Lords Sitting of 25 January 1994

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Peterborough.
Baroness Willoughby de Eresby— Sat first in Parliament after the death of her father.

Iraq: Human Rights
Lord Archer of Weston-Super-Mare Lord Archer of Weston-Super-Mare asked Her Majesty's Government:
What action is being taken to ensure that the Government of Iraq carries out UN Resolution 688 concerning human rights in Iraqi Kurdistan.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, we will maintain pressure on Iraq to observe Security Council Resolution 688 and other resolutions and to cease repression of its civilian populations, including Kurds and Shia. We, the United States, France and Russia made a démarche to Iraq on 5th January protesting about Iraqi behaviour. The Security Council also took Iraq's failure to observe Resolution 688 into account when it decided on 18th January that there were no grounds to lift UN sanctions.
Lord Archer of Weston-Super-Mare: My Lords, I thank my noble friend for that reply. However, is she aware that the Iraqi UN representative has begun a "charm offensive" on the other ambassadors in the United Nations in order to obtain the lifting of Resolution 688? Can my noble friend assure us that the Foreign Office has no intention of being charmed by that evil tyrant and will not allow that sanction to be moved until Saddam assures the safety of the Kurds in the north and the Shias and marsh Arabs in the south?
Baroness Chalker of Wallasey: My Lords, like most women I have learnt to recognise the so-called "charm offensive" and not to be taken in by it, from whatever source it comes. But, more seriously, the only guarantee for the needy people of Iraq is for them to concentrate their efforts on the defeat of the dictator, Saddam.
Lord Mellish: My Lords, is it not a fact that Saddam Hussein gets away with blue murder? He ignores United Nations resolutions; he does exactly what he wants to do and we are given to understand that our Government can do nothing. Is that really the position? Can we not amalgamate with America, France and Russia to prepare our air forces so that we can say to Saddam Hussein, "If you do not do what you are told, you will get it"?
Baroness Chalker of Wallasey: My Lords, I should like to think that we could follow the advice of the noble Lord, Lord Mellish. I regret to say that the international community, which imposed severe sanctions and does
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not intend to lift them, does not have a large number of options at its disposal. I was interested to read that the Iraqi National Congress managed to produce in Baghdad a newspaper under the name of Saddam's newspaper, Babil, which led the people of Baghdad to rejoice because they thought that some moves towards the overthrow might be beginning. I believe it is within Iraq that we must encourage the defeat of Saddam. Bombing of Iraq by allies will achieve nothing and harm many thousands of innocent people.
Baroness Blackstone: My Lords, as a woman, can the noble Baroness tell the House what was meant by her phrase, "maintaining pressure"?
Baroness Chalker of Wallasey: My Lords, we take every opportunity in the United Nations to bring Iraq to book for all the atrocities that it continues to commit. Much as I should like to see Saddam removed—as I am sure would the noble Baroness and all other Members of your Lordships' House—from his position as dictator in Iraq only the Iraqi people can do that. I do not believe that we have the capacity to go further than the United Nations is already prepared to go; that is, to operate sanctions against Iraq.
Lord Avebury: My Lords, while I entirely agree with the noble Baroness that the overthrow of the dictator must be accomplished by the Iraqi people themselves, what specific measures have the Government taken to help the Iraqi National Congress and other democratic forces in Iraq?
Baroness Chalker of Wallasey: My Lords, specific measures have been taken to help the Iraqi National Congress with its "Operation Provide Comfort" for the Kurdish people in the north. We maintain good contacts and links with them. We talk to and advise them when they ask for it, but we do not have a right to interfere. That is one of the problems that from time to time commentators in this country lose sight of. However, we shall continue to help the Iraqi National Congress to achieve democracy, which is what its members want.
Lord Avebury: My Lords, has any money been given to them?
Baroness Chalker of Wallasey: Yes, my Lords. But I do not have the figures to hand.
Baroness Park of Monmouth: My Lords, can my noble friend say what objection there could be to a decision by the United Nations to apply some of Iraq's sequestered assets to the building of a power station in what is, after all, northern Iraq?
Baroness Chalker of Wallasey: My Lords, I do not see that there could be any objection, but the Iraqis have not helped their own population, which they are perfectly free to do, because they have failed to implement Security Council Resolutions 706 and 712, which permit Iraq to export the oil. There are many other ways in which the Iraqis could help their own people but they have failed to do so and now they are not even continuing negotiations on that possible implementation.
Lord Tordoff: My Lords, are the Government worried by the developments in Russia which seem to indicate that the extreme nationalists and the communists are seeking to sway the Russian Government to back off from their support for the United Nations resolutions?
Baroness Chalker of Wallasey: My Lords, I have indeed heard similar accusations but I do not know the veracity of them. I do not think that they are widespread among those in charge of Russia's overseas affairs but I shall certainly look into what the noble Lord said because I share his concern.
Lord Archer of Weston-Super-Mare: My Lords, although the Minister does not have the latest figures for aid I thank her for the fact that Britain has a larger aid programme for that part of the world than any other part of Europe.
Baroness Chalker of Wallasey: My Lords, it is only the figures for the Iraqi National Congress that I do not have to hand. I am grateful for what my noble friend has done and for his efforts with the Kurdish people in northern Iraq and for Miss Nicholson's efforts with the Shias in southern Iraq.

Single European Act
2.45 p.m.
Lord Barnett Lord Barnett asked Her Majesty's Government:
Whether they are satisfied with the working of the Single European Act.
Baroness Chalker of Wallasey: My Lords, yes, the overall working of the Single European Act is satisfactory. It has brought a number of benefits including completion of the single market and improved foreign policy co-operation.
Lord Barnett: My Lords, it is not clear to me how the noble Baroness can be content given the huge variation in VAT and duties. I speak as someone who is in favour of the single market being effective and indeed of the Maastricht agreement, but will she accept that it is quite impossible for the single market to succeed while the VAT and duty rates are so widely varying? For example, on whisky the French have half the rate that we do. In those circumstances, what does she plan to do to make sure that the single market really works?
Baroness Chalker of Wallasey: My Lords, the noble Lord, who knows far more than I about VAT and duties, having levied such high ones when he was at the Treasury many years ago, is probably in a very good position to give me some helpful suggestions. But he has not done so. We are aware that distortions can come from these duties; but that will be resolved over time and it is not something that can be done immediately. There are many other aspects of the single market which are working very much in Britain's favour.
Lord Bruce of Donington: My Lords, is the noble Baroness aware that at the time of the passing of the Single European Bill, my noble friend Lord Stoddart
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and I were told by the Government, and indeed by some members of our own party, that unless the Single European Act came into operation, all kinds of dire consequences would follow and that unemployment in Europe would rise, as evidenced by the Cecchini Report of that time? Is she further aware that the more the Single European Act appears to be in operation, the worse economically Europe as a whole and our own country seem to have become as a consequence?
Baroness Chalker of Wallasey: My Lords, I really do not think even the noble Lord, Lord Bruce of Donington, can blame the Single European Act for those social costs which have been imposed heavily by many of the individual countries on their nations. We who have sought not to impose such heavy social costs on industry are the country coming first out of recession and most strongly.
Lord Thomson of Monifieth: My Lords, is the Minister aware that there are still some important gaps in the working of the single market? One of them is the rules regarding public procurement, particularly in the telecommunications field. If the Government could use their influence to make progress on that, it would be to Britain's benefit.
Baroness Chalker of Wallasey: My Lords, that is just indeed what we intend to do.
Lord Stoddart of Swindon: My Lords, the noble Baroness will remember, as my noble friend Lord Bruce pointed out, that the Cecchini Report said that if we did not have a single market, there would be economic difficulties; and that if we did, 5 million jobs would be created. What has happened is that we have had the economic disaster and we have lost 5 million jobs. Is it not a fact that the working of the Single European Act is going awry because many non-tariff barriers are being put in the way of our exports, particularly by France and Germany? My organisation, the Campaign for an Independent Britain, published a pamphlet before the passing of the Single European Act. It was called Single Market or Double Cross? We now know of course that we were double crossed.
Baroness Chalker of Wallasey: My Lords, there are few times when I feel a little annoyed by the noble Lord, but this is one of them. I shall say why. Without the Single European Act this country would have lost many more opportunities. I wonder how often people realise just how much investment has come to this country because we are a member of the European Community and because we have participated fully in the Single European Act and were in fact one of the first to do so. When the noble Lord speaks about a level playing field and non-tariff barriers, I say to him that, yes, there have been individual problems, but they are minimal compared with the successes which we have had as a country in competing with others. Where better enforcement of the single market legislation is needed, we have a special unit in the DTI to deal with that. We shall continue using that unit for Britain's best future.
Lord Gisborough: My Lords, does my noble friend know the amount of foreign investment in this country compared with the rest of Europe and whether that is related to the fact that we are in the Common Market?
Baroness Chalker of Wallasey: My Lords, the figures are very strong. Some one-third of Japanese and US investment in the European Community has come to this country as opposed to going to others, for the very simple reason that we are offering the best opportunities for those countries in the European Community.
Lord Ezra: My Lords, will the noble Baroness indicate what the Government are doing to stimulate industry to take advantage of the new opportunities in the single market? Whereas a year ago the DTI was conducting a very high profile campaign to this effect, its efforts in that direction have subsequently diminished. Is that correct?
Baroness Chalker of Wallasey: My Lords, the effort of the 1992 campaign was obviously to make every business in the country well aware of the open market which commenced at the beginning of 1993. I do not believe that any business which is looking to the future—most businesses have increased their export markets—could possibly be in any doubt about the opportunities. The DTI has special offices in each region to deal with business both within the Community and now in the wider economic area which the applicant countries to the European Community are fully engaged in.
Lord Eatwell: My Lords, further to the noble Baroness's answer to the supplementary question put by my noble friend Lord Barnett, will she confirm that the rates of VAT now levied by this Government are more than double the rates which were levied when he was at the Treasury?
Baroness Chalker of Wallasey: My Lords, so far as I know, rates throughout the Community have varied. While ours have gone up, if we are to meet what the noble Lord, Lord Barnett, said a moment ago, then we must work towards—although we may not quickly reach—common levels.
Lord Richard: My Lords, it was kind of the noble Baroness to agree (as indeed she had to) that VAT rates are higher now than they were when my noble friend was Chief Secretary to the Treasury. Since she could not resist the temptation of taking a swipe at the social attitudes and policies of other member states, apart from the United Kingdom, what is going to happen now when social policy is to be discussed? Under the terms of the Maastricht Treaty, are we to leave the room and leave the discussion on social policy to the other members or are we going to sit there supine and say nothing?
Baroness Chalker of Wallasey: My Lords, I firmly believe that we shall participate so far as we are able. But for the sake of Britain, we negotiated the opt-out from the social chapter. We shall not participate in the final decision if it is working against Britain's interests. That is why we had the opt-out. I was very interested to hear the noble Lord say what he did at the beginning of
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his question. I have to conclude from that that if he is in agreement with his noble friend Lord Barnett, then he would be putting up VAT rates still further.
Lord Barnett: My Lords, the Government have had 15 years in which to reduce the VAT rate which I imposed, but they have done nothing about it. The question I was really asking was this: if the single market is to be effective (which I want) what are the Government doing to harmonise the rates? As I understand it, VAT harmonisation will not come until 1997 at the very earliest. So what are the Government doing about it? Has the noble Baroness seen the KPMG consultant's report—I am sure she has because she is smiling, and I am charming her now—which shows that 48 per cent. of exporters have seen no benefit from the single market?
Baroness Chalker of Wallasey: My Lords, perhaps I may first deal with the KPMG report. The noble Lord may know that I am a former market researcher. This is a survey which, on a self-selecting basis, got only a 5 per cent. response. While the company may have been satisfied with that, I, as a market research fellow, would not be. Neither would I be happy not to know what happened to the 52 per cent. which the noble Lord did not mention. When he speaks about VAT, we are going quite wide of his original Question. I remind the noble Lord that we have retained unanimity on all matters of taxation. That will enable us to prevent undesirable Community legislation if we so find it. We shall be working to find the best way to resolve taxation.
Lord Dormand of Easington: My Lords, is the noble Baroness aware—
Noble Lords: Next Question!
Lord Dormand of Easington: —that we are very concerned that such a pleasant lady should be so annoyed about what has happened, particularly when she is not normally like this? On a wider point, can she have words with her Chief Whip to say that it is really time that we had a full-scale debate on what is happening in Europe? I know that I am right in saying that in another place they have a full-scale debate every six months. It really is time that we did the same in your Lordships' House.
Baroness Chalker of Wallasey: My Lords, I am quite certain that my noble friend heard all that the noble Lord, Lord Dormand of Easington, had to say.

The Mentally Ill: Care
2.57 p.m.
Lord Mottistone Lord Mottistone asked Her Majesty's Government:
What action they are taking in response to representations that there seem to be widely conflicting views within the professions concerned about appropriate care for mentally ill people.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): My Lords, the Government are taking a range of actions to

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improve professional working within the mental health service through the task force launched on 1st January 1993, joint training schemes, support groups, Open University courses, working with the royal colleges and the King's Fund and through the production and use of the mental illness handbook.
Lord Mottistone: My Lords, I thank my noble friend for that reply which goes some of the way. Does she not agree that it is most unfortunate that psychiatrists are unhappy about the way in which the social workers interpret the code of practice for handling the mentally ill and that, vice versa, in many cases social workers are unhappy about the way the psychiatrists interpret the code? Arising from what my noble friend said, does she agree that it does not seem that the question of bringing the two together and making sure that both know what the rules really are is being pursued as actively as it should be?
Baroness Cumberlege: My Lords, I agree with my noble friend's first comment that it is essential that all the professions work together, not only nationally but at local level. But I do not agree with my noble friend's second comment. The Government are actively pursuing this matter through the measures which I outlined in my Answer.
The Earl of Longford: My Lords, I know that the noble Baroness is well versed in these matters. Does she agree that they cannot be fully considered without publication of the Reed Report concerning special hospitals? Can she explain why, after quite a few months, the report has not yet been published? Will she say when it is to be published?
Baroness Cumberlege: My Lords, I know that the noble Earl, Lord Longford, is very anxious that the report should be published, and so are we. But there is still more work to be done on it. Once that is completed we shall publish it.
Lady Kinloss: My Lords, can the Minister say whether the Government are satisfied that, before any mentally ill patient is discharged from hospital, there is an adequate community care programme arranged for them?
Baroness Cumberlege: My Lords, it is essential that that is the case. Indeed, my right honourable friend the Secretary of State introduced a number of measures in August and December of last year and again in January to ensure that the guidance given is followed.
Lord Dean of Beswick: My Lords, is the Minister aware that organisations and people dealing with this problem challenge what the Minister has said? Is she further aware that the people dealing with the problem and trying to operate the discharge of mentally ill people into the community are distressed at the increasing frequency of mentally ill people, having been discharged from hospital and sent out into the community, appearing very quickly on the list of homeless people?
Baroness Cumberlege: My Lords, that is why we intend to introduce legislation to ensure that the most difficult and vulnerable patients who have a history of repeated admission to hospital receive the aftercare that is needed. The Government recognise the need for a legal framework and we intend to introduce it as soon as the parliamentary timetable allows.
Baroness Fisher of Rednal: My Lords, is the Minister aware that the Housing Corporation and housing partnerships are becoming sceptical about helping mentally ill people discharged from hospital because they are failing to receive back-up from the Department of Health and the local authorities? Therefore, it ill behoves us to criticise if the housing associations cannot fulfil their part of the bargain struck when mentally ill people leave hospital.
Baroness Cumberlege: My Lords, we have involved the Housing Corporation in these schemes because we recognise the points that the noble Baroness makes. Housing is an integral part of discharge arrangements. We have also introduced short-stay hostels. Five are already open. Five multi-disciplinary psychiatric teams have been established in London to ensure that people who are discharged are well supported.
Baroness Jay of Paddington: My Lords, is the Minister aware that, as my noble friends' questions have demonstrated, there are a number of concerns about the operation of community care for people discharged from hospital? Is she certain that the legislative proposals of her right honourable friend will be tight enough? Is there not a need for resources to back the guidelines rather than just having guidelines on their own?
Baroness Cumberlege: My Lords, the resources that have gone into mental health have been considerable over the past 10 years or so. We have seen an increase in the number of community psychiatric nurses, consultant psychiatrists, mental illness day hospital places, local authority residential places, local authority day centre places and voluntary and private residential provision. All have increased substantially. I am convinced that there are sufficient resources. I am not convinced that the methods being used now are foolproof. Indeed, we are trying to introduce measures to ensure that, in most cases, we will be able to cover the situations mentioned by your Lordships today.
The Countess of Mar: My Lords, is the Minister satisfied that local social service departments have sufficient numbers of qualified social workers adequately to be able to cover the discharge of patients from mental hospitals?
Baroness Cumberlege: My Lords, that is under review. At the moment, we have no reason to suppose that there is a shortage.
The Lord Privy Seal (Lord Wakeham): My Lords, perhaps we should move on now to Question No. 4.

Bosnia: NATO Summit Decisions
3.2 p.m.
Baroness Williams of Crosby Baroness Williams of Crosby asked Her Majesty's Government:
In view of the continuing shelling of Sarajevo and the intervention with civilian aid convoys, what steps are being taken to act on the decisions of the NATO summit announced on 11th January 1994.
Baroness Chalker of Wallasey: My Lords, the NATO summit reaffirmed the alliance's decision taken last August on airstrikes. The summit sent a clear signal to the Serbs, which reinforced the warning that the UK and US had already given Milosevic. Shelling fell last week to the lowest level for many weeks. But all sides are responsible for horrific actions. We unreservedly condemn the shelling which killed young children in Sarajevo and Mostar this weekend.
Baroness Williams of Crosby: My Lords, I thank the. Minister for that Answer. I should like to express our congratulations to the Foreign Secretary on his courage in personally visiting central Bosnia to see what has been happening. In view of the Minister's Answer and the fact that only two weeks ago Mr. Koljevic, the vice-president of the Bosnian Serbs' so-called state which has no official standing at all, objected to the reopening of Tuzla Airport; in view of the fact that civilian aid convoys are still being regularly interrupted and that civilians, including innocent children, are still being shelled, I should like to ask the Minister whether the decision that was made at the NATO summit can now be activated with real action and real efforts to try to make the work of UNPROFOR effective?
Baroness Chalker of Wallasey: My Lords, the visit of the Foreign Secretary was indeed important. The UN has been asked, and is currently drawing up plans, for both Srebrenica and Tuzla under the new UN Secretary-General's Special Representative Mr. Akashi. The UN's plans will be put to us as soon as they are available. I very much agree with the noble Baroness about the reopening of Tuzla Airport. She may remember that it is now more than 15 months since I advocated that. Unfortunately, it is only recently that we have had the full support of our allies in wanting to go ahead with that. I can assure your Lordships that we shall leave no stone unturned to get aid to that area. The results of the aid that has been delivered are very creditable.
Lord Renfrew of Kaimsthorn: My Lords, does my noble friend share the sense not only of disquiet, but perhaps of shame, that many of us feel that, after so many United Nations resolutions and so many NATO and European Community statements, no effective action has been taken to deter the continuing Serbian aggression? Does she not feel that perhaps we are getting close to the time when some such action may be necessary?
Baroness Chalker of Wallasey: My Lords, one must realise that it is not only the Serbs who are committing
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those horrors. They are being committed by Moslems and Croats as well. Whatever action we take—and UNPROFOR, particularly BRITFOR arid our own ODA personnel, are carrying out extraordinarily good work in getting the aid through—it is important to remember that if we should have to take military action, almost inevitably those aid deliveries will cease. Having seen for myself the situation on the ground, I have to say that. I hope that we shall never have to take that action, but if we should have to, we shall.
Lord Molloy: My Lords, bearing in mind that the British Foreign Secretary is now probably one of the best informed statesmen in the world, cannot the Government make it clear to the United Nations that we are not prepared to sacrifice. our soldiers or those of any other country? There must, however, be massive action by the United Nations because if the UN fails it will mean total victory for the anti-democratic and fascist regimes.
Baroness Chalker of Wallasey: My Lords, I thank the noble Lord for what he said about my right honourable friend the Foreign Secretary. The only way in which the conflict can be ended is through political efforts. I find the efforts that are being made by the UN Secretary-General's Special Representative, Mr. Akashi, very creditable in these early days of his work in Bosnia. We shall give him all support. Of course, we shall play our role, but with others, in the political process and not only in the giving of aid or, should it come to it, in the bombing of those positions which are preventing the aid being delivered.
Baroness Blackstone: My Lords, is the Minister aware that the Government's recent vacillation over our commitment to the UN forces in Bosnia will encourage further aggression by all parties in that country? Does she accept that the withdrawal of French and British troops could precipitate a bloodbath far worse than the terrible loss of life that we have already seen in Bosnia?
Baroness Chalker of Wallasey: My Lords, I can assure your Lordships that there has been no vacillation by Her Majesty's Government, but the troops cannot continue indefinitely without political progress and co-operation with the aid effort from parties on the ground. The decision that we took on 18th August 1992 to put troops into Bosnia was to help the aid to be delivered. It was not for other reasons. The security of UK troops and of our aid workers must remain a key concern. As I said in answer to the noble Lord, Lord Molloy, the conflict will end only through the political process, and we must work at that as well.

