HL Deb 03 May 1994 vol 554 cc1079-95

7.33 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Viscount Astor) rose to move, That the draft regulations laid before the House on 24th March be approved [14th Report from the Joint Committee].

The noble Viscount said: My Lords, I beg to move that the draft Maternity Allowance and Statutory Maternity Pay Regulations 1994 be approved.

The improved maternity payments introduced by these regulations will benefit around 285,000 women a year. Some 90,000 women a year will be entitled to the higher rate of statutory maternity pay (90 per cent. of their earnings) for the first time. Women will have greater freedom about when to start their maternity leave. At the same time the scheme has been simplified to make it easier for employers to administer.

The regulations before the House amend the statutory maternity pay and maternity allowance schemes and comply with the maternity pay provisions of the European Community Council directive on the protection of pregnant women at work. That was adopted in October 1992 following negotiations between member states. The Trade Union Reform and Employment Rights Act 1993 implements the directive's employment protection requirements, including the right to 14 weeks' statutory maternity leave.

The changes to the maternity schemes will be: the higher rate of statutory maternity pay will be payable to all women who qualify; the lower rate of statutory maternity pay and maternity allowance for employees will be increased to £52.50 a week to equal the higher rate of statutory sick pay; there will be one simple employment test of 26 weeks for statutory maternity pay. The two-year and five-year employment tests for higher rate statutory maternity pay are abolished; the test period for maternity allowance will be increased from 52 to.66 weeks, giving more women the chance to qualify; women will now have the freedom to choose when their maternity leave and pay should start; the amount of statutory maternity pay reimbursed to employers will be reduced to 92 per cent. but full reimbursement will be retained for small businesses (approximately two thirds of all employers); the new provisions will be introduced at the same time as the new maternity leave and dismissal provisions and will apply to all women expecting a baby on or after 16th October 1994.

These affirmative regulations are made under Section 2 of the European Communities Act 1972 and will amend the Social Security Contributions and Benefits Act 1992 to effect the changes needed. They will be followed shortly by a further set of negative regulations which will use the revised primary powers to make the more detailed changes.

We published a consultation paper in August 1993. It sought comments from all sectors of industry and other interested parties on changes to maternity pay and described the additional financial costs. More than 700 copies of the consultation document were sent out and nearly 130 responses were received. The majority of employers favoured a simple approach but were concerned that there should be a length of service test for statutory maternity pay. There was a general welcome for the greater freedom of choice over when maternity leave can start.

I am grateful to all those organisations and individuals who responded. Their replies were taken fully into account and proved very valuable in helping us reach our final decisions. For example, as a result of the responses the service test of 26 weeks is being retained.

I realise that some noble Lords are concerned about the contribution to be made by employers. The Government believe that it is only right that employers should meet a small part of the costs of maternity pay for their employees during a period of leave from work. Employers in this country will still be doing better than their counterparts in most other EC states who contribute at least 50 per cent. of the cost of maternity pay.

It is important to remember that employers' national insurance contributions have been reduced by £830 million. That is £125 million more than the combined cost of this change and the change in statutory sick pay. Overall, employers will be better off as a result of the changes.

The changes are good news for 285,000 women. We have chosen a simpler option for implementing the changes; so there will be administrative benefits for business. We believe that it is reasonable to ask employers to meet the extra cost, given that the state continues to pay the lion's share —92 per cent.—of maternity pay. We have not cut the level of state funding at all and small businesses, which, as I said, account for two thirds of all employers, will not pay a penny more. I commend the regulations to the House.

Moved, That the draft regulations laid before the House on 24th March be approved [14th Report from the Joint Committee].—(Viscount Astor.)

Earl Russell rose to move, as an amendment to the Motion, to leave out ("approved") and insert ("not proceeded with, and that this House calls on Her Majesty's Government to lay amended regulations which do not have the effect of transferring to industry social costs which would otherwise fall on the taxpayer.").

The noble Earl said: My Lords, I have no wish to obstruct the passage of these regulations. Indeed, the regulations are required under European law, since they implement the European Community pregnant workers directive. Under the European Communities Act 1972 we are bound to implement that directive. Since the directive has behind it the authority of an Act of Parliament, I do not see how any believer in parliamentary sovereignty can object to it.

On these Benches we do not always agree with what directives say, any more than we always agree with what Acts of Parliament say. In both cases we try and alter them in the appropriate forum. My objection is entirely to what the Government have done in the exercise of their own discretion in the course of implementing the directive. In fact, my objections are concentrated on Regulation 5, which is not part of what is required to implement the directive; it is a decision taken by the Government themselves. It is not based on any requirement of the European Community and the body of the regulations could stand perfectly easily were the Government to accept the invitation I am extending to them to withdraw Regulation 5 and proceed with the rest.

