HL Deb 30 March 1993 vol 544 cc728-92

3.16 p.m.

The Parliamentary Under-Secretary of State, Department of Employment (Viscount Ullswater)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Viscount Ullswater.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 29 [Amendments of transfer of undertakings regulations]:

Lord Wedderburn of Charlton moved Amendment No. 204: Page 46, line 46, at end insert: ("() For the purpose of implementing Council Directive 77/187/EEC, 14 February 1977, there shall be inserted as Regulation IA in the Transfer of Undertakings (Protection of Employment) Regulations 1981 the following provision—

Recognition of Trade Union for purposes of negotiation.

"1A.—(a) Where an independent trade union notifies ACAS that an employer does not recognise it for negotiation of terms and conditions of his employees ACAS may, if it sees fit, make inquiry of and consult the employer with a view to ascertaining whether to recommend that he should grant the union recognition as bargaining agent for some or all of his employees in respect of such matters as it recommends for the purpose of implementing these Regulations.

(b) Where at a date set by ACAS not later than six months after the date of such a recommendation the employer refuses or fails to recognise the trade union which was recommended by ACAS, the authorised representatives of the trade union so recommended shall be presumed to be representatives of a recognised trade union for the purposes of Regulations 10 and 11. (c) ACAS shall conduct its enquiries under this Regulation of such persons it sees fit to consult, and in accordance with a Code of Practice made by the Secretary of State under section 203 of the Trade Union and Labour Relations (Consolidation) Act 1992; and where in its discretion it deems it to be necessary ACAS may hold a ballot of some or all of the employees concerned under conditions approved by the Certification Officer. (d) ACAS shall publish its recommendations or other decisions made under this Regulation. (e) Disputes under this Regulation shall be referred to the Central Arbitration Committee ("CAC") for determination under regulations to be made in consultation with the CAC by the Secretary of State by order made by statutory instrument." ").

The noble Lord said: I beg to move Amendment No. 204 and speak also to Amendment No. 218, both of which have some relevance to Amendment No. 207 in the name of my noble friend Lady Turner and Amendments Nos. 212 and 220 in the names of the noble Lord, Lord Rochester, and the noble Baroness, Lady Seear.

The amendments largely concern two Community directives, Directives Nos. 187 of 1977 and 129 of 1975 as amended last year. I say at once that the problem which they raise is every bit as important to the interests of working people as are the issues on the Marshalled List, such as that of low pay, for the Committee to debate later.

Community law requires employers to consult with the representatives of employees in two situations; first, very broadly, on the transfer of the employer's undertaking, which is the subject of this amendment and of the 1977 directive; and secondly, when the employer contemplates collective dismissal—or, in a special sense here, redundancy—which is the parallel concern of Amendment No. 218 and of the 1975 directive as amended.

The amendments propose, first, that there should be proper fulfilment of our Community commitments under those directives; and secondly, even more forcefully, that they are right in themselves. On a transfer of the undertaking in all its many forms or when facing mass dismissals, it is not asking very much that workers should at least have the right to consultation with their independent representative. In a recession, amid mounting unemployment, it is scarcely extreme, and is certainly not seen as extreme by our competitive partners in the Community, that the law should provide for some consultation—a spirit that demands the support, I believe, of the country as a whole, as the Government learned last October. But there can be no consultation unless independent representatives of workers have a place at the table. There cannot be what the Community's directives set out to enforce if those workers' representatives are not there. The existing provisions purporting to implement those Community directives in this country are the so-called TUPE regulations of 1981, now Section 188 of the consolidation Act of 1992.

Both measures provide that in British law the employer is to consult with authorised representatives of a trade union recognised by him. But we know from the Government's insistence on the point in another place that since the Act of this Government which was passed in 1980, there has been no legal obligation to recognise at the table independent representatives or indeed any representatives of workers. Again and again in another place Ministers have stated their policy. Let me take the most crisp formulation of that government policy. Mr. Forsyth said: The terms of the directive allow for existing custom and practice to be taken into account in implementing the directive. There will be no requirement to consult, if an employer has not recognised trade unions. That is our interpretation of the directive".—[Official Report, Commons, Standing Committee F, 26/1/93; col. 545.]

That is the doctrine of subsidiarity turned into the doctrine of inactivity. I am well aware—the Government have repeated it again and again—that it is the stance which the Government have taken before the European Court of Justice in Luxembourg. They made some play of the fact that, with due attention to subsidiarity, both directives define the representatives (to take the precise formulation of 1977) as representatives of the employees provided for by the laws and practices of member states. From that the Government draw the conclusion that the directives should not be implemented in a way that might be thought to give some substance to consultation, because in Britain there is no law that requires employers to recognise, except for very marginal issues, any consultation at all, save for health and safety.

It seems to me that the Government never address themselves to a further point. If the directive meant that it allowed for a practice or law in a member state to the effect that it does not have representatives of employees—I do not believe that any other member state takes that position; nor does the Commission, which is why it is pursuing infraction proceedings before the court—then it would not get off the ground. It would have been a very odd directive to pass. But that is not the position. After 1975, when the consultation on redundancy directive was implemented in the Act of that year, and until 1980, there was a procedure whereby ACAS could require an employer to recognise a trade union for certain purposes. There was that procedure. It was not a perfect procedure by any means but it was a fallback situation. The law said that after ACAS had gone through all the steps it had to take (sometimes failing in doing so) and had followed all the right procedures, the employer was obliged in law, with the very ordinary sanction which was not very severe, to act accordingly. Once it had got to that point, the directive bit.

The reason why the directive does not bite is because the Government repealed the one measure which caused it to bite in English law. The Government therefore have to say to the court and the Commission, "The directive does not say that nobody need consult if there is a law or practice that does not enjoin it. Furthermore, the representatives of the employees who once had a right to consult and therefore fell under the Commission's directive now have no place because we, the Government, have repealed that law."

If one took that approach to the directive, one would be able to escape from any directive that one wished to avoid. Indeed, the Government have said that they wish to escape from the transfer of undertakings directives. So far as Community law is concerned—I appreciate that we stand on the edge of a battle in the Luxembourg court—surely the Government owe it to the people of this country who were deprived of their Community rights in 1980 at least to put them back on the statute book.

To cure any misunderstanding, that is precisely the effect of this amendment and its fellow amendment for the redundancy consultation section. The amendments say that where there has been no consultation or negotiation after a long time, ACAS can inquire into the matter and, according to a code of practice which it is for the Minister to lay down, ACAS can say that employers must sit at the table with those people as recognised representatives for the purposes of consultation over redundancies. That is no extreme proposition. It is common sense. I believe it to be our obligation within the Community. I beg to move.

Baroness Turner of Camden

I support the amendment moved by my noble friend. I believe that Clause 29 is an improvement and generally to be welcomed. But the Government have finally had to come to terms with the fact that their 1981 regulations do not provide proper protection for those affected by business transfers and do not meet EC requirements.

It seems to me that there is a problem, to which my noble friend has drawn attention. An employer could simply ignore the obligation to consult with representatives of the workforce simply by derecognising the trade union. Similarly, there is no right to consultation under the regulations if the employees are in a union which the employer stubbornly refuses to recognise. Perhaps he has done so in order to comply with what he perceives to be the philosophy of the Government. That frequently happens now. Indeed, as we know, there has been active encouragement to employers by the Government not to recognise unions. However, it is not an easy philosophy where unions are regarded as social partners rather than potential adversaries.

The amendment provides a mechanism whereby the workforce can secure recognition and thus the right to be consulted in the event of a transfer and the problems that may follow, including the problem of possible redundancies. Under my noble friend's amendment, ACAS is involved in the process. That seems entirely right, bearing in mind its functions and expertise in the areas concerned. My noble friend has thought through the whole process, including making a provision for the Central Arbitration Committee to deal with any dispute. The amendment seems entirely admirable. I hope that the Minister will support it in principle even if he cannot support the wording.

The Minister may well say that the amendment imports trade union recognition by the back door, so to speak, and that trade union recognition is a matter only for the employer on an entirely voluntary basis. We have heard him say that in discussions on this Bill on previous occasions. But the fact remains that that is not in accord with EC philosophy and not in accord with the spirit of the regulations. In the EC unions are not marginalised as they have been in the UK by over a decade of Conservative legislation. Involvement of the workforce means in the EC directive involvement via the unions. My noble friend's amendment tries to ensure that the mechanism exists in the UK for carrying out the intentions of the regulations. I support it.

Lord Boyd-Carpenter

I hope that my noble friend the Minister will not accept the amendment. It is a very ingenious attempt to use the European Community legislation to effect a substantial and, in the view of some Members of the Committee, very harmful change in our existing law. It is perhaps a matter for some amusement that the amendment refers to a Community directive formulated as long ago as 1977. One would have thought it might perhaps have lost a certain amount of validity with the passage of time and non-implementation.

But the substance of the matter is serious and important. There are situations in which an employer does not wish to recognise a union. Fortunately, there are not very many of them. Most employers are well disposed toward recognising most unions. But there are some unions whose reputation and attitude are such that a sensible employer does not wish to have anything to do with them. As I understand it, the amendment would have the effect of depriving those employers of that discretion.

That would be a very serious change for the worse in our law. Although the amendment has been ingeniously engineered by its reference to the attitude of the European Community, it is not acceptable to those who are concerned with the smooth and efficient working of the British industrial system. I hope that the Committee will reject the amendment.

3.30 p.m.

Lord Campbell of Alloway

On this occasion I could not agree less with everything that has been said by my noble friend Lord Boyd-Carpenter. It is far better that I say that and be totally frank. It will come as no surprise to my noble friend the Minister that I say that from these Benches; I have been saying as much to him over a period of some two years. He is courteous and gracious enough to accept that.

There are two views. There is the view of my noble friend Lord Boyd-Carpenter—which I shall take a little time to consider—and another view which is not exactly the form of the amendment. That view is that it is assuredly not harmful to our domestic law to import a recognition machinery into our industrial relations system. Indeed, it is a wholly requisite provision for any ongoing highly industrialised society today. The cleavage between my noble friend Lord Boyd-Carpenter and myself is great—he says that it is harmful and I say that it is requisite.

As yet the Government adhere to the view expressed by my noble friend Lord Boyd-Carpenter, but they did not always do so. The day will come when assuredly they will not do so again. I hope that it will be within a short time and that both my noble friend Lord Boyd-Carpenter and I will be present to discuss the matter once again.

The recognition machinery which existed was originally devised by Barbara Castle in In Place of Strife. The Labour Cabinet was divided upon the matter, as appears from the Crossman Diaries. As I suppose was inevitable, in the end Barbara Castle won and produced In Place of Strife and the industrial relations Bill which contained a recognition machinery. It was madly complex and I was concerned with it professionally on behalf of employers and trade unions in the wake of the 1971 Act.

The curious thing is that although the Act was under savage and sustained attack throughout the whole of its life, the one aspect of it that worked to the entire satisfaction of both employers and trade unions was the recognition machinery. Indeed, the noble and learned Lord, Lord Donaldson, who was President of the National Industrial Relations Court, would confirm that if he were in his place. It was at a time when strikes were far more prevalent than they are today. That is why I say from my professional experience, my belief and my view as to the status of trade unions and employers in an industrial society such as our own, that there ought to be a recognition machinery.

Many Secretaries of State, including my noble friend Lord Carr of Hadley—with whom I worked closely in those days —took the view, and other responsible Conservatives have taken the view, that it is essential to have some form of recognition machinery as an aid to predictability—for forward pricing and forward contracts, the essence of a successful industrialised society.

I am not concerned with breaches of convention. I do not much like the form of the amendment or, with respect to the noble Lord, Lord Wedderburn, the way that he argued in support of it. But I support the fundamental principle for the reasons that I have given. Breaches of convention are justiciable both before the European Commission and at the European Court of Justice. Even in our courts credence is given to the legal efficacy of those directives. I am not so concerned about that. However, I am concerned that we have no form of recognition machinery either for negotiation or for consultation.

I apologise for detaining the Committee but the issue is something in which I believe. It is time we had a recognition machinery. That does not mean that I shall vote against the Government. I shall probably abstain because I know that the Government do not agree with me.

Baroness Seear

Although the names of my noble friend Lord Rochester and myself are not attached to the amendment, we wish to support it. Like the noble Lord, Lord Campbell, we believe that it is essential to have well organised industrial relations machinery, and that involves properly recognised trade unions. For that purpose we believe that the Act, either intentionally or unintentionally, is fatally undermining the trade union tradition. That will be extremely bad for industrial relations in this country.

The use of ACAS for recognition machinery and the need for recognition machinery is obvious. On that line of argument I wish to support the amendment.

Viscount Ullswater

Amendment No. 204 is concerned with identifying employee representatives for the purpose of the transfer of undertakings regulations, while Amendment No. 218 is concerned with the statutory consultation requirements in relation to collective redundancies contained in the 1992 consolidation Act.

The amendments apparently accept that consultation rights should continue to be restricted to recognise trade unions but seek to put in place mechanisms whereby trade unions can be deemed to have been recognised. I hope that it will be helpful to the Chamber if I first set out the existing position.

As the transfer of undertakings regulations currently stand, an employer in a transfer is required to inform and consult with representatives of an independent trade union which he has chosen to recognise for the purpose of collective bargaining in respect of any employees who are affected by the transfer. That is the case whether or not the employees actually work in the undertaking which is to be transferred. Similarly, Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 provides that an employer who proposes to dismiss one or more employees as redundant must consult representatives of any relevant trade union which he recognises for collective bargaining purposes. He must do that within prescribed time limits which depend upon the number of employees to be dismissed.

Where an employer has chosen to recognise a trade union for collective bargaining purposes, he is required to inform and consult the union's representatives when its members are affected by a transfer or proposed redundancies. The key words however are, "where an employer has chosen to recognise a trade union".

In company with my noble friend Lord Boyd-Carpenter I commend the ingenuity of the noble Lord, Lord Wedderburn, in finding another opportunity to press the case for statutory recognition arrangements. But he can be in no doubt about the Government's views on the subject. It is a fundamental principle of government policy that employers should be free to decide for themselves in the light of the circumstances and the needs of their business whether or not to recognise a trade union. My noble friend Lord Campbell of Alloway and I will have to continue to differ. I know that he holds his views very sincerely, but I do not share them.

I understand that the deemed recognition contained in the amendments would not be recognition for any purpose other than the information and consultation provisions of the transfer regulations or the statutory redundancy consultation provisions. Nevertheless, what the noble Lord, Lord Wedderburn, is seeking is irreconcilable with a fundamental principle of the present law on transfers and redundancy consultation. That principle is that the requirement to inform and consult a trade union arises only as a consequence of an employer's choice to recognise that union for collective bargaining.

The noble Lord, Lord Wedderburn, and the noble Baroness, Lady Turner, have suggested that the United Kingdom may be technically in breach of the acquired rights and collective redundancies directive because there is no statutory right to employee representation for the purposes of the transfer regulations and the law on redundancy consultation. The Government do not accept that argument. Both directives define the employee representatives who must be informed and consulted as those provided for by the laws or practices of the member states—the words that the noble Lord, Lord Wedderburn, read out. In the United Kingdom it means representatives of recognised trades unions; that is, unions that an employer has chosen to recognise for collective bargaining, not ones that he has been deemed to have recognised for the purpose of the directive. Therefore, these amendments are unacceptable in principle.

Even if that is not the case it is very hard to see how the proposed mechanisms can possibly work in practice. Any employer planning a transfer or the making of redundancies who does not recognise a trade union for collective bargaining purposes will presumably have to call in ACAS to adjudicate on whether or not one or more unions shall be deemed to have been recognised. I very much doubt that ACAS would relish having to decide whether a union's representatives were suitable for such purpose. Noble Lords may be forgiven for wondering just what the criteria of suitability may be.

The amendment envisages that ACAS may for some unspecified reason recommend that a ballot be held. Such ballot will have to take place under rules approved by the certification officer, but the amendment offers no answer to a range of questions that will arise. Whose ballot will it be? Who will supervise and pay for it? Who will be the constituency? Thai and a great many other questions will arise. The overriding problem is that the involvement of ACAS and any necessary ballot will need to be arranged and to take place long enough before a transfer to allow the provision of information and adequate time for consultation. Does the noble Lord, Lord Wedderburn, really believe that it will make sense for the law to require a full-scale ACAS investigation, and possibly a ballot of the entire workforce, in a case where an employer proposes to make a single employee redundant? Does he believe that ACAS, having found the statutory recognition procedures unworkable —ACAS's own words in the late 1970s—will welcome having to determine, in the absence of any given criteria, whether or not a union shall be deemed to be recognised at a particular workplace?

It is quite clear to the Government that the result of these amendments can only be to make transfers of undertakings more difficult, with obvious implications for business efficiency and employment prospects, and to make it virtually impossible for employers to make employees redundant in accordance with the statutory consultation requirements. I suggest that the amendments cannot possibly be accepted, and I ask the noble Lord to withdraw them.

4.45 p.m.

Lord Wedderburn of Charlton

I thank my noble friend Lady Turner for her support and the noble Lord, Lord Campbell of Alloway, for his support in principle. I also thank the noble Baroness, Lady Seear, for her support from the Liberal Benches. The noble Lord, Lord Boyd-Carpenter, compliments me for ingenuity. I think it is a compliment and I will take it as such. It does not need much ingenuity to look back at the 1975 machinery and devise something that makes it workable. Sometimes I am amazed by the narrow horizons in the Government's mind. When they see something that is imperfect they say that they cannot do anything better. I believe that my amendments are the beginnings of something better than the 1975 arrangements. It may not work perfectly, but it could be there. The central point, as made clear by the noble Lord, Lord Boyd-Carpenter, is that we must not deprive the employer of his discretion whether or not to recognise a trade union so that he can retain his ability to dismiss his employees. The Minister says that this is something that really cannot be done. Without going through them, there are other jurisdictions where legal support for recognition and negotiation has been fitted into the system.

I pass over the Minister's complaint that we will never know which union it is. That is fine for a government that is just passing a Bill to dispose of the Bridlington machinery. The Minister also asked who would pay for the ballot. That is rich since the Government have just withdrawn their promise to fund trade union ballots. I pass over those matters that need not stop us addressing the serious question. The directive says that the representatives of work people are those who are provided for by the laws or practices of the member states. What the Government have set out to do—and I put money on their not doing it—is to convince the court that if it is said that there is no practice and no law it means that they do not have to do anything and can simply dispose of the directive.

