empting the Budget by making substantial purchases and so to that extent frustrating the Chancellor's intentions. One can understand that idea. But over recent years Budgets have frequently introduced major tax reforms. Early examples are the introduction of VAT and the 1971–72 reform of corporation tax. A more recent example is the taxation of husbands and wives. No Chancellor since the noble Lord, Lord Callaghan—he is not in his place—would in his senses announce major taxation changes without publishing his proposals in consulta-tive form and having one or two years of widespread consultations, including perhaps Select Committees from another place, before introducing legislation.

I took part in the debates on VAT and corporation tax. One has followed what has happened since then with husband and wife taxation. There have been many other examples. Even in the Budget field, anticipating major changes by giving opportunities for substantial consultation is now widely accepted. What we have seen here is that the public expenditure round has almost become a matter of quasi-Budget secrecy: nothing must be allowed to get out until the Chief Secretary or the Chancellor stand up in the other place and make a Statement. Even when major changes in legislation are called for, they somehow have to be kept under wraps. That never used to be the case, and I do not believe that it is right. If there are some over-riding reasons why secrecy must be maintained, the Exchequer must recognise that what it announces in November cannot happen by 6th April if controversial legislation is required. The Bill is an example of that difficulty.

Having originally introduced the proposal for a statutory sick pay scheme in return for a reduction in national insurance contributions, I most assuredly do not quarrel with the principle of the Bill, but clearly as the debates have shown—not least those on the relief for small businesses for which I hope I can claim some of the credit —close consultation is required with all the organisations likely to be involved. The problem has arisen because the Government want the savings to take effect from 1st April, 6th April or whenever it is. The regulations must be made shortly so that they can take effect then. I believe that the cost has been greater than the advantage.

I fear that the Government now face some difficult decisions over what to do with the Bill in another place and what to bring back here. Please, let us not elevate the public expenditure round into a second Budget. If legislation is required, and that legislation requires consultation, the timing must take account of those facts or the last date becomes worse than the first.

I believe that I hold the record of being the only Back Bencher who has supported the Bill's main principle. I have not broken that duck yet. Nevertheless, I believe that that factor has been at the heart of the trouble. People will accept what they do not like if they have a chance to talk it through. They may then reluctantly feel that if the proposal must happen at least it is happening in a way that they can live with.

5 p.m.

Lord Mottistone

My Lords, I agree with the closing remarks of my noble friend Lord Jenkin. The trouble over the Bill has arisen from the error of judgment made by Ministers and, I believe, officials. Legislation like this involves not just an extra charge on industry but an administrative process in which industry shares the labour with government. That is a concept about which there was a great deal of consultation during the earlier stages and the intermediate stages in 1985. However, it was not a matter that could be used as part of the negotiations with the Chief Secretary to which my noble friend has just referred.

We are mucking about with industry's chances of balancing its books. It is all very well to say that the Treasury must balance its books, but Treasury officials are not sacked in the same way as are people employed by a company that goes bust. I happen to know that there are small firms, some of which I am closely associated with, that are struggling to keep alive at the moment and on which such added costs will bite. They are involved in high-tech industry, and so all the amendments designed to help small businesses will probably not apply to them because of the employees' levels of salaries.

The world is a real one. There has been an error of judgment. The best thing would be to take away the Bill and to start again next time; but on the assumption that our friends in another place do not do that, I implore the Government to stick to the amendments we have put into the Bill and not try to ease them away and think, "Oh, well, we can put it under the carpet and we can have consultations even though there is not enough time for them to be done properly". I desperately hope that the message will be heard not just by my noble friend who I believe has done a good job under difficult circumstances but by his right honourable friend the Secretary of State and the officials in all government departments whose affairs affect industry.

There are many of them. For example, the Home Office is seeking to have pay deductions for maintenance orders enforced statutorily. That is another activity—it may not be a cost—that industry is being required to undertake on behalf of the Government. We cannot continue with such legislation and expect industry to say, "It is all right. We shall do the work. We shall go on helping government", because it will not. Such activities take time and labour and cost money. It is important that governments do not ride roughshod over industry. I hope that such a thing will not happen again.

Lord Stanley of Alderley

My Lords, I have never previously spoken in a debate on the Bill do now pass, but on this occasion I feel that I must thank my noble kinsman Lord Henley for his calmness and good temper, which have been in sharp contrast to mine. All I can say is that I do not believe that I can possibly have been as unpleasant to him as my great aunt, Rosalind Carlisle, was to his family a few years back.