The use of the Motion to resolve, which invites the Government to amend subordinate legislation, is well understood. The closest parallel to the Motion I am moving today is one moved by the noble Viscount, Lord Mountgarret, on 22nd May 1989 on the Summer Time Order. He moved as an amendment that, this House declines to proceed further with the debate on the Motion for an humble Address for a Summer Time Order"— [Official Report, 22/5/89; col. 73.], which is a rather stronger form of words than those I am using today.

I gave the noble Viscount, Lord Astor, notice that I intend to ask some questions about the vires of the regulations, or rather the vires of Regulation 5. I have no intention of challenging the vires. For the purposes of this House, though not of the courts, we normally take the verdict of the Joint Committee as final. But if these are correct vires then I should like to know what is their extent. What other action is the Government empowered to take under these vires? When have they been used before?

In the consultation paper to which the noble Viscount referred, the Government said that this change, if introduced, would require primary legislation. I was one of those who replied to that consultation paper. I said that, if the Government proceeded with that specific proposal, they might have some difficulty in passing the measure through this House. I have just heard that the views of everyone who wrote were taken into account. I wonder whether that remark was taken into account.

Again, on the Motion that the Bill do now pass on the Statutory Sick Pay Bill this year, the Government were warned by all parties that they might have difficulty securing passage of the measure through this House. It was after that that the Government made the timely discovery that it was possible to introduce these measures by regulation. That is done under Section 2 of the European Communities Act 1972. So far as that relates to the actual implementation of the directive, there is no problem about it. The problem is in the use of the vires to extend the costs to employers. That is justified under Section 2(2) (b) of the Act, allowing the use of regulations for matters arising out of or relating to the European Community directive.

That is perhaps a rather wide use of those words. If that use is correct, what else could be done under it? In particular, what can be done in the way of imposing charges? It is common ground on the one hand that it is possible to use regulations to introduce changes under European law which impose costs on business. The precedents for that are so wide that there is no scope for argument about it. On the other hand, under Schedule 2 to the 1972 Act, regulations may not be used to introduce taxes. We have here a charge which is not under the employer's control; it does not relate to any duty of care. If that can be introduced by regulation, what else can be introduced by regulation under these powers? And when have they been used in a similar manner before?

As I must speak to the Minister's Motion as well as my own amendment, Ì join in the welcome to the shorter qualification for access to the higher rate of statutory maternity pay. I also join in the welcome to the greater flexibility for the date of starting maternity leave. But I regret that they have not ended the anomaly of the difference between the 18 weeks' maternity pay and the 14 weeks' maternity leave. If the noble Baroness, Lady Turner, has more to say on that topic, she will probably be speaking for us both. I regret also the exclusion of women whose earnings are below the lower earnings limit of national insurance. I cannot see the ground in the directive for justifying that exclusion under European law. I am not a specialist in the matter. Has the Minister taken legal advice on whether that exclusion is within the spirit or the letter of the directive itself?

I also very much regret that the fixing of statutory maternity pay to a benefit which has itself not been uprated for a long time reminds me of the time when I was a boy when I rashly moored a boat with a short rope on a rising tide. I did not make that mistake again. I regret also the effect on the self-employed. If employers are to pay, who is to pay for the self-employed? But most specifically I am concerned with Regulation 5—the costs to the employer. Somebody must pay the costs. Under the directive it can only be the taxpayer or the employer. We need a great deal more discussion on the division of costs between industry and the taxpayer. As I see it, the true cost of labour should fall on industry, but social costs should not, especially if they do not relate to any duty of care by the employer, if they are not under the employer's control, and if they are uneven in their incidence. The basic point is that in any machinery like this we cannot deal with uneven levels of absence or uneven levels of maternity.

Some businesses employ many more women than others, and in particular more young women. The Minister told us that employers as a whole will not be worse off. But employers are not as a whole. No employer pays the wage bill of employers as a whole. They each pay their own, so some of them may be severely affected. I have often heard people complaining of the cost if their roof was damaged in the great gale. I have never heard anybody welcoming the saving because their roof was not damaged. So, equally, will be the reaction.

Employers cannot police the incidence of maternity, as the noble Viscount himself admitted on 11th April in this House. I cannot see that this change can be other than a disincentive to employ women. It may be argued from the precedence of the equal pay legislation that the increased cost of wages to women does not seem to have deterred people from employing them. But those cases are not on all fours. When employers were told to pay employees the same, a simplification of the payroll burden resulted, and that is something which is generally welcome.

If one listens to employers one hears over and over again that what they mind is the burden of paperwork. And., increasingly as academics have more dealings with this Government they sympathise. What we are given here is a greatly increased burden of paperwork involved in employing women. In fact, it will mean for many people increased cost in getting software, computer facilities and secretarial facilities. That, apart from the cost, is an increased burden arising from employing women. Again, I should like to know whether the Minister has taken legal advice on whether this is within European law and whether it is within the spirit and the letter of the directive itself.