Statutory Sick Pay Bill
3.8 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Viscount Astor): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Viscount Astor.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 1 [Restriction of employers' right of recovery]:
Lord Jenkin of Roding Lord Jenkin of Roding moved Amendment No. 1:
Page 1, line 5, leave out subsection (1) and insert
("(1) In section 158(1) of the Social Security Contributions and Benefits Act 1992 (recovery by employers of amounts paid by way of statutory sick pay) paragraph (a) shall be repealed and replaced by a new paragraph (a) as follows—
"(a) entitling, except in prescribed circumstances, any employer who has made one or more payments of statutory sick pay in a prescribed period to recover an amount equal to the amount by which such payments exceed a specified percentage of the employer's contributions payments for the same period by making one or more deductions from his contributions payments and" ").
The noble Lord said: The amendment stands in my name and that of two other noble Lords from the Front Benches opposite. That indicates that the amendment which I foreshadowed in my speech on Second Reading has attracted a wide measure of support. As well as the two noble Lords who have added their names to my amendment, the proposal which the amendment embodies is supported firmly by the CBI; it has the tacit support—I have to say—of the Institute of Directors; and it has the support of the British Payroll Managers' Association, and I shall be referring to that organisation later. I am told that none of the employer representatives on the Department of Social Security's employers' panel on SSP is opposed to the amendment. I believe that my noble friend the Minister will wish to take note of that as he listens to the debate.
Put simply, the purpose of the amendment is to provide a better targeted relief for small firms against the cost of exceptional sickness absence. Under the Bill, the Government propose to give relief to small firms, first, by identifying the firms which come—if I may put it this way —within the charmed circle: those with annual national insurance bills of under £20,000; and, secondly, by paying 100 per cent. of the SSP for any individual employee's period of sickness of four weeks or more.
I rehearsed briefly on Second Reading the disadvantages of that proposal, and this may be the moment to look at them in rather greater depth. First, the concept of the charmed circle: the idea that there is a cut-off point. Any firm below that point qualifies for the relief, while any firm above it is outside it.
Here I must draw the Committee's attention to an interesting document entitled Deregulation Task Forces Proposals for Reform. Page 1 states:
"Proposals affecting several or all Departments".
The heading is, "Small Businesses", and it states (right at the top of the first page):
"The representatives of small businesses on the Task Forces met as a separate group and unanimously agreed the following proposals which were subsequently ratified by all the Task Forces.
1. Do not create exemptions, barriers and thresholds for small business regulation. Regulate only where essential—and then universally".
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Yet, within days of the proposals of my noble friend Lord Sainsbury of Preston Candover being presented to the Government, we are debating precisely a measure providing for a threshold.
Any threshold is bound to be an arbitrary cut off. It must inevitably create unfairness, and so, at the margin, undesirable incentives. Inside the charmed circle, a firm will receive 100 per cent. of the relief for sickness of over four weeks; outside, it will receive nothing. My noble friend Lord Dean of Harptree suggested on Second Reading that that situation might be dealt with by a taper, but I agreed with my noble friend the Minister that tapers make the matter infinitely more complex. We are looking for simplicity for employers and for the people in the department who have to administer the scheme. That is the first flaw in the Government's scheme.
The second flaw is that the scheme fails to provide relief if a large number of staff are off sick for periods of fewer than four weeks; for instance, if there is a 'flu epidemic or a bus accident. Let me give an example of a firm of contract cleaners whose workers reach their place of work in a mini-bus. They travel together, and the mini-bus is involved in a serious accident in which all the workers are injured. They may all be off sick for three weeks. The total level of sickness is far in excess of the average. It is no fault of the employer. The employer is liable to pay them SSP, but under the Government's scheme there is no reimbursement to that employer because no one is off for more than four weeks.
I shall describe what the figures might be in such a case. Let us suppose that those cleaners earn about £100 per week, and they have a supervisor who earns twice that sum. The employer has a monthly national insurance bill of about £410 and a monthly turnover of about £5,000. The 1 per cent. cut in national insurance contributions saves that firm about £40 a month. It is a worthwhile saving for average sickness. The employees then have their crash and are off work for less than a month—let us say three weeks—and the firm has to pay SSP totaling £1,291. The employer will obviously have to find substitutes for the people off work, because he has to fulfil his contract. He has to hire temporary staff to do that, and yet he receives no help under the reimbursement scheme. It is the type of situation in which one would have thought the employer should be helped: it is something out of the ordinary which gives rise to a substantial bill for the employer. But, lo and behold, he receives nothing. In those circumstances, that business might face considerable difficulties.
Thirdly, even if there is a firm which is within the charmed circle, which would qualify for relief, it can receive considerable relief when common sense would say that it does not need it. One can take at the other end of the scale a small professional firm with a few highly paid employees and a substantial turnover which may run into hundreds of thousands of pounds. Because it is small, its national insurance bill is lower than £20,000 and therefore it is within the charmed circle. If that firm had a member of staff off even for as long as 12 weeks SSP would amount to £630 and it would receive back

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£420. That is ludicrous for a firm with a turnover running into hundreds of thousands of pounds. That is one of the effects of the Government's scheme.
As well as conflicting with the Sainsbury recommendation by having a limit of £20,000, the government scheme does not give help in ordinary cases —they may be exceptional, but they are easy to understand—where help is clearly needed. Yet the scheme shells out substantial sums of money to firms which do not need it.
Those three objections arise because the government scheme is targeted on the wrong target. It targets small firms as such and the individual length of sickness of the individual employee. What is needed is a system targeted to protect firms against exceptional sickness. It is the exceptional sickness which should trigger the relief and not whether the firm is of a particular size or an individual employee is off sick for a given number of weeks. What is looked for is compensation where the bill to the firm comes to substantially more than the relief offered by the 1 per cent. reduction in national insurance contributions.
The amendment proposes that each month—it is a simple system—a firm tots up its total national insurance contribution payments. It has to do that anyway, because it has to pay them. It then totals its SSP payments for that same month. If the payments amount to more than a given percentage—for the moment we have been talking about 5 per cent.—of the national insurance contributions, there should be full reimbursement of the excess. In that way, the target of exceptional sickness is hit—I was going to say fairly and squarely—accurately and effectively.
It does not depend upon a firm being within a charmed circle. It will therefore have the approval of the Sainsbury Report. There is no cut-off point, but common sense dictates—I touched upon this point on Second Reading—that almost by definition it is only relatively small firms which will have a significant number of people off at any one time. To have five members of staff out of a firm of 10 would not be unusual during a 'flu epidemic, but 500 out of 1,000 would be wholly exceptional. Perhaps, as I said, if there were an incident such as Bhopal and a large number of people were seriously injured in a massive explosion, the Committee might feel that some relief would be appropriate. However, it is mostly the small firms that would receive it. In short, the scheme is a universal form of disaster relief.
I said earlier that the CBI has come round to supporting the scheme. Perhaps I may quote from a letter which I received this morning. It states:
"Our members welcome your amendment, designed to provide more effective assistance for smaller firms who may experience excessive sick pay costs, for example, in the case of a 'flu epidemic. The proposal should provide help for those companies which really need it, without setting thresholds which create disincentives for small companies to employ more people".
As regards the example I gave of members of a small firm involved in a minibus accident, under the Government's scheme the firm will receive nothing. However, under the scheme proposed in the amendment, if the firm's monthly national insurance
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contribution is, say, £410—a figure which would be perfectly reasonable—and eight employees were off work for three weeks, its statutory sick pay would come to just under £1,300. Instead of receiving nothing it would receive about £1,270 back. That incident would be a disaster, and it would need disaster relief. Perhaps we may take the example of those employed in the highly-paid professional firm with one employee off for 12 weeks and the government scheme paying £420 to a firm with a turnover of hundreds of thousands of pounds. Depending on where the percentage figure is pitched the firm might receive something back but I suspect that it would be so small that it would not bother.
I turn to the cost of the amendment, because with a proposal of this kind one must have some idea about that. Members of the Committee will have seen that I tabled a string of parliamentary Questions to by to obtain the information on which we could do the sums. My noble friend and his officials have done their best but, surprisingly, the department does not have the information I seek. Therefore, out of kindness and an anxiety not to disappoint, my noble friend has answered a whole lot of different questions which I did not ask and which may or may not be helpful. I am reminded of the case of the examination candidate who was asked to describe the principles of the Archimedes pump. He said, "I know nothing about the Archimedes pump but here is a list of the kings of Israel and Judah".
My noble friend's answers are also obscure and inconsistent with some of the information we have been given. The Government have always argued that average sickness records may be four or five employees out of 100 off sick at any one time. When asked to give the figures for the estimated average number receiving benefit at any one time we were told that it was 330,000 people. The employed population is 24.2 million, which gives a figure not of 4 or 5 per cent. but of 1.3 per cent. One is left with doubts about how much value one can place on these figures. Other questions aimed at quantifying the cost of the Government's scheme have produced answers which cannot be reconciled with each other, and so with reluctance I have had to abandon them.
I take instead the figures provided by the Forum of Private Business. In my experience it knows what it is talking about and some reliance can be placed on what it says. If one assumes that average pay of a firm's employees is £1,000 a month—that is £250 a week, which technically would be the "mean monthly salary" —a 5 per cent. trigger for the reimbursement would not be activated until at least 11 people out of 100 were off for a full week, or half that number for two weeks. The figure of 11 can be compared with the figure of 1.3, derived from the Written Answer to which I referred a moment ago.
If one is dealing with lower paid people with a mean salary of, say, £600 per month the trigger level is lower because the monthly national insurance contributions are lower. A 5 per cent. trigger would be activated if 4.5 per cent. were off sick in any one week for a full week. That is still well above the figure of 1.3 per cent.

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But there remain uncertainties and the amendment therefore leaves the percentage figure to be fixed by order. My noble friend, with the resources at his disposal, will, I believe, be able to ascertain the figure which produces a fair compensation for exceptional sickness without imposing a burden he would be unable to persuade his colleagues in the Treasury to accept.
Is it all practical? On Second Reading my noble friend gave a number of reasons why he thought there may be difficulties. I conclude by quoting from the letter I received from the British Payroll Managers' Association. That is the professional body of those who will be responsible for implementation and who operate SSP. It states that,
"there is certainly much to commend the scheme you put forward. It would certainly be simple to operate, requiring only one calculation per accounting period. The proposed Government scheme would require an individual calculation in respect of each potentially qualifying period of absence".
The letter mentions another point. My noble friend has been good in listening to us since Second Reading. He raised the problem of the time constraint because of the late Budget and the short timescale. On this the association states that,
"the imposition of a bad scheme on the pretext of time constraints is not an acceptable basis for rejecting a potentially good scheme".
We may need regulations to prevent abuse; for instance, employers shifting the claim from one month to the next so as to bring them within the 5 per cent. trigger, or whatever the figure may be. However, it cannot be beyond the wit of my noble friend's department to do that. Yes, it will have to move fast because the legislation is due to take effect from the beginning of April. I refuse to believe that with good will it cannot be done. A measure of support has piled up behind this vastly improved scheme compared with what is currently in the legislation. That is a good incentive for my noble friend and his officials to make the effort. The scheme targets relief where it is needed: exceptional sickness—not long individual spells —among employees of small firms. I beg to move.
The Chairman of Committees (Lord Ampthill): Perhaps I may remind the Committee that if the amendment is agreed to, I shall be unable to call Amendments Nos. 2 and 3.
Earl Russell: I wish to congratulate the noble Lord, Lord Jenkin of Roding, not only on his speech but also on winning the race to be the first to put his name to the amendment. Often we find amendments in search of Peers. Since Second Reading it has been clear that we have had Peers falling over each other to put their names to this amendment. The noble Lord succeeded, and I congratulate him. He has presented the case well. I have little to add.
Those Members of the Committee who are aficionados of election results may be familiar with the name of Dixville Notch in New Hampshire. Dixville Notch announces its election results for a presidential election at one minute after midnight on the day polls open. So everyone wanting to see which way the vote has gone waits anxiously for the results from Dixville
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Notch. But if, as often happens, all 12 voters of Dixville Notch happen to vote Republican that does not prove that the Republicans will get a landslide vote. It does not even prove that they will win. And if, unusually, the vote turns out to be 11 Republicans to one Democrat that does not prove that the Democrats will win. The inhabitants of Dixville Notch are not a statistically significant sample. That is the basic principle with which we are dealing in this amendment—
Lord Carter: The noble Earl said that the town announces the result one minute after the polls open. Surely he means one minute after the polls close.
Earl Russell: No. That is, in fact, correct. The inhabitants of Dixville Notch go to the polls en bloc one minute after they have opened. Since there is a 100 per cent. poll there is no need for further waiting. But it does not tell us what the results will be.
One can do anything with a small sample. I once proved that in a department of which I was then a member one's chances of admission were trebled if, as an entrance candidate, one's surname happened to begin with "W". I do not believe that that is evidence of bias. In the same way a small businessman may have either exceptionally high or exceptionally low levels of sickness. It will not prove anything about your competence as an employer. It may prove something about the nature of your business, and thought should be given to that. For example, if you own one fishing trawler and you happen to hit a tremendous freak wave off Land's End, you can easily have all your crew laid up and unable to carry on earning at all. In that situation, some form of relief is rather important.
The noble Lord, Lord Jenkin, is surely right. What matters is not the size or the number of employees of the firm but how exceptional is the level of the sickness bill. I agree that this provision will apply normally to small businesses, but that will not always be the case. I have known of businesses whose staff have been affected by infections carried in the air conditioning ducts. Where that happens an exceptional level of sickness can occur in a large firm. I agree with the noble Lord, Lord Jenkin, that such a case could be seen to be worthy of an exceptional level of relief.
As the noble Viscount said on Second Reading, it is true that this proposal will involve work in the contributions agency—record keeping and monitoring —which is not of itself desirable; bureaucracy never is. But the alternative is that we shall take away the relief from firms with an exceptional level of sickness. That will mean that the cost will come all at once, thus creating cash flow problems. We should not forget that aspect. It may cause business bankruptcies.
We have here a straight question of priorities. We have record keeping and paperwork, which are undesirable, or we have business bankruptcies which, in my opinion, are more undesirable. As a country we need to earn our living. It is our businesses, large and small, which do that. Everything else is built on the backs of the profits which they make. Because the avoidance of bankruptcy is the highest priority, this amendment is right and I very much hope that it will be accepted.
3.30 p.m.
Lord Carter: Like the noble Earl, Lord Russell, I was pleased to add my name to the amendment. When I read it I had the feeling that we had been here before. We all remember the debates that we had on the 1991 Act when we attempted, with some success, to introduce amendments, which were eventually accepted by the Government, to protect small businesses. When we dealt with that legislation we felt that eventually the Government would return with another Bill, although at the time they said that they thought that that was unlikely.
Although, as the noble Lord, Lord Jenkin, said, the amendment applies to any employer, it is likely to have the greatest effect on small businesses because, as the noble Lord explained so well, an abnormal level of sickness hits a small business much harder and, indeed, has a disproportionate effect. We know also that most absences due to sickness are for fewer than four weeks. I believe that 76 per cent. to 78 per cent. of absence is for fewer than four weeks, as was shown in a very useful paper produced by the Commons Library.
This is an ingenious approach. I congratulate the drafters of the amendment on it. The argument has been largely made so that there is no need to speak at length. A similar approach was adopted in 1991, and again with the help of the formidable Mr. Mendham. I hope that on this occasion the Government will be able to accept the amendment or at least take it away and come back with their own version of it. I hope that the Minister will not say that there is not enough time because I am sure that his department will be able to find an answer to that problem. There is an interesting article in this week's edition of The House Magazine by Sir Robert McCrindle, a former Member of another place. In it he says:
"Take the ongoing debate on the degree to which the State should look to the private sector to provide welfare benefits. The City is distinctly cool other than in areas where money can be made, which does not include those who are likely to be ill frequently".
That makes the point extremely well. There is a need for the protection which is sought by this amendment. The scheme will be easy to administer. It involves a specified percentage. The matters can be implemented by regulation. We shall await with interest the Minister's reply, but I hope that he will not say that there is insufficient time for the implementation of this measure, because it can be dealt with by way of regulation. I believe that this is an ingenious approach to the problem which deserves the support of the whole Committee.
Lord Reay: Smaller firms will always be more vulnerable to sickness and to the need to make sickness payments than larger firms. As Members of the Committee have already pointed out, in a small firm it is quite possible either for none of the workforce to go sick or for 50 per cent. or more to go sick at one time. The larger the firm, the less likely it is either to gain or to lose disproportionately. Therefore, with most sickness occurring within the four-week period, the reduction of the reimbursement rates from 80 per cent.
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to zero for the first four weeks of sickness harshly exposes small businesses to the risk of large statutory sickness payments.
The amendment has the merit of setting a cap on firms' liability to pay SSP, based not on the length of individuals' sickness leave but on the total cost of sickness payments for a firm expressed as a percentage of total national insurance contributions. The smaller the firm, the greater the likelihood that that percentage will be high.
I think, and the CBI thinks, that that is a fairer method of protecting small businesses than that provided in the Bill. As my noble friend Lord Jenkin of Roding pointed out, the amendment has the further merit of dispensing with the need for the national insurance threshold above which firms would abruptly cease to be eligible for relief. Such a threshold would surely have an effect, on the margin, of discouraging firms from expanding their workforce, in particular if firms consider themselves exposed to having to make sickness payments.
The amendment leaves it to the Government to set the percentage of national insurance costs to which SSP payments should amount before firms become eligible for reimbursement. The CBI accepts that the Government may have only a certain sum of money available for the relief of small firms. If that is the case, it suggests that the Government should select a percentage which results in a cost to the Government equal to that of the proposal currently contained in the Bill.
I do not see why the proposals contained in the amendment should be considered to be too complicated, although I have heard them so argued. The calculation which firms will have to make seems to me relatively simple and straightforward. It may well be simpler than the scheme currently in operation which is modified by the Bill and which involves firms in tracking the cumulative total of their individual employees' absence before making a claim. That has apparently proved too complicated for many small firms. In any event, many small firms, to judge from what their representatives say, seem generally to prefer the solution embodied in the amendment.
Nor do I see why there should not be time to incorporate this alternative scheme into the Bill. In 1981 the SSP reimbursement rates were reduced from 100 per cent. to 80 per cent. The Government then introduced the small business relief, which we now have. That was designed to persuade noble Lords to accept the reimbursement rate reduction which they had previously rejected. That small business relief was proposed in February, to be implemented in April. Perhaps the Minister will remind his officials of their sterling efforts on that occasion and ask them kindly to repeat them. I hope that my noble friend will indicate in his reply a readiness to continue to explore that avenue.
Lord Dean of Harptree: I have much sympathy with the amendment moved by my noble friend Lord Jenkin of Roding. It seems to me to have many attractions. Above all, it provides a direct link as regards the amount of sickness, the number of employees sick and full reimbursement of statutory sick pay. As. my noble friend

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and other speakers have stressed, it would give particular help to small firms suffering from exceptional sickness due, for example, to a flu epidemic or an accident in a minibus which affected a large proportion of the workforce in a factory. Indeed, many other examples have been given.
However, it seems to me that the proposal does not get away from a threshold or a trigger. The Forum of Private Business has suggested that the figure might be 5 per cent. of national insurance contributions. In his amendment, my noble friend has left the percentage to be specified by order. As I see it, there is one difficulty here in that there is no obvious trigger. Moreover, I suspect that there is insufficient information available for a meaningful figure to be given. It would be largely a matter of judgment. If the trigger was fixed too low, it could well mean that some small firms which benefit from the existing scheme would be excluded. On the other hand, if the figure was fixed too high, the scheme might well become more expensive than would otherwise be the case and might let in the employer who really does not need such reimbursement.
The latter seems to me to be a critical practical weakness in a scheme which otherwise appears sound in principle. It would also of course be new and unfamiliar to employers and, as a result—despite what my noble friend said—I suspect that the cost of administration, of record keeping and of monitoring the scheme so that abuse is prevented, would be somewhat higher than the administrative and other costs involved in the existing scheme. Therefore, on balance, I believe that the scheme as improved in the Bill is preferable to the amendment moved by my noble friend.
3.45 p.m.
Viscount Astor: The noble Earl, Lord Russell, took us to New Hampshire. I rather thought that he would explain what would happen when all his 12 voters came down with the flu. But, instead, he used the situation to explain a statistical point. I shall seek to use his argument to explain why I believe that the Government's proposed scheme is statistically better. I agree with the noble Lord, Lord Carter, that it is an intriguing amendment. My noble friend Lord Jenkin of Roding has made a strong case. Of course, I expected nothing less from someone so closely connected with the SSP scheme.
No one could deny that employers are in trouble when a large part of the workforce goes sick, however rarely that might happen. The cost of paying SSP may seem a trifle compared with the problem and cost of replacing absent workers, but any cost is unwelcome in such circumstances. My noble friend's amendment seeks to compensate those employers when SSP exceeds a prescribed percentage of their monthly national insurance payments. That seems an attractive idea. I have considered the proposal carefully but have reluctantly concluded that it would not work as presently drafted. I will try to explain why.
There are three main flaws in what is proposed. The first is the scope it would create for unscrupulous employers to abuse the new scheme. They could delay
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their SSP payments so as to build up a larger sum to pay in a later month. That larger than usual sum would have a better chance of crossing the threshold for compensation. There is an argument that employers would not find it worth their while to fiddle the figures in that way, but I am afraid I cannot accept it. Either the compensation is worth having or it is not. I take it that my noble friend thinks it worth while, otherwise he would not have tabled the amendment. If it is, it could attract some employers to concentrate as much of their SSP as possible into one payment so as to maximise their chances of getting compensation.
We could not prevent that abuse by requiring employers to pay SSP always in the month in which the employee falls sick. Payroll systems could not cope with last minute adjustments to take account of sick spells occurring towards the end of the month. Such eleventh-hour adjustments would delay wages payments beyond the end of the month to no one's advantage. Instead, pay records are adjusted in the following month to take account of those absences. That is a sensible procedure which we would not wish to change.
To counter the risk of abuse under the scheme proposed by my noble friend Lord Jenkin, we would have to require a separate and complex exercise whereby employers who wish to claim compensation would have to apportion SSP paid each month between the months in which the relevant sick absences occurred. Compensation would be payable if the total SSP paid for the month (as opposed to in the month) exceeded a prescribed percentage of the monthly national insurance bill.
I believe that many employers would ignore the compensation scheme, preferring to forego compensation than adopt such a cumbersome procedure, especially as it would benefit them only rarely. For those employers who altered their pay systems and performed the necessary calculations, there would be the further burden of additional checks by the Contributions Agency which would quite properly wish to establish that the employers had recovered the compensation payment correctly.
We would also have to consider the risk of employers deliberately reducing their national insurance contributions. The lower the national insurance payments in a particular month, the easier it would be for SSP to cross the compensation threshold proposed in the amendment. Employers paying more than the average SSP in a particular month might delay that month's salaries until after the last day of the month. Delaying salary payments is not unheard of, especially when employers find themselves in difficulties at the end of a financial year. I fear that it could become more widespread if employers were attracted by the new compensation scheme.
The amendment's second problem is the timescale envisaged. It is frankly impossible for all concerned to implement the arrangements in little more than two months from now. Employers would not be able to adapt their pay systems and train their staff to operate the new procedures. Payroll firms which we consulted told us that they could not rewrite payroll software in

