HL Deb 20 March 1995 vol 562 cc1081-95

7.15 p.m.

Lord McCarthy rose to ask Her Majesty's Government whether they will take steps to devise satisfactory machinery for the designation of workers' representatives with whom employers are required to consult in the event of collective redundancies and transfers of undertakings.

The noble Lord said: My Lords, the Question arises out of the Government's silence for the past nine months since the decision of the European Court of Justice in June 1994. The ECJ decided that the Government were in breach of two directives: the directive on collective redundancy and the directive on transfer of undertakings.

In fact, the ECJ decided that we were in breach of those two directives in a whole range of ways. The Government accepted that that was the case and took steps, such as they were, to conform with those two directives 12 months or so before the ECJ decided that they were in breach of them. Therefore for the most part we had those matters put into the 1993 Act. But there was one decision of the ECJ which the Government failed to accept. Nine months have gone by and we have not heard from the Government whether they accept the decision that employers cannot evade the effect of those directives merely by failing to recognise, or derecognising, trade unions.

That is what the ECJ said. It said that the effect of the present regulations was that employers could avoid having any worker representatives to carry out consultation and representation in cases of redundancy and transfer of undertakings merely by not recognising trade unions.

I asked the noble Lord, Lord Inglewood, on 9th February, after many months had gone by, whether the Government had any thoughts on this matter. The noble Lord said: The Government are presently considering what action needs to be taken".—[Official Report, 9/2/95; col. 301.]

Naturally enough he was asked subsequently to elaborate. He said: The important point about the decisions in the two judgments is that it is for the employees to determine who their representatives will be".

That was a most interesting response, because it suggested to me at the time that the Government had, in effect, accepted the judgment, because the judgment says that it is for the employees to determine who their representatives will be. The employer cannot decide.

Then, unfortunately, the noble Lord seemed a bit less sure, because in answer to further questions he went on to say: As the noble Lord will know, the judgments and the law in this area are far from straightforward. We are anxious to make sure that we consider the matter properly. Subsequently we shall discuss our ideas before bringing proposals forward.

At that point the noble Earl, Lord Russell, said: My Lords, does the Minister agree that the judgments have the force of law because in the European Communities Act 1972 Parliament, in the exercise of its sovereignty, so decided? Will he further agree that the only question can be about how and not whether we implement them?

I thought the noble Lord, Lord Inglewood, was helpful. He said: My Lords, the noble Earl, Lord Russell, is absolutely correct in his analysis of the constitutional position. I can confirm that he is correct that it is not a matter of whether but how these matters are dealt with."—lcol. 302.]

So we asked the noble Lord how he had taken nine months as it was a matter only of how and not whether. We are still asking him. Therefore, I ask this Question. Before this Question could appear upon the Order Paper, I was contacted by the noble Earl who asked me whether I would like to withdraw the Question tonight because the Government were just about to give birth, as I understood it—they were going to issue a statement about this matter on Red Nose Day.

I had to think carefully. My difficulty was that I knew that the Government rarely issued statements that had not been leaked to the Guardian. This statement had not been leaked to the Guardian and I thought that perhaps it would not be published. I thought that, at any rate, if the statement were published it would be interesting for us to debate it tonight because it might not be as we would have wished it. I kept the Question on the Order Paper, and on Red Nose Day the Minister wrote to me informing me that the Government were not yet in a position to issue their legislative proposal.

Therefore, I understand that the Government have a legislative proposal and I hope that the Minister will confirm that. I understand that, after nine months, they will not say, "Talk among yourselves and in another nine months we might tell you what we think", but that they are going to issue a legislative proposal.

Therefore, I wish to ask the Minister several questions. First, when can we have the legislative proposal? Secondly, will it contain a proposal and not state merely, "Talk among yourselves. Get on with it. We shall come hack in 1996."? The Minister will not tell me the contents of the proposal and I do not expect him to do that. However, surely he can tell me whether it is based on the need to produce a designation beyond voluntary recognition. The ECJ stated that we cannot get away with the situation in which we do not designate the way in which the representatives are to be elected, appointed or whatever unless they are there because they are from recognised trade unions, which is voluntary recognition. Are we to face the fact that we cannot hide behind the argument that the laws and practices of this country forbid that kind of designation?

