Employment Bill

HL Deb 26 February 2002 vol 631 cc1356-408

Second Reading debate resumed.

5.10 p.m.

Lord Borrie

My Lords, I shall try to bring your Lordships' minds back to the Second Reading of the Employment Bill, after the exciting minutes that we have spent on the other matter. For those of your Lordships who would like to remain, my contribution will focus mainly on Parts 2 and 3.

I recall giving evidence in the 1950s with others from the Society of Labour Lawyers to the Franks committee on tribunals and inquiries. I was then—and still to a degree am—an enthusiast for tribunals as an alternative to the ordinary courts in settling disputes, especially in specialised areas such as social security and employment.

In 1957, the Franks report accepted that tribunals were likely to be cheaper than the courts, more readily accessible, more expeditious and freer from technicality. That probably sounds a bit idealistic today. Over the intervening 40 to 50 years tribunals have tended to become ever more like the ordinary courts, with their formalities and detailed procedures and, above all, because to a large extent they have, to put it crudely, been taken over by lawyers. When employers at employment tribunals are represented by a lawyer. it is natural that the employee feels disadvantaged if he is not represented by a lawyer as well, even though tribunal chairmen invariably try to assist the unrepresented employee to put his case.

In view of that, it is not surprising that the Government are rightly concerned at the growing numbers and consequent cost to everybody concerned of employment tribunal cases. Indeed the issue might have been dealt with a few years ago in earlier legislation, as the noble Baroness, Lady Miller, suggested. Parts 2 and 3 have been designed to increase the cost disincentives on those who bring broadly unjustified claims and to require internal procedures to be used fully before an approach may be made to a tribunal. I am aware of the argument—which we shall no doubt hear deployed in due course by my noble friend Lord Wedderburn of Charlton—that the Government may have exaggerated the case for the changes by talking up abuse by employees of the employment tribunal system—

Lord Wedderburn of Charlton

My Lords, would my noble friend like to wait and see what I say about that`?

Lord Borrie

My Lords, I was anticipating a little because I have read some of what my noble friend has written, but I am happy to say no more about it at this stage.

My view—and it is natural that I should give my view rather than that of my noble friend—is that there is every reason in principle for legislating to ensure that internal dismissal and grievance procedures in the workplace are created where they do not currently exist and that their use is fully encouraged. I am told that most larger employers have such procedures, but far too many smaller and medium-sized employers have no internal procedures. I favour the requirement and the no contracting out provisions in Clause 30.

In parentheses, I may want to raise in Committee the question of whether Clause 30 affects the disclosure of wrongdoing regime in the Public Interest Disclosure Act 1998. I hope that it does not. Clause 30 may need to be amended to make it clear on the face of the Bill that an employee may properly make appropriate disclosures of wrongdoing in the workplace to regulators such as the Financial Services Authority without first having to raise the matter internally.

While I favour the concept of Clause 30, I have serious doubts about Clause 31, which requires tribunals to vary compensatory awards for failure to use internal procedures before approaching a tribunal. The Government will know that Judge Prophet, the president of the employment tribunals, has published a paper that is highly critical of Parts 2 and 3 of the Bill. He asks why an employee dismissed for redundancy should risk having to lose part of his redundancy payment, to which he seems to be fully entitled under law, because he has not used to the full his former employer's internal procedures. Similarly, on the other side of the argument, why should an employer have to pay an employee or former employee up to 50 per cent more than the employee's actual loss for failure to use his own internal procedures? Judge Prophet suggests that the Bill seems to mix up compensation assessment and a penalty.

Of course, there must be some enforcement procedure if parties are to be encouraged sufficiently and effectively to use internal procedures before going to a tribunal. Judge Prophet reminds us that a tribunal can always stay proceedings that have been launched at the request of an employer who has proper grievance procedures, pending the completion of the internal processes using those procedures. Tribunal proceedings may then be unnecessary because the parties have resolved their differences through those internal procedures. The Bill could require tribunal proceedings to be stayed pending the outcome of internal procedures. That would be a more straightforward and fairer sanction than attacking the amounts of compensation to which someone is entitled.