It says in the preamble of the directive that measures to implement it should not treat women on the labour market unfavourably nor work to the detriment of directives concerning equal treatment for men and women. I wonder whether Regulation 5 meets that test. I am not a European lawyer but it seems to me that there is a real question to be asked here. If this burden is laid on employers, they may react unfavourably. They may dismiss women while pregnant. The noble Viscount may say that that is illegal. It is—and I thank the Government for strengthening measures in this area—but the last cases I read of this were in this month's Citizens Advice Bureaux bulletin which I was reading by chance about an hour ago.

Employers may fail to pay statutory maternity pay. The noble Viscount will recall a meeting he very generously gave us to discuss the risks of employers not paying statutory sick pay. He promised to monitor that situation. It is probably too early for him to report any results of that monitoring. If there are any, I should be very interested to hear them.

Nor do I know how all this will be policed. Whose job is it to ensure that employers pay statutory maternity pay? What will be done if they do not? How easy will it be without the fear of dismissal for employees to make the requisite complaint if they do not get it? What is to happen, for example, in the case discovered by the Maternity Alliance of a woman who wanted statutory maternity pay from her employer, who was a Harley Street dentist. He said, "Don't bother me. I am retiring. Go to the Department of Social Security". Or what is to happen in the case, still sadly too prevalent, of someone who works for an employer who becomes bankrupt? On whom do such people claim for their statutory maternity pay?

But, above all, it is time we accepted that employing women is the normal state of affairs. The report from the Institute of Management today which indicates a drop in the proportion of women in high management positions is bad news for our economic future. What is normally incident to women should be normally incident to employees. I see no more reason why employers should be asked to pay statutory maternity pay than why they should be asked to pay war pensions. Maternity pay is a social benefit. It is not a form of pay. And since many of the women concerned do not return to work, it seems unfair that the employer should bear the cost of a measure which enables them to do so if they wish, We all understand that the woman cannot ultimately know until after the child is born whether she is certain to want to return to work.

It is also the thin edge of a wedge. The noble Viscount will tell us, as he has done already, that employers as a whole—that mythical beast—are not worse off. However, he does remember what has happened with statutory sick pay. We were told that in 1991. But even if we accept totally the good faith of this Government, as I am sure with the noble Viscount we do, he understands that no Parliament can bind its successor. At some other time a hungry Chief Secretary will want to take a bite out of public spending. There is no reason at all now why he should not choose this. So we are getting here a privatisation of liability. Mr. Dewar, in a press release, said: This may not just be penny-pinching by the Treasury but a staging post to privatisation which would dump extra costs on employers". We on these Benches agree with Mr. Dewar and we take it seriously. I beg to move.

Moved, as an amendment to the Motion, to leave out ("approved") and insert ("not proceeded with, and that this House calls on Her Majesty's Government to lay amended regulations which do not have the effect of transferring to industry social costs which would otherwise fall on the taxpayer.")—(Earl Russell.)

Baroness Turner of Camden

My Lords, the Minister will not be surprised to learn that I am in considerable sympathy with the Motion put forward—

Viscount Astor

My Lords, I am sorry to interrupt the noble Baroness but I think that my noble friend Lord Reay is next and the noble Baroness, Lady Turner, is speaking further down the list.

7.56 p.m.

Lord Reay

My Lords, the CBI, by which I am advised, has for some time been concerned that the Government were contemplating making industry pay the full cost for the increases in statutory maternity pay which are going to result from the implementation of the European directive on the protection of pregnant women at work. I myself expressed those anxieties in your Lordships' House during the Second Reading of the Statutory Sick Pay Bill earlier this year and later at Third Reading.

The CBI could accept that there was a case—even a strong case—to be made for transferring the full responsibility for statutory sick pay on to industry in order to give an incentive for employers to monitor and control absence from work, for so long at least as this additional cost was more than fully offset by reductions in employers' national insurance contributions. But in the case of statutory maternity pay there was, and is, in the view of the CBI, no such justification. There are no bad habits in this field, so far as I am aware, which the Government need to use the influence of firms to correct. The Government do not wish firms to discourage pregnancy, or to take on fewer female employees of child-bearing age; or at least they have not declared their hand if they do. Maternity pay—I agree with the noble Earl—is a purely social cost which should be borne by government.

The Government argue that the cost to industry which will follow from the reduction in the statutory maternity pay reimbursement rate will be more than offset by the compensating reductions which the Government have introduced into employers' national insurance contributions. However, these reductions were introduced primarily to compensate industry for the costs of statutory sick pay. When the Secretary of State in another place in December last year introduced the Statutory Sick Pay Bill he made no mention of statutory maternity pay when he explained his reasons for reducing employers' national insurance contributions. And when he told the other place that employers would be some £160 million better off next year as a result of the combined changes which he was introducing, he plainly did not have statutory maternity pay in mind—because today the Government's figure, repeated again by my noble friend the Minister, for how much better off industry will be as a result of the combined changes has fallen to £125 million. The difference must be accounted for by a half-year's contribution by industry towards the cost of statutory maternity pay. It is to be hoped that the Government do not develop any further ideas for recouping what remains of the balance in industry's favour.