I have tried hard to understand the arguments that the Government put to the ECJ. I believe that they have sought to argue three objections to accepting that logic. First, that once upon a time we all agreed to accept a single channel principle. In other analogous cases, such as health and safety legislation, that the Labour Government accepted the voluntary principle, or the single channel principle, or the principle that the only rights were trade union rights. My answer to that argument is that that was long ago and far away. Such cases arose at a time when a whole range of legislation encouraged the recognition of trade unions and when the regulations were not being used by employers as a mechanism for derecognition, which is now the case.

Secondly, that is not what the ECJ now states. My third point is the EU has a range of ways of compelling us to accept the decisions of the European Court. In the period post-Maastricht, of which the Government were in favour, there are many ways in which that can be made extremely expensive for the Government. I raise in passing the dreadful example, from the point of view of the Government, of the Frankovitch case. That should make the Government think not a second time but a third and a fourth time if they believe that they can evade the consequences of an ECJ decision.

I shall repeat the questions that I want the Government to answer. First, the Government must accept (must they not?) that in the near future it will be necessary to produce an acceptable policy which embodies the principles in the ECJ decision. I do not ask how they intend to do that; it is a matter for them. However, the policy must contain designation of the representatives beyond the area of recognised trade unions. Secondly, they must tell us when they are publishing the policy.

Finally, why have the Government been so remiss in accepting this particular decision? Will the Minister tell the House what is the Government's real objection to representative provision of this kind? They cannot say that they are against trade unions, although they are, because it does not have to be trade unions; it has to be representation.

What is it that the Government, or their employer friends, are afraid of in the directive? All that is involved is that the employees will be allowed freely and independently to choose their representatives. The employer must then inform them of his plans in respect of redundancy, transfers and takeovers. The representatives will discuss them, consider them and perhaps raise objections. The employer may have to find agreed ways of meeting their points of view. It is not compulsory arbitration nor the infringement of management rights and it will not cost money. We are not discussing minimum wage legislation; we are discussing consulting, talking, considering and trying to reach agreement.

For a long time, most good employers have found that they can learn through such a process and that their employees can tell them how to act. What are the Government and employers afraid of? Why cannot the Minister tell me tonight that the Government accept the principle?

7.25 p.m.

Lord Wedderburn of Charlton

My Lords, my noble friend's timely Question prompts me to declare—although I am not sure that it is strictly necessary—that last year I was professionally instructed to advise on the judgments of the Court of Justice of 8th June 1994, from which this Question arises. Those instructions are now spent.

Those judgments require the United Kingdom Government to observe their obligations under the directives of 1975 and 1977, as interpreted by the court, to guarantee consultation with workers' representatives in the event of transfers of undertakings and collective dismissals. The Government must take account of the fact that they appear to have been in breach for a long time and therefore risk a considerable number of actions under the Frankovitch doctrine, as the court has developed it.

The court rejected the Government's argument, not surprisingly, that in Britain employers were not bound by the directives' obligations to consult where they refused to recognise a trade union for collective bargaining. In 1980 the same colour of government repealed the key procedure for obligatory recognition of appropriate trade unions which was introduced by the Labour Government of 1975. Of course, that factor means that there is no analogy for the position of governments before 1980 and afterwards.

It should be put on record that the two directives are not, as some believe, an extravagant code of worker protection. It is no esoteric privilege that, before one loses one's job and family income, an employer should talk with one's representative about how that has occurred and whether anything should be done about it. In view of tonight's time constraints I shall not elaborate, but I say firmly that some of us believe that the protections in the directives are much too weak, in particular in terms of the sanction. No right is stronger than its sanction.

Secondly, it is worth noting that the court made it clear that worker protection is only one part—some writers have it only a minor part—of the directives. The court stated that the directives are: intended both to ensure comparable protection for workers' rights in the different Member States and to harmonize the costs which those protective rules entail for Community undertakings".