Part 2 introduces tougher cost disincentives to discourage abuse of the tribunal system. I see value in the Bill's proposals to award costs against paid representatives and to extend costs to cover lost management or preparation time. However. existing regulations already give tribunals the power to impose costs on any party who behaves, vexatiously, abusively, disruptively, or otherwise unreasonably". Tribunals can even award costs against a party who has brought proceedings that are misconceived—that is, those that have no reasonable prospect of success.

According to paragraph 58 of the Explanatory Notes, the Government want to widen the powers because existing regulations, do not give tribunals a general power to award costs against the losing party, in the absence of these factors"— that is, the factors that I have just mentioned. Why should the Government want a more general power? The clue seems to be in paragraph 60 of the Explanatory Notes. They want a general power to award costs for "time wasting". I am not exaggerating. One cannot even be more precise than to say "time wasting". Currently, that is all that is being said in the proposals. What the term means, or may mean, will he known only if the Government choose to make the appropriate regulations. There is nothing in the Bill to help us with the meaning of time wasting.

I would suggest that an employee or employee's representative who seeks to make an effective application may often seem to a tribunal to he time wasting, especially if that tribunal subsequently refuses the application. If the tribunal does not feel that my application is justified, it may well feel that I have wasted time. However, if the time wasting does not amount to vexatious or unreasonable conduct—which is already covered by costs regulations—why should it be condemned in costs? Clause 22. which is what I am talking about, is much too broad and could, on the Government's own explanation of their intentions, be a serious and unjust disincentive to bringing what may be—or may not be—a valid claim.

Your Lordships may be surprised to hear me say that I commend the Bill, which I largely do. I commend the parts of it about which I have not spoken. For the sake of time, I have chosen to concentrate on the provisions about which I have serious reservations.

5.21 p.m.

The Lord Bishop of Hereford

My Lords, I should first apologise to noble Lords who remain in the House for not being in my place when the Minister began his introduction, surprised as I was by the speed with which we have reached this item of business. Noble Lords had the same experience yesterday evening. I hope that the Minister will accept my apology.

I shall speak very briefly, and very differently from recent speeches by noble Lords, about Part 1—the provisions relating to parental leave—and the implications of those provisions for childcare, good family life and a stable society.

The Church of England Board for Social Responsibility responded in detail to the Government Green Paper, Work and Parents: Competitiveness and Choice, which was published just over a year ago. We recognised the radical change that has occurred in the past 20 or 30 years in the part played by women in the world of work. That is much to be welcomed, although of course it has enormous implications for childcare and for family life. It is good that there is an increasing recognition of the vital part that fathers play in the care and nurture of children, not least in their very early years. The emergence of the "new father", with his nappy-changing skills, is a very important and welcome development. On reflection, however, I think that it is not all that new: I was a pretty dab hand at nappies myself 38 years ago.

We therefore warmly support the Bill's proposals on paid parental leave for fathers. Childbirth is an amazing and wonderful experience, and any father who is present at the birth of his child will know how profoundly moving it is—although fathers do well to be properly modest about their part in the process. Childbirth is also a time of radical change in the relationship between mother and father, a change that can make the man feel distinctly vulnerable as love and loyalty have to begin to be shared in new ways. It is a very good use of public money to enable fathers to spend more time at home after the birth of a child and to become used to being almost equal partners in childcare.

The same warm welcome applies to the provision on adoption leave. For children to remain in care must be the policy of last resort. But adoption is not easy however confidently and knowledgeably it is approached and however wise and careful the support given to adoptive parents. I declare an interest as an adoptive parent; there has been plenty of grief and bewilderment as well as delight and happiness and fulfilment. It is excellent that adoption leave is being introduced.