However, today the Minister has gone even further. Not only do the Government fail to address themselves to the repeal of the 1975 recognition measures in 1980—which was a unilateral government act disposing of a member state's obligations (they say) under the 1975 directive—but they also rely on the practice of there not being any practice. It is quite clear what the directive means. If one goes to Denmark and finds that 95 per cent. of the workforce is covered by the practice of negotiation, though the Commission may complain a little about the 5 per cent. one is obviously implementing the arrangement. Ours is not an industrial relations jurisdiction of that kind; it needs a legal prod, and it needs to get it right.

This amendment is the basis on which one can get it right. After discussions with my noble friends on the Front Bench, I will not withdraw the amendment.

3.47 p.m.

On Question, Whether the said amendment (No.204) shall be agreed to?

Their Lordships divided: Contents, 105; Not-Contents,143.

Division No. 1
Airedale, L. Jay, L.
Annan, L. Jay of Paddington, B.
Ardwick, L. Jeger, B.
Ashley of Stoke, L. Jenkins of Hillhead, L.
Attlee, E. John-Mackie, L.
Aylestone, L. Judd, L.
Beaumont of Whitley, L. Kilbracken, L.
Birk, B. Kirkwood, L.
Blackstone, B. Llewelyn-Davies of Hastoe, B.
Blease, L. Lockwood, B.
Bonham-Carter, L. Longford, E.
Boston of Faversham, L. Lovell-Davis, L.
Bottomley, L. Macaulay of Bragar, L.
Broadbridge, L. McCarthy, L.
Bruce of Donington, L. Mackie of Benshie, L.
Callaghan of Cardiff, L. McNair, L.
Campbell of Eskan, L. Mallalieu, B.
Carmichael of Kelvingrove, L. Mayhew, L.
Carter, L. Merlyn-Rees, L.
Cledwyn of Penrhos, L. Molloy, L.
David, B. Morris of Castle Morris, L.
Donaldson of Kingsbridge, L. Mulley, L.
Donoughue, L. Murray of Epping Forest, L.
Dormand of Easington, L. Nicol, B.
Eatwell, L. Ogmore, L.
Ewing of Kirkford, L. Peston, L.
Ezra, L. Prys-Davies, L.
Falkender, B. Richard, L.
Falkland, V. Robson of Kiddington, B.
Fisher of Rednal, B. Rochester, L.
Gallacher, L. Russell, E.
Galpern, L. Sainsbury, L.
Geraint, L. Seear, B.
Gladwyn, L. Sefton of Garston, L.
Glenamara, L. Serota, B.
Graham of Edmonton, L. [Teller.] Shackleton, L.
Soper, L.
Gregson, L. Stallard, L.
Grey, E. Stoddart of Swindon, L.
Halsbury, E. Strabolgi, L.
Hampton, L. Taylor of Blackburn, L.
Hanworth, V. Taylor of Gryfe, L.
Harris of Greenwich, L. Thomson of Monifieth, L.
Hayter, L. Tordoff, L.
Healey, L. Turner of Camden, B.
Hilton of Eggardon, B. [Teller.] Varley, L.
Hirshfield, L. Wallace of Coslany, L.
Hollis of Heigham, B. Wedderburn of Charlton, L.
Holme of Cheltenham, L. Whaddon, L.
Hooson, L. White, B.
Howell, L. Wigoder, L.
Howie of Troon, L. Williams of Elvel, L.
Hughes, L. Williams of Mostyn, L.
Aldington, L. Carnegy of Lour, B.
Alport, L. Carnock, L.
Annaly, L. Cayzer, L.
Archer of Weston-Super-Mare, L. Chalker of Wallasey, B.
Charteris of Amisfield, L.
Arran, E. Chelmsford, V.
Ashbourne, L. Cockfield, L.
Astor of Hever, L. Colnbrook, L.
Auckland, L. Constantine of Stanmore, L.
Belhaven and Stenton, L. Cranborne, V.
Bessborough, E. Croham, L.
Blatch, B. Cross, V.
Blyth, L. Cullen of Ashbourne, L.
Boardman, L. Cumberlege, B.
Borthwick, L. Davidson, V.
Boyd-Carpenter, L. Denham, L.
Brabazon of Tara, L. Denton of Wakefield, B.
Braine of Wheatley, L. Derwent, L.
Butterworth, L. Dundonald, E.
Buxton of Alsa, L. Effingham, E.
Caldecote, V. Ellenborough, L.
Campbell of Croy, L. Elles, B.
Elliott of Morpeth, L. Moyne, L.
Elton, L. Munster, E.
Faithfull, B. Murton of Lindisfarne, L.
Ferrers, E. Nelson, E.
Flather, B. Norfolk, D.
Fraser of Kilmorack, L. Northbourne, L.
Gainford, L. O'Brien of Lothbury, L.
Gardner of Parkes, B. O'Cathain, B.
Gilmour of Craigmillar, L. Oppenheim-Barnes, B.
Gisborough, L. Orkney, E.
Goold, L. Orr-Ewing, L.
Goschen, V. Oxfuird, V.
Gray of Contin, L. Palmer, L.
Gridley, L. Park of Monmouth, B.
Hailsham of Saint Marylebone, L. Peel, E.
Pender, L.
Harding of Petherton, L. Prentice, L.
Hardinge of Penshurst, L. Rawlinson of Ewell, L.
Harmar-Nicholls, L. Reading, M.
Harvington, L. Renton, L.
Hayhoe, L. Rodger of Earlsferry, L.
Henley, L. St. Davids, V.
Hertford, M. St. John of Bletso, L.
Hesketh, L. [Teller.] Seccombe, B.
Hives, L. Shannon, E.
Holderness, L. Sharples, B.
HolmPatrick, L. Simon of Glaisdale, L.
Hood, V. Skelmersdale, L.
Hooper, B. Skidelsky, L.
Howe, E. Strafford, E.
Hylton-Foster, B. Strathcarron, L.
Johnston of Rockport, L. Strathcona and Mount Royal, L.
Killearn, L.
Kimball, L. Strathmore and Kinghorne, E. [Teller.]
Kimberley, E.
Knollys, V. Sudeley, L.
Lauderdale, E. Swansea, L.
Lincoln, Bp. Swinfen, L.
Lindsay, E. Tebbit, L.
Long, V. Terrington, L.
Lyell, L. Thomas of Gwydir, L.
McColl of Dulwich, L. Trefgarne, L.
MacLehose of Beoch, L. Trumpington, B.
Macleod of Borve, B. Ullswater, V.
Margadale, L. Vaux of Harrowden, L.
Marlesford, L. Vivian, L.
Merrivale, L. Wakeham, L. [Lord Privy Seal.]
Mersey, V.
Morris, L. Wedgwood, L.
Mottistone, L. Whitelaw, V.
Mountevans, L. Wise, L.
Mowbray and Stourton, L. Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

3.56 p.m.

[Amendments Nos. 205 to 209 not moved.]

Lord Mottistone moved Amendment No. 210: Page 47, leave out lines 22 to 24 and insert: ("(a) for paragraph (7) there shall be substituted— (7) any compensation awarded to an employee under this Regulation shall go towards discharging any liability of the employer under, or in respect of a breach of, the contract of employment insofar as both that liability and the compensation awarded are attributable to a period during which the employer did not perform his duty to consult. Conversely, any payment made in discharging such liability to the employee by the employer shall go to reduce the amount of any compensation awarded under this Regulation insofar as that payment and award are similarly attributable to such a period." and").

The noble Lord said: In moving this amendment I shall also speak to Amendment No. 219. These amendments essentially deal with the same point— that is, the preservation of the existing rules whereby industrial tribunals, when determining compensation for breach of the employer's obligation to provide information and to consult with employee representatives prior to a transfer of undertakings or a redundancy situation, may take account of payments already made to the employee under his contract of employment. At present, the law allows for payment made by the employer under the employment contract or for breach of that contract to be credited to the employer in his discharge of obligations to pay compensation for failing to consult on a transfer or to pay remuneration under a protective award. The converse also applies whereby payments under an award may be credited towards the discharge of contractual obligations. The Bill as it stands would remove this position, no longer allowing the set-off. The amendments seek to maintain the current position.

To take one example, under the existing law, if an employer dismisses employees as redundant without giving them due notice, he will, in addition to any statutory redundancy entitlement, be liable to pay damages for breach of their contracts arising from his failure to give the proper notice period on termination. That will usually reflect the loss of pay which each employee would have accrued during the notice period. Consequently, it is normal practice for employers to pay money in lieu of notice on termination as immediate compensation for the breach. In the event that a tribunal should subsequently rule that the employer failed to consult on the redundancies and award compensation for the protected period—that is, the notional period during which the employees' employment would have continued had there been proper consultation—it will take account of the fact that such payment in the form of pay in lieu of notice has already been received. Similar rules permit the offset of other contractual remuneration which relates to the period corresponding to the protected period.

If, as the Government propose, the tribunal will no longer be able to offset those sums, in our example the employer would be better off not making a payment in lieu of notice until such time as the tribunal has assessed compensation for failure to consult. That is because in any subsequent proceedings in the civil court to recover the payment in lieu of notice or contractual remuneration, the court will apply the general rule that damages reflect the loss which the individual has suffered and will take account of any payments awarded by the tribunal which are referable to the same period.

If by the time the court comes to do that, the tribunal has already awarded payment for the relevant period by way of the protected award, in many cases there will be no further loss to the individual and thus no liability for money in lieu. The net result of that scenario is that the only way in which employers will be able to ensure—if the Government's present proposal goes through—that the individual does not recover twice for the same loss, is not to make immediate payments on termination.

That is patently absurd both from the employers' and employees' perspective. The employers are quite prepared to pay their contractual liabilities, but there is no sense in making them liable for two sets of compensation for the same loss. The clauses in the Bill on redundancies and transfers do just that. My amendments seek to restore the original position.

This example has more direct application to the proposed Amendment No. 219 on redundancies since on the transfer of an undertaking there will be no need to pay money in lieu of notice. However, the principle remains the same since the compensation for breach of the consultation rules on a transfer is by implication referable to a period during which consultation would ordinarily have taken place and for which employees may already have received other contractual payments. It therefore follows that similar offsetting provisions should apply to avoid double recovery.

This is a complicated situation, as I am sure the Committee is aware. It is difficult to explain it clearly enough. But it is difficult to see why the Government are now attempting to remove an established part of the law as it applies both to transfer and redundancy. It is understood that the changes may have arisen consequent on a call from the European Commission requiring change to the UK law. If that is the case, I am not convinced that the Commission has made a case for such an amendment. But I will not at this stage pursue that particular argument. I beg to move.

Viscount Ullswater

I note from the groupings that Amendments Nos. 210 and 219 have also been grouped with Amendments Nos. 211, 213, 216 and 217. Therefore I shall address one or two of my remarks to those amendments as well. Each amendment in this group is concerned with the situation where an employer fails to consult with an appropriate recognised trade union, either about a proposed transfer or an undertaking or about proposed redundancies.

My noble friend Lord Mottistone has given an explanation of the law as it currently stands. Perhaps I may begin with the two amendments which he dealt with; namely, Amendments Nos. 210 and 219. Those amendments seek to prevent the Government removing the provisions to offset penalties for failure to consult unions. As I shall explain, the European Commission has informed the Government of its view that those provisions are not compatible with the acquired rights' and collective redundancies' directive and has referred the matter to the European Court of Justice.

The Government agree that the purpose of the penalty is not just to provide compensation for actual damage suffered by employees, but to create a sanction against employers who fail to consult. An employer dismissing employees as redundant or transferring them must do two things. He must pay any wages or pay in lieu of notice to which they are entitled and he must consult the recognised trade union. As the law stands it may well be that there is no penalty for failing to consult if the employer has paid the wages due to the employees.

There is thus no real sanction and the Government are obliged to ensure that such a sanction is provided under Community law. That being the case, I am sure that my noble friend Lord Mottistone will appreciate why the Government cannot accept his amendments. I believe that he will understand that we have accepted that the directive is not adequately implemented and that it is appropriate that we should put matters right by removing the offset of the protective award against wages. I also remind him that any employer who meets the requirements on consultation set by the directive will not risk incurring any costs at all. Therefore, having heard my explanation, I hope that my noble friend will agree that it would not be appropriate to press his amendments.

Perhaps I may now briefly turn to Amendment No. 211 tabled by the noble Lord, Lord Wedderburn. I do not know whether he wishes to speak to it or even move it. However, as it is on the Marshalled List, it is worth mentioning. The Committee may not be altogether surprised to see that that amendment attempts to go in the opposite direction to those of my noble friend about which I have just spoken. The amendment clearly does not dissent from the view that two weeks' pay is an insufficient maximum for compensation where an employer has failed to consult properly within the requirements of the transfer regulations. However, it seeks to increase it not to four weeks, which is the change which the Government recommend, but to 10 weeks. The Government have taken careful note of the Commission's argument and have doubled the size of the maximum possible compensation. We believe that it is right to do so. However, we do not accept that it is necessary or appropriate to go as far as Amendment No. 211. Therefore, I ask the Committee to reject it.

Lord Wedderburn of Charlton

Perhaps we may dispose of the matter by way of a question. The noble Viscount was kind enough to refer to the amendment standing in my name. Does he not agree that the principle is a little different from the way he put it? The Community principle is that for the breach of an obligation flowing from a Community instrument there must be, according to the European Court of Justice, something adequate in relation to the damage sustained and it must be effective and have a deterrent effect. Have the Government applied their mind to something which is effective and has a deterrent effect as a sanction against an employer who has so failed as regards the payment of two weeks' or four weeks' wages? To double something depends on where one starts. Twice nothing is nothing and twice two is four even in this Chamber and even when the Government advance it. The reason for 10 weeks is that it will be something more of a deterrent. Will the Government think again before Report as to whether they have really applied their mind to the European Court of Justice formulation of something effective and an adequate deterrent?

Viscount Ullswater

The Government believe that there is no reason to think that the European Court of Justice will find a maximum of four weeks' pay to be insufficient. An increase to 10 weeks' pay would clearly increase the potential burden on employers.

Lord Mottistone

The argument between my noble friend and myself is the degree to which we think that the European Commission is on good ground in requiring a change in our law. As I see it, we are not convinced that the Commission has made a case for such an amendment for the following reasons. In the case of Von Colson v. Land Nordrhein-Westfalen [1986]2CMLR/430, the European Court of Justice examined Article 6 of the equal treatment directive. The court held that the wording of the article, which states, Member States shall introduce into their national legal systems such measures as are necessary to enable all persons who consider themselves wronged … to pursue their claims by judicial process does not prescribe a specific sanction; rather, it leaves member states free to choose between different solutions for achieving the objective although the sanction must guarantee effective judicial protection. Where a member state chooses to penalise by award of compensation, that compensation must be adequate in relation to the damage sustained.

Lord Wedderburn of Charlton

I am obliged to the noble Lord for giving way. Will he now read out the line that he left out between the last two sentences?

Lord Mottistone

The noble Lord did not leave any lines out.

Lord Wedderburn of Charlton


Lord Mottistone

The collective redundancies directive, amended by Directive No. 92/56/EEC, now provides in the new Article 5a that member states must ensure that judicial and/or administrative procedures for the enforcement of the directive are available. This, in terms, is similar to the article which was under consideration in the Von Colson case. To that extent, therefore, it would seem that the words of the European Court would apply equally to the collective redundancies directive; that is, put simply, so far as Von Colson is any authority at all on the issue, where the UK has chosen to penalise the employer by a compensatory protective award, that compensation must be adequate in relation to the damage sustained.

Clearly, that is exactly what the protective award is designed to do. Moreover, the very reason for allowing wages paid to be offset against the award is to ensure that the employee is adequately compensated for the damage sustained and to avoid double compensation. In my view the Commission has no grounds therefore for proceedings against the UK.

I hope that my noble friend the Minister will consider what I have put forward with a view to accepting that, although the wording of the amendment may have lots of room for improvement, the principle which I aim for—to guard against unreasonable double payments—is one that should be retained as far as practicable.

Lord Wedderburn of Charlton

Before the noble Lord sits down, I feel that there is some misunderstanding between us, and I apologise to him if there is. My version of the judgment states that the member state must ensure that compensation, is effective and that it has a deterrent effect, that compensation must in any event be adequate". Those words come from the judgment that I have. They are different from the noble Lord's. We can compare texts afterwards.

Lord Mottistone

Yes, but the noble Lord is better provided with legal quotations than I am. He is therefore able to quote more fully. However, the argument still stands up. I do not know whether my noble friend the Minister will wish to pursue the matter further at this stage: it would be helpful if he could.

Viscount Ullswater

I shall have to read carefully what my noble friend said. I must repeat that the Government agree that the purpose of the penalties is not just to provide compensation for actual damage suffered by employees but to create a sanction against employers who fail to consult. My noble friend and I may have some disagreement. I want to read what he said and consider it further. I cannot, however, give any undertaking that I shall be able to support a further amendment on the matter.

Baroness Gardner of Parkes

I do not wish to delay the Committee, but I must point out that the offset principle works well in practice. It is fair to both parties. If we find I hat people are not given their pay in lieu of notice, for the reasons quoted by my noble friend Lord Mottistone, that might adversely affect a number of people for a long period of time while waiting for a case to come to a hearing. I hope that my noble friend will take these comments into consideration also when he considers the text.

Lord Mottistone

I thank my noble friend Lady Gardner for her contribution, which strikes at the root of the problem. I differ from my noble friend the Minister on the degree to which the Commission or the European Court of Justice require the UK Government to do things and the degree to which, as my advisers tell me, they do not. I shall read with great care what my noble friend said. I am grateful to him for saying that he will do the same as regards my remarks. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 211 not moved.]

4.15 p.m.

Lord Rochester moved Amendment No. 212: Page 47, line 27, at end insert: ("() This section shall not be brought into force by the Secretary of State under section 44 of this Act unless, prior to such day as the Secretary of State may appoint for such purpose, the Secretary of State shall have laid before both Houses of Parliament, and both Houses of Parliament shall have approved, further amendments to the Transfer of Undertakings (Protection of Employment) Regulations 1981 which shall have the effect of extending the application of paragraphs 10, 11 and 12 of such Regulations to representatives of "affected employees" (as therein defined) of a description other than one in respect of which an independent trade union is recognised by the employer concerned.").

The noble Lord said: In moving Amendment No. 212, I wish to speak also to Amendment No. 220. I should first assure the Committee and the noble Viscount, Lord Ullswater, that I have no intention of pressing either of these amendments to a vote. To do so successfully would mean delay in enacting Clauses 29 and 30, which is certainly not what I seek.