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time. We do not have the statistics that we need in the form that is necessary to implement the proposed scheme. A special data collection exercise would be needed which could not be completed in time for introduction this April. My noble friend has no doubt noticed my struggle to answer his Written Questions. We do not have the data in the form that he requires.
The third important drawback is that the amendment could encourage employers to cut back their occupational sick pay. The less occupational sick pay they provide, the lower their national insurance contributions for the month and thus the easier it would be for their SSP payments to cross the compensation threshold. It is not for the Government to lay down how much employers' own schemes should pay when an employee is sick. But we would not wish to give a perverse incentive to business to reduce or abandon existing occupational schemes which have become so widespread that over 90 per cent. of employees work for employers that provide them.
We should not forget that we already have a scheme for helping small employers. Members of this Chamber persuaded the Government to adopt it in 1991. Employers paying £16,000 or less in contributions in the previous tax year get full reimbursement of any SSP paid after six weeks' illness. We have undertaken to enhance that help by making more employers eligible and giving full reimbursement sooner. Once the Bill has completed its passage through Parliament, we will lay regulations to raise the threshold defining eligible employers from £16,000 to £20,000. In addition, full reimbursement will be available after four instead of six weeks. About 750,000 employers will thus be brought within the scope of the scheme.
My noble friend has pointed out that the present system of small employers relief was crude. Crude it may be, but it is simple and certain, unlike the plan embodied in this amendment. Better, I believe, to improve what we have and be confident that it works rather than to rush into the dangerous uncertainties of a completely new approach without all the data and statistics that we need.
Indeed the National Federation of Small Business opposes this amendment precisely because it prefers the existing system of helping small employers. It also opposes the amendment because it is intended to cost no more than the existing small employers relief scheme which it replaces. But as the new system, as proposed by this amendment, would not be confined to small employers and covers a different set of circumstances, without spending more money, some small employers would lose out. Not surprisingly, the federation sees improving the existing system as the best way to help small business.
As I have explained, I cannot support this amendment. But I recognise the anxieties that have prompted my noble friend Lord Jenkin of Roding to move his amendment. This amendment seems attractive at first sight but fails on closer examination. In practice, it would be a burden. It could not be implemented in the time available. It gives employers a perverse incentive to reduce occupational sick pay provision. The Government plans improve the present small employers
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relief scheme. Added to the financial gains flowing from the cut in employers' national insurance contributions, enhancing this help is the safest, simplest means of protecting small employers. Should our monitoring and contacts with employers reveal problems, we are always ready to consider.
If, having listened to my serious concerns, my noble friend still thinks his plan is practicable, I would be more than happy to discuss any further thoughts he may have between now and Report stage. However, I hope my noble friend will understand that we have serious anxieties that the scheme proposed in the amendment is simply not workable.
4 p.m.
Earl Russell: Before the noble Lord, Lord Jenkin of Roding, replies to the amendment, I wish to say a few words. I thank the noble Viscount for the spirit in which he has answered this amendment. His answer was helpful in spirit and was, I believe, informed by a real desire to get at the truth. I shall try to reply to him in the same spirit. There are two sets of argument here; one is technical and concerns means; the other concerns priorities. I wish to think aloud about both of them and perhaps be put right if necessary.
I understand the argument about the danger of abuse through delay in reporting of sickness. Am I correct that that is limited in scope by the fact that one cannot delay reporting sickness until one has the sickness to report. and therefore that at least the scale of that risk, even if not its fact, is perhaps rather less than it might be? As. regards priorities, the proposed scheme might be abused. If it is to be brought in, we must do everything we can to prevent it from being abused. However, the question is about priorities. Suppose we were in the government of Albania, where until recently the motor vehicle was effectively illegal, and people proposed to bring it in, it might well be argued that it should not be brought in because it might be abused in that it might be driven dangerously and that it might cause accidents. I think we might decide in those circumstances that in spite of the truth of those arguments, it was better to bring it in nonetheless for the sake of the greater good. When we consider the risk of business bankruptcies, I wonder whether we might consider that there is a case of this sort to be made in favour of this amendment.
I take the point of the noble Viscount on the difficulty of making last minute adjustments to payrolls and the problems of apportioning sick pay between month and month. I can see the problems of that; but we are dealing at the moment with absences of longer than four weeks, and even if there were to be some retreat on that principle of four weeks, I believe that we would still be dealing with absences long enough to require certification. There will be a date on that certification. That is already a record. Doctors do not normally sign documents without putting dates on them, assuming at least that one can read those documents. If a date is recorded, is it possible that we might be able to use that to apportion the statutory sick pay to the month in which the sickness happened? Is there any way forward in this direction?
Lord Carter: Before the noble Lord decides what to do with the amendment, I must inform the Minister that I either misheard or did not understand a point which he made in his reply. I believe the Minister said that salaries could be delayed—to fiddle the system, as it were. I have a contract of employment with the employees of the companies I am involved with which states they will be paid monthly in arrears. Is the Minister suggesting there will be a mass outbreak of breaches of contract to fiddle the proposed system?
Viscount Astor: No, I am not suggesting that. What I was saying was that if an employee is off sick on the last day of the month for example, the employer will probably not make an adjustment to the pay until the following month. Therefore, under the terms of the amendment that is proposed, employers would have to adjust the pay of the specific month when the sickness occurred, whereas what actually happens is that someone looks back to a previous month and then adjusts the pay.
The noble Earl, Lord Russell, asked whether the risk of abuse was reduced by the requirement to report sickness as it happens. However, it is not a matter of the scope for abuse but rather when sickness benefit is paid. I should make the point—this is an important point and I have already mentioned it briefly—that not all employers' organisations support this amendment. Some of them have reservations about it. However, the most important point I should make is that we have not really consulted the industry on this intriguing amendment as there has not been time to do so. I do not believe that we should take this radical departure from the existing scheme without seeking employers' views. We cannot risk getting this matter wrong especially as we already have a scheme to help small employers which works and which we plan to improve.
Lord Jenkin of Roding: I cannot say I am over-enthusiastic with my noble friend's reply. As he knows, I have been Secretary of State in the department which he now graces and I am familiar with the, in some senses, admirable tendency of officials to try to block every conceivable loophole. There is an ever more common view that as government and, inevitably, life become more complex, such a tendency is not the right way to prevent abuse. A much better way of preventing abuse is to let everyone know that there will be a few rigorous, statistically significant checks—that is to say, there will be enough checks for them to count—and that anyone who is found fiddling the system will suffer some condign penalty. That is a much cheaper way to tackle the matter.
It is quite obvious that the penalty for this kind of abuse should be no reimbursement for a period of years. If someone has cheated the system, he should be placed outside it. The vast majority of employers in this country comply with the complicated law on PAYE and with the complicated laws on employers' and employees' national insurance contributions in a perfectly honest way. I do not believe my noble friend would deny that. I suspect that in the contributions
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departments officials know—under the rules which allow an exchange of information with the Inland Revenue—where the risks lie.
I believe that we need to explore the matter further. My noble friend said at the beginning that the amendment would not work as presently drafted. I take that as an invitation to have another go. I believe that we need to look at the question of abuse. It is suggested that it would require a massive new system of record-keeping by employers. That is not my advice. The advice that I have received is that it would be simpler than the present scheme. I take issue with my noble friend Lord Dean of Harptree who seemed to think that it would be more complicated. It would not. It would be simpler, involving two calculations which employers already make—their national insurance contributions for the month and their statutory sick pay for the month. There is no question of having to deal with individual employees and calculating how long each employee has been off sick. That is what employers have to do under the Government scheme. Therefore, I cannot accept that argument.
I accept that the Government will need to fix a figure. It is not beyond the wit of man to be able to arrive at a sufficient degree of accuracy in order to do that.
To return to the point with which I opened, my amendment hits the target, which is exceptional sickness. The Government's proposal hits some of it but misses at both ends. It misses, as my minibus example shows, in that a small employer suffering a serious accident can receive nothing because nobody is sick for more than four weeks. On the other hand, a wealthy employer with few employees can be entitled to reimbursement of a sum which is wholly inconsequential in relation to the total turnover of the firm. That does not seem to be a sensible way of proceeding.
The amendment has attracted a great deal of support. Of course the Bill has not attracted the support of small businesses. As my noble friend knows, the federation is totally opposed to the Bill. It wants none of it and is highly suspicious of the Government's good faith in maintaining the 1 per cent. cut in the national insurance contribution. If the scheme set out in the amendment became part of the law there would be built-in protection against a change in the national insurance contribution. Therefore, it seems to me that that argument can be turned on its head. The benefit of the reimbursement would remain and the national insurance denominator in the fraction would be changed.
I shall come back to my noble friend, as he invited me to do. I shall return to the matter at Report stage. With support in all parts of the House and from most major organisations, as my noble friend Lord Reay said, I do not believe that we should let the matter go. We must find ways round the difficulties and persuade my noble friend that there are ways round the difficulties. I believe that that can and should be done. With those remarks, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Earl Russell Earl Russell moved Amendment No. 2:
Page 1, line 8, leave out ("cease to have effect") and insert ("continue to have effect with the substitution of the words "75 per cent." for the words "80 per cent." ").
The noble Earl said: State relief for sickness has always been one of the pillars of the welfare state. At Second Reading the noble Viscount rather pooh-poohed the idea that any dismantling of the welfare state was involved here. He pointed out, perfectly correctly, that employees are still supposed by law to receive statutory sick pay. Whether they will receive it is another question, to which I hope to return on the Question whether the clause shall stand part of the Bill. In putting that argument the noble Viscount will not have given any comfort to employers, and I have never been one of those who believed that the welfare state was not supposed to be of any benefit to employers.
When the noble Lord, Lord Jenkin of Roding, said that the proposals in this Bill were not targeted he hit the nail on the head. The national insurance relief is across the board. It has nothing to do with levels of sickness or with times of sickness. It does not spread the risk. In fact, here the risk for the employer is concentrated at the one moment when the sickness happens. That is an instance where private insurance cannot match national insurance. It cannot spread the risk as widely. In actuarial terms it cannot do as well.
I also have very profound doubts about the objective of reducing sickness absence. On many occasions that may actually serve to increase sickness. Coming into the office with flu is an obvious case. Coming into work which involves heavy lifting with a back injury is another. If we could reduce sickness that would be very welcome indeed. But reducing sickness absence, which this taking away of the relief tries to encourage, is not likely to reduce sickness. For that reason it will produce more people who are not capable of being employed. For that reason also it will cost the state more because people with long sickness records will be concentrated on benefit and will become a charge on the Exchequer when they could perhaps, with a little sickness absence and with a decent recovery, have got back into work.
I suspect that the noble Viscount may be preparing to say that the amendment is a rather bigger one than he is happy to see. Members of the Committee may remember an amendment moved by the noble Lord, Lord Graham of Edmonton—who was in his place a few moments ago—proposing to leave out Part I of the football supporters' Bill. The noble and learned Lord, Lord Taylor of Gosforth, may on some occasion tell us that we would have saved him a great deal of hard work had we been sufficiently courageous to carry that amendment when we had the chance to do so. That amendment was no smaller than this one. It was one that we could have carried. It is one that I wish we had carried. If we do not carry this one I expect in three or four years to be standing here saying what a pity it is that we did not. I beg to move.
Viscount Astor: A reduction in the reimbursement rate to 75 per cent. instead of abolition for all but small employers in prescribed circumstances would considerably reduce employers' incentives to improve the well-being and motivation of their employees. It is widely accepted that we have one of the worst sick absence rates in the EC. Research proves that.
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Absenteeism through sickness costs British industry anything between £9 billion and £13 billion annually. The Government believe that employers need to be prompted to help themselves by cutting that cost. SSP reimbursement of 80 per cent. or even 75 per cent. of employers' SSP costs, as proposed in the amendment, acts as a disincentive to them to improve the well-being, motivation and attendance records of their employees. As my noble friend Lord Reay said during the Second Reading debate, there is widespread acknowledgment that the Government's case has merit. That includes support from organisations such as the CBI and the Institute of Directors, which do not oppose the abolition of the 80 per cent. reimbursement rate. They have welcomed the Government's proposals to offset employers' extra SSP costs by an even higher reduction in their national insurance contributions liability; so much so that employers as a whole will be well over £100 million better off as a result of these reductions. All employers will be able to benefit from the reductions, but employers who respond positively to the incentive to improve sick absence levels will be better off still.
If the amendment were to be accepted, and I hope that I have explained why it should not succeed, the Government would seriously have to consider whether to proceed with the proposed reductions in employers' national insurance contributions. Those reductions are clearly associated with and are intended to compensate employers for the extra SSP costs arising from the abolition of the 80 per cent. reimbursement rate. The Government could not reasonably be expected to continue to fund the lion's share of SSP costs while at the same time reducing the national insurance contributions by some £800 million during the corning year. We believe that the SSP and national insurance contributions reductions package—and I have to tell the noble Earl, Lord Russell, that it is a package—is a generous one which has been welcomed by employers and their representative organizations. Employers will make substantial savings from their contribution reductions and could save even more by improved control and monitoring of sick absence rates where they are above average.
The amendment does nothing to help employers improve sick absence rates in British industry. I do not believe the argument that it will help those who are sick and sick absence rates, as the noble Earl suggests. That distinction is not valid when one considers the importance of employers improving the sickness absence rates of their employees, improving conditions and being more responsible.
It is important that British industry retains the advantage over our foreign counterparts which we shall continue to have if the Government's overall statutory sick pay and national insurance contribution reductions proceed as planned. Therefore I urge the Committee to reject the amendment.
Earl Russell: I thank the noble Viscount for that reply. He will hardly be surprised that the points about sickness absence do not appear to me to be entirely persuasive for this among other reasons: employers are

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not doctors. If they start trying to discipline absence on grounds of sickness, they will often not know whether they are dealing with an actual back injury, a genuine case of depression—something very hard for a layman, and often a doctor, to recognise—or malingering. The effect of the proposals will be to cause people to go to work when they are not well. I do not believe that that is a good thing.
I heard what the noble Viscount said about the CBI. The CBI's brief is not quite as unhesitant as he suggested. I also read the brief sent by the CBI on the subject in 1991. I found the 1991 briefs entirely clear and persuasive; and I still do.
I listened to what he said about the advantage to employers as a whole. But, of course, no individual employer is "employers as a whole".
The noble Viscount may remember that in the Bill in 1991 there was originally a clause which would have allowed the department to bring in this change by regulation. That would have deprived us of the opportunity to vote on it. It is a change of such substance that it would have been wrong to deprive us of the right to vote on it. Having sweated blood to preserve that right, I should like to exercise it. I commend the amendment to the Committee.
4.13 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 95; Not-Contents, 153.

Division No. 1

CONTENTS

Acton, L.

Hardwicke, E.

Airedale, L.

Harris of Greenwich, L.

Archer of Sandwell, L.

Haskel, L.

Ashley of Stoke, L.

Healey, L.

Aylestone, L.

Hilton of Eggardon, B.

Barnett, L.

Hollis of Heigham, B.

Bath, M.

Holme of Cheltenham, L.

Beaumont of Whitley, L.

Hooson, L.

Birk, B.

Howell, L.

Bonham-Carter, L.

Hughes, L.

Brooks of Tremorfa, L.

Hunt, L.

Bruce of Donington, L.

Jay of Paddington, B.

Carmichael of Kelvingrove, L.

Jenkins of Putney, L.

Carter, L.

Judd, L.

Cledwyn of Penrhos, L.

Kintore, E.

Cocks of Hartcliffe, L.

Lawrence, L.

Cudlipp, L.

Listowel, E.

Dahrendorf, L.

Longford, E.

Dean of Beswick, L.

Lovell-Davis, L.

Donoughue, L.

Lytton, E.

Dormand of Easington, L.

Macaulay of Bragar, L.

Eatwell, L.

McIntosh of Haringey, L.

Ezra, L.

Mallalieu, B.

Falkender, B.

Mason of Barnsley, L.

Falkland, V.

Mayhew, L.

Fisher of Rednal, B.

Milner of Leeds, L.

Fitt, L.

Morris of Castle Morris, L

Foot, L.

Nicol, B.

Gallacher, L.

Ogmore, L.

Gladwyn, L.

Peston, L.

Glenamara, L.

Plant of Highfield, L.

Gould of Potternewton, B.

Prys-Davies, L.

Graham of Edmonton, L. [Teller.]

Rea, L.

Greene of Harrow Weald, L.

Redesdale, L.

Gregson, L.

Richard, L.

Grey, E.

Ritchie of Dundee, L.

Hanworth, V.

Robson of Kiddington, B.

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Rochester, L.

Thomson of Monifieth, L.

Russell, E.

Tordoff, L. [Teller.]

Sainsbury, L.

Turner of Camden, B.

Sefton of Garston, L.

Wallace of Coslany, L.

Serota, B.

Whaddon, L.

Shepherd, L.

White, B.

Stallard, L.

Williams of Crosby, B.

Stoddart of Swindon, L.

Williams of Elvel, L.

Strabolgi, L.

Wilson of Rievaulx, L.

Taylor of Blackburn, L.

Winchilsea and Nottingham, E.

Taylor of Gryfe, L.

NOT-CONTENTS

Abinger, L.

Harmar-Nicholls, L.

Addison, V.

Harmsworth, L.

Alexander of Tunis, E.

Harvington, L.

Allenby of Megiddo, V.

Hayter, L.

Alport, L.

Henley, L.

Archer of Weston-Super-Mare, L.

HolmPatrick, L.

Arran, E.

Hood, V.

Astor, V.

Howe, E.

Bellwin, L.

Jenkin of Roding, L.

Beloff, L.

Johnston of Rockport, L.

Blatch, B.

Knutsford, V.

Blyth, L.

Lauderdale, E.

Boardman, L.

Lawson of Blaby, L.

Borthwick, L.

Lindsey and Abingdon, E.

Boyd-Carpenter, L.

Liverpool, E.

Brabazon of Tara, L.

Lloyd-George of Dwyfor, E.

Braine of Wheatley, L.

Long, V.

Braybrooke, L.

Lucas, L.

Brookes, L.

Lyell, L.

Brougham and Vaux, L.

Mackay of Ardbrecknish, L.

Bruntisfield, L.

Mackay of Clashfern, L. [Lord Chancellor.]

Burnham, L.

Macleod of Borve, B.

Butterworth, L.

Macpherson of Drumochter, L.

Cadman, L.

Mancroft, L.

Campbell of Alloway, L.

Marlesford, L.

Campbell of Croy, L.

Marsh, L.

Carnegy of Lour, B.

Merrivale, L.

Carnock, L.

Mersey, V.

Chalfont, L.

Middleton, L.

Chalker of Wallasey, B.

Miller of Hendon, B.

Charteris of Amisfield, L.

Milverton, L.

Chelmsford, V.

Montgomery of Alamein, V.

Clanwilliam, E.

Morris, L.

Clark of Kempston, L

Mottistone, L.

Colwyn, L.

Moyne, L.

Constantine of Stanmore, L.

Murton of Lindisfarne, L.

Cornwallis, L.

Napier and Ettrick, L.

Crathorne, L.

Nelson, E.

Cumberlege, B.

Norfolk, D.

Davidson, V.

Norrie, L.

Dean of Harptree, L.

Orkney, E.

Denham, L.

Orr-Ewing, L.

Denton of Wakefield, B.

Oxfuird, V.

Derwent, L.

Park of Monmouth, B.

Dixon-Smith, L.

Peel, E.

Dormer, L.

Pender, L.

Downshire, M.

Peyton of Yeovil, L.

Dundonald, E.

Platt of Writtle, B.

Ellenborough, L.

Plummer of St. Marylebone, L

Elles, B.

Prentice, L.

Elliott of Morpeth, L.

Pym, L.

Ferrers, E.

Quinton, L.

Forbes, L.

Radnor, E.

Fraser of Carmyllie, L.

Rankeillour, L.

Fraser of Kilmorack, L.

Reay, L.

Gainford, L.

Renton, L.

Geddes, L.

Renwick, L.

Gilmour of Craigmillar, L.

Rippon of Hexham, L.

Gisborough, L.

Rodger of Earlsferry, L.

Goschen, V.

Rodney, L.

Granard, E.

Romney, E.

Gray of Contin, L.

St. Davids, V.

Grimston of Westbury, L.

Seccombe, B.

Haig, E.

Shannon, E.

Hailsham of Saint Marylebone, L.

Sharples, B.

Harding of Petherton, L.

Simon of Glaisdale, L.

Hardinge of Penshurst, L.

903

Skelmersdale, L

Thomas of Gwydir, L

Stewartby, L.

Torrington, V.

Stodart of Leaston, L.

Trefgarne, L.

Strange, B.

Trumpington, B.

Strathclyde, L.

Ullswater, V. [Teller.]

Strathcona and Mount Royal, L.

Vivian, L.

Strathmore and Kinghorne, E. [Teller.]

Wade of Chorlton, L.

Sudeley, L.

Wakeham, L [Lord Privy Seal.]

Swansea, L.

Westbury, L.

Swinfen, L.

Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.
4.21 p.m.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 3:
Page 1, line 9, at end insert:
(" except where an employer is liable to make a payment of statutory sick pay to an employee who has in the preceding two years been entitled to receive sickness benefit or invalidity benefit or incapacity benefit, when sub-paragraph 158(1) (a) (ii) shall continue to have effect.").
The noble Baroness said: In moving the amendment, I am not confident about the wording and if, on behalf of the Government, the Minister feels that there is merit in the proposal, we would be delighted to take the amendment back and submit a subsequent one. The proposal touches on a real problem presented by the Bill. Put simply, larger firms now have to pay 100 per cent. of statutory sick pay and that means that in future, anyone who is out of the labour market and who has a record of disability or ill health will find it that much harder to be employed. The amendment tries to address the problem that the changes in the statutory sick pay presented by the Bill mean that someone who is disabled will enter the labour market with a negative dowry, so to speak, in the perceptions of employers.
In his speech on the Bill in another place, the Secretary of State made much of the fact that the measures would act as a positive incentive to employers to promote employees' health. However, in practice, as the Conservative Party briefing shows, the primary reason for it is disciplinary. It is stated that in Britain absence from work due to sickness is relatively high compared with other European countries. The Government presume that that is evidence of malingering and they are therefore encouraging employers to strengthen their policing role vis-à-vis sick employees by giving them a clearer financial interest to do so.
The belief behind that and behind the incapacity Bill, which is currently going through the Commons and, I imagine, will arrive in a few weeks at your Lordships' House, is that the sick, the chronically sick and the disabled must be assumed to be fraudulent in their ill health and in their claims for right to benefit unless proven otherwise. As the Disablement Income Group has said, that represents a character assassination of the disabled.
We have already heard at Second Reading—and we shall return to this with the final amendment today—that people fear that one of the side effects or consequences of the Bill will be the dismissal of staff in employment who become sick. As we shall report, the CAB already has well attested cases to that effect. No one in this
904
Committee—and certainly not on our side of it—countenances fraud. But it is clear that British employers are already overzealous in removing their chronically sick from the labour force. We believe that they are already over-hesitant about re-employing anyone with a disability history and taking them back into employment.
That evidence is well attested to by several quite sturdy research reports on disability—commissioned by the DSS longitudinal studies of recipients of disability allowances. Those studies show that three-quarters of employers now do nothing to keep someone who is suffering sickness or disability in work. They do not offer lighter work or more flexible hours and they do not modify their equipment, even though in a third of cases for those employees their illness, sickness or disability was caused by or contributed to by their work situation. The employers walk away from it. When, as well, we have recently heard that employers will in future be required to pay 50 per cent. of the costs of equipment for disabled members of their staff who have been employed by them for six months, we regard it as yet another inducement by employers to sack the sick.
All the evidence suggests not only that British employers are quick to sack the sick but also that they are extremely reluctant to re-employ the disabled once they have left work. Once, out of the labour market, the chronically sick or disabled find it hard to re-enter. In an Answer to a Parliamentary Question only a couple of days ago, we were told that most firms could not meet their quota of 3 per cent. registered disabled. Only the Department of Employment manages to do so; local authorities and public bodies have as much difficulty in meeting the quota as do private companies. Yet, something like 22 per cent. of the disabled are unemployed—three times the average for those who are fit.
Why would anyone wish to employ someone with a dubious health record? I know, and the Minister may tell us—and he would be right to do so—that most disabled people who return to work are conscientious to a fault. But employers who have dismissed someone because they were sick, or released someone because they were disabled, would not believe that. When employers consider whether to take on someone with a disablement history, they are likely not to do so, especially because the vast majority have fluctuating and therefore unpredictable health records.
For example, of those whose invalidity benefit ended because they were fit to work, only 12 per cent. were able to find work, even though all the research shows that they were attached to the labour market and were flexible in what they sought in terms of wages, skills, hours and closeness to their homes. Only 12 per cent. could find work; and of that 12 per cent., two-thirds who returned to work could only do so with their previous employer. In other words, if employees are fit to return to work and their previous employers not take them back, almost no one else will.
The Spastics Society's research quoted last night in another place showed that employers are six times as likely to turn down for interview a person with

905
disabilities as to turn down persons without such disabilities, even though they have identical qualifications.
We shall soon see the purpose of the Bill. At the very time when the Government are requiring disabled people to be available for any work for which they are functionally competent, with this Bill the Government are increasing disincentives for employers to employ or re-employ the disabled. All the evidence shows that the main growth in the invalidity benefit is not because there are more claimants but because people are staying on the benefit longer because they cannot get off it in order to re-enter the labour market. When they do re-enter it, they cannot get work because they are disabled.
Disabled people, as I said, already have three times the unemployment rate of the able-bodied. They are seldom retained by their employers and unless their existing employer re-employs them they will almost certainly otherwise never find work. With this Bill we are making the situation even harder for someone with a history of disability to re-enter the labour force and find work. The Bill requires larger employers to meet the whole bill, and it therefore adds to the negative dowry, if I may use that phrase, that the disabled already carry when they seek to re-enter the labour market.
Already, 95,000 of those who would have got invalidity benefit, we are told, will not be eligible for incapacity benefit next year, rising to something like 190,000 people. It looks as though there may be something like 200,000 people who will lose invalidity benefit because they are fit to work but who will not perhaps be eligible for unemployment benefit or income support because they are not fully available for work.
If the Government are right in saying that disabled people have a better work record—and I believe that that may well be true—then the refunding of the cost for anybody who comes into the labour market with a history of invalidity benefit during the last two years will be trivial. It will be a cost that we can well afford to pay. However, if the Government are wrong and a person's health or disability remains a real obstacle to steady work, it is even more important that we and the Government should help disabled people and employers, who cannot be expected to act charitably in the circumstances, to bring people back into the labour market even though they may then go on to seek disability working allowance. After all, we shall be saving one and a quarter billion pounds in year two of the incapacity Bill currently going through the other place.
To accept this amendment would cost, I suspect, very little money indeed. But it would help the disabled to re-enter the labour market. The problem over disability, as we know, is not the problem of the disabled and their motivation. The problem lies with the employer and his perception, and also with the Government and their statutory disincentives as carried by this Bill.
The Secretary of State said yesterday in another place:
906
"I want those who are fit enough to work to be helped back to work by the benefits appropriate to them". [Official Report, Commons, 24/1/94; col. 36.]
Precisely. That is why we are moving the amendment today.
4.30 p.m.
Earl Russell: In supporting the amendment, I declare an interest. I once had three months off work as the result of a back injury. The medical advice I received was that I had a straight choice: either I took three months off work and enjoyed a complete and permanent recovery or I returned to work and the effects of the injury would recur for the rest of my life. Your Lordships will therefore see why I am so concerned. It is a mistake to confuse reducing sickness absence with reducing sickness.
Having a generous employer, I took the advice I was given and remained for three months flat on my back. In a period of about 30 years—touch wood—the effects of the injury have not recurred. If, as the noble Baroness put it, I had come before an employer under the conditions of this Bill I would have been carrying a form of negative dowry. I would have a label on me saying "This person is expensive to employ: be careful of him". I may be in error, but I believe that if I had been looking for a new job with this Bill in force my chances of being re-employed would have been very much diminished. I cannot help believing, possibly mistakenly, that that would have been a pity.
The points made by the noble Baroness about the disabled are also simple and clear. I think we are all agreed that the disabled have a better record than the rest of us as employees. Of course, that does not prove that employers perceive the fact. There is a great deal of reason to believe that they do not. There are certain beliefs so ingrained in public consciousness that they are capable of surviving a great deal of evidence to the contrary. Let me take, for example, the belief that the Conservatives are a low-tax party—
Baroness Hollis of Heigham: I thank the noble Earl for saying that.
Earl Russell: I support the amendment.
Lord Lucas: I agree with a great deal of what the noble Baroness said. There is a lot to be done in encouraging companies to behave better towards the disabled and those with long-term ill health, but I would say that statutory sick pay has very little to do with the reasons why employers do not employ such people. The reasons are based in the disruption that employers believe such people cause. To take an example, if you are looking at employing a teacher with multiple sclerosis, £50 a week possible sick pay is neither here nor there. What you are concerned with is the effect on the children of the teacher's absences on days when he has not the energy to work fully. What you are concerned with is the cost of £100 a day that is needed to get a supply teacher. However much I agree with the overall arguments of the noble Baroness, I feel that the change the Government are making will not have any effect on those employers who take the right attitude towards employing the disabled.
Lord Carter: If there are people with the attitude that has been described, it is our job to persuade them that they are wrong. I have been involved in disability issues for a long time and I can assure the noble Lord opposite that the attitude he speaks of is held by a few people. However, it is remarks such as those he has just uttered which make people feel that those views are held by a large number of people.
Viscount Astor: I think that my noble friend Lord Lucas was explaining that while we all have concerns about the employment of disabled people, the amendment does not help them. That is a fair argument. The noble Baroness, Lady Hollis, claimed that the incapacity Bill, I believe she said, charges that the chronically ill are fraudulent unless proved otherwise. That is a massive distortion of the incapacity Bill which had its Second Reading in another place yesterday. She quoted my right honourable friend the Secretary of State. It is a pity that she did not bother to quote the following sentence where he said that it is wrong to give people who are able to work benefits which can eventually lead to their becoming unable to work because of unfamiliarity, lack of motivation and the staleness of skills caused by their being on benefits for some time.
We will have a chance to discuss the aims of that Bill when it comes to your Lordships' Chamber. I am sure that all your Lordships will want to look at the Bill closely. I listened carefully to the reasons given by the noble Baroness for introducing the amendment. I have to tell her that the complexities of administration which would follow for employers operating different reimbursement rules for different employees, depending on whether they had been sick and in receipt of an incapacity benefit such as sickness benefit or invalidity benefit, would be extremely daunting.
However, I want first to address the important issues that the noble Baroness raised about the effect which abolition of the 80 per cent. reimbursement rate will have on an employer's willingness to recruit people with disabilities or those with a poor health record. The noble Baroness claimed that as a direct result of the proposals in this Bill employers will be reluctant to employ such people. If this were true, I should also be concerned. But I have to say that the Government believe that that is not the case.
Similar charges were levelled at the SSP scheme when it was first introduced more then 10 years ago and again three years ago when the reimbursement rate was reduced from 100 per cent. to 80 per cent. Those fears proved groundless and we believe the result will be no different this time.
We do not expect there to be any changes in the pattern of employment of people with disabilities as the result of the abolition of the 80 per cent. reimbursement rate. People with the right attitude to work and who have the necessary skills will always be attractive to employers because those attributes are more important than their disabilities or their past health record. I do not believe that employers' recruitment practices are determined, or even influenced, by whether or not they
908
receive 80 per cent. reimbursement for their SSP costs when an employee goes sick. There is no evidence to support such a suggestion.
Recent research reveals that employers see the costs of sick absence more in terms of lost production and the cost of employing a replacement worker than either their actual SSP costs or even their occupational sick pay costs. If employers were concerned about their potential SSP costs for people with poor health records they would have changed their hiring policies or would have instigated action to reduce their SSP or occupational sick pay costs. That has not happened and the Government do not believe that the April 1994 SSP changes, accompanied as they are by the reduction in employers' national insurance contributions, will have any knock-on effect on the employment prospects of people with disabilities or poor health records.
Baroness Hollis of Heigham: As this is the Committee stage, will the Minister be kind enough to comment on the two pieces of research evidence I put forward—one coming from the DSS research and the other from the Spastics Society. According to the DSS research, only 12 per cent. of those who come off invalidity benefit and are attached to the labour market can find jobs. According to the Spastics Society, six times as many people with disabilities are not called to interview as those without disabilities but with the same qualifications. That makes it six times harder for them to gain access to an interview. How does the Minister explain that if what he is saying is correct?
Viscount Astor: I have not seen the research to which the noble Baroness refers. But even if I had, I am sure that it does not affect the reimbursement of SSP. The noble Baroness is talking about statistics that affect people with disabilities for employment, adding that to the reimbursement of SSP and making a connection where we believe there is none.
The existing scheme already has a provision which protects the state benefit entitlement of those people with recurring bouts of sickness who take up employment while at the same time ensuring that employers do not have to take on the responsibility of having to pay SSP if that employee falls sick again within eight weeks of a previous sickness spell. The Government believe that eight weeks is a reasonable period after which an employer should become liable to pay SSP to a new employee who has previously been entitled to sickness or invalidity benefit.
The practical effects of operating the system proposed by the amendment would result in the imposition of an elaborate and costly scheme for the exchange of information between the Benefits Agency, which administers the state incapacity benefits, and individuals; between individuals and their employers, and even between employers themselves where the individual has changed employers during the period concerned. That seems to me to be a recipe for disaster. It would add significantly to employers' costs and could act as a deterrent to the recruitment of those workers which the amendment is aimed at helping. Even if

909
employers were not deterred from recruiting such employees, the system would stigmatise them as people with poor health records.
It will also complicate the reimbursement arrangements. Each month when the employer paid over his national insurance contributions and income tax to the Inland Revenue he would have to calculate the SSP payments which attracted the 80 per cent. recovery rate and those payments for which no reimbursement was due. In some cases, he could find himself having to apportion monthly payments of SSP during a month for a specific employee between that part of the payment for which he was due 80 per cent. and, if he was a small employer, that part on which he could revert to 100 per cent. recovery.
The amendment is unnecessary for protecting the employment prospects of those less healthy people who may be more prone to sick absence. It would also result in an administrative nightmare and add to the costs of administering the scheme without helping the employees it is intended to help; it could even damage their job prospects.
We are all concerned with the employment of people with disabilities; there is no disagreement on that. But the amendment does not help them; it does not aid their case.
4.45 p.m.
Baroness Hollis of Heigham: I am disappointed by the Minister's reply. No one is suggesting that the amendment will transform the situation of someone who is disabled from being among the least eligible in the labour market to being among the most eligible. We are saying that somebody who has been disabled in the past couple of years—has had disability, invalidity or sickness benefit—enters an already difficult labour market situation with even more of a burden.
The Bill makes it even less attractive for employers to employ somebody with a poor health record. That is undeniable. If, in future, an employer will have to pay 100 per cent. of the Bill whereas in the past he paid only 80 per cent., it stands to reason that it will be less attractive to him to employ somebody with a question mark over their health. I do not say that that would be the sole or main reason; but it is a reason for not employing somebody. I make no bigger claim than that.
If the Committee accepts that argument—that it is a reason for making it less likely that a disabled person will be employed—then we can meet and address that situation today.
Viscount Astor: Perhaps the noble Baroness will allow me to interrupt. I do not believe it is accepted that that is a reason for employers not to employ people with a disability. That is not the case. The noble Baroness is making a case based on a false premise.
Baroness Hollis of Heigham: Neither of us has hard evidence. But the evidence we have that comes from the DSS report—I am sorry and disappointed that the Minister did not acquaint himself with it—together with
910
the research evidence from the disability associations, shows that it is one factor. It is not the main factor but it is a factor that is presented by the Bill.
This is not the place for a widescale debate on disability. However, it is common sense that if an employer has to pay the full costs of someone's ill-health then, all things being equal, he will not employ somebody with a record of ill-health over somebody with a record of good health. That is obvious. I cannot understand why the Minister challenges that. That is what the Bill encourages.
Given that the position of the disabled in the labour market is so precarious, as we know from the Government's own research, and if the Bill makes their position even more precarious—as it undeniably does —then we should seek to remedy it. The cost will be trivial. We know that disabled people are extremely conscientious, though fluctuating conditions of sickness may produce a different pattern. But if we can help the disabled to enter the labour market and come off benefit, and if we can encourage the employer to employ such people, we should do so. That is what we are asking.
The procedure is simple. The amendment provides that somebody with an existing record of benefit can carry that, so to speak, as a passport, if they wish, into work. That would therefore trigger the possibility for the employer to reclaim sickness benefit for that person. We have passports of benefits across the whole realm of social security, so why not here for a few people who carry an immense burden on re-entering the labour market? I suspect that the costs will be trivial, certainly compared with the savings that will come from the incapacity Bill. I take the point of the noble Lord, Lord Lucas. But even if it helps an employer to only a modest degree to employ somebody with a disability record so that he is not taking a financially bad risk, that must be sensible; that must be humane and it must be civilised.
Before I sit down, is the noble Viscount—in the light of my comments—willing in some way to reconsider his answer? Will he take the matter away and address the position? I am not interested in winning or pushing or pressing a point; I am interested in seeing whether, together, we can help the disabled not to be further penalised by the clauses of the Bill. That is all.
Before I sit down, I invite the Minister to say whether he feels he can take the amendment away, in a worthwhile sense, with a view to helping the disabled not to carry a further burden on re-entering the labour market.
Viscount Astor: I am very keen to help the disabled enter the labour market but this amendment does not do that. I am happy to discuss with the noble Baroness at any time proposals she may have to help those people with disabilities enter the labour market. However, I have to make it clear to the noble Baroness that I cannot accept the amendment. I cannot consider the amendment because I do not believe that it achieves her very laudable aim. I am quite happy to discuss any points the noble Baroness has, but I must make it clear that I do not believe that the amendment achieves her aim.
Earl Russell: Does the Minister accept that it is a basic principle of market economics that if you increase the cost of something you create a disincentive to using it? Therefore, if you increase the cost of employing those with a long sickness record, you create a disincentive to employing them.
Viscount Astor: I believe that employers look at the whole picture when they employ someone. They look at the person, they look at his record, they look at his abilities and they look to see whether they are employing the right person for the job. Those are the most crucial factors that employers look at.
Baroness Hollis of Heigharn: I am extremely disappointed. I had hoped that the Minister could have accepted that there must be some connection between asking firms to pay the entire bill of statutory sick pay and their willingness to re-employ someone with a history of poor health. That is our assertion. I am not saying that it is the overriding explanation of whether or not they will employ someone but it is a contributory factor. We should not be weighting the scales against them.
The Minister said that he was not willing to consider the amendment. Those were his words. I did not want to press it but if the Minister is not willing even to consider it he has left me with no alternative but to seek the opinion of the Committee.
Viscount Astor: Before the noble Baroness sits down, if I had said to her that I was willing to consider the amendment that would have been giving her some encouragement that I would bring forward my own amendment at Report stage. I said to the noble Baroness that cannot do that. I cannot offer to bring forward an amendment at Report stage on that basis. I said that I would be very happy to discuss between now and Report stage any ideas that she has. It would be a little unfair of her to push me too hard because if I said "consider" she would be quite rightly expecting me to come forward with my own amendment at Report stage. She must realise that I am not in a position to do that.
Baroness Hollis of Heigham: I heard the Minister perfectly well. I understand and appreciate the candour with which he has put his position. He is willing to help the disabled in general but not in particular; he is willing to discuss them in general but not in particular. In the light of that, I wish to seek the opinion of the Committee.
4.53 p.m.
On Question, Whether the said amendment (No. 3) shall be agreed to?
Their Lordships divided: Contents, 84; Not-Contents, 152.

Division No. 2

CONTENTS

Acton, L.

Beaumont of Whitley, L.

Airedale, L.

Bonham-Carter, L.

Archer of Sandwell, L.

Boston of Faversham, L.

Ashley of Stoke, L.

Brooks of Tremorfa, L.

Aylestone, L.

Bruce of Donington, L.

Barnett, L.

Callaghan of Cardiff, L.

Bath, M.

Carmichael of Kelvingrove, L.

912

Carter, L.

Mason of Barnsley, L.

Cledwyn of Penrhos, L.

Mayhew, L.

Cocks of Hartcliffe, L.

Merlyn-Rees, L.

Donoughue, L.

Milner of Leeds, L.

Eatwell, L.

Milverton, L.

Ezra, L.

Molloy, L.

Falkender, B.

Morris of Castle Morris, L.

Falkland, V.

Nicol, B.

Fisher of Rednal, B.

Ogmore, L.

Fitt, L.

Pitt of Hampstead, L.

Foot, L.

Plant of Highfield, L

Gallacher, L.

Prys-Davies, L.

Gladwyn, L.

Rea, L.

Glenamara, L.

Redesdale, L.

Gould of Potternewton, B.

Ritchie of Dundee, L.

Graham of Edmonton, L. [Teller.]

Robson of Kiddington, B.

Grey, E.

Rochester, L.

Hanworth, V.

Russell, E.

Hardwicke, E.

Russell of Liverpool, L.

Harris of Greenwich, L.

Sefton of Garston, L.

Healey, L.

Serota, B.

Hilton of Eggardon, B.

Shepherd, L.

Hollis of Heigham, B.

Stoddart of Swindon, L.

Holme of Cheltenham, L.

Strabolgi, L.

Hooson, L.

Taylor of Gryfe, L.

Howell, L.

Thomson of Monifieth, L.

Hughes, L.

Tordoff, L. [Teller.]

Hunt, L.

Turner of Camden, B.

Jenkins of Putney, L.

Wallace of Coslany, L.

Judd, L.

Whaddon, L.

Kintore, E.

White, B.

Listowel, E.

Williams of Crosby, B.

Longford, E.

Williams of Elvel, L.

Lovell-Davis, L.

Wilson of Rievaulx, L.

McIntosh of Haringey, L.

Winchilsea and Nottingham, E.

NOT-CONTENTS

Abinger, L.

Dixon-Smith, L.

Addison, V.

Dormer, L.

Alexander of Tunis, E.

Downshire, M.

Allenby of Megiddo, V.

Dundonald, E.

Alport, L.

Elibank, L.

Archer of Weston-Super-Mare, L.

Ellenborough, L.

Arran, E.

Elliott of Morpeth, L.

Astor, V.

Fanshawe of Richmond, L.

Birdwood, L.

Ferrers, E.

Blatch, B.

Forbes, L.

Blyth, L.

Fraser of Carmyllie, L.

Boardman, L.

Fraser of Kilmorack, L.

Borthwick, L.

Geddes, L.

Boyd-Carpenter, L.

Gisborough, L.

Brabazon of Tara, L.

Goold, L.

Braine of Wheatley, L.

Goschen, V.

Brigstocke, B.

Granard, E.

Brookes, L.

Gray of Contin, L.

Brougham and Vaux, L.

Gridley, L.

Bruntisfield, L.

Grimston of Westbury, L.

Burnham, L.

Haig, E.

Butterworth, L.

Hailsham of Saint Marylebone, L.

Cadman, L.

Harding of Petherton, L.

Campbell of Alloway, L.

Hardinge of Penshurst, L.

Campbell of Croy, L.

Harmar-Nicholls, L.

Carnegy of Lour, B.

Harmsworth, L.

Carnock, L.

Harvington, L.

Chalker of Wallasey, B.

Henley, L.

Charteris of Amisfield, L.

Holderness, L.

Chelmsford, V.

HolmPatrick, L.

Chesham, L.

Hood, V.

Clanwilliam, E.

Howe, E.

Clark of Kempston, L

Huntly, M.

Colwyn, L.

Ironside, L.

Constantine of Stanmore, L.

Jenkin of Roding, L.

Cranborne, V.

Johnston of Rockport, L.

Crathorne, L.

Knutsford, V.

Cumberlege, B.

Lauderdale, E.

Davidson, V.

Lawson of Blaby, L.

Dean of Harptree, L.

Lindsey and Abingdon, E.

Denham, L.

Liverpool, E.

Denton of Wakefield, B.

Long, V.

Derwent, L.

Lucas, L.

913

Lyell, L.

Renwick, L.

Mackay of Ardbrecknish, L.

Rippon of Hexham, L.

Mackay of Clashfern, L. [Lord Chancellor.]

Rodger of Earlsferry, L.

Macleod of Borve, B.

Rodney, L.

Mancroft, L

Romney, E.

Marlesford, L.

St. Davids, V.

Marsh, L.

Seccombe, B.

Merrivale, L.

Selborne, E.

Mersey, V.

Sharples, B.

Miller of Hendon, B.

Shrewsbury, E.

Montgomery of Alamein, V.

Simon of Glaisdale, L.

Morris, L.

Skelmersdale, L.

Mottistone, L.

Stewartby, L.

Mowbray and Stourton, L.

Stodart of Leaston, L.

Moyne, L.

Strange, B.

Munster, E.

Strathclyde, L.

Murton of Lindisfarne, L.

Strathcona and Mount Royal, L.

Nelson, E.

Strathmore and Kinghorne, E. [Teller.]

Norfolk, D.

Sudeley, L.

Norrie, L.

Swansea, L.

Onslow, E.

Swinfen, L.

Orkney, E.

Thomas of Gwydir, L.

Orr-Ewing, L.

Torrington, V.

Oxfuird, V.

Trefgarne, L.

Park of Monmouth, B.

Trumpington, B.

Peel, E.

Ullswater, V. [Teller.]

Pender, L.

Vinson, L.

Peyton of Yeovil, L.

Vivian, L.

Prentice, L.

Wakeham, L. [Lord Privy Seal.]

Pym, L.

Wise, L.

Radnor, E.

Wyatt of Weeford, L.

Rankeillour, L.

Wynford, L.

Reay, L.