It must, of course, be emphasised that these calculations describe the effects for industry taken as a whole. In practice, some firms will lose out while others gain. As the noble Earl pointed out, in particular those employing larger numbers of women of child-bearing age will lose out. Do the Government wish to discourage the employment of women of child-bearing age?—for that must be the long-term effect of adding to their costs of employment. Already they are more expensive to employ than other categories. Fair pay legislation requires that they should be paid the same wage as anyone else. But the law also obliges firms to keep open the job of anyone on maternity leave for anything up to 40 weeks, depending on length of service, with the cost of recruiting and employing replacements falling on the firms themselves. Many firms now find this an onerous requirement, particularly as studies show that only a minority of women return to the jobs kept open for them.

Now for the first time the Government want firms to pay part of the cost of statutory maternity pay itself. Hitherto the Government have very meticulously seen to it that firms did not have to pay any of the costs of statutory maternity pay. Firms have been reimbursed 104 per cent. of the cost of benefit in order that they should also be compensated for the administrative costs of the scheme. So a principle of considerable importance is now being breached. And having once abandoned the principle, I fear that the Government will be less careful to ensure that the 92 per cent. reimbursement rate survives. After all, it took little more than three years, as the noble Earl pointed out, for the reimbursement rate for statutory sick pay to fall from 100 per cent. to 80 per cent. and then to zero.

Industry's expenditure on statutory maternity pay will therefore be in double jeopardy from further falls in the reimbursement rate and from future increases in the employers' national insurance contributions, impelled perhaps by some future financial crisis. The Government are asking us to take a lot on trust.

My noble friend the Minister argued that British industry is being treated much more favourably than industry on the Continent, which in most countries has to pay more than 50 per cent. of maternity pay entitlement itself. But the heavy social costs which other member states impose on their industry was something I thought we wished to avoid, not to emulate. I thought that the Government wished to persuade those countries to align their policies with ours for the sake of the competitiveness of their industry and to reduce their unemployment, not to align our policy with theirs. I thought that that was the whole purpose and philosophy behind our refusal to sign the Social Chapter of the Maastricht Treaty. We wished to reduce, not add, to the costs on industry. One is entitled to ask oneself: What has happened to the Government's sense of consistency?

If these changes are persisted in, not only will our record for one of the highest rates of female participation in the labour force within the European Union be put at risk—which itself is not an accident but a product of our own more flexible system—but, more crucially, we will be undermining our own case in Brussels at a time when other members of the European Union were beginning to be swayed by our arguments about the damage such burdens can cause to competitiveness and employment.

I do not believe that the Government are being true to themselves. I urge them to think again, and if it is too late for that—I would not be happy to vote to overturn an order on a matter such as this involving direct expenditure and which had been passed through another place—then I beg the Government not to do this sort of thing again.

I should like to make one additional point on the subject of small business relief. I believe that it would be desirable and logical if the consultations which the Government are holding now with industry before deciding which system of small business relief to introduce for statutory sick pay—the system in the original Bill or the one embodied in the amendment moved by my noble friend Lord Jenkin of Roding and accepted by the Government—were now extended to cover the question of what should be the appropriate system of small business relief for statutory maternity pay.

There would be much to be said in favour of having the same system in both cases, possibly even combining the two reliefs so that a firm whose combined statutory sick pay and statutory maternity pay exceeded the given percentage of monthly national insurance payments would be reimbursed. In the case of statutory sick pay the Government must report to Parliament by 1st December which system they intend to operate. I should like the Government to give an assurance that, even if this order is adopted, they will retain an open mind over what should be the eventual system of relief for statutory maternity pay as well as statutory sick pay until after they have completed their current round of consultations with industry. I should be grateful if my noble friend could reply to this point in his winding up; or failing that, as I have not been able to give him notice of the question, if he would write to me.

8.5 p.m.

Lord Trefgarne

My Lords, I must start by declaring an interest. I am president of the Mechanical and Metal Trades Confederation which, through its members, represents some 5,000 companies (many of them very small) employing upwards of 350,000 people. The small companies with which I have contact in particular are concerned about the imposition of these additional burdens. Many of the arguments which my noble friend Lord Reay has deployed are sound and important. I hope my noble friend the Minister will take those into account as well as the consultation to which he has referred, before he comes to reply in a little while.

The effect of which I complain as my noble friend Lord Reay has pointed out, is the imposition of a further financial burden on companies by the reduction in the rate of reimbursement from 104.5 per cent., as I believe it has been hitherto, down to 92 per cent. That is a very significant additional cost on companies which is not welcome at this time when economic recovery is still so fragile.