Lord Rippon of Hexham

My Lords, perhaps I may make a brief if not so amusing comment. By any test, constitutional, financial, economic or quality of draftsmanship, the Bill reached the House as a thoroughly bad Bill. The extraordinary thing is that it seems to have gone through the other place with hardly any comment. It must be a matter of concern to us that that can happen in another place. It underlines the responsibility that the House has to consider such matters. It may be a better Bill now, but it still needs a great deal of improvement.

I associate myself with everything that has been said about my noble friend Lord Henley. He has done the best that he can. Anyone who has been a Minister in another place is aware how bereft of support Ministers in this House may sometimes be. They are thrown into battle by their departmental Ministers and told to get on with the job and see the Bill through with the words, "We do not want any trouble."

There has been a great deal of trouble over the Bill, and for good reason. It has been attacked by those whom I call "the old loyalists" and, as I might believe them to be, the "new loyalists" as well. I regard the Bill as a project of an old regime. We have been promised a change in the style of government. That means two things to me: first, more consultation with people who may be affected by legislation before the Second Reading of a Bill ever takes place, because we are aware that after the Second Reading of a Bill the Government are immediately on the defensive. They try to defend every point while being forced into making changes by hostile amendments or, sometimes, even by amendments that are intended to be helpful. We must have more consultations with interested parties, as speaker after speaker has said, before legislation affecting them deeply is ever introduced.

The second improvement we must have in the style of government is in the quality of legislation. I entirely agree with everything that the noble and learned Lord, Lord Simon of Glaisdale, said on that subject today and on previous occasions. It was pointed out that it was not just in the Children Bill that Henry VIII clauses were introduced. They have become increasingly common in recent years. The noble Lord, Lord Williams of Elvel, will know that in relation to financial services and local government legislation these points have been made again and again.

There have been too many Bills in the past; I hope that there will be fewer in future. The difficulty is that when a Bill comes before the House it attracts the attention of a certain section and speakers raise points in relation to their own measures. However, they do not see the same problem happening over and over again in one field after another. The significance of the Children Bill was that the Henry VIII clause drew the fire of the late Lord Elwyn-Jones and the noble and learned Lord, Lord Simon of Glaisdale. Since then, more and more of your Lordships have been conscious of the importance of the constitutional point and of the inherent dangers in this type of legislation.

I entirely agree with the noble and learned Lord, Lord Simon, when he said that it is astonishing to some of us that, after the discussions that took place on the Courts and Legal Services Bill, the noble and learned Lord the Lord Chancellor did not seize on the point. I believe it is because the noble and learned Lord no longer chairs the legislation committee of the Cabinet which is regarded as a political instrument to get political measures through.

Therefore it is important that we press upon the noble and learned Lord the Lord Chancellor his responsibilities in the matter, the need for him to give effect to what was promised at the time of the Courts and Legal Services Bill that this would never normally happen again. He should have regard to the Donoughmore Report; implementing that report is one way of dealing with the matter. I hope that your Lordships will also consider the suggestion that I have made from time to time that we follow the Australian precedent and set up a committee to examine the legislation from a drafting and constitutional point of view, without considering its politics or its merits, before it comes to the House. Then a wider number of noble Lords would know the issues at stake. That is my final point.

I believe a heavy responsibility now lies upon the noble and learned Lord the Lord Chancellor to examine the legislation with greater care than has apparently been the case in the past.

Lord Harmar-Nicholls

My Lords, I know that it is almost unforgivable for someone to walk into the House towards the end of the discussion on a subject and then to make a contribution. That is what I am doing. It is because nowadays we have no control over transport, the means of reaching the House, as we used to, when our timing could be good. If I had been a former Treasury Minister, no doubt I should not have had thick enough skin to go against protocol and all that goes with it. However, as a former Minister of Works, I am used to getting the job done and wanting it done properly rather than always keeping rigidly to standards.

I am sorry that I was not here in time to contribute on the amendments which have been passed. The only reason I wished to intervene was that I wanted to be certain that, even at this late stage, my noble friend will take into account the recommendations put to him by the Forum of Private Business. We wished to table an amendment but, because of the speed of the passage of the Bill, we missed the opportunity.

However, there is still time before the Bill becomes a statute for the recommendations made by the Forum of Private Business to be taken into account. Members of the forum had a worthwhile meeting with my noble friend's officials and they had every reason to believe that there was a certain sympathetic reaction to the point they tried to make. That is of particular help to people owning very small businesses. It meets the problem I tried to describe when I contributed at the Committee stage of the Bill.