Harmonisation of employers' costs in the integrated market is a central purpose of these directives.

The task in Britain, as the court declared, is to take all appropriate measures to ensure that workers' representatives are designated for consultation and no longer allow an employer "to frustrate" the protection provided for workers. The Government's obligations in this matter have been manifest since 8th June 1994. I do not complain that they have not found the perfect scheme since that time, but to say nothing is really quite extraordinary.

In this state of legislative dysphasia, they still cannot rescue from the dark recesses of their labour law unconscious even the dreams of the four-page letter which the Minister told us that we might receive, and never did receive, in the past week. If the Government are not ready this evening to let the whole cat out of the bag, perhaps I may put four questions to the Minister, of which I have given him notice, in relation to specific guarantees, because it is right that we should look to the future rather than re-analyse all the nice points from the past, albeit that they are many.

The first matter is existing relationships. Surely it should be common ground that the new machinery for consultation must not damage existing good relationships between employers and their recognised trade unions or discourage further employers and unions to make such arrangements. Consultation with a union which is already a partner for relationships in that place of work should surely be a primary aim for strengthening and, in a way, achieving that part at least of the judgment which would cause management the fewest complexities.

The second aspect is independence. Workers' representatives must be properly independent both of state control and of control by the employer. That is not a matter where house unions or staff associations which are not independent will do. In order to represent freely the interests of their constituency, there must be guaranteed independence. Certainly, if one looks at the debate in other member states where there has been perhaps rather stronger discussion of those points, if we are to have, as the judgment put it, something which is comparable to other member states, that is a not unimportant heading.

Thirdly, whatever the selection procedures are to be, where workers are to select their representatives on ground where there had been none before perhaps, surely the procedures must be open to appropriate independent organisations of workers. If there are to be elections, for example, then an appropriate independent organisation of workers must have some right to participate—to nominate candidates perhaps, to communicate with the workforce—and not meet with a closed door from the employer. I appreciate that that may be difficult to draft and to get right, but this evening I am asking for agreement as to aspirations.

Fourthly, there is the question of the continuity and resources of the workers' representatives. I do not say this to make any particular ideological point, but it is a matter of fact that where a trade union is carrying out that process, continuity and resources are not so difficult to find. But it may be that there are representatives who have a less secure place at a particular workplace. I submit that we must ensure that the arrangements provide sufficient continuity and resources.

The directives envisage workers' representatives assimilating a great deal of information and making counter-proposals in the face of the employer's obligation: to consult with a view to agreement".

The directives do not lay down bargaining but they lay down the need for a high level of consultation—to consult with a view to agreement. That is rather a new concept for our law and it has been discussed already in the High Court. In that process, the worker representatives must be given the, opportunity, when there are redundancies, to comment on management's plans after it has sent its proposals to the competent public authority, as it is obliged to do.

It would be quite inadequate to allow merely for workers to choose representatives only after redundancies have loomed up over the horizon, still less when they are actually declared. It would be at the choice of management. I do not criticise the management, but redundancies come over the horizon at the initiative of management. The representatives must have more resources and better continuity.

Baroness Seear

My Lords, it would be extremely valuable if the noble Lord would explain how he sees the distinction between "negotiation", as we have understood it over the generations, and "consult with a view to agreement". I find that change very difficult to understand.

Lord Wedderburn of Charlton

My Lords, I am grateful to the noble Baroness for that interruption. I too was not brought up on that concept and it is a foreign concept for at any rate our legal categories. The noble Baroness will know as well as I do the difference between consultation and bargaining. With consultation, normally management takes the decision willy-nilly. But surely "to consult with a view to agreement" requires a little more from management. It may perhaps not be as much as bargaining where the decision is a joint decision and the directives do not require a joint decision.

I appreciate that our drafting of these matters will have to be improved and we shall have to learn new tricks. This evening I am asking that the workers' representatives, as a principle, must not be put in a position in which they come on to the field too late in the game to be effective players in what the directive requires them to do.