Statutory maternity pay is not pay in the true sense of the word. I always thought that pay was payment for services rendered. Clearly, by definition, when a staff member is absent because she is pregnant then naturally she is not rendering the service. No, truthfully, this is a social security benefit. It has been long established that social security benefits are not paid by employers but by the Government as a result of the contributions which are made to them.

My noble friend has referred to the fact that other European countries ask their employers to make a substantial contribution to the cost of maternity pay. That may be so, but as my noble friend Lord Reay again pointed out, the fact of the matter is that we do not accept some of the less desirable aspects of the Maastricht Treaty and in particular of course the social chapter. We fought valiantly and effectively against the inclusion of that particular aspect of the Maastricht Treaty so far as concerns this country. This is very much a similar thing. I do not believe that we should be guided by the other members of the European Union when it suits us particularly in the context of social matters to which we have taken such exception in another context.

I too have doubts about whether we should vote against this order tonight. This is a financial matter. It is in effect taxation. It may not be defined as such but clearly that is the effect of the order. It is very doubtful whether it would be right in this House to vote against the order tonight when the other place has made its views known and when in truth financial matters such as this are really for them and not for your Lordships. None the less, the effect of this order tonight is to impose additional burdens on companies at a time when that is the last thing we ought to be doing. I hope therefore that my noble friend will recognise the anxieties which have been expressed and offer some comfort to those of us, who feel worried by what he proposes.

8.9 p.m.

Baroness Turner of Camden

My Lords, the Minister will not be surprised to learn that I am in considerable sympathy with the Motion tabled by the noble Earl, Lord Russell. I put down a Question in similar circumstances several weeks ago. I welcome improvements in arrangements for maternity pay. As we have been told, they have been introduced to conform with EC requirements. I do not believe that they go far enough. Indeed, during the passage of the Trade Union Reform and Employment Rights Bill several of us on this side of the House sought unsuccessfully to obtain improvements. As the Equal Opportunities Commission rightly says, the Government have missed an opportunity to introduce a simplified maternity rights scheme. In particular, there is the inconsistency in allowing for only 14 weeks' leave while the statutory maternity period lasts for 18 weeks. Furthermore, women who earn below the lower earnings limit—that is about 20 per cent. of pregnant employees——will continue to be excluded from the statutory pay scheme. Moreover, the higher rate statutory maternity pay (SMP) is payable for six weeks only. After that has expired, women will continue to rely on the flat rate SMP, worth only around 20 per cent. of women's average earnings.

Nevertheless, there are improvements—notably, the intention to reduce the length of service requirement for access to higher rate statutory maternity pay, 90 per cent. of earnings. The EOC says that that will benefit approximately one in five pregnant employees. Clearly, that is a step forward.

However, the noble Earl's amendment addresses the issue which we have raised in this House earlier, particularly in connection with statutory sick pay: the increasing tendency of government to load social costs on to employers. In the case of statutory sick pay, it was a gradual process, beginning simply with the arrangement that employers would administer the scheme but would be able to recover the whole amount. Then there was a reduction in the amount that employers could reclaim; and, finally, in the most recent Bill, the provision that employers could no longer reclaim anything, except in the case of very small employers.

The Government have claimed—the Minister claimed this again this evening—that it will cost employers no more because of the reduction in employers' national insurance contributions. However, many see it as the thin end of the wedge, as the noble Earl said, and believe that at some future date the national insurance rate will be increased quietly and the employers will be left to pay the benefits involved but with no recompense.

Let me say at once that I believe that social costs —for which we all pay either via national insurance contributions or via taxation—should not be put on to employers. When that is done, there is always the risk, as the National Association of Citizens' Advice Bureaux told us in regard to statutory sick pay, that some employees may not get their proper entitlement. It is no use saying that employees have a right which is enforceable by industrial tribunals. Many employees are ignorant of their rights anyway; and they are often, in days of high unemployment, too concerned about possible job loss to risk claiming them.

I must say that I find the Government's attitude in these matters surprisingly inconsistent. This is the Government who are always talking about "burdens on businesses". It is because the EC social chapter is supposed to represent "burdens on businesses" that we, of all EC countries, have opted out of it, as several noble Lords, including the noble Lord, Lord Trefgarne, have said this evening.

It is supposed to be a burden on business to insist that workers get at least a living wage. In pursuit of this philosophy, the Government last year abolished wages councils. There is no evidence at all that that action has led to an increase in the number of jobs on offer. There has been evidence, collected by the Low Pay Unit, that some employers have even tried to slash the wages of existing employees following the demise of the wages councils. The Government also argued that abolishing wages councils would not result in lower wage rates in the industries formerly covered. But that does not appear to be the case either. A survey conducted by the Low Pay Unit found that about one-fifth of jobs advertised in Jobcentres which had previously been covered by wages councils now pay below the old minimum rates. Workers reaching their 21st birthday who would formerly have been entitled to go onto higher wages council rates have found that their wages have not been improved to what would have been wages council levels. All in all, it appears that we are well on the way to the creation of "sweatshop Britain", which is what we who opposed the abolition of wages councils said would happen.