Renton, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.2 p.m.
On Question, Whether Clause 1 shall stand part of the Bill?
Earl Russell: Perhaps I may hasten to reassure the noble Viscount that I am not attempting to remove the clause. I have had one bite at that cherry already. But as the noble Viscount explained extremely clearly to us a moment ago, we are dealing with a package involving statutory sick pay and national insurance. I understand that the national insurance changes are coming before us by regulation. It seems that this is a convenient opportunity to address some of the elements in that package and to consider whether in fact we have got the proposals right.
If I had spoken in this House some 70 years ago, and I had said the words "three weeks" I believe that I would have been taken to be referring to what was then a very famous novel describing a love affair of the most sensational intensity, capable of being described as the experience of a lifetime. Maybe we are not speeding up so much as we think we are because nowadays the job takes 9½ weeks. Three weeks —even if that may be long enough for the experience of a lifetime—is not long enough to be able to qualify one's employer for reimbursement for statutory sick pay. Earlier on, the noble Lord, Lord Carter, gave us some figures for the facts which we all know—that is, that the vast majority of sickness lasts fewer than four weeks. That means that even for the small employer the vast majority of sickness will not be reimbursed. Where one has an epidemic a very high proportion of the workforce may be ill for a shorter period than four weeks.
914
The noble Lord, Lord Dean of Harptree, suggested at Second Reading the possibility that the Government may be prepared to consider being flexible about this period of time. He suggested the possibility that they might be asked to consider two weeks. I am using the opportunity of clause stand part to raise that possibility now and to ask the Minister whether he has given this matter any further thought since Second Reading and, if so, what his thoughts are.
My second point is raised as a question and not as an answer and concerns the future of self-certification. I do not necessarily want to insist that every sickness should be certified by a doctor. It would be extremely inconvenient for me if that were necessary every time I had flu. I can imagine what my GP would say to such a proposal. Therefore, the argument here is not all on one side. But we are dealing with arguments which have been put forward on the Government's side of the House for labour discipline and the management of absence. That necessarily must mean some invitation to take disciplinary action or at least warning action, against those absent on the ground of sickness.
There will be inevitably some cases where employers will clamp down on people who were absent for medical reasons or for those kinds of reasons which count as health reasons even if they are not illness—for example, drink problems which are very often unknown to the employer. If employers are to be invited to exercise this kind of discipline over those who are sick, it may be a good idea for them to know that the people they are dealing with are actually sick. I do not see how they can possibly know that except by having the opinion of a doctor. So although I can see a strong argument against this proposal—which I imagine the noble Viscount will develop and he may say things with which I agree—there is an argument on the other side as well. I want to take the chance and invite the Committee to consider it.
The third point that I wish to raise is one that I shall not develop at length because the noble Viscount has very kindly agreed to arrange a meeting. In that regard he has been extremely helpful and I would like to thank him for it. I refer to the question of the right of employees actually to obtain statutory sick pay. The noble Viscount was insistent that an employee's right to get statutory sick pay is undiminished. The problem is how to make that right effective. There are a number of cases where the employers do not pay it, or where they only pay part of it or where they pay it only for a shorter period than that for which it is due. There is another case where they say that they do not pay it for anyone on shift work. These cases are legion. We need some further form of discipline to deal with that.
The noble Viscount will of course say that people may go to the benefit office; they have a legal recourse. That is true, but in the general atmosphere of labour discipline which we are now getting, especially for people in part-time jobs, on short-term contracts and possibly not enjoying employment protection the fear of dismissal is a very real one. I understand that there is a case before the Appellate Committee of this House at the moment involving employment protection which I

915
shall not pursue because it is sub judice. It is a cold breath at the back. It is not a good world in which to be dismissed from one's employment at the moment.
So there is a very real risk of people not getting their statutory sick pay and simply not feeling that it is safe for them to go ahead and make a claim. I was encouraged by what the noble Viscount said as regards Amendment No. 2 today. He said that he regarded the employer's national insurance relief and statutory sick pay as part of one and the same package. In fact, the relief to employers as regards national insurance is pretty well a contractual obligation to go with pay and sick pay.
I suggested at Second Reading that since this is a contractual obligation and a mutual one, if the employers do not discharge their side of it and do not pay statutory sick pay, I do not see why they should get national insurance relief which is designed to finance it. The Minister did not reply to that suggestion at Second Reading. He may well have felt, very properly, that he needed to take advice on it. If he has taken such advice, I should be grateful to know the result of it on the technical question of how and in what procedural form could this question be addressed. Does it need to be a Motion to resolve on the regulations on national insurance or is there any way in which it can be brought within the Long Title of the Bill? Does the Minister see any practical advantages or disadvantages in doing that? On the practical side, I shall listen to what he has to say very carefully. I beg to move.
Baroness Turner of Camden: I rise also to oppose the Motion that Clause 1 should stand part of the Bill. This is the clause that imposes the whole burden of statutory sick pay upon employers. Although we had what I might call some "hopeful" exchanges on Amendment No. 1 in regard to the possibility of there being an alternative scheme for small employers, nevertheless, as it stands, the whole burden is to be imposed upon larger employers anyway.
On Second Reading, we went into the history of statutory sick pay when the obligation was first imposed upon employers. My own doubts about what was imposed at that time were somewhat stilled because of the guarantee about full reimbursement. Worries that employees might not get their sick pay entitlement were set aside because of that guarantee. Then we had the 1991 Act which reduced the guarantee by 20 per cent., with some protection for small businesses following protests in this House. Now we are back again—and this time round the guarantee has disappeared altogether.
We face the total privatisation of what is essentially a social benefit. There are a number of reasons why my noble friends and I regard that as unacceptable. First, there is the concern that employees may not get the sick pay to which they are entitled. A number of instances were quoted by the noble Earl, Lord Russell, on Second Reading, from a briefing provided by the National Association of Citizens Advice Bureaux to the effect that many people are not getting their entitlement now when there is 80 per cent. reimbursement. Indeed, NACAB said:
916
"Many employees do not receive the full amount of sick pay and some do not receive any sick pay at all. In many cases, the employees will have no other form of income as they are not always eligible for other benefits".
The briefing from NACAB quoted a number of cases to prove the point.
The Minister may say that that happens in only a small minority of cases, but we need legislation to protect the minority. There is no need to legislate for good employers. They will provide occupational sick pay schemes because that is the right thing to do and often will do so as a result of union negotiations. It is the job of legislators to protect the vulnerable.
There is also the possibility that people who are more vulnerable than others—people with a poor sick record, those who are disabled, those who have been injured or perhaps even those who are older—may find it harder to get employment because they will be regarded as a sickness risk, a risk which employers will now have to bear in full. We had some discussion of those issues on Amendment No. 3, moved by my noble friend Lady Hollis. I regret very much the fact that the Government did not see fit to accept that amendment.
It was suggested on Second Reading that discrimination against the more vulnerable was unlikely since it was well known that disabled people were better risks in relation to absences than more fit employees. However, as we have heard, the Spastics Society says that the level of unemployment among disabled people capable of, and willing to, work is 22 per cent. That has recently been confirmed by government figures. If employers are now more willing to give disabled workers a chance, that is not showing up in the figures. I do not believe that this Bill will help.
There is also the question of the cost to employers. We dealt with that point at some length earlier. As is clear from the brief of the Confederation of British Industry, employers are concerned about what the Bill represents. I have a letter from the CBI dated 24th January stating its concern that the Bill shows that the Government are withdrawing more and more from social provision and leaving it all to the private sector.
Employers received assurances that their full SSP costs would be met. They are now to be given some form of incentive not to make too much fuss about the Bill through a decrease in the amount of national insurance contributions they will have to pay. But for how long, they ask, will that continue? Can they be sure —can the Minister give any assurances—that the Government will not remove that incentive in some future piece of legislation? Can employers be sure that they will not be asked to bear the cost of other social benefits, such as maternity pay and industrial injury benefit? Clearly, the CBI sees the Bill as setting an unfortunate precedent and employers are likely to feel dubious about government assurances in that direction. I should like to hear from the Minister what assurances the Government can give employers on these very important issues.
In case the Minister seeks to chide my noble friends and myself on the ground that we have not previously concerned ourselves with employers' costs, let me say that we are very much aware of them, as is the TUC which has raised the same point. The Government are

917
loading the costs onto employers in a way that did not occur under Labour governments. There is not only this Bill; other costs which are also in the pipeline represent a tax on employment. We have been advised, for example, that there will be a tax on insurance premiums. All employers must carry employers' liability insurance. In future, premiums for that cover will carry a 3 per cent. tax. That is an employment tax if ever there was one.
Employers are now being asked to bear the full weight of SSP on the grounds that somehow or other that will enable them to manage sickness absences better. I share the views of the noble Earl, Lord Russell, when he opposed the Motion that the clause should stand part of the Bill. Even if absence records are higher than they used to be, the causes of such absences cannot be dealt with simply through the administrative procedures set out in this legislation. The causes of absence often go very much deeper.
I welcome the assurance that the Minister will look again at this provision in relation to small businesses although he was not terribly precise about it. However, this is such an unacceptable measure that we have no alternative but to oppose the Motion that the clause should stand part of the Bill.
5.15 p.m.
Lord Boyd-Carpenter: This clause embodies the whole purpose and effect of the Bill. The Committee has discussed it for some hours, so it is not necessary for me to add more than a word. However, I should like to point out to certain noble Lords who have spoken that whereas in one way a burden is placed on employers, the placing of that burden coincides with a very substantial reduction in the national insurance contributions they will pay. On balance, as I understand it, employers will benefit quite considerably. That is a very important point. I appreciate that there may be exceptional and difficult cases. Your Lordships have explored the possibility of covering some of those. I refer, for example, to whether the period of four weeks is sacred or whether a shorter period might be contemplated.
The noble Baroness, Lady Turner, also touched on the question of whether the same principle of transferring the direct burden to employers while relieving them of some of their general payments is likely to be applied in future in respect of maternity benefit. I hope that that is not the case. The situation is totally different. I do not believe that it would be a wise, humane or sensible thing to do.
On the main issue as embodied in the Bill, Clause 1 puts it into effect and I hope that we shall put it into law as soon as possible.
Viscount Astor: My noble friend Lord Boyd-Carpenter is absolutely right when he says that employers' extra statutory sick pay costs will be more than offset by the accompanying reduction in their national insurance contributions liability. Those reductions will be worth about £800 million in 1994–95, rising to almost £1 billion a year in 1996–97. The
918
reductions will exceed employers' extra SSP costs by well over £100 million, and business as a whole will not be out of pocket.
Businesses need to plan for any eventuality; for example, normal sickness rates. They can do so by taking out insurance. Firms with low sickness absence rates—many small companies fit into that category—will have the extra cash from their national insurance contributions reductions to meet the cost of that insurance.
The noble Baroness, Lady Turner, made much of fears that we might increase employers' national insurance contribution rates in future years. No government can give guarantees about the future levels of those rates, but we can point to an impressive record from which employers can draw their own conclusions. In 1979, employers' contribution rates were 13.5 per cent. They now range from 4.6 per cent. to 10.4 per cent. They will be reduced to 3.6 per cent. and 10.2 per cent. respectively from next April. Some of those reductions were made in 1991 when the SSP reimbursement rate was reduced to 80 per cent. The reduction has held, and the process of reduction will continue next April.
The noble Earl, Lord Russell, used the debate to ask about small employers' relief. That was probably the only way we could discuss that matter in the context of the Bill. He asked why we will not give full reimbursement after two weeks. Giving full reimbursement after two weeks reduces employers' incentives to tackle high sickness absence rates. That is perilously close to 100 per cent. reimbursement immediately. That is not in keeping with the Bill's main objectives. Abolition of the 80 per cent. reimbursement rate in no way affects the rights to SSP of individual employees. They will continue to be entitled to a prescribed minimum amount of sick pay provided that they are sick and absent from work for at least four days in a row, and provided that they satisfy the other qualifying conditions. In fact, the vast majority of employees will have their SSP topped up to full pay by occupational sick pay.
Reports recently have highlighted some examples of where employers have failed to pay SSP when it appears to have been due, or where they have threatened to sack the sick employees. We should put those examples in perspective. I condemn such practices, as I said on Second Reading. An employee who considers that he has been wrongly denied SSP, or is not being paid the correct amount, can seek a formal decision from the adjudication officer at his local DSS office. Where an employer fails to comply with such a decision within the prescribed time, the responsibility for payment passes to the department. Therefore the employees' SSP rights are protected fully if the matter is brought to our attention.
The noble Earl asked me also about self certification. Employees were allowed themselves to certify short absences in 1982 before the introduction of SSP. That change was made on the advice of the BMA which pointed out that it was nonsense to clog up doctors' waiting rooms with people wanting certificates to the effect that they had the flu. However, employers are not required to accept employees' certificates if they have grounds for suspicion. Equally, if an employee is not

919
happy with the employer's refusal to pay SSP, he can seek independent adjudication at his local DSS office. When it comes to self certification, we should be careful to take the BMA's concerns seriously.
The noble Earl offered an interesting idea about denying the reduction in national insurance contributions to an employer who had wrongly denied SSP to an employee. I am afraid that the idea would not work. National insurance rates are announced and implemented for the year as a whole. It would be impossible to unpick those arrangements in the year and to police whether the new rules had been applied correctly. I hope that with that explanation the noble Earl will allow the clause to stand part of the Bill.
Baroness Turner of Camden: Before the Minister sits down, will he give an assurance of the kind for which the CBI is asking, and which I mentioned: that the Bill will not set a precedent for transferring statutory maternity pay in the same way as SSP is being transferred? It is a matter of grave concern.
Viscount Astor: We have issued a consultation document on statutory maternity pay which gave two options. We are presently studying all the replies that we have received. When we are ready, we shall make an announcement about our proposal and, of course the matter will come before this place.
Clause 1 agreed to.
Clause 2 [Transitional and other supplementary provisions]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 4:
Page 1, line 27, leave out subsection (3) and insert:
(" (3) A statutory instrument which contains (whether alone or with other provisions) any regulations made under subsection (1) shall be laid before and approved by a resolution of each House of Parliament.").
The noble Baroness said: The amendment requires that any statutory instrument should be brought before this place under the affirmative resolution procedure. The Committee will appreciate that this is a sensitive subject, because during discussion on the Statutory Sick Pay Bill 1991, which reduced reimbursement from 100 per cent. to 80 per cent. it was this place which defeated the Henry VIII clause which would have allowed the Secretary of State to have reduced that 80 per cent. to 70 per cent., 60 per cent., 50 per cent., down to today's nil figure, without the Government bringing primary legislation before this place. Had it not been for the defeat of that clause then by this place, today's Bill would not have been necessary. That is why the Committee will understand that this is something of a sensitive issue. Behind it lies a wider concern that too much social security legislation is targeted, fixed and determined by regulation and not by primary legislation. The tendency we have seen is that the shorter the Bill, the more discretion it tends to give to the Secretary of State to make regulations on matters intimately affecting the lives of many hundreds of thousands of people.
Whereas with primary legislation we can oppose, amend or delay clauses, and invite the other place to think again, we have no such powers, as I understand it,
920
in respect of statutory instruments, whether affirmative or negative. Convention does not allow us to reject them. We have no powers to amend them. All we can do is scrutinise them. That is why it is so important that, wherever possible, Parliament's intentions should be brought within the framework of primary legislation rather than for it to be left to departmental policy to be handled by regulation. When it comes to this Bill, as was noted in the other place, words such as, "savings", "transitional" and "consequential" all need to be defined. In particular, as the Bill stands, it apparently gives the Secretary of State power to make by regulations such savings as he considers necessary or expedient for the operation of any enactments repealed or amended by Clause 1. Those are wide-ranging powers, but at least the affirmative resolution procedure requires the Minister automatically to bring such powers to this place for scrutiny, for discussion, so that the views not just of Members of this place but of the wider pressure groups intimately associated with disability can be heard.
But with negative resolutions, the onus is largely, but not invariably, on Opposition Members to draw such resolutions to the attention of this place, but to do so within a time limit of 40 days. We have to do that without the resources that the Minister has: four civil servants in the Box and a whole department behind him. Our Box is usually empty. That is why we seek, wherever possible, to ensure that the Secretary of State's powers should be determined by primary legislation and not by statutory instrument. Where they are to be determined by statutory instrument, they should wherever possible be by affirmative resolution, so that the onus is on the Minister to bring them forward, explain them, and seek out consent to them, rather than by the negative procedure which means that we put up the trip wire so that we have an opportunity to discuss them.
Traditionally the Government's position is that controversial propositions require the affirmative resolution procedure and that non-controversial propositions require the negative resolution procedure. The Government have suggested that such transitional arrangements as are contained in the Bill are non-controversial. The Minister may be right. We do not know. We cannot tell. That is why we preferred the affirmative resolution procedure. The Minister may suggest that the regulations caught by the negative resolution procedure are trivial. Again, he may be right. Again, we do not know. Again, we cannot tell. We do not have the resources continually to put in place the trip wires to ensure that they are properly scrutinised if, heaven forbid, the Minister has misjudged.
The Minister may say that this is an onerous procedure for small issues. But on the assumption that the major and controversial issue will in any case be caught by the affirmative resolution procedure and must be brought before this Chamber there is no problem of attaching to it other instruments which may be trivial and non-controversial but which allow us all to review them collectively and en bloc, and thus to scrutinise the progress of this procedure. That has been our experience in other areas such as local government.

921
We seek the Minister's agreement that such changes which are to be carried by resolution, by statutory instrument, come under the affirmative resolution procedure rather than the negative procedure. Otherwise this Committee will find its control of social security legislation incrementally whittled away. That has been the history of the past decade. I beg to move.
5.30 p.m.
Lord Boyd-Carpenter: My approval is almost always in favour of parliamentary control of delegated legislation. However, after studying carefully what the noble Baroness said and the terms of her amendment, I believe that it goes too far. Members of the Committee will see that it applies to:
"any regulations made under subsection (1)".
That is any regulation, however trivial and minor it may be. There is a danger of piling on additional obligations to apply the affirmative procedure to minor regulations. The problem is that if we overload our list with Motions for the approval of minor and trivial proposals we shall blur interest in the important issues which can arise under certain regulations, some of which are of great importance.
I shall listen to what my noble friend the Minister says. However, after listening to the noble Baroness my first reaction is that the amendment goes too far, that it is unnecessary and will add many unimportant matters to the list of business in this Chamber and thereby perhaps distract attention from the more important ones.
Earl Russell: The noble Lord, Lord Boyd-Carpenter, argues that we should refrain from invoking the affirmative procedure because we are not certain what kind of regulations we shall have. That point may well be used as an argument for the other side of the case. The regulation-making power arises in Clause 2 (1) which states:
"The Secretary of State may by regulations make such transitional and consequential provision, and such savings, as he considers necessary or expedient".
I cannot help remembering my favourite quotation from W.S. Gilbert:
"Is gentle music rolls in the melody of souls",
which is pretty, but I do not know what it means.
It may be that regulations made under this power are trivial. It may be that they are far-reaching. However, the clause is worded so generally that this Committee cannot tell. For that reason the noble Baroness was correct to table the amendment. When we debated the Henry VIII clause in the 1991 Bill we were given the most urgent and earnest assurances that the department had no present plans to do what it is now doing. I believe that those assurances were genuine at the time they were given but I cannot help wondering whether the present Bill was just a twinkle in the Treasury's eye—or maybe I should say a chink in the Treasury's pocket. I do not know what may be coming to this Chamber.
I heard the remarks made on the Friday before last by Mr. Michael Portillo. He expressed a great dismay about those who diminish respect for Parliament. I share his dismay in diminishing respect for Parliament. But respect for Parliament depends on what Parliament may
922
do. It depends on the belief that Parliament can make the law and can control the Executive. The use of the regulation-making power, especially in this Chamber, diminishes both those aspects. It diminishes our power to control the Executive and the increasing use of the regulation-making power—I shall not mention other Bills, I am sure that Members of the Committee know what is in my mind—tends to cast doubt on the principle that Parliament makes the law. If Parliament gives way on those two crucial issues it will diminish respect for itself. I, for one, would regret that very bitterly indeed. I am happy to support the amendment.
Lord Boyd-Carpenter: Before the noble Earl sits down, will he note that the passage which it is proposed to delete refers to "any regulations"? I agree that we are dealing with important regulations but surely the phrase "any regulations" is carrying the matter to an extreme, which means that the whole procedure becomes somewhat discredited.
Earl Russell: The noble Lord, Lord Boyd-Carpenter, is right about the pressure on our business. I am well aware of that. However, I do not see how we can make the distinction in relation to the amendment until distinctions are made in the regulation-making power which allows us to address that. If the Minister will offer to withdraw the clause and to redraft it so that we can distinguish between the major issues which need an affirmative power and the minor issues which do not I should be delighted to go along with that. I do not see how I can do so without the Minister's help.
Lord Carter: Subsections (2) and (3) make it clear that any regulation is subject to the negative procedure unless there is a requirement for the affirmative procedure. Members of the Committee have always rejected that approach and prefer that all the regulations shall be affirmative unless the Government produce a requirement that it shall be negative. As the Bill stands, it is within the power of the Government to ensure that all the regulations, however important, are subject to the negative procedure.
Lord Simon of Glaisdale: I am generally strongly in favour of the affirmative resolution procedure as against the negative resolution procedure. There are a number of reasons for that. The first is that the negative resolution procedure frequently involves no scrutiny in the other place because time has flowed out before the time for a review of the regulations. Secondly, with the affirmative resolution procedure one has a much more orderly debate. The Minister opens, explains the purpose of the regulations and debate ensues. In the negative resolution procedure the debate is generally ragged with various Members feeling their way and the Minister replying at the end.
But having said that, and having expressed a personal predilection of my own, we must remember that we have now, in the face of some opposition, the scrutiny committee. That committee has adopted an extremely sophisticated approach. It does not adopt a general view in favour of one procedure or another. It discriminates very closely, according to the importance of the regulations. In my view it is extremely important that

923
when the scrutiny committee gives a clear signal, as it did on the Railways Bill and, in the current Session, on the Local Government (Wales) Bill, we should pick up that signal and vindicate the committee's view.
On the other hand, in the present case the scrutiny committee has found nothing to complain of at all. It seems to me that with all that has been said in favour of the affirmative resolution procedure here, we should blur the impact of the scrutiny committee if we adopted this amendment, although the reasons for it have been persuasively argued by the noble Baroness and the noble Earl. In view of that, and subject to anything that the noble Viscount may say, I hope that the noble Baroness will not press the amendment to a Division.
Viscount Astor: I can assure the Committee that it is normal practice for statutory instruments which give effect to the detailed non-controversial provisions consequential to the main changes proposed in primary legislation to be dealt with under the negative resolution procedure. The Government's proposals in this piece of legislation do not differ from those normally included in the social security legislation which comes before this place. Indeed, the last major piece of statutory sick pay legislation with which this place had to deal—the Statutory Sick Pay Act 1991, which Members of the Committee will recall reduced the reimbursement rate from 100 per cent. to 80 per cent.—contained a provision similar to that provided for in Clause 2(3).
My noble friend Lord Boyd-Carpenter is normally a strong proponent of the affirmative resolution procedure but he explained clearly why the amendment goes too far. I do not believe in this case that there is any diminution of Parliament's power, as was suggested by the noble Earl, Lord Russell. The noble and learned Lord, Lord Simon, also agreed that in this case, because there have been no comments from the scrutiny committee on this clause, there is no need for the affirmative resolution procedure.
Having heard from the noble and learned Lord, Lord Simon, and my noble friend Lord Boyd-Carpenter, I could rest my case and sit down. However, in a spirit of helpfulness to Members of the Committee opposite, perhaps I may give an example explaining the circumstances in which the negative resolution procedure is intended to be used. The main purpose of this legislation is to end the right of an employer to recover 80 per cent. of the SSP paid out to his employees from their remittances of national insurance contributions with effect from 6th April. But we need to provide clear and workable instructions to employers on just how the change will operate in practice. We need to be able to tell them what effect the change will have on the recovery arrangements in respect of those employees who are already sick and entitled at about the time of the change.
The Government's intention is to provide that employers will be able to continue to recover the appropriate amount of SSP paid for days of sickness up to and including 5th April 1994, even if the employer cannot actually recover the amount due until after that date. Only SSP due for days of sickness occurring on or after 6th April will be affected by the ending of the 80
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per cent. reimbursement rate. That is in line with what industry will expect at the change-over date. It follows the practice adopted in April 1991 when the reimbursement rate was reduced. All SSP due for days immediately before that change was recoverable at 100 per cent. The reduction to 80 per cent. applied only for days of sickness falling on or after 6th April 1991. That is a typical example of how the Government propose to exercise the power contained in Clause 2(3). It simply provides a power for the Secretary of State to implement non-controversial transitional and consequential changes promptly without the need for further lengthy debate.
Employers rightly expect to know as soon as possible the nature and detail of the changes that they will have to administer from next April. This amendment will only delay the issue of clear and definite instructions to employers and will only confuse matters for employers who have to administer the SSP scheme. Without clear and comprehensive instructions delivered in a reasonable time, they will not be in a position to introduce the changes smoothly.
In the light of that and in the light of what has been said by the noble and learned Lord, Lord Simon, and by my noble friend Lord Boyd-Carpenter, I hope that the noble Baroness will withdraw the amendment.
5.45 p.m.
Baroness Hollis of Heigham: I thank all Members of the Committee who have taken part in this interesting debate. The noble Lord, Lord Boyd-Carpenter, and the noble Viscount, Lord Astor, are right to say that the business of this Chamber should not be cluttered up by discussing trivial matters of detailed regulations. However, there are important issues which require the proper scrutiny of this place. On these Benches we all wish to see a full debate of those statutory instruments which are important and significant, but we do not wish to take up the time of this place in debating that which is trivial.
That is fine. But our problem is that we do not know which is which. We have no way of knowing that in advance because this clause gives total power to the Minister, rather than this place, to determine which is which.
I have every confidence in the Minister's integrity, but I remind the Committee that it is the same department, if not the same Minister, which only a couple of years ago tried to persuade us to accept a Henry VIII clause which would have allowed the Minister, by regulation, to change at will primary legislation and thus reduce reimbursement from 80 per cent. down to any figure that he saw fit. I am quite sure that at that time the Minister—I suspect that it was the noble Lord, Lord Henley—told the House that there would be plenty of opportunity to scrutinise the matter; that the affirmative resolution procedure was unnecessary; and that any such changes were trivial. Fortunately at that time the House, in its considered and wise judgment, disagreed with that and insisted that any such changes should be made in the form of primary legislation, the Minister notwithstanding. The House was entirely right to do so.