The Explanatory and Financial Memorandum to the Bill states that these clauses bring, detailed provisions of UK legislation … fully in to line with the EC Acquired Rights Directive", and with the EC directive on collective redundancies, in the one case, on employees' rights on transfer of undertakings and related consultations arid, in the other, on consultations on collective redundancies.

I do not believe that that claim is justified. The Transfer of Undertakings (Protection of Employment) Regulations require employers to consult recognised trade unions about prospective transfers, but the acquired rights directive requires consultation with "representatives of employees". The European Commission has long argued that restricting the right to consultation and information to recognised unions is insufficient. I agree. The Government, however, have made no concessions on that point. The purpose of Amendment No. 212 is to persuade the Government to extend the right to employee representatives generally.

My difficulty is that it would be incredibly complex and indeed wrong to proceed by way of substantive drafting. As the noble Viscount said, the directive refers to employee representation provided for by the laws or practice of the member state—and there is no such law or practice in this country except in so far as there is a recognised trade union. In any case, I do not think that such drafting should be undertaken without consultation at least with employers' representatives. And that is a task, not for a party in opposition, but for the Government.

In other words, I have concluded that it is really up to the Government to be proactive in this matter rather than merely reactive, as they have been in framing Clause 29, and positively to promote "employee representation" outside the trade union structure—not in order to "do down" trade unions, but simply for the benefit of employees who do riot choose to be represented by a union.

Amendment No. 212 therefore invites the Government to lay before Parliament an order which would further amend the Transfer of Undertakings (Protection of Employment) Regulations 1981 and have the effect of extending application of the duty to inform and consult trade union representatives so that the regulations apply to employee representatives generally.

In the case of the proposed amendment to Clause 30—Amendment No. 220—the argument is the same as with the amendment to Clause 29. In this instance, however, the relevant EC directive, on collective redundancies, was transposed into UK law by the Employment Protection Act 1975, which is now consolidated in Sections 188 to 198 of the 1992 Act. Both the directive and the UK legislation require employers contemplating large-scale redundancies to inform and consult workers' representatives well in advance. That is of course what British Coal should have done recently under its own agreement with the NUM before announcing that it intended to close 31 pits without giving, in that case, 90 days' notice of the collective redundancies involved.

The European Commission considers that conducting negotiations only with representatives of independent trades unions recognised by the employer, as provided for in Section 188 of the 1992 Act, makes it possible for the consultation procedure to be completely inapplicable where no trade union is recognised by the employer. In other words, in that respect Clause 30 does not respond to the Commission's criticism that restricting the right to consultation and information to recognised trade unions is inadequate. Amendment No. 220 therefore asks the Government to lay before Parliament an order that would further amend Sections 188 to 192 of the 1992 Act, which would have the effect of extending the application of those sections to employee representatives generally.

Since the thinking behind the amendments is very much in line with the Government's often expressed support for the extension of employee involvement, I trust that the Minister will respond to them positively. If the Government acknowledge the need, as they do in bringing forward Clauses 29 and 30, for recognised trade unions to be consulted about prospective transfers and collective redundancies, they cannot very well fail to treat in the same way employees who do not choose to be represented by a trade union. Nor can it reasonably be claimed that commercial confidentiality might here be an inhibiting factor. There is no reason to suppose that employee representatives are any less capable than trade unions of respecting confidential information where that is involved. I beg to move.

Lord Boyd-Carpenter

The noble Lord has said that he does not proposed to divide on this amendment, and so I hope that he will not think it discourteous if I say that I do not see why we need to take very much time over it. I should like to put in a protest against the form of Amendments Nos. 212 and 220. What he does is ingenious. He says that the provisions of the Bill shall not come into force until some subsequent legislation, including amendments to other legislation, has operated. That is an ingenious way of sparing himself the problem of drafting amendments to other legislation, but it does seem to be a difficult way of proceeding. Apart from anything else, I hope that the noble Lord will not think that it is a good practice which should be followed by subsequent amendments to the Bill.

We must consider the Bill as it stands. It is wrong that we should seek to defer the operation of some of its clauses merely until some other totally separate legislation has been undertaken or regulations submitted. I hope therefore that we shall not spend much time on this practice.

Viscount Ullswater

I note of course what the noble Lord, Lord Rochester, said about not wishing to delay the passage of the Bill and therefore that he will not be pressing the amendments which would have that effect with regard to the two clauses.

The amendments, like Amendments Nos. 204 and 218, which were discussed earlier, are about employee representation. Amendment No. 212 is concerned with identifying employee representatives for the purposes of the Transfer of Undertakings Regulations, while Amendment No. 220 is concerned with the statutory consultation requirements in relation to collective redundancies contained in the 1992 Consolidation Act.

I have already set out at some length the Government's views on that subject, and I shall not repeat the arguments that I have already advanced. I shall merely concentrate on the different approach adopted in the amendments. The amendments seek to provide that Clauses 29 and 30 should not come into force until Parliament has approved changes to the transfer regulations and the statutory redundancy handling provisions which would have the effect of extending information and consultation rights to any or all employee representatives.

There is some doubt as to whether the amendments as drafted are satisfactory for technical reasons. I note that my noble friend put forward his views, which I share, as to the right way to proceed, but I do not believe that this is the right moment to pursue that question. The main problem with the amendments is that they provide no clue as to how an employer would be able to judge who should, or should not, be considered to be an employee representative. That would surely cause considerable confusion. I appreciate that noble Lords who support the amendments wish Parliament to give further consideration to this question. I have to say, however, that the Government's view is entirely clear. Employee representatives for the purposes of these provisions should be trade unions which an employer has freely chosen to recognise for collective bargaining. I must therefore ask the noble Lord to withdraw the amendment.

Baroness Seear

Is the Minister really saying that an organisation, of which there are many, which has a works council to which people other than trade unionists are elected, as is the case, for example, in the German Republic, does not provide adequate machinery for the kind of consultation to which my noble friend referred?

Viscount Ullswater

What may suit Germany, may suit Germany. In my original reply I said the laws that pertain in this country are for the recognition of trade unions. That should be entirely at the option of the employer.

Baroness Seear

In many cases in this country there are works councils elected by employees. That being so, surely it is appropriate that they be used for this purpose.

Viscount Ullswater

There is no reason why an employer should not consult anyone he feels entitled to. What we are talking about is a statutory provision.

Lord Wedderburn of Charlton

Before the noble Lord, Lord Rochester, replies, I wonder whether I may mention two problems that I have with the amendments. The thrust of the amendments is in the same direction as mine. They require us to think of representatives of a description other than one in respect of which an independent trade union is recognised. That can mean two things: first, it is something other than a trade union. I apprehend that most of the bodies about whom the noble Baroness, Lady Seear, spoke would come within the definition contained in Section I of the new Consolidation Act as trade unions. Sc what are these bodies which are not trade unions? Secondly, the body can be something other than a trade union which is independent. Does the amendment envisage bodies which are not trade unions? That is technically difficult in view of the definition. And does it envisage bodies which are not independent?

Lord Rochester

r should first respond to the noble Lord, Lord Boyd-Carpenter. I find myself in a little difficulty here, but perhaps I should accept the compliment he paid me in terms of the ingenuity brought to bear in framing the amendments. I endeavoured to be open in what I said; that there was some difficulty in drafting. I said that it would be incredibly complex to draft a suitable amendment. I hope that I made it plain that my object in bringing forward the amendments was to persuade the Government to be pro-active in the matter rather than reactive, as it seemed to me that they had been in framing the clauses.

I was disappointed, to say the least, in the Minister's response, especially when he said that there would be some difficulty in defining the term "employee representatives". It seemed to me that my noble friend Lady Seear dealt with that matter adequately, in referring the Minister to those cases, many of them throughout industry, where works councils or similar bodies have been constituted. In answer to the noble Lord, Lord Wedderburn, I had in mind bodies such as works councils.

There may be technical faults in the amendments; indeed, the noble Viscount suggested that there were. Furthermore, it may be open to question whether Clauses 29 and 30 bring UK legislation fully into line with the relevant directive. Unfortunately, what is all too plain from the response of the noble Viscount is that the Government are not prepared to meet my basic argument that if there is a need for trade unions to be consulted about prospective transfers and redundancies that need should in principle be extended to employee representatives generally. In that way the Government could give effect to their professed support for employee involvement. I am sorry that they are unwilling to do so but, as I said at the beginning, I do not propose to press the issue and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Seear

Before the noble Lord, Lord Wedderburn, deals with his next amendment I wish to ask whether I am the only person who considers that the temperature in the Chamber is intolerable and that the air is suffocating. If we are going to be here until eleven o'clock we shall all be baked. Can steps be taken to see what is happening because I am quite sure that it is not right? We talk about health and safety at work but and it would be a pity if we were to boil ourselves.

Lord McCarthy

I agree with the noble Baroness.

Viscount Ullswater

I see that steps are already being taken. I hope that they will be successful.

[Amendment No. 213 not moved.]

Clause 29 agreed to.

4.30 p.m.

Lord Mottistone moved Amendment No. 214: After Clause 29, insert the following new clause:


. In Schedule 13 to the 1978 Act (computation of period of employment), after paragraph 12 there shall he inserted—

  1. "13.—(1) Where—
    1. (a) a trade, business or undertaking is transferred from one person to another;
    2. (b) at the time of the transfer, a payment calculated in respect of the period of service with the transferor is paid to the employee on the basis that he is redundant (this payment not being a payment referred to under sub-paragraphs (2) (a) (i) and (2) (b) (i) of paragraph 12 but being at least equivalent to such a payment); and
    3. (c) the contract of employment under which the employee was employed is transferred from the transferor to the transferee in accordance with Regulation 5 of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (the 1981 Regulations),
    then in determining, for the purposes of Section 81(1) or Schedule 4, the period for which he has been continuously employed, the continuity of the period of employment shall be treated as having been broken as at the date on which the transfer took effect.
  2. (2) in this paragraph, references to "transferor" and "transferee" shall be construed in accordance with the 1981 Regulations." ").

The noble Lord said: I too was finding that my waistcoat was too much of a garment. The amendment is designed to remove uncertainty in the existing legislation governing employment rights in the transfer of an undertaking. It arises from the difficulty in interpreting whether a particular transaction amounts to a relevant transfer for the purpose of the Transfer of Undertakings (Protection of Employment) Regulations 1981.

Before I make my case perhaps I may give the Committee an example of what I am talking about. Let us say that an employer wishes to put out to contract a particular service such as cleaning, which is currently carried out by in-house staff. The employer and the contractor both take the view that the arrangement does not amount to a transfer of an undertaking. The employees are not dismissed as such but are merely advised that a contractor is taking over the service and that they should consider applying for positions with the contractor who is anxious to take on existing personnel. The employees do that and all are offered jobs with the contractor, which they accept. The contract duly takes effect and the employer, believing there to be no transfer, subsequently makes redundancy payments to the employees concerned.

Let us further say that some two or three years into the contract the contractor finds the need to reduce staff and dismisses as redundant one employee who brings proceedings in the industrial tribunal claiming a redundancy payment. He argues successfully that, despite the views of the employer and the contractor, the award of the contract constituted a transfer of an undertaking and that under the TUPE regulations and paragraph 17 of Schedule 13 to the Employment Protection (Consolidation) Act 1978 his contract has in effect transferred to the contractor with full continuity of service.

That means that because there was no dismissal as such by the original employer the payments made on transfer did not in law constitute statutory redundancy payments. Consequently the usual rule whereby previous statutory redundancy pay can be taken into account when assessing subsequent entitlement—and I refer to paragraph 12 of Schedule 13 to the 1978 Act—does not apply. The employee can therefore recover a payment based on his entire period of service with both employers even though he has in effect already received a proportion of that, which relates to his first employment.

My noble friend will be aware of the major anxieties held my many organisations about the question of whether the regulations will apply in certain circumstances; for instance, those which I have outlined. That has particular relevance where a service has been contracted out by the main employer and thus has important implications for those involved in compulsory competitive tendering in the public sector. In essence, contractors will in many cases now be required to observe terms and conditions applicable in the public sector which will inhibit the contractors' competitiveness and freedom to tender for particular work. There is no doubt that the issues raised in this area are complex and the source of the uncertainty rests with the Acquired Rights Directive and the interpretation given to it by the European Court, where the failure to spell out the distinction between contracting out in both public and private sectors and the genuine transfer of an undertaking, whether commercial or otherwise, leaves employers in a state of confusion.

My right honourable friend the Attorney-General has confirmed that the interpretation of the law in this area depends to a large extent on case law in domestic tribunals and courts and in the European Court of Justice. He has confirmed further that the contracting out of a service is not a transfer unless it involves enough of the elements of the original operation—such as premises, staff, goodwill and customer base—to constitute the transfer of a going concern. No single one of those elements is essential for there to be a transfer of an undertaking. The overall picture needs to be examined. In practical terms, it is difficult to see at the pre-tender stage whether a tribunal, a domestic court and ultimately the European Court of Justice would decide that any particular contract award would constitute a transfer of an undertaking. Therefore, contractors tendering for public and private sector work will be uncertain about whether they must assume the obligations of a full transfer.

Ultimately the answer lies in revising the European Community Acquired Rights Directive so as to avert a grave threat to contracting out. However, in the interim an amendment to existing legislation may be necessary to address the situation where, because of the uncertainty, the transferor, the employer, mistakenly believes that a transaction is not a relevant transfer but rather treats it as a redundancy situation and makes redundancy and/or other severance payments to employees who are subsequently engaged by the transferee.

Under the existing rules on continuity of employment, should the transferee subsequently make the transferred employees redundant it is unclear whether he will be liable for redundancy payment based on the entire period of service with both employers. My example gave point to that. It is possible that where prior redundancy payments have been made paragraph 12 of Schedule 13 will not be interpreted as breaking the continuity in those circumstances. If that is so the effect could be that in addition to the dual costs to employers, which could be substantial and unbudgeted, the employee is doubly compensated for the same period of service. Clearly, that would be inequitable. This amendment is aimed at clarifying the point that where payments at least equivalent to statutory redundancy compensation have been made those will be taken into account when calculating future redundancy entitlement payable by the transferee. There is clearly some uncertainty as to whether payments made in those circumstances are covered by paragraph 12. I believe that for the avoidance of doubt the Government should take the opportunity to clarify the matter and approve my amendment. I beg to move.

Lord Wedderburn of Charlton

There are two points that I wish to make in answer to the noble Lord. I make them only because the iron discipline portrayed by my noble friends and myself meant that we passed over certain amendments which would have placed my remarks on the record. Therefore, in view of the arguments put forward by the noble Lord, Lord Mottistone, I shall make those points now.

Both points relate to the noble Lord's complaint about the interpretation concerning the European Court of Justice not serving the interests of employers for which he wishes to alter British law. In both respects, the amendment flows against the tide of both recent and earlier interpretation. First, in a quite recent decision in the case of Katsikas v. Konstantinidis from the German courts, the European Court of Justice held what many had argued—although I did not —that the directive allows the employee an option on a transfer of undertaking; that it does not necessarily amount, as in paragraph (c) of the amendment, to a transfer of the contract of employment without the employee being allowed a view unless national law is quite clear on the matter. It is dangerous to make an amendment to the national law which would, by a side wind, as it were, decide that issue which should be decided in the face of all the Community and national considerations. Therefore, it would be quite improper for the Committee to consider paragraph (c) at this point.

Secondly, in terms of what is a transfer of undertaking, decisions such as that in the Rask case in the European Court of Justice have made it quite clear that some contracting out may well be a transfer of an undertaking if there is retained that unity of the economic entity which was found to exist in many such cases. We should have preferred the unit of economic entity to have been removed by our amendments. However, in view of those considerations I submit that the Government cannot consider the amendment in its present form at this time.

Viscount Ullswater

Amendment No. 214 takes us into a rather complicated area of the law. It is intended to address a situation which my noble friend believes might arise as a result of uncertainty about whether the transfer regulations apply in a particular case.

What concerns my noble friend is the possibility that redundancy payments may be made in error. The situation which I believe he has in mind, as I understand it, is one in which the transfer of an undertaking covered by the transfer regulations takes place but the old employer mistakenly believes that the regulations do not apply and consequently makes redundancy payments to employees who are subsequently employed by the new employer.

My noble friend is concerned that paragraph 12 of Schedule 13 to the 1978 Act would not operate to break continuity in such circumstances because the payment made by the old employer was not a statutory redundancy payment as the employee was not actually dismissed as redundant but had his contract of employment automatically transferred to the new employer. My noble friend fears that that would mean that the employee's continuity of employment for redundancy payment purposes would be unbroken. If the new employer had to make him redundant in due course, that might result in both employers making payments for the same period of service. That would result in the employee being doubly compensated.

I can understand why my noble friend takes the view that this would be inequitable. Nevertheless, the legal advice that I have received is that the situation which he envisages would not happen in practice. I am advised that a statutory redundancy payment, as defined in the 1978 Act, does not cease to be such because it emerges subsequently that the regulations applied and that a statutory redundancy payment breaks continuity so that no double payment would be made even if the regulations apply.

Where an employee is dismissed on the grounds of redundancy, he is entitled to a redundancy payment. I am advised that if there is later found to be a transfer, that transfer does not nullify the dismissal. It has the effect that the employment of contract was continued but it does not have the effect of removing the entitlement to any payment which may have been made. That payment would therefore count as removing entitlement to any later payment for the same period.

I have listened carefully to the representations made by my noble friend. The Government do not share his view of the legal position. Nevertheless, in view of his obvious anxiety, I shall give further consideration to whether it would be advantageous to make the position absolutely clear. If that seems to be advisable, the Government will introduce an amendment along the lines proposed by my noble friend on Report. I hope that my noble friend will agree to withdraw the amendment on that understanding.

4.45 p.m.

Lord Mottistone

I am grateful to the Minister for his closing remarks. As I understand it, the advice given to the CBI—and the Committee knows that the CBI advises me—is at variance with that supplied to the Government. The CBI has taken counsel's opinion on this matter. Therefore, there is room for further discussion within that kind of field. I am most grateful to my noble friend for his undertaking to look closely at the matter and to bring back an amendment on Report if he believes that to be appropriate in all the circumstances. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 30 [Redundancy consultation procedures]:

[Amendments Nos. 215 to 220 not moved]

Clause 30 agreed to.

Clause 31 [Repeal of Part II of Wages Act 1986]:

Lord Eatwell moved Amendment No. 221: Page 48, line 41, at end insert ("in those trades in which two-thirds of the workers receive remuneration, over the period of a year, substantially in excess of the statutory minimum established by the wages order made by the wages council for that trade.").