The idea that workers might designate representatives ad hoc, to which Advocate General Van Gerven alluded in his opinion of March 1994, which must be taken into account when interpreting European law, cannot mean that the representatives are allowed by the employer to appear only at the point at which they cannot carry out that extremely difficult process, as the noble Baroness said, of consulting to achieve agreement, if that is possible.

Indeed, under such a scheme, by choosing his moment the employer could—I do not say that he would do it intentionally—as a matter of fact render ineffective, in practice, the designation of representatives at a date that he chooses for the redundancies and for which the representatives are either not there or under the implementation scheme cannot do anything effective. That would offend the ratio of the court's judgment; namely, that it must not he open to the employer to: frustrate the protection provided for the workers".

Refusing to recognise trade unions is not the only way in which an employer might frustrate the venture.

Therefore, perhaps rather uncharacteristically, with one minute to spare, I conclude by asking the Minister whether he will give us those assurances and delay no longer in accepting those basic rights with regard to workers' representation at work.

7.37 p.m.

Lord Rochester

My Lords, I welcome the opportunity which the noble Lord, Lord McCarthy, has given us to discuss the whole question of the application in the United Kingdom of the acquired rights and collective redundancies directives.

My interest in those matters goes back, as does that of other noble Lords who have spoken, to the debates on the Trade Union Reform and Employment Rights Bill in 1993. At that time, like the noble Lord, Lord Wedderburn, I tabled amendments which questioned and sought to overturn the Government's contention that the relevant clauses of the Bill brought the detailed provisions of UK legislation fully into line with the requirements concerning consultation contained in the two directives.

In reality, the Government's so-called TUPE regulations of 1981 obliged employers to consult only the representatives of recognised trade unions about the prospective transfer of undertakings, whereas the acquired rights directive required consultation with the representatives of employees generally. The European Commission had long argued that restricting the right to consultation and information to recognised trade unions was insufficient; and I agree.

Similarly, the directive on collective redundancies required employers contemplating large-scale redundancies to inform and consult workers' representatives well in advance. The European Commission considered that conducting negotiations only with representatives of trade unions recognised by the employer, as now provided in the Trade Union and Labour Relations (Consolidation) Act 1992, made it possible for the consultation procedure to be completely inapplicable when no trade union was recognised by the employer. The Commission found that also to be unacceptable.

In the 1993 Bill the Government made no concessions on those points. My amendments to the Bill sought to persuade them to extend the right to information and consultation to employee representatives generally. The difficulty for me at that time was that it would have been incredibly complex and indeed wrong to do that by way of substantive drafting. That would have required prior consultation with representatives of employers and trade unions and was thus a task not for Opposition parties but for the Government. I therefore said that it was up to the Government to be proactive in the matter and positively to promote employee representation outside the trade union structure, not so as to do down trade unions but simply for the benefit of employees who did not choose to be represented by a union.

Accordingly, my amendments invited the Government to lay before Parliament orders which would amend both the TUPE regulations and the relevant sections of the 1992 Act and would have the effect of extending the application of the duty to inform and consult trade union representatives so that UK law applied to employee representatives generally. The amendments proposed that the 1993 Bill should not be enacted until that had been done. I suggested then that the thinking behind the amendments was very much in line with the Government's often-expressed support for the extension of employee involvement and I expressed the hope that they would make a positive response. I further said that, since the Government accepted the principle that recognised trade unions should be consulted about prospective transfers and collective redundancies, they could not very well fail to treat in the same way employees who did not choose to be represented by a union.

The Government's response was that the main problem with my proposal was that it provided no clue as to how an employer would be able to judge who should or should not be an employee representative and that would cause considerable confusion. The Government's clear view was said at that time to be that employee representatives should be trade unions which the employer had freely chosen to recognise for collective bargaining purposes. But now, following the judgments of the European Court of Justice last June which effectively upheld the view of the Commission to which I have referred, the noble Lord, Lord McCarthy, has again challenged the Government themselves to devise machinery which would designate who should be workers' representatives for the purposes we are discussing.