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The Minister said that we should not accept the amendment because it would introduce further and lengthy debate while such regulations are discussed. That is precisely our problem. Some issues require some debate and some do not. We have no way of knowing in advance which do and which do not. Therefore, we are dependent upon the integrity and honour of Ministers in that regard.
I accept that we now have the scrutiny committee to assist us in that judgment. Nevertheless, the Minister is continually placing a responsibility on the Opposition to put in a trip wire rather than bringing rafts of statutory instruments, which have the force of law, before the law-making Chamber.
I do not propose to press the amendment this evening. Obviously we wish to consider the matter further. I believe I am right in saying that the DSS is more remarkable than virtually any other government department of which I am aware in furthering its policy aims by regulation. If I am right, it behoves this Chamber to have even more urgent powers of scrutiny and to put the presumption on the Minister by going for the affirmative rather than the negative resolution procedure. After all, 20 million people in the country are the clients, customers or recipients of the benefit procedures of the DSS. On their behalf, it behoves us to be stringent and scrupulous in our vigilance. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
Lord Carter Lord Carter moved Amendment No. 5:
After Clause 2, insert the following new clause:
("Annual report on effect of Act on disabled people
. The Secretary of State shall annually publish a report on the effects of this Act upon the employment of people with disabilities and that report shall be laid before Parliament.").
The noble Lord said: The amendment again deals with the employment of people with disabilities. Members of the Committee will be aware from the debates in another place and from debates on previous amendments of the concern expressed about the possible effect of the Bill on the employment of people with disabilities. We are told by Disability Alliance that its rights workers receive numerous calls for help from people who have had problems obtaining their statutory sick pay or, worse still, have been dismissed as a result of a long spell of illness.
The flaw in the argument heard from the Government from time to time regarding the employment of disabled people is that it does not deal with the healthy or fit employee who develops a serious condition during his employment. Again, Disability Alliance points out that its rights service regularly comes across people who have been refused statutory sick pay or who have been dismissed during a protracted spell of illness.
We know that two out of five people with disabilities work for small firms whose record in terms of employment practice tends not to be all that good. Therefore, in that sense disabled people are likely to be even more vulnerable than the average person. We know also that only one-third of disabled people remain
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with their employer after the onset of disability and that the unemployment rate of disabled people is three times that of the able bodied.
We are not asking in the amendment for any special arrangements which will cost the Government money or any payment arrangements, disbursements or compensation. We are merely asking for a report to be laid before Parliament which will give the facts and the evidence to Parliament and thus enable a conclusion to be reached about the effects of the legislation on the employment of disabled people.
I am sure that the Minister will repeat something we are always hearing; namely, that the average attendance record of people with disabilities in employment is better than the average of able-bodied people. That is true, but it only applies to those in work. The essential point is the number of disabled people who find it hard to find employment either because they are already disabled or because the onset of disability occurs in the course of their employment. As I said, the unemployment rate for disabled people is three times that of the able bodied.
If the Government are confident—and they keep saying they are—that the Bill will not unduly affect disabled people, what have they to fear from accepting the amendment? This Chamber has a long record of expert all-party concern over issues of disability. In the light of that expertise and concern, I hope that the Minister will feel able to accept at least the principle behind the amendment. I repeat. There is no cost to the Government other than that of preparing the report. It would at least enable Parliament to obtain the facts and the evidence and thereby enable it to draw a conclusion as to whether or not the fears of those who feel that the legislation will have a deleterious effect on the employment of people with disabilities is well grounded. I beg to move.
Lord Lucas: The amendment is worthy but aims at achieving something which is impossible. How can anyone hope to tell what the effect of this measure will be on the employment prospects of those with disabilities? Surely we need comprehensive information on the employment prospects of the disabled which examines all the factors affecting them. At the very least the Government should ensure that when we ask such questions we are not told that the information is not collected centrally or that it is not collected in such a form. I hope that my noble friend the Minister will be able to give us some comfort in that respect.
I should like to point out to the noble Lord, Lord Carter, that if two-fifths of disabled people are employed by small firms, that does not say that they are more vulnerable as a result: it says that small firms have a better record of employing disabled people than larger firms. That is to their credit.
Viscount Astor: While I understand and appreciate the concerns expressed by the noble Lord, Lord Carter, I do not wholly agree with the claim that people with disabilities who have poor health records have suffered since the SSP scheme was first introduced and on subsequent occasions when changes were made to it. As I said previously, we do not accept that the abolition of

927
the 80 per cent. reimbursement rate will lead to discrimination against people with disabilities or poor health records. Nor do we expect that there will be any changes in the pattern of employment of people with disabilities as a result of the change. I am sure that the noble Lord, Lord Carter, agrees that the evidence suggests that people with disabilities make very good employees and often have a more reliable sickness absence record than other employees.
We believe there are many other factors of far greater importance in determining job opportunities for disabled people. Both this department and the Department of Employment have developed policies to promote the employment of people with disabilities. The disability working allowance which we introduced in April 1992 promotes greater opportunities for employees with disabilities by providing them with financial support while in employment.
It has been the endeavour of successive governments to increase awareness that disabled people are good employees and have a valuable contribution to make. The Government share the aim of ending any possible discrimination against disabled people and believe that the best approach is by a programme of education and persuasion. The Prime Minister has asked my right honourable friend the Minister of State for Social Security and Disabled People to work with the all-party disablement group to identify areas for further action where discrimination could be eliminated at little or no cost Moreover, "access to work" will provide a wider range of help to a greater number of people. That new, more flexible, provision has been widely welcomed by organisations of and for disabled people. I am aware that employment Ministers are carefully considering all the representations made to them by disability and employer groups. They will be mindful of those views when reaching decisions on outstanding issues. Moreover, the employment of people with disabilities is already governed by the Disabled Persons (Employment) Acts 1944 and 1958. In addition, people with disabilities have the same employment rights and protection as everyone else under employment protection legislation. That is an important point.
However, we shall be monitoring the effects of the change in the course of the routine visits of the Contributions Agency to employers and by other means such as the feedback we receive from employers, employees and their representative organisations. The groups representing people with disabilities are quick to come to us and explain their concerns. With that explanation, I hope that the noble Lord will see that it would not really be appropriate for a special report to be laid before Parliament. I trust that he will feel able to withdraw the amendment. I have given him the reassurance that we are certainly doing a great deal to help people with disabilities to gain employment.
Lord Carter: We are not engaged in a debate about what the Government are, or are not, doing to help people with disabilities obtain employment. The amendment deals specifically with the effect of the Bill on the employment of people with disabilities. That is the purpose of the amendment. I repeat. We are
928
continually told that people with disabilities make good employees, that their average attendance at work is good, and so on. As I said, that is fine but only if they are in work. The rate of unemployment among people with disabilities is three times the unemployment rate of able-bodied people. Those who are in work are extremely good employees but the problem is that three times as many disabled people are out of work as able-bodied people.
The Minister said that the Government did not expect, any change in the prospect of employment for disabled people as a result of the operation of this Bill. I am sure that is correct but—it is only fair to mention this—if there was evidence to the contrary, the Government would no doubt wish to take action. If the Government discovered from their monitoring that there was evidence that the Bill affected the employment of people with disabilities, they would wish to take action. All we are asking is why should the Government not find out about that. Why not ask for a report to be submitted to Parliament each year to answer the question? We would be delighted if the Government were correct about this matter.
I know from long experience that many groups of disabled people and groups representing disabled people approach the Government and explain the problems. However, the problem is that the Government do not always listen. I shall, of course, withdraw the amendment at this stage, but this is a point to which we shall wish to return. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 6, as an amendment to Amendment No. 5, not moved.]
6 p.m.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 7:
After Clause 2, insert the following new clause:
("Annual report on effect of Act on women
The Equal Opportunities Commission shall annually publish a report on the effects of this Act upon the employment of women and that report shall be laid before Parliament.").
The noble Baroness said: I rise to move the amendment standing in my name and that of my noble friends. We have been seeking, in discussion on this Bill, to protect the most vulnerable. Clearly, disabled employees come into that category. The rate of unemployment among the disabled is already unacceptably high and the position is unlikely to improve as a result of the Bill. However, it might perhaps not be thought necessary to write in any special protection for women.
The noble Viscount will probably remind the Committee that employment among women has increased. That is true, but that employment is mainly in part-time and in low-paid jobs. It is noticeable that many of the cases mentioned by the National Association of Citizens Advice Bureaux of employees who even under the present system are not getting their entitlement involve women working in low-paid employment. Often such employees are so grateful to have any kind of job that they do not make a fuss when they do not get their sick pay. Examples of this are referred to in the

929
NACAB brief. The situation of such employees may well become worse as a result of the legislation that we are now debating. Furthermore, women have special problems and many of these are connected with their reproductive function. There are already provisions in law in regard to maternity leave and maternity pay. I wish to emphasise at this point—as I did earlier—the concerns of the CBI and other employers' organisations that they may eventually be landed with responsibility for statutory maternity pay. I hope that the noble Viscount will take seriously the representations that have been made on that point.
There are other conditions connected with maternity which can cause sickness absence. Some of these conditions are not life threatening and therefore perhaps are not treated all that seriously. However, they can give rise to absences, as can stress-related illness to which many women are prone as a result of having to look after a family and carry out some form of outside employment. The amendment suggests that the Equal Opportunities Commission be asked to monitor the situation and to publish a report,
"on the effects of this Act upon the employment of women".
This Bill is a new departure. For the first time employers are being made fully responsible for the whole of a particular social benefit. It seems to me that we are right to be wary of it and to want to see how it affects employees who seem to us to be most vulnerable. By writing into the Bill a role for the Equal Opportunities Commission, we will signal to women, who may feel particularly vulnerable, that there is a body prepared to watch over them and to look after their best interests. I beg to move.
Baroness Seccombe: I always follow new legislation that affects women very carefully. I have no evidence to hand, but I think I am right in saying that women are reliable, regular attenders at work. That applies particularly to women who are returning to work after a break. I believe that this amendment would constitute a bureaucratic and expensive way of monitoring when it could be done simply in the way that was suggested earlier by my noble friend Lord Astor.
Earl Russell: I am happy to support this amendment. One reason why women are particularly vulnerable in this situation is that a high proportion of them, often for obvious reasons, are in low-paid, part-time employment. They have sometimes been in that employment for a short period of time and they enjoy employment protection much less often than men. We have here a special problem and I hope that the Minister will pay it some attention.
Viscount Astor: There is no evidence to suggest that measures such as the introduction of the statutory sick pay scheme in 1983—and subsequent changes to the scheme made since then—nor the introduction of the statutory maternity pay scheme in 1987 have had any adverse effect on the employment of women. Between 1979 and 1992 the number of women employees as a percentage of all employees grew from 41 per cent. of all employees to 47 per cent. As the noble Baroness
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said, these figures include both full-time and part-time employees. But, even if we compare the numbers of full-time women employees in 1984 with the numbers in 1992, the growth rate is around 15 per cent. The corresponding rate from 1987—when the statutory maternity pay scheme was introduced—until 1992 is around 10 per cent. There is no evidence there that either of these measures has affected employment prospects.
Women already have statutory employment rights, including protection against discrimination and unfair dismissal in legislation governing equal treatment and employment rights. The Government are confident that the changes in this Bill will have no adverse impact on the employment prospects of women. On the contrary, all the evidence suggests that the employment opportunities for women have steadily increased and will continue to do so. There is no evidence to suggest that they have been or will be affected by measures such as the availability of statutory sick pay or statutory maternity pay.
In any event this amendment is unnecessary. Under Section 56 of the Sex Discrimination Act 1975 the Equal Opportunities Commission is already required to publish an annual report on its activities during the year. Each annual report shall include a general survey of developments during the period to which it relates, in respect of matters falling within the scope of the commission's duties. I hope that with the explanation that the amendment is unnecessary because of the requirement on the Equal Opportunities Commission to publish an annual report already, the noble Baroness will feel able to withdraw the amendment.
Baroness Turner of Camden: It is not my intention to press the amendment this evening, but I am rather disappointed with the noble Viscount's response. Of course I am well aware that the Equal Opportunities Commission has to issue an annual report. I was a member of the EOC for some six years. However, it is a general report. It covers the whole spectrum of what has happened in the preceding year. This amendment seeks to give the EOC a specific role because this Bill constitutes very much a new departure. For the first time employers are being given the total responsibility for a social benefit.
As we have already heard when discussing various aspects of the Bill, categories of employment in which many women are engaged such as part-time and casual work, are the very categories in which the individuals concerned do not often succeed in obtaining the rights that are available to them now. If the employers are responsible for all rights, it seems to me doubtful that the employees that I have mentioned will continue to obtain their rights in the future. As I have said, I will not press the amendment this evening, but this is a matter which we may return to on Report as I do not feel that the Minister has dealt with the anxieties that we on this side of the Chamber have expressed in moving the amendment. However, in the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
[Amendment No. 8 not moved.]
Remaining clause agreed to.
House resumed: Bill reported without amendment.
Viscount Goschen: My Lords, I beg to move that the House do now adjourn during pleasure for a period of 10 minutes.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 6.9 to 6.19 p.m.]

Student Awards and Loans Regulations
6.19 p.m.
Earl Russell Earl Russell rose to move to resolve, That the Education (Mandatory Awards) (No. 2) Regulations 1993 (S.I. 1993, 2914) and the Education (Student Loans) (No. 2) Regulations 1993 (S.I. 1993, 2915) shall not come into force until the right to claim housing benefit and income support during the long vacation has been restored to students.
The noble Earl said: I fear that the House may feel that I am farming the bowling. On the other hand, if one looks at the matter from my point of view, I did not introduce the Statutory Sick Pay Bill, and I did not introduce these regulations. It seems to me that the Government are bowling at my wicket no matter at which end I may be standing, and if the ball is bowled at my wicket, I have to play a stroke.
During the course of the debate, the noble Baroness may wish to draw attention to the difference between the wording of this Motion and of the Prayer moved by my honourable friend Mr. Foster in the other House. The explanation for that is purely in the difference between the procedure of the two Houses. It is much easier to do here what I am doing now, and this Motion is put down with the full prior approval and encouragement of my honourable friend Mr. Foster. The Motion represents party policy. On the other hand, the evidence that I am using and therefore the judgments that I make on it are based entirely on my own personal experience as a university teacher. Therefore those must be individual.
I must declare an interest in my capacity as a university teacher and also in my capacity as a parent.
The noble Baroness may perhaps wish to raise the question whether this is a fatal Motion. It is not a fatal Motion. It is a commencement Motion. It attempts to lay down a conditioned precedent for the commencement of these regulations. If the Government wish to accept that condition, then the regulations can come into force as proposed. However, if the Government were to say that they would sooner be dead than accept the condition, then one might argue that the regulations were rather felo de se than killed as a result of this Motion.
I shall take this point lightly. The noble Baroness offered us a promise in 1990 when we debated the student loans Bill that the grant would be maintained in cash terms at its 1990–91 level. We have had four years. I suppose that that is not a bad run. However, it confirms the great wisdom of the noble Baroness, Lady Blackstone, in insisting in 1990 that before the Government could go beyond 50 per cent. grant and 50 per cent. loan they must have primary legislation. We
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may yet be very glad of that. I should like to thank the noble Baroness, Lady Blackstone, for ensuring that that is the case.
The change from grant to loan does not seem to me a very wise one in the present situation. First, it will tend to increase the public sector borrowing requirement in the medium term. I should have thought that that was at least unnecessary because if one looks at the figures set out in the White Paper Top-up Loans for Students in which it was argued that until 2007 the net effect of introducing the loans would be to increase public sector borrowing and not to diminish it and one calculates the money forgone, the interest forgone arid the administration costs, that is actually worse for the public sector borrowing requirement than it would be to pay out the money as grant. I thought that we were trying to reduce the public sector borrowing requirement. If the Government are now determined nonetheless to increase it, I should like to know for what motive.
Secondly, the Government are risking a public opinion disaster. We can say about student grants what Mrs. Rumbold once said about child benefit—it is deep in the culture. In 1990 I heard a number of noble Lords say that without the student grant they could not possibly have been here. That sense of attachment to the principle of grants is strong, and challenging it is risky.
As regards the effect of the change to loans on educational practice and experience, I do not believe that I was right and I do not believe that the noble Baroness was right. The person who was right in 1990 was the noble Lord, Lord Boyd-Carpenter, who I see is no longer in his place. I talk to every one of my pupils and advise them to take the loan. Over and over again I meet the deep horror of going into debt which the noble Lord, Lord Boyd-Carpenter, invoked and, in one or two cases, a sense that borrowing money is absolutely wrong in principle. That is why there has been such a low take-up rate of student loans. A great many people prefer to take paid employment during term, to the great detriment of their work, rather than take up these loans. The educational effects of that are serious.
Although I believe that the change to a further element of loans is a mistake, I do not believe that it is the biggest mistake that the Government have made. The biggest mistake of all was that the total package they offered in 1990 was too small by a very large amount. I say that in my capacity as a parent as well as in my capacity as a teacher.
The immediate effect has been a rush into paid employment. That is doing a great deal of harm to the quality of our education. Noble Lords may say that in other countries people take jobs and work their way through college and seem to survive it. I have taught in the United States, and I would agree with that. However, the difference is that south of the Border in this country we have a three-year degree course which is the shortest anywhere in the advanced world. One simply cannot do that and maintain an adequate standard unless people are able to do academic work full time during term and to do a substantial amount in vacations. Considerable parts of a university course, my own special subject class being a case in point, simply cannot he done unless people are able to do large chunks of work during the

933
vacation. I had to tell my special subject class yesterday that they were doing less work than any other class of that sort that I had taught in the past 20 years. I do not know whether I blame them or the Government or if both—as I believe to be the case—in which proportions. I do not like having to blame my students for the Government's misdeeds.
I reckon that the average amount of work done by undergraduates has been approximately halved since I came back from the United States in 1984. That must diminish the quality of the product we are turning out. If the noble Baroness wants to quote statistics about the proportion of first and second-class degrees, I believe that most of us have a feeling, which I certainly share, of repugnance at penalising our undergraduates for what we believe is not their fault. I believe that more than before we are marking on the quality of mind rather than on the quantity of work. The amount of work needed to gain an upper second degree is imperceptibly but quite rapidly diminishing. That cannot be good for the international recognition of our degrees.
The key point of the Motion is to restore the right to benefit—housing benefit and income support during the long vacation—before this change to a further element of loan can come into force. That is I think proper, first and foremost because it is a citizen's right. It is clear—the noble Baroness herself admitted it when we debated the matter last year—that divided over the full number of weeks, student support is below income support levels. Mr. Scott admitted it again in 1990. Anyone who is below income support level as a citizen should be entitled to income support. If they are not, one has second class citizens. In this country we have not believed in that concept for a long time.
Because the basic package is not enough, at present of the sample of people whom I teach this term to my certain knowledge 25 per cent. are taking paid work for more than 12 hours a week. I believe in the right to silence. Therefore if 25 per cent. are known to me, I presume that more than 25 per cent. are actually doing so. We are reaching a situation where the quality of a degree depends more on the parental bank balance than on the quality of the undergraduate. That is not right.
Perhaps I may cite a few individual cases. One of my present pupils is a mature student. He states:
"For my first 52 weeks"—
note the 52 weeks my Lords—
"almost half … my expenditure was either borrowed or transferred from savings… I did not seek part-time work during my first year, since I wished to establish myself academically. (Expensive though it may have been, I believe this policy has been successful.)".
And he is right about that. He continues:
"Sadly, since I was forced to borrow so heavily during the long vacation, it will not be possible to devote all my working hours to study for the remainder of the course".
He is now working in paid work for 16 hours a week. If I need to change his tutorial because I have to go to a meeting—as happens in academic life—it is difficult to find a time.
With the problem of the vacation—and the man, having left home 10 years ago, feels he cannot go back and live off his parents—it is a case where one needs
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social security. The point about social security is that it deals with anomalies. That is what the safety net is for. Since life is full of anomalies, we need a safety net.
Let us take another case. A pupil at the end of her first year succeeded in getting a job for the long vacation. She thought that she was all right, but she had a cyst and worried, as one does. It occurred to her that it could possibly be malignant. She asked me what she would be able to obtain to live on if it were to prove malignant. She could not have social security because she was a student. She could not rely on her parents because her parents' business was failing. Indeed, her last parental contribution cheque to the grant had bounced. For that reason, her bank would not allow her any help. The only thing I could tell her was that if it proved the worst, she would have to withdraw from the college, become eligible for social security, and apply for readmission another year. Mercifully, the worst did not happen in that case; but it illustrated a real gap in our arrangements.
I am dealing with another case at the moment. A student had a job with the Student Union for six hours a week. The union needed to economise and she lost the job. She has reached the limit of her bank overdraft. Just when she was beginning to search flat out for employment, she was knocked over in a crowd. Someone stepped on her with a heavy boot close to the elbow of her left arm. She happens to be left handed. Nevertheless, she is doing her level best to find jobs that she is capable of doing. But, again, that is precisely the situation which social security is designed to deal with.
The Minister may tell us, as she has before, that student levels of support are higher than they were. Can the Minister produce a single, live student who passed through the financial changes of 1990 who will agree with her that that is the case? If her argument contradicts universal experience, I will ask her to consider whether her figures might possibly be misleading. In fact, I must remind her of the regular 17th century maxim: "The prince may not say that is for the people's good which they see and feel to their hurt." I beg to move.
Moved to resolve, That the Education (Mandatory Awards) (No. 2) Regulations 1993 (S.I. 1993, 2914) and the Education (Student Loans) (No. 2) Regulations 1993 (S.I. 1993, 2915) shall not come into force until the right to claim housing benefit and income support during the long vacation has been restored to students.—(Earl Russell.)
6.35 p.m.
Lord Lucas: My Lords, I listened to the noble Earl, Lord Russell, with great interest. I hope that my noble friend the Minister will pay close attention to the particular examples which he gave because although the Government have to concern themselves with the broad brush, the big figures, nonetheless what is happening to individuals can show us weaknesses in the system. We ought to pay close attention to them to discover how we can improve what we are doing and to avoid the problems outlined by the noble Earl.
However, I do not agree with his main thesis. The noble Earl seems to me to be saying that he finds the principle of loans wrong and concludes that as a broad