The noble Lord said: This is the first in a series of amendments which we are to discuss on Clause 31, the clause in the Bill which would abolish wages councils. There have been a number of extraordinary aspects of the passage of this clause. In another place two former Conservative Ministers from the Department of Employment voted against the Second Reading of the Bill on the grounds that it contained this clause.

Another extraordinary aspect of the passage of the legislation is that neither in another place nor in your Lordships' House have the Government managed to produce any substantial evidence whatever in favour of the measure which they propose. We have heard from the Secretary of State and from the noble Viscount a range of assertions and a raft of prejudices but hardly a shred of evidence.

On Second Reading four weeks ago, I asked the noble Viscount for some evidence to back up his assertions. He merely rebuked me for asking too many questions. In those four weeks since the Second Reading debate, I have not received a single item of correspondence from the Department of Employment addressing my questions. I look forward to hearing some answers today.

Despite the unwillingness or perhaps the inability of the Government to make a case for the abolition of wages councils—and that inability probably explains the absence of this measure from the Conservative election manifesto—I have put forward an amendment in the spirit of compromise. It is an amendment which meets the Government half way by adapting their own criterion for the abolition of wages councils.

On Second Reading in another place the Secretary of State for Employment asserted that: Two thirds of employees covered by wages councils are paid well above the statutory minimum rates laid down by the councils".—[Official Report, Commons, 17/11/92; col. 177.] On Second Reading in this Chamber the Minister likewise asserted that: Some two-thirds of wages council workers are paid significantly above minimum rates".—[Official Report, 1/3/93; col. 427.] It is clear that the Government believe that those propositions are sufficient to establish that wages councils are no longer needed. I do not agree but I am prepared to give the Government the benefit of the doubt.

My amendment would require that instead of the Government's criterion of two-thirds of workers being paid well above the minimum being applied to all wages councils taken en masse, it should be applied to each trade individually. Hence if in one trade—let us say the famous ostrich and fancy feathers trade—over two-thirds of the workers are paid substantially above the minimum, then the wages council could be abolished. However, in the case of the retail non-food wages council my researches suggest that fewer than half the workers are paid substantially above the minimum, and the wages council would, on these grounds, be retained. I hope the Minister will agree that this is a constructive application of his and the Government's own criterion. I hope that he accepts the amendment or at the very least the spirit of the amendment. Of course this amendment would have the effect of preserving some wages councils in industries in which wages are particularly low. The Minister may feel that he should resist the amendment on other grounds. Those grounds have been well rehearsed.

First, the Government have claimed that abolishing wages councils will, by allowing wages to be cut, create jobs. On this point, my earlier criticism of the Government for presenting no evidence to back up their assertions is, I must confess, a little unfair. On 4th November last the Under-Secretary of State for Employment, Mr. Patrick McLoughlin, having faced repealed demands for evidence from his honourable friend Mr. Peter Bottomley to back up his assertion that wages councils destroy jobs, presented Parliament with a list of 26 studies. He must have thought that no one would read them because the remarkable fact is that of the 26 studies, only six supported the Government's case, and of those six, four were actually prepared by government departments. The remaining 20 studies were either inconclusive or found that wages councils had no adverse effect on employment at all. By the production of this list, the Government not only managed to shoot themselves in both feet but they deposited the smoking gun in the House of Commons Library.

I should add that the finding that wages councils do not reduce employment is not surprising to any serious student of economic theory. In general, economic analysis suggests that we would not necessarily expect there to be any impact on employment. I will not detain the Committee by giving the details of the argument; but I can assure the Committee that it suggests the results would be inconclusive, as indeed empirical research shows they are. I conclude therefore, with the aid of the Department of Employment—I thank that department for preparing its list—that my amendment will not threaten jobs.

The Government have also argued that wages councils are not a means of alleviating poverty. This is the famous "pin money" argument. As the Secretary of State argued in another place, 80 per cent. of the employees the wages councils cover live in households with two or more incomes. As the noble Viscount elaborated, the plain fact is that wages council workers are spread right across the income distribution. Both points are correct but both are completely irrelevant.

As regards the 80 per cent. point, roughly the same proportion of workers, whether in wages council industries or not, work in households where there is more than one income. That applies to everyone, not just those in industries covered by wages councils. That fact does not distinguish them. The noble Viscount also made the point that wages council workers are spread throughout the income scale. While it is true that some wages council workers live in the wealthiest households in the land and they are spread right across the income distribution, it will not surprise the Committee to hear that they are predominantly concentrated in the lowest income groups.

To tackle the question of poverty seriously, I have used the empirical analysis of income distribution of the Department of Applied Economics at Cambridge. That work not only studies the distribution of gross incomes but also the impact of taxes and benefits on net incomes. The relevant results are as follows. First, 27 per cent. of all workers earning wages in the wages council range are in the bottom 10 per cent. of families. Secondly, a fall in wages of just 30p an hour would reduce those families' incomes by 7 per cent., having taken account of all the changes in taxes and benefits. I remind the Committee that this 10 per cent. is exactly the bottom 10 per cent. that the noble Lord, Lord Henley, said in this Chamber on 24th February have seen no increase in their real income at all since 1979. Now the Government propose to reduce the income of a quarter of the families in this group.

I conclude that my amendment, by preventing wages falling in those industries in which wages councils are retained, will help alleviate poverty. My amendment will also mean that the Exchequer will be relieved of the cost of subsidising inefficient employers via family credit. I have calculated that the total abolition of wages councils would have a net Exchequer cost of up to £400 million. My amendment would save the Government roughly £300 million. Is the Chancellor of the Exchequer aware that the noble Viscount is proposing to spend £400 million? Will he tell us why he is prepared to throw this money away?

This amendment, by preserving wages councils in those industries—and those industries only—in which wages are clustered around the minimum level will preserve jobs, alleviate poverty, save the Exchequer £300 million and allow the Government to use their own criterion for the abolition of the councils. I hope the Government will accept the amendment in the constructive spirit in which it is offered. I beg to move.

Baroness Turner of Camden

I rise to support the amendment moved so ably by my noble friend this afternoon. The Committee will be aware that we on this side of the Chamber are opposed to the abolition of wages councils. We have said so on many occasions in the past and of course on Second Reading. We know that wages councils are not perfect. We have never said that they were. We know also—the Minister will no doubt remind us of this again this afternoon—that Labour administrations have abolished wages councils in the past and that not all unions have always been in favour of them. But that is because they have been seen as an interim measure until proper collective bargaining arrangements could be established. It was never the intention that the interim period should be followed by abolition and absolutely nothing, else. However, that is more than likely to be the situation if the Government proceed with their objective as set out in the Bill and do not accept the amendment moved by my noble friend.

The Government have actively discouraged collective bargaining and made it much more difficult for unions to organise than it was prior to the extensive programme of industrial relations the Government embarked upon in 1979. Wages councils now cover 2.5 million workers—one-eighth of the workforce. Large numbers of those workers are women and many are from ethnic minority groups. In other words, they are among the most vulnerable workers and that is why they need some form of state protection. These women are not in the main working for pin money, either. Even so, wages council rates are not very high. They range from £2.63 an hour in the clothing trade to £3.08 per hour in food shops. The Government have claimed, first, that the existence of wages councils is inimical to job creation; and, secondly, that their abolition would not lead to pay cuts. I should have thought that was an inconsistent argument because it seems to me that the only economic, as distinct from moral, argument for doing away with them would appear to be that it would free employers to pay less than they would otherwise have to do. I believe that is the real reason for abolition.

Further, it has been frequently claimed by the noble Viscount that wages councils have outlived their usefulness. It is said—my noble friend has said this this afternoon —that two-thirds of the workers covered by wages councils already receive wages in excess of the wages council minimum. It seems to me that here is the justification for the amendment moved by my noble friend Lord Eatwell. He is suggesting that if this is really so, then wages councils could be abolished in those trades in which it is demonstrated over a period of a year that two-thirds of the workers are receiving remuneration in excess of that established by the wages councils.

I would suggest to the noble Viscount that this provision gets the Government off the hook. They would have the opportunity, given this amendment, of proving their case far abolition. The threat to abolish wages councils has raised enormous ire and the anxiety of numerous organisations. The Government must be well aware that a substantial amount of lobbying has been carried out while the Bill has proceeded through both Houses of Parliament. Therefore, I hope that if the Government cannot be persuaded to depart from their ultimate objective, they will at least give sympathetic consideration to the proposition advanced by my noble friend this afternoon.

5 p.m.

Baroness Seear

I should also like to support the amendment. I do not believe that wages councils are ideal instruments for setting wages. In many ways they were never intended to be. As has been said so often, they were an interim measure. However, it seems an extraordinary moment to choose to get rid of them when we have 3 million people unemployed and a great many people need to earn these very small sums.

I should like also to take the greatest exception to the argument that was put forward by the Secretary of State that it did not matter much because so many of the people involved were not in poverty and there were other wage earners in the household. When did we ever consider that pay should depend on family income or on need? If one once follows that argument one's whole wages policy is in tatters. Pay has to be for the job done. It does not have to bear a relationship to whether there is someone else in the household bringing in some money. That is an argument which gets one nowhere.

I should like also to emphasise the point that a great many single women and single parents—because people working in the wage council industries are largely, though not entirely, women—are dependent on that money. As everybody knows, they are some of the people in the greatest poverty at present. This is no moment to remove that safeguard.

In some ways I can understand why the noble Lord, Lord Eatwell, made his concession. However, I am sorry that he has done so because protective legislation of this kind is always meant for those who are falling through the net. It is meant for the one third of the employees who are not in the higher paid group to which the noble Lord referred. I accept the amendment and I know why he has done that, but it leaves unprotected some people who are at the very bottom of the pile. This is no moment to bring forward this change.

Lord Boyd-Carpenter

It is known that Members of the Committee opposite are against the proposal in the Bill for the abolition of wages councils. However, the Committee is also aware of the fact that many of us on this side of the Chamber have, over the years, seen the reduction in the scope of wages councils and have urged on the Government the importance of abolishing them. There is, therefore, a clear-cut line of division between us. The amendment, although no doubt it is an ingenious attempt to suggest that it is something of a compromise, is apparently a last minute attempt to salve wages councils.

I should like to say a word on the merits of the issue. Wages councils are a form of statutory wage fixing. It is well known, and I believe generally agreed, that statutory wage fixing creates unemployment.

Noble Lords


Lord Boyd-Carpenter

Wages councils seem to some of us to have the effect of creating unemployment. Let me put this argument to Members of the Committee who said "No".

In this country there are many people who are partially disabled, with physical limitations, who cannot work a full week and therefore cannot expect a full week's pay. However, they are capable of doing a limited amount of work. They are anxious to do so. It enables them to earn a certain amount which they would not otherwise earn at all. Does the noble Baroness desire to intervene?

Baroness Turner of Camden

I do. Does not the noble Lord recall the disability working allowance, which was introduced by this Administration with the support of this side of the Chamber, which is intended to deal precisely with that point?

Lord Boyd-Carpenter

It does not deal with the question at all. The position is that there are people who cannot earn a full statutory minimum wage for reasons of physical limitation but who can nonetheless earn a certain amount through a partial week's work. Perhaps the noble Lord will contain himself for a moment. Those people would be denied the opportunity to work if their area of work were covered by a wages council. Does the noble Lord wish to speak?

Lord McCarthy

The noble Lord is making assertions again. He says that there are such people but he never produces any evidence. It seems to me that he is actually talking about people who work part time and who are paid so much an hour. There is no earthly reason why they should not be paid wages council rates. A large number of the people he is talking about are paid wage council rates.

Lord Boyd-Carpenter

Exactly. If one lays down that they must receive wages council rates one is denying them employment. That such people exist is within our own knowledge. I myself know several such people in my own part of the country. I shall just finish what I have to say. I am responding to a challenge by the noble Lord opposite, so perhaps the noble Baroness will contain herself. The position is that there are plenty of such people. I know many of them personally. They are incapable of doing a full week's work yet they can do a limited amount of work. That would be denied them in a wages council industry. That is the problem which the noble Lord opposite does not seem prepared to face. Does the noble Baroness now wish to come in?

Baroness Seear

I may be being very stupid, but I fail to follow what the noble Lord is saying. If in hairdressing, which is a wages council industry, a slightly disabled young woman works two days a week, she receives two-fifths of the wages council weekly rate. She is paid by the hour for the time she works. Despite the fact that she cannot work for a full week she still receives wages council rates, but for the time that she works. There may be many arguments against wages councils but for the life of me I cannot see the point put forward by the noble Lord, Lord Boyd-Carpenter, as one of them.

Lord Boyd-Carpenter

The noble Baroness has not understood the position. It is quite clear that if, owing to a disability, one is unable to work for continuous periods and can work only intermittently, one does not receive the daily wages council allowance because that would be in breach of the legal provision for wages councils. That is what the noble Baroness and noble Lords opposite must face. For that reason, as for several others, wages councils generate unemployment because there are a number of people who can and would like usefully to work but are unable so to do because of deficiencies of one kind or another—physical or perhaps in some cases mental. Therefore it is the greatest mistake to keep the wages councils in existence.

Wages councils are a means of creating unemployment by imposing an artificial rate of pay, which is not related to the value of the work but simply arbitrarily laid down by the wages councils themselves. Therefore, I very much welcome the fact that the Government have now decided finally to abolish those councils. They do not serve a useful purpose. They have many of the disadvantages of statutory minimum wages which we have seen in other countries.

Therefore, I hope that the amendment will be firmly rejected, that we shall proceed with the clause as it stands and that wages councils will therefore be properly abolished when the Bill becomes law. That will be a great improvement, help the working of our economy and help a great many people in this country.

Lord Murray of Epping Forest

Before the noble Lord sits down, I wish to say that I am genuinely puzzled by his argument. I am sure that he knows people with disabilities in his locality who would very much like to work full time. I believe that all of us know such people. Will the noble Lord identify the employers to which the people to whom he referred applied and the trades in which they have failed to find part-time employment because a wages council order prohibits the employer from employing them? Is that what he said?

Lord Boyd-Carpenter

The noble Lord nearly has it right. I was saying that where one has a statutory minimum wage—in other words, a wages council ruling—there are categories of people who are denied employment because, quite frankly, to an employer they are not worth the statutory minimum wage, but who could do a useful job of work in return for quite reasonable remuneration if one had freedom of negotiation and of bargaining.

Lord Murray of Epping Forest

Will the noble Lord tell us what trades these people belong to? He has talked to people who have complained that they could not obtain a certain kind of employment because of the wages councils. What are the trades that they have tried to get into but have been prohibited from entering? I do not know them.

Lord Boyd-Carpenter

There are many. For example, there is gardening. That is a very useful part-time occupation. It is no use the noble Lord shaking his head, he simply does not know. Perhaps the noble Lord, Lord McCarthy, will contain himself.

Lord McCarthy

Perhaps I may—

Lord Boyd-Carpenter

Perhaps the noble Lord, Lord McCarthy, will wait a moment. Noble Lords are so excited by their love of the wages councils that they seem to be losing control of themselves. I was responding to the noble Lord seated behind him. In my own experience I have encountered these people. Gardening is one type of employment; that of attendant at public houses and restaurants is another. The inflexibility which wages councils impose, with the inflexible fixing of an amount of remuneration laid down not as the result of bargaining or of the study of the worth of people's work but quite arbitrarily by wages councils, denies those people employment. If the Committee were to decide to throw out the clause —I hope that it will not—the Committee would be responsible for creating quite a bit of unemployment.

Lord Skidelsky

I hope that the Government will resist the amendment moved by the noble Lord, Lord Eatwell. The purpose of the amendment is this. Clearly, the noble Lord would like to use wages councils to protect the incomes of the lowest paid workers. I agree with him that some groups need to have their income protected. The sole disagreement is about the mechanism by means of which that protection is afforded. I do not believe that wages councils are an efficient method of doing that. The standard minimum rates are not an efficient way of dealing with poverty because of the lack of fit between individual wage rates and the incomes of households. As a general proposition that is quite true. There are some groups to which the proposition does not apply. Individual wage rates are not proxies for household incomes. That point has not been grasped by the noble Lord. Household income depends on the number of income earners; that has been referred to. It depends on the number of dependants; that has not been referred to. It depends, too, on the housing circumstances of the families, including their location.

It is perfectly true that the income of some groups needs to be protected. I am aware of single parents, for example, who rely on wages councils incomes. But there are better ways of dealing with those groups. In that particular case, there is no reason why income support should not be targeted through family allowances. In each particular case one will find ways of dealing with the problems of poverty that are better than interfering in the bargaining between employees and employers. Those interferences inevitably distort the working of the labour market. I hope that we shall have an opportunity later to discuss the more general claim made by the noble Lord that wages councils do not tend to reduce the amount of employment.

If the general argument for abolishing wages councils holds, it should apply to all employees covered by the wages councils. The attempt to separate them out by level of income in any particular wage council industry is not an efficient or correct way to proceed.

I wish to take up one other point made by the noble Lord. I ask it in the form of a question. Do his estimates of increased cost to the Exchequer—he referred to a figure of £300 million as a result of the abolition of wages councils—take into account the possibility of increased employment resulting from the abolition of those councils, which would represent a saving of dole money to the Exchequer, or do they assume that employment will remain entirely unaffected? That is an important question. What is at issue is the net cost to the Exchequer and that depends on assumptions made about employment. I hope that the Government will resist the amendment.

5.15 p.m.

Lord Campbell of Alloway

On this occasion, apparently it being an enforced privilege on these Back Benches to be able to follow my noble friend Lord Boyd-Carpenter, I enter into the conflict of controversy. I greatly admire the courage and tenacity of my noble friend in defence of his opinions. By and large, I share some of them. But, broadly speaking, my approach is much nearer to that of the noble Lord, Lord Skidelsky. In essence he stated that there are better ways of dealing with the problem of low wages. All noble Lords care about that problem. It is a problem that has to be recognised and met. That, I accept. However, there are better ways of dealing with it than keeping the wages councils. That is where I take my stand, which I believe is not the stand taken in argument by my noble friend.

When the wages councils were set up to deal with the problem of sweated labour—the) did a magnificent job—there was no social security. We now have a welfare state. The element of the adverse effect on employment to which my noble friend Lord Boyd-Carpenter rightly refers is surely better met under extant social conditions, by the welfare state provisions, than under the wage council provisions which now, with respect to noble Lorcls on the other side (I always entertain respect for noble Lords on the other side) have become an anachronism. They have produced anomalous results. They are becoming out of date.