It seems astonishing therefore that this Government should come along with provisions which undoubtedly add to burdens on business—and this despite opposition from their erstwhile friends at the Institute of Directors and the CBI. The CBI points out that the costs will fall disproportionately on businesses which have employed more women—a curious way, it says, of recognising equal opportunities policies. Do the Government really want employers to discriminate against the employment of young women? Are they utilising this as a way of getting young males off the unemployment statistics and into low paid jobs that were formerly occupied by women? The EOC, in its Maternity Rights Agenda, put at the top of its list of 10 points the demand to, Remove the proposal to make employers liable for the cost of change". The Maternity Alliance takes a similar view. So, I accuse the Government of hypocrisy. A "burden on business" is anything which lays down minimum standards and which seeks to protect workers from exploitation; but it is not a "burden on business" if it relieves—even in part—the Government from meeting social costs which it is bound to meet within the terms of the UK's commitment as an EC member state. I think that is totally unacceptable.

It is in all our interests to have a satisfactory maternity rights scheme. At present, the cost of maternity is borne disproportionately by women and their families, and yet it is in all our interests that healthy children should be born and reared by women who are not under pressure to return to work at too early a stage after childbirth. It is now generally accepted that working women are playing a crucial role in the economy. Indeed, many of the new jobs which have been created are being done by women—often, I may say in passing, at too low a rate of pay. I believe therefore that the EOC is right to campaign for an increase in the length of leave to 18 weeks and progression towards full income replacement during the leave period.

But the possibility of achieving these desirable objectives is lessened by transferring part of the cost to employers, who will be wary, lest on past experience with statutory sick pay, they eventually find the total costs transferred without appropriate recompense. So I support the general thrust of the noble Earl's Motion. The amendment is not a Motion against the regulations as a whole. As I have said, the regulations contain improvements; and although I certainly wish that they had gone a little further, I would not wish to do anything that would hold up the improvements that have been stipulated in the regulations. As I understand the amendment, it simply asks the Government to amend the regulations in the terms suggested by the noble Earl. Therefore, I hope that in the light of the contributions that have been made to the debate, the Minister will agree to take the regulations away and rethink them in the terms suggested by the noble Earl.

8.17 p.m.

Viscount Astor

My Lords, the noble Baroness, Lady Turner, accused the Government of hypocrisy and of putting a burden on business. I found that a surprising statement from the noble Baroness when one considers the Labour Party's reply to the consultation on maternity benefits. The Labour Party proposed a universal scheme with full replacement income during maternity leave. That would cost £500 million or £0.5 billion. Its proposals included giving maternity pay to women on low incomes. That alone would cost £50 million. However, the Labour Party did not actually say —it never does—who would pay, but stated rather confusingly: "Labour believes fundamentally in the partnership approach towards costs". That means costs to industry.

The changes required by the directive and the measures needed to meet the additional cost are being made by affirmative resolution under the EC Act rather than by a Bill which would have taken up unnecessary parliamentary time. Both Houses have an opportunity to debate the regulations. They were debated and accepted in another place on 20th April. I have explained that although there is a cost to the regulations, industry as a whole will not be worse off. I shall give your Lordships more specific examples of that.

Perhaps I may deal first with the noble Earl's point that the EC does not allow one to impose a tax. The new reimbursement rate has been set to cover only the additional costs of the improvements so it is cost-neutral as far as the taxpayer is concerned. In any case, employers are not paying a tax—rather they are now being asked to meet a small part of the cost of maternity pay for their employees. Reducing the reimbursement rate in this way falls within Section 2(2) of the EC Act as it is related to a community obligation.

The noble Earl asked what else the Government could do. I should make it clear that I am speaking to the regulations that are before the House tonight and not about what the Government could, might or will consider in the future. All the regulations have to be seen by the Joint Committee on Statutory Instruments to ensure that they are correct. The committee has seen the regulations and it is content that it is a proper use of the powers. The directive allows us to have conditions of eligibility as laid down under—

Earl Russell

My Lords, I take the noble Viscount's point, but if I should not ask him for the scope of those vires, whom should I ask?

Viscount Astor

My Lords, I was coming to the vires. The directive allows us to have conditions of eligibility as laid down under national legislation and all governments have a principle of a lower earnings limit.

With regard to the extent of the vires of Regulation 5, Regulation 5 is related solely to the costs of implementing the directive's requirements. It does not give a power to reduce reimbursement further.

My noble friends Lord Reay and Lord Trefgarne are concerned about the costs to employers. The level at which employers are reimbursed for the money they pay out in statutory maternity pay is to be reduced to 92 per cent. It is to pay only for the costs of the directive. The extra costs to employers are small. On average they are about £230 a year, which is just under £15 a week for each pregnant employee. The Government believe that it is only right that employers should meet a small part of the cost of maternity pay for their employees during the period of leave from work. As I have said, the reductions in national insurance contributions more than compensate.