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experience we are not supporting students sufficiently. I disagree on both counts. First, on the concept of student loans, it seems to me that it is a thoroughly reasonable arid respectable thing to ask students who are likely personally to benefit greatly from higher education to make some contribution towards its cost. It is a concept that is widely supported on these Benches and in the report of the National Commission on Education which states:
"The only way is to seek a contribution from individual students in Higher Education".
The concept is supported by the Labour Party in the chapter which it excised from its Green Paper. A debate in another place showed that the Labour Party refused to deny that it will continue with student loans. It is really only the Liberal Party which has no interest in continuing with this principle.
We are asking students to borrow to invest in their future. The parties opposite regularly ask the Government to do that, but when that principle is applied to individuals it suddenly becomes anathema.
As to the level of support, we support students generously. I quote again the National Commission on Education:
"The United Kingdom has the highest expenditure of all on student welfare and support".
That conclusion is backed up by the continuing increase in the number of students benefiting from higher education. There is no evidence that a lot of people are being held back because of the financial constraints under which they have to operate for those three years. The Government have greatly increased the level of support over the past few years by about 30 per cent.—in the current year by 4 per cent., comfortably ahead of inflation.
The point has been well made by the National Commission on Education and others that there is a problem in attracting children from deprived backgrounds into higher education. But surely the problem is that those children in general have received a poor education in their early years. If they were achieving better results in GCE, then surely they would have higher expectation and ambitions and would be going into higher education in greater numbers. It seems sensible not to add to resources in an area where we are already the best but to concentrate them on areas where they are needed, where clearly we are doing a lot worse than many of our competitors.
I believe that the noble Earl's case for additional support fails. Even if it did not, I cannot see that a general change to the benefits system is the best way of adding to student support. I have no hesitation in supporting the Government in opposing the Motion.
6.40 p.m.
Baroness White: My Lords, during the past 12 months I have more than once raised matters concerning the financial and other difficulties which currently face university students. Consequently, I am very much in sympathy with the noble Earl's intentions. We are all indebted to him for the, to my mind, very convincing account that he has given of the difficulties faced by the students with whom he is in regular touch professionally
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every day of the week. Whether the rather roundabout procedure which he suggests is the most desirable way of improving matters, I am not entirely sure. I remain to be convinced because his intentions are of considerable importance and value.
I am naturally concerned very much with our position in Wales. Only last week an interesting survey was shown in the local press, the Western Mail headed:
"University applications rise despite fall in places".
That is interesting, because if students show an increasing intention of trying to go into university education, they do not seem to be entirely discouraged, though they may not be fully acquainted with the present proposals of the Government in relation to grants and loans. At the University of Wales in Cardiff, which is rapidly growing, there has been an almost 20 per cent. increase in applications. However, there is a decline of about 200 places out of 9,000. That is not a large number but nevertheless it is a decline in the number of places likely to be available. At the university at Aberystwyth in mid-Wales applications have increased by more than 30 per cent. In Bangor, in North Wales, there is a slight decrease, while a slight increase is expected at the University of Glamorgan, which is a former polytechnic.
The estimates do not allow for second thoughts should prospective students become aware of what their position may be under the present proposals. One must guard against misrepresentation. I do not know how many noble Lords realise that this year, for the first time, prospective students have been allowed to name up to eight possible universities on their application form—the UCAS application form—instead of the previous limit of five. Therefore, most of the apparent additions are less than they seem. If students may apply to eight universities which are shown on the list of applications, plainly a good many of those do not really represent greater confidence than before.
The extra numbers are not necessarily a guide to extra student confidence, although from time to time certain noble Lords opposite like to insist that they are. In any case, we are informed that, owing to the cuts proposed by the Government, there are likely to be up to 10,000 fewer places available in the next academic year. Some people will be disappointed, whatever happens.
The noble Earl was absolutely right—students are deeply perturbed at the thought of running into debt. That is particularly so for what, in the old days, we would have called "good working-class families", who did not get into debt. I know that that is not the philosophy of the generation represented by the noble Lord, Lord Lucas, or by the social class to which he belongs. Students are keenly aware that, despite the possible postponement of repayment, they will be overshadowed by the thought of being in debt. They can see before them the current generation of students, many of whom seemingly face endless searches for worthwhile jobs. We surely all know families where the parents are now deeply concerned as to what their graduate son or daughter will be able to do with the education for which they have struggled.
Yet the Government have drastically cut down—I make it by close on 10 years—the period during which

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student grants and loans would gradually, more or less, be made to balance. It has to be done much more rapidly. Meanwhile, the so-called access funds are hardly to be increased at all. Furthermore, students will become liable for the domestic fuel tax which we discussed last year in this context in the House. We then commented on the high cost of adequately warming student lodgings, particularly those in substandard houses with the threat to health which that can entail.
Finally, the difficulty of finding vacational work or fitting it in with the modularisation of courses—which is a new problem—complicates matters further. I shall not detain the House any longer, beyond saying that surely this is not the best time to make more students feel even more insecure.
6.47 p.m.
Baroness Park of Monmouth: My Lords, I strongly support the Motion before the House. There is even greater hardship among a significant group of students than before. My noble friend the Minister will quote the, I have to say, opaque and even somewhat misleading picture put forward on the basis of a sample of 1,264 younger students and 451 mature students by the RSL survey on student income and expenditure published in December. Less than 40 per cent. of the sample actually provided the details required.
The survey shows that those students who receive a proper family contribution and do not come from a poor background are not badly off. That is good. We are, however, concerned with the poor; those who have no family resources, who are on their own. I know, from my own Junior Common Room at Somerville, that for those who are living out, the rent, payable for 52 weeks in the year, absorbs the whole of the present maintenance grant. At an average of £45 per week—without counting heat and light—that rent is £2,340 in Oxford, against a basic grant of £2,265. Eighteen per cent. of undergraduates in their final year in college are having to work to earn money through the Christmas and Easter vacations, in some cases doing both a night and a day job. In the North-West, a quarter of students work in term simply to survive.
That is the most absurd and criminal waste of higher education. The effect on academic work can only be appalling. Can we afford that, as a country? Most of those poor undergraduates are forced—since they cannot conceivably live on the student loan alone, especially the lower sum available in the last year—also to borrow from banks. Few of them have overdrafts of less than £100; many may borrow up to £400. And, of course, they apply to the access funds—still insufficient —where the biggest grants are between £100 and £500. The last figure is an absolute maximum.
Students in the North-West, Liverpool, Lancaster and Manchester are in equally dire straits, though rents are lower. The maximum income available to them is £3,065, including an £800 student loan. But the University of Manchester estimates the actual cost of living to be £5,655. Graduates leave the university owing money, both to the loans scheme and to the banks. I wonder whether they, or indeed the
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Government, realise that by 1997 their compulsory monthly payment, spread over five years, is likely to be between £60 and £70?
For someone with a salary of 85 per cent. of, say, £14,000 or less who borrowed the full loan and who will presumably have take-home pay of about £700 to £750 per month, this will be just about 10 per cent. of that take-home pay. Medical students, repaying five years of loan over seven years, will have to face even more daunting figures. Already, to judge from the evidence given by the department and the loan company to the Public Accounts Committee, there are 2,400 defaulters, 842 cases have been transferred to litigation, and legal expenditure is about £23,000, or £27 a case, going up to £50. I find it ominous and difficult to understand that the company operates on the basis that,
"the legal expenditure is recoverable from the borrower."
How is it possible to extract this from people who already cannot meet their debt? It is difficult to understand.
It is even more interesting that the chairman of the company, when the question of the costs being incurred by universities in administering the scheme came up —costs which are, at £7 per student, nearly double the sum paid to them by the student loan company of £4 —said that he had neither heard nor read of the statement made in this House on the 29th March last year that the Government were committed to meeting those costs. He went on to say that he,
"really did not feel that he could get involved in the discussions between the Earl of Caithness and the House of Lords".
Fortunately, the department is clear that it is accountable to Parliament. It is less reassuring to learn that the accounting officers, in a memorandum to the Committee,
"would not wish to underwrite the extra costs incurred where less than efficient practices are adopted."
The company, for its part, believed that processing a student's application takes only 12 minutes; so the institutions are really doing very well in terms of income. Presumably they think that each of these processes will be done consecutively. That would produce a very interesting situation. In fact, as one of the members of the Public Accounts Committee pointed out, the CVCP survey showed that the institutions are subsidising the scheme to the tune of £1.5 million, which could and should have been spent on education.
I have dwelt on all this because it is all part of the same climate of unreality that characterises many of the judgments made, in the best of faith, by the Government about student poverty and about market choices. They are proud, rightly, of the fact that there are more students wishing to enter higher education—that is good, although it has now been slowed down—and more students taking up the loans. As one member of the Public Accounts Committee said of the loan take-up, it has nothing to do with efficiency; it has to do with desperation.
I beg my noble friend the Minister to think long on this issue. The Government have created a future generation who will have a heavy load of debt. They will either default and become a living negative equity in society, or they will feel obliged, in order to pay, to enter as lucrative a job as possible as soon as possible.

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Where shall we then find our teachers, social workers, public servants, doctors and lawyers? I do not oppose loans, but I believe that the present system of repayment is likely to backfire. Moreover, for the next few years at least—for although I believe in the country's recovery, unemployment of graduates is still a serious problem —they may well have to take poorly paid jobs that will neither allow them to repay nor to use the education that they have had to the full. In any case, as I have said, I have grave fears about what the unremitting financial pressure and anxiety will have done to their academic progress. I believe the Government should also remember that students, their families and their teachers, all have votes.
Let me return to the survey which I quoted. What are we to make of a society in which, according to the survey, student expenditure on books is subsumed into a section on the tables which also includes equipment, stationery, photocopying, field trips and other course-associated travel, and which amounts annually to a princely sum on average of £230? The average course textbook costs £20, and as many as five may be needed in one term. Even bought secondhand, they will not be less than £5 each. Libraries are starved of funds and so it is not easy to count on access to library copies. In any case, there are many textbooks which are needed for regular reference and textual work.
The conclusion must be that students are not able, on such figures, to afford the most basic tools of their trade. The single most heavy item of expense and anxiety is housing, so far as students are concerned. In nearly every institution they must expect to pay rent in the private sector over a whole calendar year for at least one year of their course. Housing benefit is means tested and therefore will only be available to those in need. Students can no longer count on vacational work to repay overdrafts, still less to pay rent; and so they cannot help themselves as they once did. May I urge the Government to weigh things up and recognise that there is a positive financial advantage in restoring housing benefit, because it will free students to work as they should; it will ensure value for money from their university education and it will thus free them to work well? It will also, incidentally, be a most valuable contribution to the difficulties of postgraduate students.
It is difficult in any case to understand the reasoning which requires students to pay the community charge, which allows them to vote but excludes them absolutely from all benefits, even where the need is demonstrable and urgent. Perhaps I may ask my noble friend the Minister whether the new financial package for students will contain an element for VAT on fuel.
I reiterate once more that there is a real, demonstrable and urgent need for some relief to be given to those students whose parents, especially if unemployed themselves, cannot contribute to their maintenance and cannot afford to feed and house them during vacations if they are themselves on income support? Students themselves receive £500 less than they would if they were on income support. The best, the simplest and the fairest measure would be the restoration of housing benefit. I would also plead for the vacation hardship allowance to be given in extreme cases of need. Do not
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let us see good education wasted because the recipients are too busy working in bars and supermarkets to do the academic work they are there for to the highest standard which should be the norm. These students are our investment for the future. We have a national interest in freeing them to learn.
I have tried not to bombard this House or indeed my noble friend the Minister with statistics. I realise that she, and others, may accuse me of that heinous crime in the academic world: the anecdotal approach. I can only say that we are talking about young, vulnerable and valuable human beings known to many of us, and we all know too many who are in trouble. Let us listen to them and try to advance their needs.
6.57 p.m.
Lord Judd: My Lords, in view of—
Earl Russell: My Lords, I believe that my noble friend wishes to speak in the debate.
Baroness Williams of Crosby: My Lords, I apologise to the noble Lord. I shall detain the House for only a moment or two. There are one or two questions that I should like to ask the noble Baroness the Minister and I indicated through the usual channels that I might wish to speak in "the gap". I really want to follow very briefly the excellent speech made by the noble Baroness, Lady Park, and also that of my noble friend Lord Russell by asking just two or three very quick questions of the Minister before she responds to the debate.
The first question concerns consultation. It seems that the period of consultation in respect of these regulations was extremely short, and that most of those who expected to be consulted were unaware of the quite substantial changes being made in the regulations. My understanding is that the date by which consultations were concluded was well before it was realised that these substantial changes were going to be made. Perhaps the noble Baroness would be kind enough to say something about why there was not fuller consultation with those concerned, especially given the information that we have had in the debate already about the very considerable hardship faced by many students because of the very "bare bones" nature of the grant and loan provisions at the present time.
Secondly, I should like to ask whether I am correct in understanding that the group which has the heaviest involvement in loans is that of married, mature students with dependants. That group, as the noble Baroness, Lady Park, and my noble friend have pointed out, is particularly subject to the kinds of contingencies such as the loss of a job by a member of the family or some additional need by a dependant which puts them in a very grave position in terms of trying to continue with their courses. It is not economic for students to break out of courses because they cannot afford to maintain the cost of staying on them. I think that this is one area where I very much hope that the noble Baroness will look again at the problem.
Thirdly, the point was made by my noble friend that some kind of provision with regard to the heavy costs of housing, where the grant and loan provisions are unrealistic in terms of the cost of housing, particularly

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in the South of England, needs to be reconsidered in terms of the eligibility of students for housing benefit. My noble friend's proposal is eminently sensible. It allows for the fact that means will be tested before grants are made, on the same basis as for any other citizen.
Approximately one third of all students entering traditional universities, and a higher proportion of students entering establishments which have become universities, come from homes where it is highly unlikely that the parents will be able to help them. It is in the interests of this country that the talents of these young people should be allowed to be taken through the courses that will qualify them for professions to which they can make a major contribution.
My final question concerns the wider issue of the possibility of income contingent loans. I do not believe that the Government have thought through with any great care the switch that is now taking place from grants to loans. I do not want to detain the House by raising the principle, about which many of us would have a great deal to say. But the system applies in many other countries where there are extensive provisions for scholarships. For example, in many American private universities some 40 to 60 per cent. of all students have scholarships for part or all of their fees and outgoings —something that simply does not obtain in this country in the same way. We are therefore not for a moment comparing like with like. That means that in the period in which we make the changeover, whether or not we approve of it, some consideration of income contingent loans should be entered into.
Finally—I echo what was said by the noble Baroness, Lady Park, in this respect—where will we look for those who will go into public service, school teaching and many other professions which are relatively badly paid? All the pressure on them to repay loans is likely to mean that they will try to move into areas of relatively high pay at the earliest possible stage and that could have a serious effect on the quality of our public services.
7.2 p.m.
Lord Judd: My Lords, the whole House will agree that it is good that the noble Baroness, Lady Williams, was able to intervene in the gap. It was a characteristically cogent and pertinent intervention. I hope also that the Minister will be able to take seriously the points made both by the noble Baroness, Lady Park, and my noble friend Lady White; they speak with immense authority on this subject. In view of the professional work which I undertake in the sphere of higher education I should, at the outset, declare an interest.
We on these Labour Benches are at one with the noble Earl, Lord Russell, in his concern. But we go further in remaining totally opposed to the loan scheme altogether. As Bryan Davies, Labour's spokesperson on higher education, pointed out from the Front Bench in the other place last week when speaking against the regulations, we are dealing with appalling legislative proposals which will make life more difficult for students in higher education and which will reduce the
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opportunities for students to enter higher education. Bryan Davies described them as a response to the £50 billion public expenditure deficit and an attempt to restrict expansion which the Government have come to regard as out of control.
Those observations reflect more general acute anxiety in higher education circles at the wider implications of the Government's recent Autumn Statement. On 10th January, in a letter to governors—of which I am privileged to be one—the director of the LSE underlined that,
"universities will suffer a cumulative real terms cut in public resource per student of 10% by 1996/7, while they will also be made to bring to a halt by then the government's previous policy of expansion in full time home/EC undergraduate student numbers, on pain of as yet unspecified financial penalties".
On 31st December, in its editorial, The Times Higher Education Supplement summed up the situation even more starkly. It said,
"The outlook for higher education in 1994 is bleak. For the first time in a decade cuts in real terms are being made in government money for universities. This contrasts with the squeeze of recent years when the total spend went up but slower than student numbers, producing cuts in per capita funding but overall growth. Now expansion is being brutally curtailed and hope, imagination and optimism blighted".
On 30th November the chairman of the Committee of Vice-Chancellors and Principals had already indicated his dismay. He said,
"The government is attempting to halt the expansion of higher education by making it financially unattractive to universities to recruit more students … Having stoked up the aspirations of young people, and encouraged them into further education, the government is now attempting to deny them the opportunity for which so many are clamouring".
On the specific issue before us the 1988 White Paper —Top Up Loans for Students —was categorical. Paragraph 3.9 stated:
"The maximum grant and the average contribution will be maintained at the 1990–91 cash level".
It was estimated that that meant the grant and loan would broadly equalise in the year 2007–08. And during the passage of the Education (Student Loans) Bill the Minister opposite herself said,
"The grant will be maintained in cash terms at its 1990–91 level".—(Official Report, 19/3/90; col. 57.)
It is entirely understandable that, in exasperation, the National Union of Students recently said,
"In bringing forward the expected date when the grant and loan will be broadly equal by 10 years … the government have signalled an abandonment of a policy they were committed to only five years ago. Indeed, it must now be open to question whether a further commitment in the 1988 White Paper that 'The government does not propose to remove the existing maintenance grant' can now be relied upon".
Let me emphasise that I am glad—and let me stress this—to acknowledge, indeed to commend, the expansion in the numbers enjoying higher education which we have seen over the past decade. We on this side want to see that trend continue. In a civilised society we believe that access to education and personal intellectual, cultural and academic fulfilment should be available throughout life. We also believe, as the National Commission on Education argued so well, that further and higher education are a critically important investment in the future of the United Kingdom. It is precisely because of the exhortations and past policies of the Government—so well expressed in their last election manifesto when they said,

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"We will continue to expand the number of students in higher education"—
that there is such widespread dismay at this crude reversal; this highly disruptive U-turn. Just less than a year ago the Minister said in this House,
"I believe that we have reason to be proud of this country's flexible and relatively generous student support arrangements. They are all of a piece with our wider achievements in higher education".
What a contrast to the spirit of those words the realities of the Autumn Statement provided.
Let me anticipate the somewhat repetitive argument of the noble Baroness—we heard it last week on nursery education —that we must all face the fact that not everything can be afforded. First, if that is the case—and of course in a sense it is—the Government should be far more careful in their public pronouncements. The crisis of confidence in the political system is directly related to the repeated contradiction between the sales talk and the action of this administration. And it is a shame if that corrosive condition is now to affect higher education of which, I believe, those opposite potentially have a certain amount to be proud.
Secondly, if the past system of funding cannot be afforded —in itself a devastating commentary on the effectiveness of the simplistic market dogma to which we have all been subjected since 1979—the Minister and her colleagues must spell out, and fast, a clear alternative strategy. What is totally unacceptable is a regime of improvised financial tactics, the "go-stop" approach which plays havoc with long-term planning, sound development and effective use of resources, not to mention literally destroying dedicated academic and administrative staff and inflicting acute hardship on too many students.
We have it on the authority of the CBI itself, reported in this month's CBI News, that,
"The UK is on the verge of a funding crisis in higher education as a result of increases in demand".
It goes on,
"Ways of raising this amount must be found if higher education is to expand without reducing the quality of provision".
The CBI then suggests that there are four options. First, more government funding; secondly, a bigger contribution by employers; and, thirdly, action by the higher education institutions themselves. On that the CBI point out that the institutions have already achieved 5 per cent. so-called efficiency gains (whatever that means in the realms of quality and originality so essential to higher education) in each of the past five years, and to squeeze them yet further, the CBI argues, will still not produce the £1.5 billion needed to increase the percentage of young people entering higher education from 33 per cent. to 40 per cent. by the year 2000.
The fourth option offered by the CBI is the students themselves. In this last respect the CBI argues that students of higher education are estimated to earn between 6 per cent. and 25 per cent. more over their lifetimes than those who have not participated and that therefore it is reasonable that students should shoulder a larger share of their costs. The article examines several options for student contributions and highlights the Australian income tax related scheme which it claims has not deterred access.
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Will the noble Baroness enlighten us today? Does she agree with the CBI on the developing crisis, or does she not? If she does, will she clarify whether or not the Government are prepared to extend their own financial support? If not, as sadly seems to be the case from the regulations before us, why not, and what is their real alternative strategy? Where do they stand on the CBI argument that there are really only four options'? Where does it leave their loan scheme? Which do they select, or indeed, which combination do they favour?
What worries us is the absence of strategy, the introduction of short term ad hocery while, as the leader of my party has put it:
"student loans policy is clearly failing and damaging students' ability to study in the process".
He has rightly said:
"Students should not be forced to live in poverty whilst they are studying and then carry a heavy burden of debt with them for years afterwards".
In July a survey by Barclays Bank demonstrated that already four out of every five students would end the academic year with an average debt of £1,672–22 per cent. more than the year before. Now we find the discredited loan scheme being accelerated; and against a background, as eloquently spelt out by the noble Earl, of the withdrawal of eligibility for income support, unemployment benefit and housing benefit. Quite uniquely, with the introduction of the new arrangements, the amount of loan available for students was to be assumed as income for social security purposes and for assessing entitlements to free NHS services, regardless of whether or not the loan was taken. It is incredible: students compelled to borrow to finance the welfare state! And what now of the additional burden of VAT on domestic fuel?
The Chancellor of the Exchequer has argued that the recent explosion in student numbers has revealed as ridiculous the fears that the student loan scheme might deter students from poorer families. But where is his evidence? The higher education expansion I have commended is made up of a higher proportion of women, part-timers, mature students and students from ethnic minorities. That is all excellent, but there is no indication that there is a significantly higher proportion of students from lower socio-economic groups. in 1991–92, 6,377 extra full time students were accepted into the old university sector from social classes I and II but only 1,406 from social classes IV and V. The Autumn Statement will not do anything to put that right.
Amidst the profound worries surrounding these regulations there is one which concerns a potentially sinister dimension —yet another step in the repealed and systematic onslaught on the quality of democracy. The noble Baroness, Lady Williams, referred to it in her intervention. Previously, the DFE has consulted interested bodies in the autumn on the awards package for the following year. Written comments arid proposals have been invited. There would then be meetings with organisations to discuss their submissions. The awards and loans regulations, for example, would then be drafted and laid before Parliament in the summer, to come into force in September. This year changed all that. In a letter dated 1st October 1993, to a number of interested bodies, the DFE. indicated some possible