The noble Baroness, Lady Turner, referred to the abolition of wages councils—I believe that it was at Second Reading—as perhaps the most controversial aspect of the Bill. As a prophetess of renowned repute, her reputation has not flagged on this occasion. I am not sure whether, in speaking to the amendment, in effect one should speak to the Question whether the clause as a whole should stand part. But as all Members of the Committee have apparently done so, I suppose it is right to continue. In any event, I believe that the aspects of the controversy which have arisen are subsumed in what I was going to say—if the time came to say it—on whether Clause 31 should stand part. For the reasons that I shall then give—and I shall not weary the Committee with any formal repetition —I am satisfied that it is now time to abolish the wages councils.

The reasons for opposing the amendment are subsumed in the reasons that I support Clause 31. It goes without saying that I accept the constructive and wholly sincere spirit in which the amendment is proposed. But it is proposed on the basis that the wages councils are not abolished. For the reasons which I shall give, if they become relevant or appropriate, in my opinion the councils should be abolished. There is nothing further useful for me to say.

Lord Gilmour of Craigmillar

The division is not so clear-cut as my noble friend Lord Boyd-Carpenter said. When the subject was discussed in another place, the only two Back-Benchers who spoke on the Government's side were against the abolition of wages councils. Both had been in the Department of Employment, occupying the place which the Minister now occupies. Both knew a great deal about the matter. I do not have that advantage or experience, so I am still not clear about a number of matters. I hope that my noble friend will be able to enlighten me.

I am still not clear what happened between the election in 1992 and today which has produced the proposal to abolish wages councils. It was not mentioned in the Conservative manifesto, and the Secretary of State at the time said that he had no immediate plans to abolish them. That phrase has become over-familiar during the past week or two. Nevertheless, I wish to know what has happened since the election that has brought this change of heart by the Government.

I support the amendment of the noble Lord, Lord Eatwell, because it seems to me that the only conceivable point of the clause is to lower the wages of those who are already very low paid. There can be no other point in it. That is what happened when the equally retrograde measure of 1986 took away all protection from the young. Since then their pay has declined sharply with no noticeable benefit to the economy.

I wish to know why the Government think that people who are already low paid should be paid less. It does not seem to me to be at all in the spirit of Tory philosophy, as I understand it, which is that the Government should take steps to look after the people who are least able to look after themselves. The clause takes away the remaining protection that they have.

As the noble Baroness, Lady Turner, said, it will particularly hit women because they form over 75 per cent. of those affected by the wages councils and they will be badly damaged. Some of my noble friends seem to believe that the matter can be dealt with by the low paid being subsidised by social security. That seems to me a very odd doctrine, I am not sure why taxpayers should subsidise bad employers. It does not seem to me to be either economically or politically a good idea.

Furthermore, I should like my noble friend to tell me how reducing the pay of the low paid will achieve the Government's ambition of a classless society. I am not quite sure exactly what a classless society is or would be, or how it can be achieved. However, assuming that it can be achieved, I should not have thought that the most promising means of achieving it was to lower the pay of the low paid. Therefore, it seems to me that there is considerable incoherence or inconsistency in the Government's policy.

As the noble Lord, Lord Eatwell, said, there is no evidence at all that wages councils reduce employment. It is merely stated as a matter of free market dogma that people should have freedom of contract. Of course there is no freedom of contract between a reasonably powerful employer and a totally powerless employee who may be very badly educated. There is no evidence at all that I can see—and I look forward to my noble friend producing some—that it has affected employment. Perhaps the Minister will tell the Committee whether it is true that in the past three years employment in those industries which are controlled or affected by wages councils has increased by 90,000, whereas employment in industries which are not affected by wages councils has decreased by nearly 1–5 million. If so, that seems to be a case for extending wages councils rather than abolishing them. Altogether, I believe that economically, politically, morally and socially the abolition of wages councils is a thoroughly retrograde proposal. I hope that it will be defeated.

Viscount Ullswater

Members of the Committee opposite have made their points strongly; but they have not been able to put forward any convincing case for the amendment moved by the noble Lord, Lord Eatwell. I believe that the amendment would do nothing to improve the Bill and I shall come to that in a moment, if I may.

Of course, there have been extensive consultations and debates on the future of wages councils. We issued consultation documents in 1985 and 1988. Following the 1988 consultation, we made it clear that the councils could have no permanent place in our system of wage setting. I have to say to my noble friend Lord Gilmour that that has been said on many occasions since that date, including before and after the last election.

In the 1988 consultation, on the five largest councils a clear majority of employers' bodies wanted the system abolished. Since then, there have been many requests for the abolition of the councils. They have not been confined to those who favoured abolition in the last round of consultation. The views of employers, the working of the legislation since 1986 and the needs of the 1990s all now point to abolition.

It is now clear beyond doubt that the wages councils are a barrier to employment. The system drags in the criminal law to prevent ordinary agreements between workers and employers which are mutually acceptable to both. Small businesses have to bear the brunt. If a small firm takes on a new, unskilled worker at a wage that it can afford and one which the employee finds acceptable, it can be a crime. There can be only one result—fewer extra staff for the business, lower expansion for the employer and fewer jobs for those seeking work.

The plain fact is that wages councils are no longer seen as providing a wage floor. They set going rates for large groups of employees, regardless of individual circumstances and setting a norm for percentage increases.

Research shows a clear link between higher pay and lower employment. Independent estimates of the job losses which would have resulted from only the first stage of Labour's minimum wage proposal ranged up to 500,000. Several wages council trades, particularly in the service industries—the hotel and catering and retail—are sectors with a high potential for employment growth. That I think is the answer to my noble friend Lord Gilmour who says that, indeed, employment has grown in those instances, not the fact that they have wages council set rates.

There is a large body of evidence, both in this country and abroad, that statutory wage fixing damages employment. This is, for example, a conclusion that has been reached by the OECD. In a recent report on France, it said: France's unemployment record compares unfavourably with that elsewhere … the problem is substantially more severe for youths, older workers and the unskilled … the national minimum wage seems in part to be responsible for this outcome".

Lord McCarthy

We have had that quotation several times in previous debates. The noble Viscount has in the past admitted that it is an unfair summary and not a direct quote.

Viscount Ullswater

No, in fact it is a direct quote from the OECD report.

Lord Eatwell

Does the noble Viscount agree that in the report the OECD said that the effect of the minimum wage in France on adult employment was nil? It was argued that there was an effect on youth employment. But we are not discussing youth employment. The report said the effect on adult employment was nil.

Viscount Ullswater

I believe that we are discussing youth employment.

Noble Lords


Viscount Ullswater

Mention has been made of what happened in the Wages Act 1986 and the removal of youths from wages council provision. The noble Lord himself alluded to that point in his Second Reading speech.

It is wrong to believe that statutory minimum wages protect vulnerable groups such as women, ethnic minorities or young people. The opposite is true. Minimum wage fixing has an adverse effect on such people. In countries with comprehensive minimum wages such as France and Spain, there are high levels of youth, female and long-term unemployment. Those who are most vulnerable are those most likely to be excluded from employment if wage levels are set too high. In the UK the proportion of the unemployed who are women or young people is lower than in EC countries such as France and Spain.

What followed the reforms of the Wages Act 1986 can be seen in statistics for the period 1986–91. Full-time earnings for the under 21 year-olds grew in real terms in all the main council industries and occupations for both males and females. Also among the 16 to 20 year-olds, employment grew faster in wages council industries (9.6 per cent.) than in all industries. I do not believe what my noble friend Lord Gilmour said. He pointed to the opposite conclusion. I believe that those statistics prove the positive effect.

The freedom of employers to offer jobs at rates which would previously have been outlawed has enabled some to provide employment which would not otherwise have been available to people. Removing wages councils altogether will improve employment prospects for women and part-time workers and build job opportunities.

I have listened carefully to the points made by the noble Lord, Lord Eatwell. I must congratulate him on the ingenuity of his arguments. I must tell the Committee that the likely result of the amendment that he has put down would be unacceptable to the Government. Some of the wages council industries would be placed in a position of protracted uncertainty. Industry would not know whether particular councils were to be abolished or continued; or, if they had not been abolished, for how long they would continue to operate. Enforcement would become difficult or impossible. The amendment would mean that individual wages councils would remain in existence where one-third or more of the workers covered were paid below some figure above the statutory minima over a period of a year. The most likely result would be to hold up the abolition of all the councils by a year or more to determine that they met the criterion.

The only point of the amendment is to water down abolition of the councils. I do not believe that arrangements which the amendment purports to introduce are remotely practicable if the amendment were accepted, the resulting uncertainty would be damaging to industry.

The amendment is also illogical. If there is any point to the wages council system, it is to provide a wages floor. The system is ineffective and self-. defeating. Even if a wages floor were desirable, the amendments make little sense. Why does the desirability of a minimum rate depend on whether an arbitrary proportion of workers in a sector earn more than an arbitrary minimum? How does the proportion of workers earning more than an arbitrary amount make one council more or less necessary than another? The concept of the amendrnent is deeply flawed.

The amendment would give rise to anomalies. Different councils set different minima. An unwelcome effect of its adoption could be that some councils covering industries with relatively low wages could be abolished, while councils covering higher paid industries were maintained because they set higher minimum rates. There would be significant practical difficulties in determining whether or not individual councils fulfilled the criteria for abolition.

We estimate that two-thirds of wages council workers earn significantly more than the minimum rates. That is a conservative assessment originally based on surveys carried out by the wages inspectorate in 1983 and 1987. The surveys were designed to supplement the information provided by the inspectorate's routine monthly and annual statistics. The employers who contributed were those visited in the course of normal inspection checks.

The results make it possible to say with confidence that at least two-thirds of all wages councils workers earn more than the minima. But it would require a much larger and more sophisticated survey to determine whether that was the case for any individual council. Furthermore, such surveys reveal the position only at a spot date. The amendment calls for the criterion to be satisfied over a period of a year.

The purpose of Clause 31 is to abolish statutory wage fixing in wages councils industries. The amendment would serve only to delay abolition, and perhaps in a few industries perpetuate it for an extended period. The amendment does not improve the clause and I ask the Committee to reject it.

Lord Eatwell

I shall not take the time of the Committee to reply to those points in detail. I cannot believe that the partial and ineffectual reply given by the Minister would convince anybody. There was, however, one substantial point in his discussion; namely, his reference to the amount of information which was available on wages council rates of pay. His case against my amendment was that the Government did not have the information. Yet they have continuously asserted that wages councils should be abolished on the basis of information which he now admits he does not have. I think it appropriate to test the opinion of the Committee.

5.36 p.m.

On Question, Whether the said amendment (No. 221) shall be agreed to?

Their Lordships divided: Contents, 111; Not-Contents, 150.

Division No. 2
Addington, L. Geraint, L.
Alport, L. Gilmour of Craigmillar, L.
Ardwick, L. Gladwyn, L.
Ashley of Stoke, L. Glenamara, L.
Aylestone, L. Graham of Edmonton, L. [Teller.]
Beaumont of Whitley, L.
Birk, B. Grey, E.
Blackstone, B. Hampton, L.
Blease, L. Hamwee, B.
Bonham-Carter, L. Hanworth, V.
Boston of Faversham, L. Harris of Greenwich, L.
Bottomley, L. Healey, L.
Brimelow, L. Henderson of Brompton, L.
Bruce of Donington, L. Hilton of Eggardon, B.
Callaghan of Cardiff, L. Hollick, L.
Carmichael of Kelvingrove, L. Hollis of Heigham, B.
Carter, L. Holme of Cheltenham, L.
Cledwyn of Penrhos, L. Hooson, L.
David, B. Howell, L. [Teller.]
Dean of Beswick, L. Hughes, L.
Donaldson of Kingsbridge, L. Hunter of Newington, L.
Donoughue, L. Jay, L.
Dormand of Easington, L. Jay of Paddington, B.
Eatwell, L. Jeger, B.
Ewing of Kirkford, L. Jenkins of Hillhead, L.
Ezra, L. John-Mackie, L.
Falkender, B. Judd, L.
Falkland, V. Kilbracken, L.
Fisher of Rednal, B. Kirkhill, L.
Gallacher, L. Kirkwood, L.
Galpern, L. Listowel, E.
Llewelyn-Davies of Hastoe, B. Robson of Kiddington, B.
Lockwood, B. Rochester, L.
Longford, E. Rodgers of Quarry Bank, L.
Lovell-Davis, L. Russell, E.
Macaulay of Bragar, L. Seear, B.
McCarthy, L. Sefton of Garston, L.
McGregor of Durris, L. Serota, B.
Mackie of Benshie, L. Shackleton, L.
McNair, L. Soper, L.
Mallalieu, B. Stoddart of Swindon, L.
Mayhew, L. Strabolgi, L.
Merlyn-Rees, L. Taylor of Blackburn, L.
Mishcon, L. Taylor of Gryfe, L.
Molloy, L. Thomson of Monifieth, L.
Morris of Castle Morris, L. Tordoff, L.
Mulley, L. Turner of Camden, B.
Murray of Epping Forest, L. Varley, L.
Nicol, B. Wallace of Coslany, L.
Ogmore, L. Wedderburn of Charlton, L.
Peston, L. Whaddon, L.
Pitt of Hampstead, L. White, B.
Prys-Davies, L. Williams of Elvel, L.
Rea, L. Williams of Mostyn, L.
Redesdale, L. Winchilsea and Nottingham, E.
Richard, L. Wyatt of Weeford, L.
Aberdare, L. Elliott of Morpeth, L.
Aldington, L. Elphinstone, L.
Allenby of Megiddo, V. Faithfull, B.
Annan, L. Ferrers, E.
Archer of Weston-Super-Mare, L. Flather, B.
Fraser of Carmyllie, L.
Arran, E. Gainsborough, E.
Astor, V. Gisborough, L.
Astor of Hever, L. Glenarthur, L.
Auckland, L. Goold, L.
Belhaven and Stenton, L. Goschen, V.
Beloff, L. Gray of Contin, L.
Belstead, L. Greenway, L.
Bessborough, E. Gridley, L.
Biddulph, L. Grimston of Westbury, L.
Blatch, B. Halsbury, E.
Blyth, L. Hardinge of Penshurst, L.
Boardman, L. Harmsworth, L.
Bolton, L. Harvington, L.
Borthwick, L. Hayhoe, L.
Boyd-Carpenter, L. Hemphill, L.
Brabazon of Tara, L. Henley, L.
Braine of Wheatley, L. Hesketh, L.
Broadbridge, L. Hives, L.
Butterworth, L. Holderness, L.
Buxton of Alsa, L. HolmPatrick, L.
Cadman, L. Hooper, B.
Caldecote, V. Howe, E.
Campbell of Alloway, L. Hylton-Foster, B.
Campbell of Croy, L. Jenkin of Roding, L.
Carnarvon, E. Johnston of Rockport, L.
Carnegy of Lour, B. Kimball, L.
Carnock, L. Kinnoull, E.
Chalker of Wallasey, B. Kitchener, E.
Charteris of Amisfield, L. Lauderdale, E.
Clark of Kempston, L. Layton, L.
Colnbrook, L. Lindsey and Abingdon, E.
Colwyn, L. Long, V. [Teller.]
Constantine of Stanmore, L. Lyell, L.
Cranborne, V. McColl of Dulwich, L.
Crathorne, L. Macleod of Borve, B.
Crickhowell, L. Margadale, L.
Cumberlege, B. Marlesford, L.
Davidson, V. Marsh, L.
Denham, L. Mersey, V.
Denton of Wakefield, B. Montgomery of Alamein, V.
Derwent, L. Morris, L.
Dilhorne, V. Mottistone, L.
Dundonald, E. Mowbray and Stourton, L.
Dunrossil, V. Moyne, L.
Eccles, V. Murton of Lindisfarne, L.
Ellenborough, L. Nelson, E.
Elles, B. Norfolk, D.
Norrie, L. Stodart of Leaston, L.
Oppenheim-Barnes, B. Strafford, E.
Orkney, E. Strathcarron, L.
Oxfuird, V. Strathclyde, L.
Park of Monmouth, B. Strathcona and Mount Royal, L.
Pearson of Rannoch, L.
Peel, E. Strathmore and Kinghorne, E. [Teller.]
Pender, L.
Peyton of Yeovil, L. Sudeley, L.
Prentice, L. Swansea, L.
Rankeillour, L. Swinfen, L.
Rawlinson of Ewell, L. Teviot, L.
Renton, L. Teynham, L.
Rodger of Earlsferry, L. Thomas of Gwydir, L.
St. Davids, V. Thurlow, L.
St. John of Bletso, L. Trumpington, B.
Saltoun of Abernethy, Ly. Ullswater, V.
Seccombe, B. Vaux of Harrowden, L.
Selborne, E. Vivian, L.
Shannon, E. Wakeham, L. [Lord Privy Seal.]
Sharples, B.
Skelmersdale, L. Westbury, L.
Skidelsky, L. Whitelaw, V.
Stockton, E. Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.45 p.m.

[Amendment NOS. 222 and 223 not moved.]

On Question, Whether Clause 31 shall stand part of the Bill?

Baroness Lockwood

I wish to oppose the Question whether Clause 31 shall stand part of the Bill. I listened with great interest to the previous debate. Much that was said bears closely on my opposition to Clause 31. I endorse much of what was said by my noble friend Lord Eatwell in his analysis, but my judgment of the situation is that the Bill would be far better without this clause. I reject what the Minister and other speakers said about wages councils being detrimental to women. I shall refer to that in due course.

First, I shall oppose this clause from an entirely different angle; namely, that of equal pay. Many Members of the Committee who are present, but not the two Ministers, will recall the protracted debates that we had in 1984 when we considered orders to amend the Equal Pay Act to provide for equal pay for work of equal value. The Committee may recall that that amendment was brought about because of infringement proceedings initiated by the EOC alleging that the Equal Pay Act did not comply with European legislation. The result was a judgment of the European Court of Justice.

As a consequence, the Government brought in what might be described as a byzantine set of processes and regulations which were largely criticised at the time in this Chamber as being unworkable and which have subsequently proved to be unworkable. That was why in 1990 the Equal Opportunities Commission put forward to the Government further proposals to tackle the problems of equal pay and to introduce a Bill providing for equal opportunities which combined the provisions of the Equal Pay Act and the Sex Discrimination Act. So far the Government have not acted on those recommendations from the Equal Opportunities Commission.