The increased costs of maternity pay for an individual employer will vary depending upon the employment profile of the female staff. An employer employing women who, on the whole, tend to remain in that employment for less than two years and who currently would qualify for the lower rate of statutory maternity pay throughout the 18-week period would have higher additional costs than an employer with a more experienced workforce. A good example is that of a large retail store chain which gave us some figures. It employs 72,000 staff, of which 71 per cent. are women. It expects about 1,500 employees to take maternity leave each year. It estimated the cost of improving statutory maternity pay at about £250,000—a cost per employee on maternity leave of £167. That is £3.50 per year for each employee or 6p per week.

The noble Baroness, Lady Turner, and the noble Earl, Lord Russell, made much of the extra administrative work involved. The Government have simplified the scheme which in the long run will save on business administrative costs. The three previous service tests of five years, two years and 26 weeks have been reduced to one service test of 26 weeks. All women who qualify for statutory maternity pay will now receive the same level of benefit. I have explained about small employers. We have full reimbursement for 750,000 small employers (two-thirds of all businesses), and the definition of a small employer will be the same as for statutory sick pay —an employer who pays £20,000 or less in gross national insurance contributions. These measures have been widely welcomed by small employers.

My noble friend Lord Reay asked why could we not link a relief scheme to one similar to that for statutory sick pay proposed by my noble friend Lord Jenkin of Roding and accepted by your Lordships. Small employers can recover currently all their statutory maternity pay costs. Large employers will still be able to recover 92 per cent. of their costs. The statutory sick pay scheme reimburses 100 per cent of a small employer's costs after four weeks of illness only. Employers receive nothing for the first four weeks. 'The amendment put forward by my noble friend Lord Jenkin proposed a scheme whereby employers would be protected against abnormal levels of sickness from day one. Statutory maternity pay is already reimbursed from day one of the period of entitlement. Therefore such an amendment would not be an improvement for small employers. The scheme will be simpler to operate and changes to computer software will not cost more. Software companies are paid an annual fee which will include such changes.

The noble Baroness, Lady Turner, said that women earning under £57 per week are losing out. They are not losing out because they are already excluded. We do not believe that someone should draw an earnings related benefit when they have paid no tax and national insurance contributions. All governments have maintained that principle. Women with no other income can claim help from the income support scheme.

My noble friend Lord Reay said that we were undermining our position in Brussels. That is not the case. The Commission had originally proposed that pregnant women should receive full pay for 14 weeks, with no qualifying period. That would have cost this country about £500 million. The Government fully supported other member states in devising a more sensible proposal which was eventually adopted at a Council of Ministers in October 1992. We secured a number of improvements to protect employers. Of course the directive was agreed before the Maastricht Treaty, so I am sure that my noble friend Lord Trefgarne knows that an opt out from the Social Chapter does not apply.

The noble Baroness, Lady Turner, asked why maternity leave was left at only 14 weeks when maternity pay lasts for 18 weeks. The 14-week maternity leave period strikes the correct balance between increasing employees' rights and adding to the burdens on business. To extend the leave to 18 weeks would add another £50 million to employers' annual costs, which in the Government's views is unacceptable.

The noble Earl, Lord Russell, said that the benefit has not been uprated. The directive requires us to provide maternity pay at a figure at least equal to the amount of state benefit a woman would receive if she were off sick. The amounts do not have to be the same. The Secretary of State will continue to review the rate of statutory sick pay and statutory maternity pay each year. The Government's commitment to maternity benefits was underlined by an increase of £1 above the retail prices index given in 1991.

The noble Earl asked me who will ensure that statutory maternity pay is paid. It is a legal obligation upon the employer. The Contributions Agency enforces it and will follow up any complaints of non-payment. Of course, if the employer refuses to pay, the department will take over the payment. It is of course an offence not to pay statutory maternity pay.

I should make it clear that if the amendment were carried the regulations would fall. It is a wrecking amendment. The noble Earl should consider the advice given by my noble friend and others in your Lordships' House about whether that is a proper way to go. It is not a revising amendment; it is a wrecking amendment.

The Government's proposals for improved maternity payments, as I have said, will benefit 285,000 women. At the same time, the scheme has been simplified to make it easier for employers to operate. Women will also have more freedom to decide on the best time to stop work and have their baby. The EOC has welcomed some of the changes to the scheme, particularly the reduction in the length of service requirement, and is pleased that we have responded positively to the representations made by it to our consultation paper. The Maternity Alliance has also called the proposed changes good news, saying, they are more generous than we had anticipated". It describes the introduction of the higher rate statutory maternity pay for all women entitled to statutory maternity pay as a "big breakthrough". We have kept the protection for small employers, who will remain eligible for the 100 per cent. reimbursement of their costs, and overall industry has still gained with the reduction in national insurance contributions. I commend the regulations to the House, and I urge your Lordships to reject the amendment.