In doing so he has followed closely the words used by the European Court in its judgment of June 1994 on collective redundancies when the Commission succeeded in its claim that the UK failed to fulfil its obligations under Articles 2 and 3 of the directive in not providing a mechanism for the designation of workers' representatives in an undertaking when the employer refused to recognise such representatives. In the same judgment the Court ruled against the UK for laying down in 1993 statutory provisions which were narrower in scope than those in the directive, for not requiring employers to consult workers' representatives with a view to reaching agreement and for failing to provide for effective sanctions against employers who did not so consult.

I think it is a great pity, as do the two noble Lords who have spoken, that the legislative proposal concerning consultation on both collective redundancies and the transfer of undertakings, which it was said the Government were going to issue at the end of last week, has not become available in time for this discussion. I shall be interested to hear from the Minister when he replies as much as he can tell us about the form that this proposal will take. I trust that in his reply the noble Lord will give us as much information about what the Government have in mind as he can and particularly that he will confirm that there will be consultation on their proposals with representatives of employers, trade unions and other interested parties before legislation is brought forward.

What we do have is a consultation document that the Department of Employment issued last year in which it asked for comments on the Commission's proposal as to how the directive relating to employees' rights in the event of transfers of undertakings should be amended. In that document the Government recognised that the present requirements of UK law would need to be extended beyond trade unions; and that I very much welcome. There are other encouraging signs—for although in the document the Government reiterated their general view that regulation on these matters at Community level is unnecessary and inappropriate, they do at least acknowledge that the proposed revision of the acquired rights directive gives them the opportunity to fulfil their cherished hopes for greater flexibility in this area.

For example, they welcome particularly the Commission's recognition that a distinction needs to be drawn between the contracting out of an activity or a service and the transfer of an undertaking as an economic entity which retains its identity. On the question of the application of the directive to the transfer of insolvent companies, the Government again recognised that the Commission's proposal seeks to provide some of the flexibility that they wish the revised directive to have.

Finally in this document the Government express the view that, subject to further clarification by the Commission and certain drafting points, most other elements of the proposal do not appear to give rise to significant difficulties for the UK. I very much hope that this apparent relaxation in the Government's attitude to the directive is an indication that they are genuinely seeking a consensus, since both the existing directive and the proposed revision are based on Article 100 of the treaty requiring unanimity within the Council. I should be grateful if when he replies the noble Lord, Lord Inglewood, would confirm that that really is the Government's aim.

As I understand the two judgments of the European Court, it will be, as has been said, for employees themselves to determine who for the purposes of consultation their representatives should be. But, as I said two years ago, and as the noble Lord, Lord McCarthy, has again suggested in the way in which he has framed his Question this evening, it is for the Government to devise the machinery needed for this purpose. The noble Lord, Lord McCarthy, has not specified any time limit within which this should be done; and that being so, it is to be hoped that the noble Lord, Lord Inglewood, speaking for the Government, will find no difficulty in accepting the proposition put forward by the noble Lord, Lord McCarthy. More than that, I hope that the Minister will give us some indication as to the timescale within which the Government hope both to consult and to introduce legislation on these important matters.

7.48 p.m.

Baroness Turner of Camden

My Lords, I am sure that we are all grateful to my noble friend Lord McCarthy for introducing a debate on this important and relevant subject. The newspapers are full of stories about the so-called "feel-good factor" which, unaccountably it seems, is eluding the Government despite allegedly phenomenal economic success. It is alleged that we shall not be feeling good for some time. Personally, I do not expect to feel good until after the next general election, and then I am fairly certain that I shall be feeling very good indeed. However, it is fairly widely acknowledged that the lack of this factor arises from a feeling of insecurity among people generally because, despite falls in the figures of unemployment—some of us have doubts about those figures and the way in which they are calculated—people do not feel secure either in their own employment, if they have jobs, or in the future job prospects for their children.