At the time when we amended the Equal Pay Act it was argued —indeed, it has been argued since 1970, when the Equal Pay Act was first introduced—that wages councils were an integral part of the statutory means by which the principle of equal pay could be promoted in the United Kingdom. Indeed, wages councils are the only means of collective protection for women in sex segregated low paid work. I am sure that many Members of the Committee will be aware that one of the major problems in establishing equal pay is sex segregated work.

The alternative to the wages council is the expensive and protracted legal proceedings of cases being taken by individuals through the industrial tribunals, possibly right through the legal process to the European Court in Luxembourg. One example of that is the recently published judgment of the EAT appeal against an award by an industrial tribunal. 'That involved the Coal Board. It is a case which had been running for over seven years and is probably not yet settled. Although the EAT made a judgment, the case may go further.

Is it the Government's wish and intention that that kind of situation should continue through individual cases being taken to tribunals? Or are they looking at the possibility of some overall means of dealing with the problem of unequal pay? Also, have they consulted the European Commission on the moves being taken to abolish the wages councils? Could the abolition of the wages councils lead to further proceedings against the UK on the grounds of infringement of the European Community's equal pay legislation? Those are extremely important questions which are related to the whole of Clause 31. I should like the Government to answer them specifically.

Further, perhaps I may say that, despite what the Minister said, the evidence that I have seen suggests that throughout the 1980s the wages councils have been a factor in reducing the wages gap between men and women. New research by PEP shows that the wages councils have performed a positive and unrecognised role in eliminating discrimination in pay between the sexes, particularly over the past 10 years.

In its report, Narrowing the Gender Pay-Gap—how wages councils work for women—PEP reveals that among manual workers women in the wages council sectors earned 81.3 per cent. of male manual workers' hourly earnings as compared with 71.5 per cent. across all industries. I do not suggest that the wages paid under the wages councils are by any means adequate. I do not believe that low wages are the answer to the UK's economic problems. In fact, I believe that the contrary is true; that is, that we need a highly-waged, highly-skilled technical workforce if we are to overcome our problems. But at the moment the position is as it is. I ask the Government to look carefully at the implications for them if they abolish the wages councils on grounds of equal pay. Furthermore, in doing that, I ask them to look, as an alternative to the wages councils, to the implementation of the recommendations by the Equal Opportunities Commission.

Lord Shackleton

I am surprised that we should be debating this subject at all. If ever there was an item that was well understood in industry it is the system of wages councils. I was a director of two companies in charge of personnel. Those companies employed thousands of people. We never had any problem with wages councils except that, if we found ourselves having to pay more to meet the requirements, it was an indication that we were not paying enough.

I should be sorry if the provision were removed from the statute book. It is a satisfactory system. I spoke to colleagues today—one was from a large department store group and the other from the biggest mining group in the world. In neither case have they had trouble. I hope that we shall take a little time and not throw out the provision.

Lord Rochester

For my part I do not believe that there is conclusive evidence one way or the other as to whether removal of young people from the scope of wages councils in 1986 had the effect of increasing or decreasing employment in the trades affected. The fact that it has been possible to compile so much evidence on both sides of the argument is indicative of its inconclusive outcome.

The noble Viscount, Lord Ullswater, in replying to an earlier debate, said that it was clear beyond doubt that wages councils acted as a barrier to employment. He quoted some evidence from the OECD to that effect. But equally, other evidence to the contrary has been adduced. For what it is worth, my view is supported by the Institute of Personnel Management, which, in a survey, found that the 1986 legislation led to no significant changes in employment levels.

However, some facts stand out clearly. First, as the noble Lord, Lord Gilmour, said, the Committee is right to be highly sceptical about a decision to abolish wages councils which is based on consultation of five years ago when last year there was a general election at which the proposal could well have been included in the Conservative manifesto but was not.

Secondly, in that abolition has the effect of reducing pay or, just as bad, acting as a disincentive for people to take jobs in sectors now covered by the councils, that is bound to increase the number of claims for family credit from those with children, who are most affected by poverty. I agree with those who feel that the social security system should not be used to subsidise low wages paid by unscrupulous employers. It is regrettable that the Government do not seem to have made any assessment of the cost to taxpayers of the resulting increase in eligibility for benefit.

In contrast to a national minimum wage, to which I and my party are opposed and which would be determined from the centre by statute, the minimum wages set by wages councils are negotiated between employers, employees and independent people in the relevant trades. The system also allows for a targeted industry-by-industry approach rather than the inflexible across-the-board approach that a national minimum wage would involve.

Of course it would be better if wages councils allowed for regional as well as sectoral flexibility. But that and other imperfections in the system are arguments not for abolition but for reform. As I said at Second Reading, most desirable would be an integration of a tax and benefit system under which benefits could be directed not to those on low pay, but to ensure that people—especially those with families —enjoy a decent minimum income.

It is claimed that minimum wages council rates have the effect of pushing up the pay of people who earn more. In my view, that is a legitimate criticism of a national minimum wage, which, because of its effect on differentials, would have damaging consequences for productivity and competition. But it is ridiculous to suppose that a small increase in the rate set by a wages council has the effect of pushing up pay throughout the whole salary range in the affected sector. In the end I believe that our economic and social problems will have to be solved by establishing common ground on which political parties can stand together. Otherwise they may not be solved at all.

Judged by that yardstick, the abolition of wages councils is a retrograde step from which even now the Government would be wise to hold back.

Lord Campbell of Alloway

Having listened to the arguments, on balance I nonetheless adhere to the view that I would not wish to abolish wages councils. Whatever way it is put, it is not right to have a minimum wage. But it is right that there should be flexible pay structures which give incentives to individual performers.

I have already given my broad reasons. Other reasons are contained in a document that appears to have reached the noble Lord, Lord Eatwell. I refer to a Department of Employment note of February 1993. I shall not weary your Lordships with any further reasons. But I wish to deal with the interesting problem of unequal pay and the suggestion that in some way it is related to the retention of the wages councils. With the greatest respect to the noble Baroness I do not believe that it is so related (though I may be wrong), because it seems to me to be a wholly disparate problem. If something needs to be done it ought to be resolved on its merits, not in a Bill such as this relating to the retention or abolition of wages councils but in some other enactment. If there is a problem with industrial tribunal decisions, the European Court of Justice and so on, whether one retains or abolishes the wages councils there will be some aspects of the problem that are bound to override the situation.

I suggest that that should be treated as a separate item and does not afford an argument for the retention of the wages councils. For those and other reasons that I will not mention I support the Motion, That Clause 31 stand part of the Bill.

6 p.m.

Lord McCarthy

Having tried on this side of the Chamber to persuade the Committee to go along with our ingenious arguments, we have failed. It is right that we should have this debate on the clause as it stands. Many arguments can be made for and against it. What is remarkable is that the arguments that have been made for the clause have been so slight and narrow. It can be argued in favour of wages councils —indeed, it has been argued most recently by the noble Baroness who moved that the clause stand part —that they have done a considerable amount for the cause of equal pay and the elimination and mitigation of sex discrimination in pay. No answer was forthcoming from the Government on that ground, though one hopes one may hear one in due course.

Another point that can be made, and has been made on this side of the Chamber—I must say that the noble Lord, Lord Skidelsky, does not understand it —is that the argument for wages councils is sometimes said to be put on the basis of low pay. That is a negative way of putting it. It is put on the basis of a living wage, which is not the same as poverty, that is to say, that there shall be a level of pay below which people shall not sink. If the Government got their way and their plans came to fruition, and it was the case that the wages councils were holding up rates to the full extent of the difference between wages council rates and non-wages council rates (because wages councils, stretching across the whole economy, are far from comprehensive), there would be a cut from about £3 per hour, which would be the average wages council rate, to about £2 per hour, which would be the rate for similar unskilled work outside the wages council area. We would say that a cut of that size was too much and it was wrong for a civilised country to allow such wages, which were not living wages, to be paid. That argument has not been met or even debated by the Government but it is an argument about living wages and low pay, not about poverty.

The Government have based their argument—in so far as they have argued—on the effects on unemployment. That is one small part of the economic case. They have said that if we abolish wages councils we shall arrest the rise in unemployment. That is the worst argument because it is the most inconclusive of all the arguments. One can look at this matter in two ways. Either one has simulations or one does field work. If one does simulations, whatever equations are put in the desired answer falls out at the bottom. One can set it up to show that there is or is not an employment effect. Simulation will produce the answer. If one goes out and asks people or looks at what has happened, for example where wages councils have been abolished—and quite a few have been abolished—or one looks at what has happened in those cases where wages council coverage has been abolished for certain groups, such as young people, one finds that the factors that affect the level of employment (which are very complicated), overwhelmingly dominate any effect that may arise from mucking about with wages councils or minimum rates. That is what field work shows. The whole thing is totally inconclusive. If the Government want to stand upon that in the middle of a recession they have a very weak argument.

One has to ask oneself what is the real argument. I put it to the Minister—and he can disallow it or set it aside if he does not like it—that I believe the Government have been led down this route by its ideology. For a very long time the Government have believed that the labour market ought to work and would work if only trade unions could be got out of the way. In effect they have had trade unions out of the way for 10 years. The labour market ought to be working but it is as bad as ever. The relationship between productivity and wages and unit labour costs is as bad as ever, certainly if one looks at international comparisons. That should not happen if the Government's theory of economics was correct. Now that one has got trade unions out of the way one ought to have much more flexibility in wage rates and falls in money wages at the level of unemployment that one has.

The Government have to advance some other explanation. The only explanation they can find is the statutory regulation of the labour market. This is the thinnest of all the arguments. The main reason why wages continue to rise is not that they are being pushed up by trade unions but that they are being pulled up by management. The first principle of management in the 1990s seems to be that the first charge on the firm must be the maintenance and improvement of the real wages of managers. That is why we have tremendous differences in differentials. The lowest decile goes up by 4 per cent. and the highest decile goes up by 47 per cent. in real terms, because the first principle is that managers have to look after their own real incomes and they are not mean enough to stop some of it dropping down to workers further down. To have more regulation of trade unions and to abolish wages councils will do nothing whatever to tackle that problem. But the Government are in the grip of ideology and one cannot talk sense to ideology.

Lord Skidelsky

I should like to open up a more general issue about the relationship between wages councils and employment. First, however, I should like to take up a point raised by the noble Lord, Lord McCarthy. He said that a level of pay below which no one should sink should be the goal of any civilised society. Had he said "a level of income below which no one should sink", I would have endorsed that proposition completely. The noble Lord has not completely understood the distinction between a living wage and a living income. That was the whole point of the argument that one should deal with poverty through the tax system and not the wages system.

The noble Lord was good enough to say at Second Reading that I was deviating from the teachings of my biographical subject, John Maynard Keynes. I should like to quote what Keynes said on this matter in his evidence before the Macmillan Committee in 1930: If on the ground of humanity or justice you want to give the poorer part of the community £100 million more income you would be wiser to do that out of taxation than by fixing the wages of individuals at a higher figure than it pays their employers to give them". That is the proposition on which I take my stand in this debate.

Let us come to the evidence. First, I do riot pay very much attention to the empirical results because, as has been said, they are inconclusive. One has to start with an intuition. It is one of the most powerful intuitions in economics. The noble Lord, Lord Eatwell, may say that it is lesson one and that I have never got on to lesson two but it is a very powerful intuition and one that instinctively strikes laymen as being acceptable. It is that if the costs of doing business are lowered, more business will be done, other things being equal. Of course, that applies to all costs. It applies to the hassle costs of doing business, which is of great importance to small firms, particularly when they are faced with bureaucratic costs which are an enormous tax on labour. That is one very good argument in itself for getting rid of the wages council machinery for small firms. But wage costs are a key element in costs. Again, the intuition is that if wage costs are lowered, more labour, other things being equal, will be demanded. There are circumstances in which that is not true—one can think of circumstances in which it is not true—but as an intuition, that seems to take us a very long way.

My second intuition is that the market covered by wages councils is a competitive market, or it is a more competitive market than many other markets in the economy. So one would expect what follows from there being a large number of buyers of labour. If one accepts that as a basic institutional datum, one would intuitively expect wages to be set by competitive conditions and not fixed below the value of the marginal product of the workers concerned.

The noble Lord, Lord Rochester, talked about unscrupulous employers. There seems to be a general feeling that employers who pay low wages are unscrupulous. I do not accept that. Suppose we agree, for the sake of argument, that all employers are unscrupulous, the conditions under which they can exercise their lack of scruple—their lack of scruple can affect wages—is fixed by the institutions of the market. My contention is that this market is more of a competitive market than otherwise.

6.15 p.m.

Lord McCarthy

I do not think people would generally say that employers who pay very low wages are unscrupulous. What we are saying is that they are inefficient. We are saying that those who find that they cannot pay more than £2 an hour are the most inefficient of all the people in the labour market. If they go out of business, more efficient people take their place.

Lord Skidelsky

That is an assertion.

Lord McCarthy

That is intuition.

Lord Skidelsky

It may be that the labour is not very efficient. In many cases we are talking about the lower end of the skills range. It may be that labour in this market is not very efficient and that workers are paid low wages which represent the value of their product to the employer. That may be true irrespective of the motives of employers. If one is in a competitive market one cannot consistently undercut the going wage for that market.

There has been no real attempt in any of the evidence that has been produced to quantify the degree of imperfection in the labour market. I refer to the study by Machin and Manning, which was mentioned by the noble Lord, Lord Eatwell, during the previous debate. They claim that this is a monopsonic market and that it approximates more to a case where there is a single buyer of labour.

However, they have not attempted to quantify the degree of imperfection in that market. They have given a test. They say that the increase in wage dispersal that the authors found to be a consequence of the softening of minimum wage requirements in the 1980s suggests that this is an imperfect market. It is not, I suggest, a good test of competitiveness in that market but may simply reflect variability in local conditions exposed by the declining bite of the wage council rates over this period. We are in the realm of assertions and intuitions here.

If we come to the empirical evidence, studies of the link between pay and employment at national levels tend to show that increases in pay caused by statutory wages are likely to decrease employment. Many studies show this. One can refer to the study by Gregg and to a study by Kaufmann in the Economic Journal of 1989 which showed a weak negative relation between pay and employment. There are studies from the United States. There are also the remarks of the OECD which have already been quoted. The study by Machin and Manning, which is the key study of the effect of wages councils in this country, states that this negative correlation between wages and employment is not present or cannot be found in wage council industries. But there are weaknesses in that study. In particular, they do not estimate the effect of changes in the statutory minimum rates on part-time workers.

Lord Eatwell

The noble Lord should be aware that because the new earnings survey does not adequately cover part-time workers no serious studies of the effects of minimum wages cover part-time workers. The data simply are not available.

Lord Skidelsky

That simply confirms the point I have just made. The data do not cover the effects on part-time workers. The effects on part-time workers are extremely relevant in this context because at least half of wages council workers are part-time workers, largely female.

My main criticism of surveys of this kind—this is why surveys of this kind will never give you the answers that you want—is that the study is a very good—

Noble Lords


Lord Skidelsky

Surveys of this kind will not give you the answers that you want and they will not give me the answers that I want either. The study is a very good example of econometric bamboozling. One does not get in that study any of the raw data on which the correlation coefficients are based and one does not get in that study any clear statement of ceteris paribus conditions—other things that need to be the same for these results to hold. This is an important matter when one is covering the effects of changes on a small number of industries. The economic evidence is inconclusive. I accept that. The effects of minimum wages may be different in different places at different times. Therefore, it is very good to rely on one's basic intuitions in this matter. That seems to be the only rational way of proceeding. One's basic intuition—

Noble Lords


Lord Skidelsky

If Members of the Committee opposite have some different concept of rationality in this case I should be very happy to hear it. But all they have cited as evidence is studies which do not back up their position.

Baroness Seear

I am going to be extremely rude. In all humility, we have to reach Amendment No. 279. I implore my colleagues that we do not descend into the senior common room which many of us have suffered for far too many years. Perhaps we can just avoid the senior common room. That would be a very great help.

Lord Skidelsky

I am responding to the very senior common room remarks made by the noble Lord, Lord Eatwell. They deserve a reply. That is how the argument should be conducted on this issue which has many technical features. I have gone through that part of the argument.

I want to return to the basic statement on which I rest my case for supporting the Government. That is that the alleviation of poverty and the achievement of a basic income should be the task of the taxation and political systems and not that of wage fixing. That has no place in the task of alleviating poverty. We hope for a situation in which wages will increase steadily with the rise in the efficiency of industry. But actually to intervene in bargains between employers and employees is to distort the market; to get the market to send out wrong signals; to allocate labour inefficiently; to slow down the aggregate growth of employment; and in the end not to have the desired effect of alleviating poverty anyway. For those reasons I support Clause 31.

Earl Russell

I hope that my noble friend Lady Seear will allow me 30 seconds in the senior common room. We have here the undistorted market existing somewhere outside Plato's cave. There is only one undistorted market which I have ever heard of in the whole world. That was the foreign currency market in Kiev which opened shortly after Black Wednesday and where in a whole day not a single transaction took place. That is the undistorted market.

I intended to reply rationally and not intuitively to the Minister. He had one single argument in answering the amendment of the noble Lord, Lord Eatwell. He said that the abolition of wages councils would create jobs. He gave us very little reason to believe that. But for the sake of argument I concede that. If it creates jobs, can the Minister say at what cost?

I understand what the noble Lord, Lord Skidelsky, said about the difference between a living wage and a living income. But the lower wages go the higher the proportion of the living income which has to come from the state. In fact, if wages go below what is regarded by the social security benefits system as subsistence level—which God knows is low enough —the proportion of the cost which falls on the state must go up. I agree with the noble Lord, Lord Gilmour of Craigniillar, whose speech I listened to with great pleasure. But I do not see why the taxpayer should subsidise the bad employer.

But the cost to the state is not only a matter of increased benefits; it is also a matter of lost revenue. This Government are a very long way from realising how much of their present difficulties in the public sector borrowing requirement are the result of falling tax revenues because of diminishing economic activity.

The noble Earl, Lord Caithness, in a Written Answer of 25th March, gave me a Treasury estimate of the effect on income tax and national insurance yields if average earnings should fall by 1 per cent. It involves the loss of £1.14 billion. That figure leaves out VAT. I did not ask the Treasury about that because I thought it might cause them some interpretative difficulty.

The effect on benefit is perhaps even greater. If one considers a man with four children paying a rent of £50 a week, earning £135, and one assumes that his income decreases to £110—which would be the likely effect of this clause—that would cost the state £851 extra benefits in a year and £388 in lost tax. That is over £1,000 lost to the Exchequer from one person.