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changes to the awards regulations on which it wished to consult—minor technical points on the whole—and stated that these were offered,
"entirely without comment on our part",
and that,
"Ministers have not yet seen or considered it".
The end date set for the consultation was 12th November. There was absolutely no indication of substantial changes to the regulations. Eighteen days later, a mere 12 working days, the 1994 regulations were laid before Parliament. Those announced far-reaching changes. How can this reassure us about the working of our democracy? It patently cannot.
As on recent education Bills, it makes a mockery of consultation. It underlines the arrogance of the Whitehall complex. It invites the question as to whether the regulations were not in fact prepared before 12th November. If not, there must have been an extraordinary rush, with no opportunity for further consultation. To take one very human example, students over 50 years of age are not eligible for loans. They have suffered a 10 per cent. cut in 1994–95 with no compensation. By 1996–97 the aggregate loss for them will be 27 per cent. of the 1990–91 grant level. With consultation, could not this anomaly have been avoided? I cannot believe that the Government would have resisted if it had come up in consultation. If the regulations are agreed by Parliament now there will be no opportunity for amendments until they are scrutinised again for the 1995–96 academic year.
This is a sorry story. The loan system was seen to be bad before it started. It has now been proved to be bad; and these regulations make bad worse. As the Times Higher Education Supplement put it in that powerful editorial of 31st December:
"For universities and colleges of higher education—those who study in them, work in them, manage them—the new year prospect could hardly be more depressing. Those who have invested time, enthusiasm and energy in attracting more students and adapting courses to new demands have every reason to feel snubbed. There has been much talk in recent years of low morale but much evidence of enthusiasm and commitment. Now morale really is at risk with those who have been most enthusiastic feeling most brassed off".
The proposals by the noble Earl, although in all humility I suggest, as my noble friend argued, a little obscure in their technique, would at least for the time being ameliorate the damage.
7.16 p.m.
The Minister of State, Department for Education (Baroness Blatch): My Lords, for a country that has the most generous support system for students and, indeed, now has allowed record numbers of students into higher education—certainly compared with 1979 when the ratio was a mere one in eight of the young population: the ratio is now one in three—this has been an extraordinary debate. The discussion has ranged quite widely around the area of student support.
It is this Government's firm belief that support for students should be channelled through the educational maintenance system and not through social security benefits. The benefits system exists to support those in
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involuntary difficulty—a description which does not apply to students who have made a conscious decision to follow a course of higher education.
Earl Russell: My Lords, is the noble Baroness telling me that students are never in involuntary difficulty?
Baroness Blatch: My Lords, I wonder whether the noble Earl could wait to hear out my speech. If I miss that point I shall either come back to it or write to the noble Earl.
That is a decision to invest in one's future, rather than enter employment straight away. Financial support for full-time students should come from the one source designed specifically to cater for such support.
The noble Earl, Lord Russell, suggests that students have faced hardship as a result of the withdrawal of the general entitlement to benefits in 1990. But the fact is that the introduction of the loans scheme in 1990 more than compensated the majority of students for any loss of benefits. The value of the grant and loan together is more than 40 per cent. higher in cash now than grant alone four years ago; and for 1994–95—under the regulations we are debating today—the main rates of support will rise by a further 4 per cent. Our student support system remains one of the most generous and most envied in the world. There should be no need for students to have to rely on social security benefits during the summer vacation.
Some have claimed that the level of student hardship is increasing. The reasons for this claim appear to be two-fold. On the one hand, it is suggested that the substitution of grant by loan has itself created hardship. But that clearly cannot be right: students do not have to pay a penny back until after they have left their courses and have a reasonable income.
On the other hand, it is suggested that the total value of student support has not kept pace with rising costs. But again, that simply is not true: since the introduction of the loans scheme the value of the grant plus loan package has more than kept place with inflation. Indeed, the recently published student income and expenditure survey—funded by my department and steered by a committee including representatives of the National Union of Students—found that total Government support had increased by about one-third in real terms compared to grant and benefits in 1988/89 where students took out a loan. By and large, the total income of a typical younger student had held steady since the last survey where loans were taken out. That some students chose not to take up all the resources which were available to them does not alter those facts. The money was available if they wanted and needed it.
Of course, certain groups of students are in a vulnerable position, financially. That is why we have allowed these groups—including disabled students and those with dependent children, as well as all part-time students—to retain their eligibility for housing benefit and income support on the same basis as before. Allowing these groups access to benefits reflects our recognition of the additional financial burdens they may face. Housing benefit and income support also remain

947
payable to partners of full-time students, as do other social security benefits including council tax benefit and family credit.
Despite these generous provisions, there will of course always be a minority of students who get into financial difficulty. In such cases institutions can use the access funds to help. For 1994/95 we have increased the access funds by 10 per cent., bringing the total to some £21 million in England. That is a very substantial increase, as I am sure the House will recognise.
Some noble Lords criticised the student loans scheme. The fact is, whatever noble Lords opposite would like to have us believe, that the loans scheme is a success. A million loans have now been issued and this year we expect about half of all eligible students to take advantage of the scheme. The Student Loans Company, too, is working extremely effectively. Its unit costs—already low—are falling rapidly. Its collections performance must be the envy of many a commercial organisation—only 4.1 per cent. of borrowers are currently in default. The company's independent assessor did not receive a single customer complaint last year.
Some noble Lords criticised our decision to shift the balance between grant and loan. It has always been our intention to replace grants progressively with loans until the two elements are broadly equal in value. Our success in bringing down inflation means that we have now decided to accelerate that process. We shall reduce the level of the main rates of grant for the next three years and make corresponding increases in the loan rates. That should bring the two elements broadly into balance in 1996/97.
But that does not amount to a cut in student support: quite the opposite. The support available to students next year through the main rates of grant and loan will be 4 per cent. higher than this year. And the supplementary allowances payable to older students, disabled students and students with dependants will also be increased by 4 per cent. The average value of the loan facility will he increased by 44 per cent.
So long as they choose to take out the loan available, the money students receive will be at least the same in real terms next year as it is this year. As I have already mentioned, they need pay nothing back until after they have left their course and their income is higher than 85 per cent. of average earnings, currently around £14,000 a year. And we have undertaken to keep repayment terms under review to ensure that repayments for those earning over that amount are manageable.
What these new arrangements will do is share the balance of student support more fairly between taxpayers, parents, and graduates. It is graduates, after all, who are the main—though of course not the only—beneficiaries of higher education. There is a growing consensus that they should be expected to make a greater investment in their own future. The Government agree. My understanding is that there is a serious debate going on in the party of the noble Lord, Lord Judd, about just that issue.
Other noble Lords have claimed that the extension of the loans scheme would damage access to higher education, particularly for students from less well-off
948
backgrounds. But that prediction clearly does not square with the experience of the past few years. Since the loans scheme was introduced in 1990 there has been a huge rise in the numbers entering higher education. The participation rate has risen by some 60 per cent. Last October over 30 per cent. of young people entered higher education for the first time. It has taken us just two years rather than the predicted seven virtually to reach the manifesto target of one-in-three participation rate. The student income and expenditure survey found that students entering higher education from less well-off backgrounds have shifted from being the minority in 1988 to being the majority now. That is hardly compatible with claims that the loans scheme deters access.
We on this side of the House are proud of the record of this administration. It is this administration which has enabled more people to go to university than ever before. It is this administration which has put in place an efficient, straightforward loans scheme to finance that expansion. And it is this administration which has ensured that our young people will continue to benefit from one of the most generous student support systems in the world.
I shall now touch on some of the individual points raised during the course of the debate. As I have said, the settlement for higher education—contrary to what the noble Lord, Lord Judd, said—provides for an increase of some £270 million in the available recurrent funding between 1993–94 and 1994–95. That is a rise of 6.7 per cent., or 2.6 per cent. in real terms.
The noble Lord, Lord Judd, was concerned about breaching commitments. As I have said, the loans White Paper of 1988 made it quite clear that the real value of maintenance grants and parental contributions would gradually be replaced by loan. But we have decided to accelerate that process which, because of our success at controlling inflation, would otherwise have been rather slow.
The noble Earl, Lord Russell, quoted my remarks from Hansard in 1990 when I said that the Government provide an adequate level of support for a student to be maintained without work during his or her course of study. That remains the case. If students freely choose to work during term time and/or the vacation, that must continue to be a matter for the individual student.
Much has been made of surveys. There has been the most expensive and reliable survey of its kind anywhere since the last expenditure survey of 1988–89. Average income from public funds, grants, loan, access funds and benefits, for those who took up student loans rose by 31 per cent. in real terms. The average income for all students from public funds showed a small, real terms increase even though less than half of all students took out a loan. If all students took out the loan, the survey says, the average real terms increase in support from public funds would have been 24 per cent. since 1988.
The average expenditure for students who took out a loan is higher than the last survey. Term time and vacation earnings remained broadly the same in real terms as in 1988–89. Borrowing from commercial sources and overdrafts increased by only 6 per cent. in real terms and withdrawals from savings declined by

949
about 55 per cent. For mature students the average income from public funds varies widely according to circumstances; from about £3,000 for a married student with a partner in work to about £6,000 for a single parent. Single mature students spent about 31 per cent. of total expenditure on housing; 7 per cent. on food and 10 per cent. on entertainment. For the younger single student, housing accounts for 34 per cent. of total expenditure; entertainment, 15 per cent. and food about 14 per cent.
Mature students, too, are likely to be entitled to additional maintenance allowance such as the older students allowance, dependence allowance and the two homes grant. These have been uprated in line with inflation for 1994–95. Those who get into real difficulties can apply for help from the access funds. The noble Earl, Lord Russell, said that students were badly affected by the withdrawal of benefits. Again, changes to the benefits system as it applied to students, were not made in isolation. They coincided with the introduction of additional resources in the form of student loans and the access funds. As I have already said and made clear, the introduction of the loan scheme more than compensated most students for the loss of those benefits, but those in vulnerable groups retain their eligibility for benefits. I must advise the noble Earl that I am not aware of any public statement by the Minister of State in another place that student grants and loans are below social security benefit levels.
The noble Earl referred to a particular case and my noble friend Lord Lucas sympathised with it, as we all did. I am aware of the anomalous position of students who temporarily suspend their studies through ill health. I believe that the number of students in that category is quite small. Nevertheless, I understand that the Department of Social Security is considering the issue and is in consultation with my department. I shall, of course, keep the noble Earl informed. However, I am surprised that the noble Earl's institution did not resort to access funds to deal with the problem of that young student if the problem was temporary. I have already given the figures for access funds which I believe are quite impressive.
The noble Baroness, Lady White, was concerned about compensation for the introduction of VAT on fuel, as was my noble friend Lady Park of Monmouth. Many students live in halls of residence, where they should not be affected directly by the imposition of VAT on fuel. For those who are, the 4 per cent. increase in the main rates of grant and loan—which reflects the Government's forecast of how much the price of goods and services in the economy will rise in the 1994–95 financial year—should compensate them for any additional living costs, including increased fuel bills.
I believe it was the noble Baroness, Lady White, who asked me about the reduction in the numbers in higher education. The explanation is that because the population of young people is falling, maintaining participation means a small reduction in the number of new students admitted to higher education next year and the year after. However, the same proportion of young people as this year—and that is a record proportion—
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should find places in higher education. Overall, the Government's plans allow for an increase in student numbers of 90,000 or 10 per cent. between this financial year and 1996–97. That is a sizeable growth. To allow for the continued growth in numbers, public funding for higher education in England and Wales will increase by 6.7 per cent.
My noble friend Lady Park of Monmouth was also concerned about commercial debt. The student income survey showed that the amount of debt has not changed significantly. Indeed, there has been an insignificant increase ranging from £8 to £147 in students' interest-free overdrafts. That is not surprising. Student loans offer a good deal for those who wish to borrow, including generous deferment provisions. It makes no sense for students to borrow commercially with a requirement to pay the debt back quickly when they can borrow at very favourable rates without having even to consider paying back the loan until they are financially well placed to do so.
My noble friend Lady Park of Monmouth was also anxious about the size of debt faced by students. A number of noble Lords shared that concern. As I have made clear, the repayment terms for loans are extremely generous. Borrowers need not pay a penny back until their income reaches 85 per cent. of national average earnings. That is around £14,000 this year. For those whose income exceeds that threshold, repayments are spread over five years—or seven for those with longer degree courses. And loans are indexed to inflation, so borrowers repay in real terms only what they borrowed. The average level of repayment of somebody earning £14,000 or more is currently £11 a month. I cannot possibly regard that as onerous.
The Government have been accused of breaking their promise to meet institutions' administrative costs. Again, the Government gave an assurance that institutions' reasonable costs would be met. I see no evidence that reasonable costs are not being met. Setting the precise level of the fee is a matter for the Student Loans Company. However, certification is generally a quick and simple process. Of course, some cases require more consideration, but the company pays higher education institutions £4 for each correctly completed eligibility certificate. That should fully meet the costs of an efficient college, bearing in mind the increasing level of take-up.
Again, my noble friend Lady Park of Monmouth was concerned about the cost of accommodation. Of course, housing costs can vary considerably from one part of the country to another. The grant plus loan should be sufficient to cover those costs in the vast majority of cases. Where students do get into real difficulty—as they do—they can apply for help from the access funds, which are targeted on areas with the highest accommodation costs.
It is probably better to talk in weekly terms when considering the amount that students are receiving. If one talks in terms of 52 weeks in the year, a student in London living away from the parental home receives the equivalent of £75.67—that is for every single week in the year. If one talks about an average academic year having 38 weeks, that figure rises to £103.55. For other

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parts of the country, the comparable figures are £61.35 for all 52 weeks or £83.95 given an academic year of 38 weeks. For students living in the parental home, the amount is £48.65 per week for 52 weeks or £66.58 per week for the academic year.
My noble friend Lady Park of Monmouth was concerned about student hardship in the summer vacation. I understand that it is not true that the withdrawal of the vacation hardship allowance in 1991 subsequently contributed to student hardship in the summer vacation. That benefit was withdrawn because it was no longer needed. Very few students ever claimed the allowance before it was withdrawn and the Government's arrangements for student support made more resources available to compensate for the withdrawal of the benefit.
The noble Baroness, Lady Williams of Crosby, asked about consultation. Consultation on regulations is not a once-a-year exercise. My department receives suggestions from a wide range of sources on possible changes to the regulations all year round. They are considered on their merits. Invitations to comment on our proposals for change were sent to the National Union of Students, the bodies representing local authorities and the higher education sector on 1st October, eight full weeks before the new regulations were made. That should have given adequate time for any objections to be voiced. Responses were received before the regulations were made from all those who were invited to comment. Those comments were taken into account when drawing up the regulations.
Finally, the noble Baroness, Lady Williams, also asked about income-contingent repayments. Repayments are already income-contingent. As I said, borrowers pay nothing unless their incomes exceed 85 per cent. of national average earnings after they have left college. For those whose income is higher, the level of repayments should be manageable. We are not convinced of the merits of introducing a more finely tuned income-contingent scheme. Collecting repayments through the tax or national insurance system, as that would imply, would not be straightforward. In particular, it would pose real problems for employers in collecting and accounting for payments from graduate employees. I believe that the scheme's proponents have underestimated the difficulties of that system.
I think that on these occasions I tend to sound rather aggressive, but it is a subject that concerns Members on all sides of the House. The welfare of our students and their success in higher education is absolutely crucial not only to the well-being of those individuals, but also to the well-being, health and wealth of the nation as a whole. Therefore, this is a subject on which I hope that we shall continue to give air to a vigorous debate in this House. It is right that there should be downward pressure on the Government to make sure that all these issues are properly considered and that real concern is shown. I can give your Lordships an assurance tonight that my department takes this subject seriously. The regulations offer a new deal. They provide for the cost of student support to be shared more equitably between taxpayers, parents and graduates. The regulations are necessary. It is our view that they are generous and fair.
7.38 p.m.
Earl Russell: My Lords, I thank the noble Baroness for her concluding words. I can assure her that we shall debate this subject again. I know that she thinks that this package of student support is adequate. Therefore, I should like to ask her why everybody else who knows anything about this thinks otherwise. I know that we all make mistakes, but why does she think that we all make the same one?
The Minister made one technical point as regards which I have an answer. She asked about the Minister who said that student support was below social security levels. That was stated in a letter—no wonder she could not find it in the official record—from her right honourable friend, Mr. Nicholas Scott, on 20th April 1990. I have quoted it before and I shall probably quote it again. I hope that it will be recognised next time.
The Minister asked why one of my pupils had not gone to the access funds. I did not hear to which one she referred. In one case the access funds for the year were exhausted; in the other, she has, but accompanied by many other people, in equal or more probably more severe difficulties, of whom probably only 10 per cent. are likely to be helped. The access funds are disproportionate to the scale of the problem.
The Minister talked about the most generous system of support. If that is so, I have tried to explain that it is because we have a different system of education: we have a table d'hôte three-year degree; other people have an àa la carte education which can be taken over a much longer period. Unless the Minister means to concede an extra year on the degree course, it is necessary that our system should be more generous, because our system of education is different.
I know that the Minister also believes that the system of student support is more generous than it was before 1990. Again, I wonder whether she could consider why no one else with any experience of the change believes that. I think that she knows that everyone else believes that the RSL survey 1988–89, upon which she relied, grossly underestimated the amounts students were receiving from social security before the change. Since the Government knew that that was a matter of general criticism, I am rather surprised to hear RSL employed again.
I see why the Minister says that the benefits system is not the ideal system. But if there is not enough in the existing system one has to go somewhere. This is doing so much educational damage that it will end with our degrees not being recognised in other countries. Before, rather than after, we reach that point, I should like to ask the opinion of the House.
7.42 p.m.
On Question, Whether the Motion shall be agreed to? Their Lordships divided: Contents, 40; Not-Contents, 110.

Division No. 3

CONTENTS

Airedale, L.

Carmichael of Kelvingrove, L.

Bath, M.

Dormand of Easington, L.

Beaumont of Whitley, L.

Dunrossil, V.

Bonham-Carter, L.

Elis-Thomas, L.

953

Falkland, V.

Plant of Highfield, L.

Gallacher, L.

Robson of Kiddington, B.

Graham of Edmonton, L.

Rochester, L.

Grey, E.

Russell, E. [Teller.]

Hamwee, B.

Selkirk, E.

Harris of Greenwich, L.

Shepherd, L.

Hilton of Eggardon, B. [Teller]

Stoddart of Swindon, L.

Hollick, L.

Taylor of Gryfe, L.

Hughes, L.

Thomson of Monifieth, L.

Irvine of Lairg, L.

Tordoff, L.

Judd, L.

Whaddon, L.

Macaulay of Bragar, L.

White, B.

McIntosh of Haringey, L.

Wigoder, L.

Park of Monmouth, B.

Williams of Crosby, B.

Perry of Walton, L.

Williams of Elvel, L.

Pitt of Hampstead, L.

Winchilsea and Nottingham, E.

NOT-CONTENTS

Abinger, L.

Cranborne, V.

Addison, V.

Cross, V.

Arran, E.

Cumberlege, B.

Astor, V.

Dean of Harptree, L.

Barber, L.

Denham, L.

Blatch, B.

Denton of Wakefield, B.

Boardman, L.

Dilhorne, V.

Borthwick, L.

Dixon-Smith, L.

Brabazon of Tara, L.

Dormer, L.

Bradford, E.

Downshire, M.

Brookeborough, V.

Elles, B.

Brougham and Vaux, L.

Elliott of Morpeth, L.

Bruntisfield, L.

Ferrers, E.

Butterworth, L.

Fraser of Carmyllie, L.

Cadman, L.

Geddes, L.

Campbell of Alloway, L.

Gilmour of Craigmillar, L.

Campbell of Croy, L.

Glenarthur, L.

Carnegy of Lour, B.

Goold, L.

Chalker of Wallasey, B.

Goschen, V.

Chesham, L.

Gray of Contin, L.

Clanwilliam, E.

Greenway, L.

Clark of Kempston, L.

Haig, E.

954

Harmar-Nicholls, L.

Norrie, L.

Harmsworth, L.

Oxfuird, V.

Harvington, L.

Parkinson, L.

Hayhoe, L.

Peel, E.

Henley, L.

Plummer of St. Marylebone, L.

Holderness, L.

Prentice, L.

HolmPatrick, L.

Reay, L.

Hood, V.

Rees, L.

Howe, E.

Renton, L.

Huntly, M.

Rodger of Earlsferry, L.

Ironside, L.

Rodney, L.

Jeffreys, L.

St. Davids, V.

Johnston of Rockport, L.

Seccombe, B.

Kimball, L.

Selborne, E.

Lane of Horsell, L.

Shannon, E.

Lauderdale, E.

Sharples, B.

Lindsay, E.

Skelmersdale, L.

Lindsey and Abingdon, E.

Stewartby, L.

Long, V.

Stodart of Leaston, L.

Lucas, L.

Strange, B.

Lucas of Chilworth, L.

Strathclyde, L.

Lyell, L.

Strathmore and Kinghorne, E. [Teller.]

Macfarlane of Bearsden, L.

Teynham, L.

Mackay of Ardbrecknish, L.

Thomas of Gwydir, L.

Mackay of Clashfern, L. [Lord Chancellor.]

Torrington, V.

Macleod of Borve, B.

Trefgarne, L.

Mersey, V.

Trumpington, B.

Middleton, L.

Tugendhat, L.

Miller of Hendon, B.

Ullswater, V. [Teller.]

Montgomery of Alamein, V.

Vivian, L.

Mountevans, L.

Wade of Chorlton, L.

Moyne, L.

Whitelaw, V.

Munster, E.

Wynford, L.

Resolved in the negative, and Motion disagreed to accordingly.
House adjourned at ten minutes before eight o'clock.