The Government have promoted the whole idea of job flexibility, which for most people actually means less security. Employers have been encouraged to treat employees as disposable items—a commodity like any other commodity. Job security has been very significantly weakened as a result of conscious government policy and the forms of collective protection built up by employees over many decades have also been weakened through a series of anti-trade union Acts somewhat ludicrously described as trade union reforms.

The idea has been propagated that there is something not quite right, even not quite decent, in expecting a job for life. But without such expectations it is hardly surprising that people feel terribly insecure, more so perhaps than at any time since the war. This is entirely relevant to the Question introduced by my noble friend this evening, for one of the purposes of the acquired rights directive surely was to ensure that in takeovers and mergers employees would have the assurance of some security and some continuation of employment on terms and conditions no less good than they had before. It seems to me that this objective is highly worthy. Similarly, who can possibly object to the notion that there should be consultation in advance of collective redundancies? Employees are not, as I have said before, just another kind of commodity. They are human beings with families, responsibilities and commitments. Without their efforts, the companies concerned would not have existed, and in general they are not to blame when an enterprise is sold over their heads, perhaps to a market predator interested only in asset stripping. They are, moreover, the guarantee, if one is needed, that the new owner will have the expertise readily available to enable the business to continue.

It is a sad fact that modernising and streamlining too often means getting rid of staff. That is why the protection—it is not all that adequate, as has already been indicated by my noble friend Lord Wedderburn—afforded by the acquired rights directive is important. The Government in the first instance—as we have heard this evening—sought to give effect to the directive through TUPE, the Transfer of Undertakings (Protection of Employment) Regulations. As is so typical of this Government, they sought to do it in the most minimal way. The directive required that there should he consultation with employees. That was not provided for adequately the first time round, so we had amending legislation. However, that legislation only required consultation to take place with recognised trade unions. As we know, the Government do not like trade unions and have done their best to persuade employers not to recognise trade unions, or to derecognise them where such agreements exist. It was decided by the ECJ in June last year that that simply will not do. Employers cannot evade their responsibility to consult employees simply by derecognising unions.

The court has ruled that the directives on collective redundancies and transfers of undertakings provide guaranteed universal rights to consultation and that it is not acceptable for UK law to restrict consultation to those workplaces where employers recognise unions. The Government, as we know, must amend UK law to comply with that judgment. In the meantime it seems to me that the Government have been doing their best behind the scenes to water down the acquired rights directive. This was the subject of a Question in this House on 2nd March at col. 1583 of Hansard. I must say that on that occasion I was not particularly impressed by the response of the Minister.

The Government's whole philosophy has been based on constant erosion of employees' rights. They seem to be under the impression that only by driving down standards through, for example, the abolition of wages councils, will it be possible to create jobs. Therefore I am not surprised that the Government have been dragging their feet over implementation of the latest decision of the ECJ. In case it is argued that trade unions might not be in favour of the wider consultation argued for by the directive and the ECJ, I must point out that the TUC has made it abundantly clear that it is in favour of the whole ECJ decision and the directives, and wants to see them implemented fully as soon as possible. It has suggested that there are two ways in which this might be done and I would welcome the Minister's response to that this evening. It says that legislation could require that for the purposes of consultation, under the law the employer is obliged to consult either representatives of an independent trade union recognised for the purposes of collective bargaining to any extent; or, where no such union is recognised, representatives elected by all the employees in elections held under the rules set out in a code or regulations under statute.

It seems to me that this is a simple solution to the issues posed by the ECJ. Certainly it is quite clear that although we may not he facing the merger mania of several years ago, substantial mergers and takeovers are a continuing feature of economic life. In recent days we have learnt of the Glaxo/Wellcome proposed merger (with an indication, incidentally, that this could well mean job losses eventually) and of course there has been the Barings collapse. This is not a time for any government to give the impression that they are intent upon watering down protection afforded by the acquired rights directive, or that they are dragging their feet as regards full implementation. We have heard this evening from my two noble friends a detailed exposition of what the directives mean, and ways in which they could be implemented. I await with interest the Minister's response.

7.55 p.m.