Right-wing governments around the world have had very considerable trouble with public sector deficits. That does not only apply in this country, but in the United States and Australia. We constantly hear noble Lords opposite talking, as the noble Lord, Lord Skidelsky, has done, about the need to keep down wages. I do not believe that they understand what a rod they are pickling for their own backs in terms of the public sector borrowing requirement that they are building up. Before doing that, they should stop and think about the drag created by the public sector borrowing requirement which grows too high on employment throughout the rest of the economy. They are cutting off their noses to spite their faces.

They should wonder about their own concept of the bogus job. If I want to spend money, as Chancellor of the Exchequer, repairing holes in a school roof, that is not a bogus job. I am paying for a service that I want rendered. But if a job is incapable of being sustained at a living wage, that is not an economic job. The noble Lord, Lord Boyd-Carpenter, most unexpectedly, is casting himself in the part of the heir of Louis Blanc. There is an even wider question here which is whether, in the long term, Marx or Keynes was right about the development of the capitalist system. My gorge rises at the thought of conceding that Marx might have been right about anything.

Marx thought—and this Government have been arguing with him for so long that they are getting like a crusty married couple who are becoming like each other because they have quarrelled so long—that continual competition would continue to force down wages until it led to the collapse of capitalism. In 1929 many people found that picture convincing; in 1949 there were many fewer. That lesson has been forgotten.

I know that we live in a global economy, but I do not believe that we shall do very well setting out to compete with Taiwan. It is a competition which we are likely to lose. If, globally, wages continue to be forced down by competition, there is not going to be anyone left to buy anything. If we try to sustain our jobs by a Speenhamland system of subsidising uneconomic wages, the bill left to be picked up will be very big indeed.

Lord Blease

The question of wages councils occurs in the penultimate clause of the Bill and it deals specifically with Northern Ireland. I do not want to touch on that at this stage but with the principle. Can the Minister say why we have the summary way in which the Government have decided to abolish en bloc the wages council system? Is it not the denial of the right of workers in low-paid industries, which has existed since 1909, to rely on fairness to be brought to bear on working conditions and wages? Can the Minister say why the machinery within the wages council legislation for constructive procedures and the establishment of recognised collective bargaining arrangements is not pursued? What studies have been undertaken by the Government to assess the consequences of social deprivation which will result from the sudden en bloc abolition of the wages councils?

6.30 p.m.

Baroness Gardner of Parkes

I should like to speak in favour of retaining the wages councils because the points raised by the noble Baroness, Lady Lockwood, are very valid. It is women who will be the most adversely affected if the wages councils are abolished. As I understand it, the wages councils now do a much smaller job than they used to—and I think that that change is for the better. However, at their current level it is important that they should be retained.

In both this clause stand part debate and in our discussion on the previous amendment, I heard statements that there are better ways of dealing with low-income families. That is a fallacy. As has been said, giving people state benefits so that they might subsist is something that we do, but it is not the ideal. People like to have the dignity of earning their own way through life. That applies particularly to women who work long hours, often part-time, in very low paid employment. Women do that because they want to make a contribution to their family's income and I think that we should encourage them to continue doing that.

It should always be worth working. Too many people today would like to work but do not have that opportunity. We should ensure that those who are willing and able to find work continue to have the opportunity of taking up work. I consider myself to be a strong Conservative and I believe that there should never be an incentive for people simply to sit back and to claim from the state.

I have heard many comments about wages and a "Taiwan economy"; but, as is the case with rents, I do not think that the movement of wages should always be upwards only. We could go seriously wrong if we believed that everything should always go up. However, when we lose our currency value, we lose again because we suddenly find that all imported goods are costing a lot more, and that means people's wages do not buy what they once did.

We live in a competitive world and the real answer is productivity. We are more likely to get high productivity from people who feel that they are receiving a fair wage for the job and not a pittance without any protection at all. I have been surprised in industrial tribunals at the number of employees who have lost their jobs who would happily have taken another job with lower pay rather than be unemployed. No one wants to be unemployed.

Wages councils protect the people who are right at the very bottom of the income scale. My noble friend Lord Skidelsky mentioned a powerful intuition. I believe that there is no intuition as powerful as women's intuition. My intuition is that we should not become too involved with the theory on this, and with discussions on studies and yet more studies. By the time that I had listened to a convoluted argument about Machin and Manning being the definitive study and then to the noble Lord saying that there were faults in that study (because he did not agree with it), and then to him saying that it was all bamboozling, I was getting more and more bamboozled myself. I hate to vote against the Government; but with my woman's intuition, I feel that this is one issue on which I must do so because I must support the retention of the wages councils.

Lord Stoddart of Swindon

I should like to make a couple of short points. First, it must not be thought that employers en bloc are in favour of this legislation. Many good employers deplore what the Government are doing. Indeed, many good employers are fearful about the results of this legislation because they say that many bad employers will cut their wages and that if they are to be competitive they will then have to follow suit although they want to retain wages at at least wages council levels. So, let it not be thought that all employers are in favour of this legislation.

The other strange phenomenon that we have heard in this debate is that the Conservative Party—not the Labour Party, not the Liberal Party and not the Communist Party—is saying that wages should be subsidised. There is something for us. There is a turn-up for the book. The Conservative Party is saying that we should subsidise wages. Yesterday in the House of Commons the Secretary of State for Trade and Industry said that we should not subsidise wages, yet today we hear from the noble Lord, Lord Skidelsky, from his common room and from the noble Lord, Lord Campbell of Alloway, from his Chambers that that is the way to settle wages—that we should subsidise them. In other words, we should subsidise bad or inefficient employers. Frankly, it is nonsense. Have not they heard of Mr. Peter Lilley, the Secretary of State for Social Security, who is embarking upon an exercise to reduce his department's £80 billion budget? He is not looking for any increases through wages subsidies or income support; he is looking for cuts, and he is looking for cuts because the Government are heading for a £50 billion public sector borrowing requirement deficit. How is it, then, that here today we have the Conservative Party—I must emphasise again that we are talking about the Conservative Party—advocating subsidising wages at the same time as the other part of the Conservative Government are saying that we must cut the PSBR and limit or even cut the social security budget? Perhaps the Minister will please explain it to me because I have no intuition about this. I need to have this paradox explained to me as I am sure do all other noble Lords. I say again to the Minister, "Please let us have the explanation".

Lord Eatwell

I promise to obey the stricture of the noble Baroness, Lady Seear, and not become involved in common room arguments other than to say that I think it is the intuition of many that the earth is flat, and the noble Lord, Lord Skidelsky, displayed flat-earth economics with considerable skill in his speech.

I support the remarks made by the noble Earl, Lord Russell, the noble Baroness, Lady Gardner of Parkes, and my noble friend Lord Stoddart of Swindon. The issue which the noble Viscount has not faced, which he has continuously refused to answer, is: what is the estimated cost to the Exchequer of this measure? Why should we be using the family credit system, as suggested in the 1988 consultation document, to subsidise employment? The Minister must answer those questions because this is the economic argument as opposed to the social argument; it is the core argument of economic efficiency against the clause.

Viscount Ullswater

We have had another long debate, and I should like to answer as many of the points that have been raised as possible. Perhaps I may start with the noble Baroness, Lady Lockwood. It is important to say that the abolition of the wages councils has nothing whatever to do with sex discrimination. None of the fundamental planks of the United Kingdom's comprehensive framework of sex discrimination legislation is at all altered by the councils' demise. Any woman working for an employer in a wages council trade who believes that a man in the same employment doing like work or work of equal value is being paid more can bring an equal pay complaint to an industrial tribunal. That is the position now and it will still be the position when the councils are abolished.

I must advise the noble Lord, Lord McCarthy, and my noble friend Lady Gardner of Parkes that the abolition of the wages councils will have no effect whatever on women's existing rights to bring claims for equal pay.

Baroness Seear

I am sorry for interrupting the Minister, but if the overwhelming number of workers in wages council industries are women, as is undoubtedly the case, is there not at least an argument that there will be indirect discrimination if we abolish wages council rates?

Viscount Ullswater

No, I do not agree with that argument. The fundamental fact that noble Lords opposite are peddling is that wages will go down immediately. The noble Lord, Lord Eatwell, is keen to demonstrate that wages will go down.

Lord McCarthy

Is the Minister telling us now, at 20 minutes to seven, that the Government will have all these positive employment effects without wages going down?

Viscount Ullswater

No. It is important that wages should find their own level. It is the Equal Pay Act not wages councils which will assist women. Wages councils are much more about minimum pay, not equal pay. The Equal Opportunities Commission has taken legal advice which suggests that the Government are in continuing breach of the principles of equal pay for men and women, and that the abolition of wages councils will result in further breaches of Article 119 of the Treaty of Rome and the equal pay directive. We shall study the opinion forwarded by the EOC. However, we have previously examined the proposals for any possible effects they may have on equal pay and came to the clear conclusion that abolition of the wages councils will not breach the equal treatment directive or the equal pay directive.

The Equal Pay Act 1970 and the Sex Discrimination Act 1975 mean that the UK complies fully with its obligations under European Community law. Our legislation will remain entirely consistent with Community laws after the councils have been abolished.

Baroness Turner of Camden

Is it not a fact that the gap between male and female rates is much narrower in wages council industries than in industry generally?

Viscount Ullswater

What is important is work of equal value. If there is a difference between the two, a woman can take the case to the industrial tribunal. I shall reply briefly to the noble Lord, Lord Blease. Consultation took place in Northern Ireland at the same time as it took place in this country. I do not believe that further consultation is necessary'. Interested parties in Northern Ireland, just as in Great Britain, have had the opportunity to express their views before the councils are abolished, as the wages order provides.

Perhaps the most obvious point is that employees in wages council industries are not all, or mainly, low paid. Each council covers almost the entire labour force of a particular industry, not just employees at the bottom of the pay scale. Large retail shops are not staffed entirely by shelf fillers. They also have check-out operators, supervisors, office staff, departmental managers and store managers. Workers in wages council industries are spread across the whole pay distribution. We know that more than two-thirds of them are paid significantly above the statutory minimum rates.

The term "poverty pay" represents an even greater distortion. Low pay and poverty are not synonymous. It is easy to jump to the conclusion that those on relatively low rates of pay will be poor. Nothing is further from the truth. The majority of lower paid workers, and indeed about half of all workers in wages council industries, work part-time. Young and part-time workers are usually not the sole source of income for their families. Frequently, they are second or even third earners in their households.

The plain fact is that lower paid workers live in households which are spread over the whole income distribution; about half of them in the top half of the distribution. That is a figure with which the noble Lord, Lord Eatwell, will agree. Almost as many low-paid workers are in the richest fifth of households as in the poorest fifth.

Opposition attacks are based on the assumption that the abolition of the councils will be the prelude to significant and widespread reductions in wages.

Lord Stoddart of Swindon

I am trying to follow what the Minister is saying. Is he suggesting that because people in wages council industries, who may be low paid, may be part of a two-income family, they should not expect a reasonable wage? Is he now saying that as well as the state subsidising bad employers, husbands and wives should subsidise bad employers because they happen to be making a larger contribution to the household? It is nonsense.

Viscount Ullswater

No, I was saying that the lower-paid workers live in households which are spread over the whole income distribution. That is what the evidence indicates.

Baroness Nicol

What evidence?

Viscount Ullswater

Over time a somewhat different pattern of pay might well emerge. Most employees will probably detect no immediate change in their pay though some new entrants may receive lower starting rates.

The best indication of the implications of the abolition for overall pay rates is from previous abolition of wages councils and removals from wages councils control. The previous Labour government abolished 11 councils covering some 600,000 workers. There is no evidence of a reduction in average earnings as a result. The 1986 Wages Act took young people aged under 21 out of wages council regulation entirely, since which time their gross wages have continued to grow.

I know that noble Lords opposite have persuaded themselves that the price of labour can be increased artificially without reducing demand, but the plain fact is that basic economic laws apply. I listened carefully to my noble friend Lord Skidelsky. I enjoyed the lesson in economics that he gave the Committee. I agree with his interpretation of economic law rather than that of noble Lords opposite, including that of the noble Earl, Lord Russell, who demonstrated with his own figures that it is better and cheaper for the Treasury for someone to remain in work rather than to become unemployed. If the price of labour is raised by statute, the number of jobs goes down. But that does not mean that it is possible to make reliable numerical estimates. A great many factors influence the level of employment and wages in the labour market. It is idle to pretend that there is a magic formula which will isolate one single factor.

Noble Lords opposite and the Labour Party in another place have had every opportunity to say that they would reintroduce wages councils, and they have failed to do so. Labour Party policy is to introduce a national legal minimum wage starting at half men's median earnings and rising to two-thirds of the male median hourly rate. The national minimum would thus be somewhat higher than the minimum rates set by the wages councils. Various bodies have estimated the likely effects on employment and estimates have ranged from 25,000 jobs lost to well over a million, with up to 2 million jobs which could be lost if the pay differentials of higher paid workers were restored fully. However, for wages councils, which set lower minimum, which cover only a limited number of industries, and which will therefore have a smaller impact on employment, the plain fact is that there is no reliable way of estimating the extent of the employment effect.

The noble Lord, Lord McCarthy, misled the Committee. He said that productivity has not increased, whereas in fact it has increased considerably this year. He said that unit wage costs are not comparable with those of our major competitors. In fact, they are rising much more slowly now than those of our major competitors.

Lord McCarthy

What I said, as Hansard will show, is that if one takes the decade as a whole, unit labour costs in this country are not competitive with unit labour costs in Europe.

Viscount Ullswater

The councils were introduced to counteract poor conditions and wages in the Edwardian era. They attempted to tackle poverty in an age before the safety net of social security benefits and before comprehensive health and safety measures. The councils have now been in decline for many years. From a peak of 66 councils in 1953 their number has fallen so that now there are only 24 which are still active. Their coverage and operation is shot through with difficulties and anomalies. The wages council system has been perpetuated for too long. It is time to end it.

Baroness Turner of Camden

Before the Minister sits down, he mentioned 1953. Does he agree that there was a high level of employment at that time, and that the high number of wages councils seemed to have no effect on that?

Viscount Ullswater

I believe that trying to draw the conclusion that the retention of wages councils means high employment is taking things a little far.

Lord Eatwell

Before the Minister sits down, will he address the question which should be associated with any measure which a responsible government advances; that is, of the Exchequer cost of the measure, which he has persistently refused to give? Members of the Committee will know that the Exchequer cost of the wages councils system as presented in the consultation document was £2.5 million—just £2.5 million. It is my estimate that the Exchequer cost of the abolition of wages councils in a full year will be £400 million. Does the Minister agree with my estimate?

Viscount Ullswater

If the noble Lord reads my words carefully in Hansard he will see that I have addressed that problem.

Baroness Lockwood

Before the Minister sits down I wish to point out that I asked two specific questions which he has not addressed. First, I asked whether he was satisfied that there should be a procession of individual cases, such as the 700 involved in the British Coal case before the EAT to which I referred, rather than a collective mechanism such as wages councils. The Minister did not reply specifically but he did say that the Equal Pay Act was the remedy that women had. I do not know what deductions I must draw from that. Secondly, I asked whether the Government have consulted the European Commission. The Minister's response was to say that he had had a legal opinion from the Equal Opportunities Commission. If that is so, and if that opinion indicates that the wages councils could be an infringement of Article 119 and the directives, how can he be so sure that the abolition of the wages councils does not affect equal pay?

Viscount Ullswater

I am sorry that I did not address myself to two of the questions which the noble Baroness put. She mentioned a case concerning employees of British Coal, which involves complex points of law. Inevitably, there would be a great number of appeals and, indeed, counter appeals. It may be that the numbers are 700, as she suggested, but I am not aware of that. However, complex points of law are involved. I tried to demonstrate that the Government are convinced that the action which they are now taking does not breach any European statute.

6.53 p.m.

On Question, Whether Clause 31 shall stand part of the Bill?

Their Lordships divided: Contents, 112; Not-Contents, 85.

Division No. 3
Aberdare, L. Ferrers, E.
Alexander of Weedon, L. Flather, B.
Allenby of Megiddo, V. Fraser of Carmyllie, L.
Archer of Weston-Super-Mare, L. Gisborough, L.
Goold, L.
Arran, E. Goschen, V.
Astor, V. Gray of Contin, L.
Astor of Hever, L. Greenway, L.
Beloff, L. Gridley, L.
Belstead, L. Grimston of Westbury, L.
Blatch, B. Halsbury, E.
Blyth, L. Harmar-Nicholls, L.
Borthwick, L. Harmsworth, L.
Boyd-Carpenter, L. Harvington, L.
Brabazon of Tara, L. Hayhoe, L.
Braine of Wheatley, L. Hemphill, L.
Brookeborough, V. Henley, L.
Butterworth, L. Hesketh, L. [Teller.]
Cadman, L. Hives, L.
Caldecote, V. Holderness, L.
Campbell of Alloway, L. HolmPatrick, L.
Carnegy of Lour, B. Hooper, B.
Carnock, L. Howe, E.
Chalker of Wallasey, B. Hylton-Foster, B.
Clark of Kempston, L. Jenkin of Roding, L.
Colwyn, L. Johnston of Rockport, L.
Craigavon, V. Kilmarnock, L.
Cranborne, V. Kitchener, E.
Crickhowell, L. Lauderdale, E.
Cumberlege, B. Leigh, L.
Davidson, V. Lindsey and Abingdon, E.
Denton of Wakefield, B. Long, V.
Dundonald, E. Lyell, L.
Elks, B. McColl of Dulwich, L.
Elphinstone, L. Macleod of Borve, B.
Elton, L. Marlesford, L.
Faithfull, B. Marsh, L.
Merrivale, L. Saltoun of Abernethy, Ly.
Mersey, V. Seccombe, B.
Montgomery of Alamein, V. Selborne, E.
Morris, L. Skelmersdale, L.
Mottistone, L. Skidelsky, L.
Murton of Lindisfarne, L. Stewartby, L.
Napier and Ettrick, L. Stodart of Leaston, L.
Newall, L. Strathclyde, L.
Norfolk, D. Strathmore and Kinghorne, E. [Teller.]
Norrie, L.
Orkney, E. Sudeley, L.
Oxfuird, V. Swinfen, L.
Pearson of Rannoch, L. Thomas of Gwydir, L.
Pender, L. Trumpington, B.
Peyton of Yeovil, L. Ullswater, V.
Prentice, L. Vivian, L.
Rankeillour, L. Wakeham, L. [Lord Privy Seal.]
Rennell, L.
Rodger of Earlsferry, L. Wyatt of Weeford, L.
St. Davids, V. Wynford, L.
St. John of Bletso, L.
Addington, L. Kirkhill, L.
Alport, L. Kirkwood, L.
Ardwick, L. Lawrence, L.
Ashley of Stoke, L. Llewelyn-Davies of Hastoe, B.
Auckland, L. Lockwood, B.
Beaumont of Whitley, L. Macaulay of Bragar, L.
Blease, L. McCarthy, L.
Brimelow, L. Mackie of Benshie, L.
Broadbridge, L. McNair, L.
Carmichael of Kelvingrove, L. Mallalieu, B.
Carter, L. Masham of Ilton, B.
Cledwyn of Penrhos, L. Merlyn-Rees, L.
Clinton-Davis, L. Molloy, L.
Cocks of Hartcliffe, L. Morris of Castle Morris, L.
Darcy (de Knayth), B. Nicol, B.
David, B. Ogmore, L.
Dean of Beswick, L. Peston, L.
Dormand of Easington, L. Pitt of Hampstead, L.
Eatwell, L. Prys-Davies, L.
Ewing of Kirkford, L. Rea, L.
Fisher of Rednal, B. Redesdale, L.
Fitt, L. Richard, L.
Gallacher, L. Robson of Kiddington, B.
Galpern, L. Rochester, L. [Teller.]
Gardner of Parkes, B. Rodgers of Quarry Bank, L.
Gilmour of Craigmillar, L. Russell, E.
Glenamara, L. Seear, B.
Graham of Edmonton, L. [Teller.] Sefton of Garston, L.
Serota, B.
Grey, E. Shackleton, L.
Hamwee, B. Stoddart of Swindon, L.
Harris of Greenwich, L. Strafford, E.
Henderson of Brompton, L. Taylor of Blackburn, L.
Hilton of Eggardon, B. Taylor of Gryfe, L.
Hollick, L. Tordoff, L.
Hollis of Heigham, B. Turner of Camden, B.
Houghton of Sowerby, L. Varley, L.
Howie of Troon, L. Wedderburn of Charlton, L.
Jay of Paddington, B. Whaddon, L.
Jeger, B. White, B.
Jenkins of Hillhead, L. Williams of Elvel, L,
Judd, L. Winchilsea and Nottingham, E.
Kilbracken, L. Wise, L.