The point of my intervention—breaking the rule of not being so presumptuous as to intervene—is that I wanted on the record even at this late stage the assurance in the winding up speech that if the recommendations of the Forum of Private Business are not covered by the amendment passed before I entered the Chamber, in the framing of the regulations and in any further amendments that may be suggested in another place, those recommendations are taken into account. If that is achieved, then it has been worth breaking the rules with the risk of incurring the displeasure of noble Lords.

5.15 p.m.

Lord Henley

My Lords, this Bill has proved an interesting experience for me. During its course, I have been described as standing at the burning Dispatch Box whence all but I had fled—I think that came from my noble kinsman Lord Russell. He now suggests that I dive overboard and swim, either with or against the tide.

I repeat what I said at Second Reading, that this is a modest Bill in its size and effect, even though it leaves the House somewhat larger than when it arrived. Bearing in mind what I said about the previous amendment which was carried against my advice, possibly the Bill leaves us in need of some further improvement. Also, I stress that it is modest in what it seeks to do, although I have received the impression this afternoon and on previous days that not everyone in the House would be in full agreement with me in saying that.

Many Members of the House have spoken during our debates and I thank all of them, if not for their support then for their contributions. I thank my noble friend Lord Jenkin for his steadfast support throughout the debate. Obviously, I cannot mention all those who have contributed, but perhaps I may mention my noble friend Lord Boyd-Carpenter. I am not sure what to make of the praise he offered me in extolling my skill as an advocate. I trust that he will never be charged with an offence of which he is obviously guilty. I am also grateful for the interventions of my noble friend Lord Mottistone and my noble kinsman Lord Stanley on this side of the House and my noble kinsman Lord Russell on the other side. On the Benches opposite, I thank the noble Lord, Lord Carter, and the noble Baroness, Lady Turner.

I wish to pay tribute to the persistence of a number of outside organisations which have taken every opportunity to put their views across to me and my honourable and right honourable friends in another place. Despite their opposition to the main provisions of the Bill, our discussions have invariably been constructive. I have already mentioned Mr. Mendham of the Forum of Private Business who expended a great deal of thought and effort in producing his proposed scheme. I explained why I thought that the proposal had problems, but perhaps I may say to my noble friend Lord Harmar-Nicholls that we have looked at it. I explained what I thought was wrong. It must be a matter for another place and its procedures as to whether it considers such a scheme or not.

I thank the CBI, the National Federation of the Self Employed and Small Businesses and the National Farmers Union which have also been heavily involved in putting proposals to me and meeting myself and my right honourable friend the Secretary of State. I hope they will all respond to my offer of consultation on the concession of small employers. I take it that the amendment that the Government brought forward has been somewhat changed but the Government's position must remain open. We shall institute consultation on whatever scheme emerges from another place as soon as possible.

We have had some very full and constructive debates on this short Bill and I do not intend to rehearse all the arguments in detail again now. I accept—that is why the Government brought forward their amendment—that there is a genuinely felt worry about the effect of the proposals in the Bill on employers, particularly small employers with low earners among their employees. That is why my right honourable friend proposed the reductions in national insurance contributions.

Some concern has also been expressed about increased costs for employers. This has been mentioned again and again but I wish to stress once more that the increases concerned are very small. As my noble friend Lord Boyd-Carpenter has said, this is a time of recession. I believe the point has been overplayed that the increases would impose untold additional burdens on the business community.

Some concern has also been expressed about the implications for employees. I wish to stress once more that the measures in this Bill will have no direct effect whatever on employees. I reject the suggestion that employment prospects of disabled people will suffer or that employers will discriminate against their employees. I am confident that there will be no adverse effect for employees as a result of the changed reimbursement proposed in the Bill. However, as I made clear to my noble kinsman on Report, the Government will continue to monitor the situation. I take this opportunity to stress to employers and to the world at large that disabled people do not have a bad attendance record at work.

I repeat that this is a modest Bill. As I have said, it makes small changes to the rate of reimbursement of statutory sick pay. As my noble friend Lord Jenkin has stressed, those small changes have allowed my right honourable friend to make some not insubstantial improvements in other areas of social security provision. However, I do not intend at this moment to be drawn into a debate on the general subject of child benefit. As I have said, my right honourable friend has made some not insubstantial improvements in other areas of social security provision. That is what the Government have sought to do in bringing forward these changes in statutory sick pay. I commend the Bill to the House.

On Question, Bill passed, and returned to the Commons with amendments.