Lord Inglewood

My Lords, this evening we have had an interesting debate on the subject of informing and consulting employees' representatives about collective redundancies and business transfers. I should like to thank the noble Lord, Lord McCarthy, for raising this important issue and the other participants for their helpful and notably expert contributions, and for asking some extremely pertinent questions which I shall endeavour to answer as far as I can before concluding.

As I have previously made clear to the House, the Government are giving full and proper consideration to this issue, following the decisions by the European Court of Justice last year. I also stated in this House on 9th February that it is not a question of whether this matter is dealt with by legislation, but how. The Government are now developing a proposal to give effect to the judgments. While I am not in a position to give details of the proposal to the House this evening—as noble Lords know, I had been hoping to be able to do that—the Government expect to make their ideas public shortly, and I anticipate that these proposals will contain clear ideas of what the Government propose for legislation. However, I suppose I should enter a caveat. I was not accurate as regards the timing of the consultation document. Therefore I suppose it is always possible that I may be wrong about what it may contain.

It may be helpful to remind your Lordships of the history of this issue. In 1975, the then Labour Government agreed the Collective Redundancies Directive and transposed it into UK law. The UK legislation required employers to consult only a recognised trade union. That legislation remained substantially unchanged until 1993 and it was some of those arrangements which a Labour Government put in place, which were criticised last year by the European Court of Justice and found to be unlawful.

It was in 1977, that the same Labour Administration also agreed the so called "Acquired Rights" or "Business Transfers" Directive, which also contained information and consultation provisions. Although that directive was transposed into UK law by a Conservative Government by the 1981 TUPE Regulations, the UK regulations' information and consultation provisions followed the pattern of the earlier redundancy legislation, again only requiring the employer to consult a recognised trade union.

That view of the directives' requirements was not seriously questioned or challenged in the UK or on the Continent at the time, and indeed it was only in 1989—some 14 years after the redundancies directive had been implemented—that it was challenged by the European Commission. As the House knows, in June last year the European Court of Justice ruled inter alia that these arrangements for consultation did not meet the requirements of the directives.

The noble Lord, Lord Rochester, and the noble Baroness, Lady Turner, referred to the possible changes to the Acquired Rights Directive. I do not have any more to add to what I told the House on 2nd March.

I have mentioned the history of this issue simply to highlight that arrangements which were thought, by common accord at the time, to meet the terms of the European legislation, have many years later been found not to do so. It is against that background that the Government are developing their proposals for changes in this area.

Although, as I stated earlier, I am not in a position to discuss a detailed proposal this evening, it may be helpful to your Lordships to summarise some of the core issues at the heart of our employment policy, and which will provide the raison d'etre for our approach to this matter. First, we believe that a flexible labour market is in the long-term best interests of employers, employees, and the country at large, because growth and job creation occur best in these conditions, and that is in the best interests of both those in and out of work.

Secondly, we are equally concerned to ensure that unjustified burdens are not placed on businesses for precisely the same reasons. Our aim is to create an environment in which employers have every incentive to offer employment to others. Hemming in our businesses, and in particular our small businesses, with over-detailed and nit-picking regulations one after another will not, in our view, do that. These are not circumstances which are conducive to employers being able to pay good wages and provide good conditions of employment. They are not the conditions for creating jobs. They become the recipe for increasing national uncompetitiveness in the face of competition from all round the globe in the post-GATT world. They will push our country in the direction of economic decline and it is not this Government's policy that we should or shall move in that direction.

Thirdly, the Government are sometimes quite wrongly said to be opposed to workplace consultation and to employee involvement. That has been said today. That is simply not the case. The Government believe strongly that, irrespective of any statutory requirements, it is good practice for employers to inform and, where appropriate, consult their employees about matters which affect them. That is in the best interests of employers and employees, which is why it makes good business sense. But the Government also believe that companies should be free to develop arrangements appropriate to their own circumstances and the needs of their employees. That, rather than inflexible statutory requirements, is the best basis for establishing working relationships which suit best both employer and employee.