Resolved in the affirmative, and Clause 31 agreed to accordingly.

7.1 p.m.

Baroness Turner of Camden moved Amendment No. 224: After Clause 31, insert the following new clause:

("Report by the Secretary of State following abolition of wages councils

.—(1) The Secretary of State shall present annually to both Houses of Parliament a report on the pay and working conditions of employees in industries formerly covered by wages councils and in the security and private residential care industries, having consulted the Trades Union Congress, the Confederation of British Industry, the representatives of employers and employees in the industries concerned and such bodies concerned with low pay and equal opportunities as he thinks fit.

(2) The first such report shall be presented within 12 months of the day on which the wages councils are abolished.").

The noble Baroness said: Again we return to some of the arguments made on the previous amendments. We have just voted on wages councils and the Committee has agreed that the clause shall stand part of the Bill. But we have said repeatedly that wages councils cover the poorest and most vulnerable in the workforce. It has not been disputed that large numbers of women and those from ethnic minorities are involved. Most are not unionised. Indeed, the industries covered by wages councils have been notoriously difficult to organise. There are many reasons for that, not least that many of the unskilled and vulnerable people are too scared of losing what employment they have to put it at risk by joining a union.

We have had a long and interesting debate on the whole issue and there is little point in covering it again. However, the amendment tries to continue the commitment which was to some extent undertaken by wages councils. The amendment seeks to transfer it to the Secretary of State. If there are no wages councils, the people formerly covered by them should not be abandoned altogether nor, as Members of the Committee have already said, should we rely on the social security system to subsidise bad employers. The market will not look after those people; quite the contrary. Without wages councils, they will be entirely vulnerable to exploitation.

That is less likely to be the case if the employers involved realise that they are to be the subject of some form of monitoring and that Parliament will be watching via a report to see precisely how they are behaving towards their employees. As we said in the earlier debates, we are not talking about people who can command very high wage rates. Even the wages councils' figures are not high. They range from £2.63 to £3.308 per hour, which is not much by way of remuneration. Now we have passed the Motion that the clause stand part of the Bill, I hope that this amendment, which seeks to give some form of cover and some kind of monitoring to those industries where there were once wages councils, will have the support of the Committee. I beg to move.

Viscount Ullswater

The amendment would require the production of an annual report on the pay and working conditions of employees affected by the repeal of Part II of the Wages Act 1986 of workers in the security and private residential care industries and, as drafted, also those affected by earlier wages councils abolitions.

The purpose can only be to establish a platform for further debate on wages councils after they have been abolished. The new clause stipulates that the TUC, the CBI, employer and employee bodies for the relevant industries—I presume that that includes trade unions and bodies concerned with low pay and equal opportunities such as the Equal Opportunities Commission—would have to be consulted prior to the production of the annual report. The composition of the consulting bodies means that any subsequent report would be against the background of opinion partly critical of the effects of abolition.

The new clause would not prevent the abolition of wages councils. It would require the Secretary of State to lay before Parliament an annual report on the levels of wages of employees now covered by the councils, those in the security and private residential care industries and those covered by wages councils at any time in the past. I find it difficult to believe that the proposed reports are intended to cover workers in industries some of whose councils were abolished up to 73 years ago. It would reopen to no useful purpose questions already long settled.

The Government already compile and publish detailed annual earnings statistics which derive from the new earnings survey. Copies are available in the Library. Those figures mean that Members of both Houses already have available to them a wider range of high quality data than is available for almost any other country in the European Community.

The security and private residential care industries have never been covered by wages councils and it would be pointless to combine them in a report with industries previously covered by the councils. An association exists within the security industry which has developed guidelines on pay and other working conditions. The security and private residential care industries have been held up as example of low paying industries. In those industries, where free collective bargaining exists, the average gross hourly pay, excluding overtime, for a full-time male worker in the occupation "security guard and related industries" in April 1992 was £5.13. The gross hourly rate for a full-time female worker in the occupational category "hospital and nursing homes" was £3.99 per hour. Those hourly rates are not much different from average rates of pay for manual workers. In any event, it is for employers and workers to agree terms and conditions of employment.

The amendment is not an attempt to improve the clause. It is either irrelevant or seeks to delay abolition. I urge the Committee to reject it.

Baroness Turner of Camden

I am not surprised by the noble Viscount's response to the amendment, which was intended to be constructive, and it is based on the decision taken by the Committee to accept the clause which abolishes wages councils.

I am surprised by some of the rates given by the noble Viscount. I have information about security pay. For example, for a security guard, the rate is £2.30 per hour. It is not unusual for a guard to receive less than £2 per hour for that kind of work. For nursing auxiliaries I have a figure of £2.42 per hour. Those are not high rates of pay. One reason that those industries were added to the clause is because employers in those industries are notoriously bad payers. It was felt in drafting the amendment that it might be an idea to have an annual report on those industries where pay is generally rather less good than it alight be.

I do not intend to press the amendment. However, we may wish to return to the issue on Report because I am unwilling to relinquish it without taking further steps to try to protect people who I believe will be grossly exploited if there are no wages councils. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32 [Constitution of industrial tribunals]:

Baroness Lockwood moved Amendment No. 225: Page 49, leave out lines 19 to 22.

The noble Baroness said: The purpose of the amendment is to remove the clause, which would open up the possibility of equal pay cases being heard alone by the tribunal chairman. It would have the effect also of removing the possibility of a chairman sitting alone by virtue of the fact that the parties have given their written consent.

I wish to make four points on the amendment. The first relates to the industrial tribunal system. It was designed as a cheap and accessible system to enable unrepresented parties to bring and defend cases. It has not worked out quite as was anticipated because it seemed that it is becoming more and more legal. But to allow industrial tribunal chairman to hear cases alone—and I understand in certain cases in private —would represent a further move towards an increasingly legalistic and inaccessible forum for the administration of justice in equal opportunity and pay cases. That is a matter of concern.

Secondly, the clause presents a further problem for equal opportunities. If we look at the composition of industrial tribunals, we can see that women, black people and members of ethnic minorities are very much under-represented within the entire industrial tribunal system, and particularly so at chairman level. I know the Government have been making efforts to increase the number of women on industrial tribunals but if we were to move in the direction proposed in the Bill it would undermine the role of women on industrial tribunals and it would be counter to what the Government have been doing.

Thirdly, there is concern about the length of time that elapses before the commencement of tribunal proceedings. It is feared that women could increasingly face pressure to allow their equal pay cases to be heard by a tribunal chairman alone. That will not help the position of women because, again, it has been found that it is tribunal chairmen, more than the representatives of the two sides of industry, who seem to suffer from a lack of expertise and training in equal pay matters. I believe that that could be detrimental to women who are putting their cases before a tribunal.

Finally, the Government might like to comment on my next point. It is believed that the Government are trying to shift the burden of delay in the county court system over to the industrial tribunal system by allowing industrial tribunals to hear breach of contract claims. There is already pressure on the county courts. If that pressure is to be shifted to industrial tribunals, that again would disadvantage people making claims. If they were to take such a claim to an industrial tribunal rather than to the county court, no legal aid would be available. Furthermore, I understand there is a requirement on the statute book for a deposit of £150. If that were enacted, it could pose yet another deterrent to women making well-founded cases. I would very much appreciate hearing the Government's comments on this situation. I beg to move.

Baroness Turner of Camden

I rise to support my noble friend's amendment. As she has said, the clause in the Bill enables chairmen sitting alone to hear cases. I can understand that the Government are anxious to speed up hearings as there are many delays in industrial tribunal cases and also in EAT hearings. However, I wonder whether this is the correct way to do it.

Industrial tribunals were, of course, originally conceived as a quick and easy way of securing justice in employment matters. It was originally hoped that the proceedings would be simple enough for ordinary employees with no legal training to make their own cases. It has, however, not worked out like that. Things have become more legalistic over the years with the result that the individual applicant is ill-advised, in my opinion, to appear before an industrial tribunal unrepresented.

One of the aspects of industrial tribunals which made them acceptable to all sides was their tripartite nature. There is, of course, the legally qualified chairman assisted by two sidespersons intended to be broadly representative of both employees and employers in industry and commerce. I believe that that was a useful innovation. When making a case for an applicant—I have made a number of cases in my years as a union official—it was helpful to know that the two sidespersons were not professional lawyers but had some knowledge of working conditions and industrial relations practice. The provision that it is all right for a chairman to sit on his or her own undermines the confidence that applicants may have that those adjudicating will have some idea of the kind of conditions at work with which they may have had to contend.

As I said earlier, if the Government wish to speed up the processes, this is not the way to do it. Nor do I believe that it is a shortage of suitable sidespersons that is responsible for delays. I rather suspect that there is an ideological reason for the proposition, as with so many others in this Bill. The Government do not like tripartitism. They are not against quangos in general. After all, it is always possible to appoint to quangos those with the right outlook—the "one of us" syndrome. However, in industrial relations, tripartitism is bound to involve ensuring that employees are somehow represented, mainly as a result of union nominations. I suspect that the Government do not like that very much.

However, it is not just unions and ordinary employees who are less than happy about this prospect. I was recently visited in this Chamber by two representatives of an employers' federation which had in membership a number of small firms. They viewed the provision allowing a legally qualified chairman to sit alone as importing yet more legalism into the system. They think that if firms are going to have to make a case before a lawyer with no assistance from sidespersons, they will have to spend money on being legally represented whereas under the present system they send along their managers or personnel people. Therefore I support my noble friend's amendment which I believe is useful in the circumstances.

7.15 p.m.

Baroness Seear

I also wish strongly to support this amendment. I have nothing against lawyers as such. They can be pure as the driven snow and I daresay they nearly all are, but the fact remains that one needs an input of people who have real practical experience of industrial relations at the level at which the case is being operated. That was the whole principle of the initial idea of industrial tribunals. It is a great pity that that is to be abandoned because the more things can be settled by agreement between the two sides in industry with the chairman acting to hold the ring, as it were, and to deal with legal matters, the better. However, matters should be considered by people who have real understanding of what goes on at the industrial level. Again, one is bound to suspect that this matter concerns the vendetta that the Government are waging against trade unions. I very much hope that the Government will accept this amendment.

Baroness Gardner of Parkes

I do not support this amendment as I consider the industrial tribunal system works well as it is. I do not consider that people need to be represented officially or formally. In fact I believe that they often do far better by presenting their own case because the people hearing the case then go to great trouble to make them feel at ease and to help them in presenting their case. There is nothing worse than being badly represented at an industrial tribunal. That does one's case harm. There are all kinds of people who set themselves up to represent others in these cases although they are not legally qualified and they do not represent a trade union. They are just people who have created an industry for themselves to present cases before industrial tribunals. Often the applicant bringing the case places great confidence in the person presenting the case and that confidence is far from justified. The applicant fares worse in that situation than if he were presenting his own case.

As regards this amendment, I believe that it would be quite in order in certain circumstances. Often the parties to a case decide not to appear and they ask for a case to be heard in their absence. In that instance it would be practical for the case to be heard in their absence. There are all kinds of reasons why people do not appear in person. They may have taken up new jobs and are not prepared to take time off or they may have moved to another part of the country and decide that the tribunal is being held too far away for them to attend it.

As I understand the position, one can refuse to have one's case heard by the chairman alone or one can give reasons why it is inappropriate to have one's case heard by the chairman alone. The amendment concerns the provision where people have given written consent for the case to be heard by the chairman alone. The Government may wish to consider the provision where a person signs an agreement and has 14 days to reconsider it. They may wish to consider introducing a provision whereby one can withdraw one's written consent within so many days of giving it. This amendment concerns written consent. Indeed, breaches of contract have been mentioned by the noble Baroness, Lady Lockwood.

I speak as someone who sits on an industrial tribunal. Very often the contract is so interlinked with the employment issue that we would be pleased to resolve what appears to be a comparatively simple matter for the applicant. The applicant then goes away very dissatisfied. His or her only hope of taking the matter further is by going to court afterwards, which involves a great deal of time and trouble. Yet the matter was fairly straightforward and could have been settled in the tribunal. Therefore, I believe that it would be beneficial for tribunals to have the power to look into contract issues. I do not support the amendment.

Lord Wedderburn of Charlton

I support the amendment of my noble friend Lady Lockwood, although I do not believe that the problems of tripartism are as easy to resolve as has sometimes been represented. The amendment addresses a particular point in the clause. I note that parties who have given their written consent are not able to withdraw it. That appears a curious doctrine. Perhaps it stems from the Government's conviction concerning the sanctity of contract: it can never be varied. However, I foresee people giving consent conditionally, for a practical reason.

As the noble Baroness, Lady Gardner of Parkes, said, it is sometimes difficult to tell how a tribunal will proceed. It does not have the set course of a High Court action. Workers often go from one adviser to another. They may find better advisers during the course of proceedings. Having gone to the tribunal unrepresented they may have given their written consent but, if they are then advised that that is not in their interest, it surely cannot be right that under no circumstances whatever can they subsequently withdraw it. At the least, those words should be deleted or some other condition included in the Bill.

Baroness Denton of Wakefield

I hope that I shall be able to reassure the noble Baronesses and the noble Lord that the Bill largely maintains the current tripartite nature of the tribunal system. Lay members' practical knowledge of employee relations in the workplace can be especially valuable in cases of alleged unfair dismissal and alleged discrimination where the role of women and ethnic minority members is particularly relevant. I note the comment of the noble Baroness concerning low numbers of lay members in those categories.

We do not believe that the great majority of cases will be affected by this provision; for example, unfair dismissal claims and complaints of discrimination on grounds of sex and race where the practical knowledge and experience of lay members may be particularly valuable. We would expect that a three-person tribunal would continue to hear such cases.

We believe that those cases generally involving less need for practical experience of employee relations where the lay members play their role, such as Wages Act claims which tend to turn on legal issues and cases which are uncontested by the employer, do not necessarily need to be heard by lay members. Even in those cases the chairman will have discretion—and I hope that this reassures the noble Lord, Lord Wedderburn—to order a hearing by a three-person tribunal if that seems more appropriate in exercising the discretion under subsection (2F) at any stage in the proceedings. Therefore, even in cases where chairmen have been given discretion to sit alone they may well choose not to do so. As the case evolves they can turn to a three-person tribunal. The sit-alone provisions will apply only where appropriate. There is no threat to the quality of decisions.

We intend to monitor carefully the effect of the new provisions to sit alone. We shall consider the results after a reasonable period of experience before coming to any conclusion about the adequacy of the provisions. We hope that by removing some cases it will speed up the hearing of cases for which tripartite sittings are appropriate. We recognise that parties should he fully informed and we shall be taking that into account in the explanatory literature and the forms which people will receive to make certain that they understand where that might be appropriate.

I hope that in view of those assurances the noble Baroness will withdraw her amendment.

Lord McCarthy

Before the noble Baroness sits down perhaps I may ask her a question. If the parties were subsequently to decide that they did not want the tribunal chairman to sit alone, as we understand it at the moment they can do nothing about it because they have given their agreement. If the chairman decides, as he or she may well decide after listening to the case, that the matter is rather more complicated than originally thought and he or she would like side members, would it be possible for the chairman to stop the show and have side members? If it is possible for the chairman to change his or her mind, why can the applicant not do so?

Baroness Denton of Wakefield

We believe that in that instance, as the case proceeds, the expertise and knowledge of the chairman will make it possible for everyone to work towards the best conclusion.

Baroness Lockwood

I thank the noble Baroness for the information which she has provided and in particular for the statement that the Government will monitor the situation before coming to a final conclusion about the effectiveness of the provision. That is very helpful.

I shall consider carefully what the Minister said. I may come back with a further amendment at Report stage depending on how satisfactory I find her statement when I read it in Hansard. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Morris

Normally, in moving an amendment, I would be brief, pithy and concise. However, as we have arranged to rise at 7.30 p.m., I do not believe that two and a half minutes is sufficient to allow time for any support which my remarks will undoubtedly generate. Perhaps I may be so bold as to suggest that we rise at this stage. I should be most grateful for any help which my noble friend sitting as Deputy Chairman of Committees and Her Majesty's Government Front Bench can offer in that regard.

Viscount Goschen

I beg to move that the House do now resume. In doing so I suggest that the Committee stage begin again at 8.30 p.m.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.