Earl Russell

My Lords, I thank the Minister for that reply. I cannot say that I was encouraged by it. He is not up to date with the Maternity Alliance which on 27th April said: The Maternity Alliance is opposed to any reduction in the rate of reimbursement to employers of the SMP they administer". The noble Lord, Lord Jenkin of Roding, regrets that he is unable to be here tonight. He and I would wish to be associated with the observations made by the noble Lord, Lord Trefgarne.

I must answer the point about privilege which the noble Lord also made. This is a matter of qualified, not absolute, financial privilege. In those matters, it is well known that there is no objection to this House asking. Another place may reply as it sees fit. The noble Viscount's comment that this was a wrecking Motion illustrated the usual government rule that there are only two classes of amendment: the unnecessary and the wrecking. It would be perfectly easy for the Government to relay the first four regulations, leaving out regulation No. 5, and no one need be bothered save the Chief Secretary to the Treasury, who today is possibly not the Cabinet's favourite member.

The noble Viscount said that a Bill would have taken up unnecessary parliamentary time. Unnecessary to whom? He said that Ole regulations have been through another place. Has he read the remarks that were made in another place by his honourable friends Mr. Alexander, Mr. Wilkinson and Mrs..Currie? As regards the vires, he has given us no answer. That is truly a stern reply. He said that the cost to employers was very small —so was the maid's baby but it had life. Like the maid's baby, this has the power of growth.

Above all, I do not see how this House can possibly carry out its function as a revising Chamber unless some generally acceptable way can be found to challenge matters in regulations. Whether I have found a way tonight is not for me to say and therefore I ask the opinion of the House.

8.32 p.m.

On Question, Whether the amendment shall be agreed to?

Their Lordships divided: Contents, 40; Not-Contents, 85.

Division No. 1
Addington, L. Lawrence, L.
Airedale, L. Lytton, E.
Bath, M. Mackie of Benshie, L.
Beaumont of Whitley, L. Mar and Kellie, E.
Butterfield, L. McNair, L.
Castle of Blackburn, B. Meston, L.
Darcy (de Knayth), B. Morris of Castle Morris, L.
Dean of Beswick, L. Ogmore, L.
Ezra, L. Perry of Walton, L.
Falkland, V. Rochester, L.
Geraint, L. Rodgers of Quarry Bank, L.
Gladwyn, L. Russell, E. [Teller.]
Grey, E. Seear, B. [Teller.]
Hamwee, B. Strafford, E.
Hollis of Heigham, B. Thomson of Monifieth, L.
Hooson, L. Tordoff, L.
Howie of Troon, L. Turner of Camden, B.
Jenkins of Hillhead, L. Whaddon, L.
Kilbracken, L. Wigoder, L.
Kirkwood, L. Winchilsea and Nottingham, E.
Addison, V. Braine of Wheatley, L.
Annaly, L. Brigstocke, B.
Arran, E. Brougham and Vaux, L.
Astor, V. Burnham, L.
Boardman, L. Cadman, L.
Brabazon of Tara, L. Carlisle of Bucklow, L.
Carnegy of Lour, B. Long, V. [Teller.]
Carnock, L. Lucas of Chilworth, L.
Carr of Hadley, L. Lyell, L.
Chelmsford, V. Mackay of Ardbrecknish, L.
Clitheroe, L. Mackay of Clashfern, L. [Lord
Cochrane of Cults, L. Chancellor.]
Cocks of Hartcliffe, L. Macleod of Borve, B.
Colwyn, L. Middleton, L.
Courtown, E. Montgomery of Alamein, V.
Cranborne, V. Mountevans, L.
Crathorne, L. Moyne, L.
Cross, V. Newall, L.
Cullen of Ashbourne, L. Norrie, L.
Davidson, V. Park of Monmouth, B.
Denton of Wakefield, B. Renwick, L.
Dixon-Smith, L. Rodger of Earlsferry, L.
Dundonald, E. Saint Oswald, L.
Elton, L. Seccombe, B.
Ferrers, E. Sharples, B.
Fraser of Carmyllie, L. Skelmersdale, L.
Gisborough, L. Soulsby of Swaffham Prior, L.
Goschen, V. St. Davids, V.
Grimston of Westbury, L. Stewartby, L.
Hacking, L. Stockton, E.
Harvington, L. Strange, B.
Hayhoe, L. Strathcarron, L.
Henley, L. Strathclyde, L.
Hives, L. Swinton, E.
Holderness, L. Torrington, V.
Holm Patrick, L. Trumpington, B.
Hooper, B. Ullswater, V. [Teller.]
Howe, E. Vivian, L.
Inchyra, L. Wade of Chorlton, L.
Jeffreys, L. Wakeham, L. (Lord Privy Seal.]
Kenyon, L. Wise, L.
Kimball, L. Wynford, L.
Lane of Horsell, L. Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

On Question, Motion agreed to.