That freedom includes the decision whether or not to recognise a trade union, which has always been a feature of British labour law. The Government recognise that trade unions can be a valuable and legitimate source of help for employees in their relations with their employers. Contrary to what is sometimes said in this House and elsewhere, the Government are not opposed to trade unions. Rather, the aim of our step-by-step reform of industrial relations and trade union law has been to ensure a proper balance in the relationship between employers, employees, trade unions and society at large.

I am sure that I do not need to remind your Lordships that, at just over a quarter of a million, the number of working days lost through stoppages in 1994 represented the lowest level of industrial action in over 100 years. That compares very favourably with the average, for the 1970s of some 12 million and has benefited everyone in the country.

I mention that to remind the House of the industrial relations background to the changes we must make. It must be right, therefore, that the Government consider very carefully exactly what steps to take next to make the necessary statutory changes in this country and at the same time improve labour law.

These are important matters and, turning to a point raised by the noble Lord, Lord Rochester, we look forward in due course to considering responses to our consultation exercise when we shall have the views of those representative bodies whose members are affected by our proposal.

I was interested to read the recently published TUC report on representation at work, which I understand owes something to both the noble Lords, Lord McCarthy and Lord Wedderburn, which considers in some detail the implications of the European Court of Justice judgments. It is open enough about its real objective, which is to reverse the steady decline in union influence and power from its zenith in the 1970s, which from the TUC's perspective is an understandable aspiration. I remind the House that union membership fell from over 13 million in 1979 to under 9 million in 1993. It is clear that in many cases employees have been far from persuaded that union membership will help them, while many employers are equally unpersuaded of the benefits of union recognition. While obviously promoting union participation whenever possible, the TUC report accepts that an exclusive role for unions is not consistent with current European law.

The TUC is arguing for a new, strong and well resourced public agency to police these matters, including determining claims for recognition, echoing perhaps the statutory recognition mechanism of the 1970s to which the noble Lord, Lord Wedderburn, alluded, which was widely regarded as unworkable. Of course legal rights must be underpinned by legal redress if they are denied. But is another public agency really the kind of legislative environment people in this country really want? Will it really contribute to Britain's competitiveness, creating jobs and generating wealth for individuals and their families and to fund public services? Is it really the kind of proposal which noble Lords opposite actually wish to endorse?

While, as the noble Lord, Lord McCarthy, accurately surmised, I am not in a position this evening to say what will be in the Government's proposal when it is published, I am sure that I shall not be giving away any secrets if I say what it will not contain. It will not contain a requirement on employers compulsorily to recognise a trade union for these or any other purposes. Nor will it contain any provision which would require an employer to establish a works council or similar body. The Government have considered the judgments carefully and they require none of those things.

To answer a point which was raised in one form or another by all speakers, there must be a mechanism for designating employees' representatives, who must clearly have appropriate guarantees of independence and resources for the job for which they have been selected. They must be consulted by employers proposing redundancies or a business transfer. Both parties must engage in a constructive dialogue. That is evident from the judgment. There are a number of ways in which that obligation might be met.

Our aim, consistent with the points I have made tonight, will be to bring forward proposals which, while fully implementing the requirements of the two directives, which have been clarified by the ECJ judgment, provide the maximum flexibility for employers to make arrangements consistent with their business circumstances and the particular needs of their employees. They must recognise the need to minimise the burden on business; they must not interfere with the delicate balance of industrial relations generally and must ensure proper consultation with employees' representatives.

In conclusion, I thank all noble Lords who have taken part for their contributions to tonight's debate because important issues have been canvassed. In particular, I thank the noble Lord, Lord McCarthy, for raising the issue in such a spirited manner. I can assure the House that the views put forward by noble Lords this evening will be considered carefully by those responsible for legislation in this area.

As I mentioned earlier, I very much hope that the proposals I have described will come forward soon. They will contain constructive ideas so that legislation will flow as soon as possible thereafter.

Baroness Trumpington

My Lords, I beg to move that the House do now adjourn during pleasure until 8.15 p.m.

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

The Sitting was suspended from 8.5 to 8.15 p.m.]