We should, however, like to urge that adoption leave be extended in certain cases to extended family adoption; not of course to step family adoption or to adoption by existing foster parents, who will already have established a very close relationship with a foster child. However, there are not infrequent cases in which a member of the extended family adopts a child, which is often the option that is in the child's best interests and most likely to lead to a stable long-term future. The Bill currently makes no provision for such leave. It may be, for example, that grandparents are the best people to adopt, but that may be at considerable cost in terms of income forgone. They should be able to qualify for any help that is available.

The Government rightly attach very great importance to encouraging people into work, which is fulfilling in itself and the best remedy for poverty and for deprivation. However, the emphasis on work as the answer to these social problems raises considerable issues about family life. How can we strike the right balance between work and family care? The ecumenical Church report Unemployment and the Future of Work, published five years ago, contains some very wise insights into these issues. They bear repetition and careful study. How can the participation of both parents in the labour force be reconciled with the stability of marriage and the upbringing of children? If I use the word marriage, it is not because I want to exclude or denigrate other forms of stable partnership which are so widely found in society today. Seven years ago, the Church published a report entitled Something to Celebrate that looked sympathetically and realistically at various forms of partnership, although of course we believe that marriage is the ideal relationship, and certainly the ideal relationship for the bringing up of children.

Do the Government's proposals recognise the reality of unstable, casual, low-paid work in which there is very little commitment on the part of employers to their employees? The provisions concerning qualification for enhanced maternity pay and leave are still strict, and this part of the Bill is fearsomely complex. If the Bill's provisions do not always fit patterns of low-paid employment, there would be grounds for real concern about whether, even with the provisions, women in low-income families will have enough money to eat properly during pregnancy and be able to make real choices between hanging on to desperately needed paid work, however poorly paid, and staying at home to look after children.

There are serious issues surrounding overwork and the rhythm of work. Looking at society as a whole, it is extraordinary how some have managed to secure significantly reduced hours of work, to well below 40 hours a week for many people, whereas many others have come to accept—even, I fear, to expect—hours of work and a pace of work that would have been regarded as intolerable 20 or 30 years ago. These changes—this workaholic lifestyle—are especially evident among high-flyers in the City, for example, at one end of the spectrum, and among the lowest paid at the other; freely chosen by the former, but forced by circumstances on the latter.

The changes raise serious questions about the balance between work and family life and make one wonder whether the Government's emphasis on raising skills levels and on competitiveness, as understandable and desirable as those things may be, may not be ignoring the fundamental need of human beings for rest and for rhythm and for families to have time off together, not simply round childbirth but at other times as well. The Sabbath principle is one which we need to recapture and to treasure.

There is much in the Bill to be welcomed most warmly. The Churches will be glad to celebrate in particular paid paternity leave and adoption leave and the provisions on flexible working. However, we have to signal the urgent importance of the needs of the poorest members of society, and the need of all human beings, especially families with young children, for a rhythm of regular alteration between work and recreation—a rhythm that the 24-hours-a-day, sevendays-a-week society has already done much to compromise if not in some cases to destroy. The crown of creation, in the profound and picturesque account of the book of Genesis, is not the creation of humanity, but the day of God's rest.

5.30 p.m.

Lord Davies of Coity

My Lords, like John Monks, the General Secretary of the TUC, I believe that much of this Bill is to be welcomed. I certainly do not see it in the extreme terms as described by the noble Baroness, Lady Miller of Hendon. Nevertheless, a number of questions need to be raised on the Bill, particularly in relation to Parts 2 and 3 on dispute resolution and employment tribunals. However, this afternoon, very much like the right reverend Prelate the Bishop of Hereford, I shall draw attention to some of the terms in Part I.

I should like to raise the issue of payment during paternity and adoption leave for those earning less than the national insurance lower earnings limit, currently standing at £72 a week. That is an issue affecting millions. Around 2.5 million people work for less than that amount every single week. This issue was raised in the other place during both First and Second Reading and the Committee stage. I am pleased to see that since the original drafting of the Bill, which excluded this large group of workers from any entitlement to payment during paternity or adoption leave, a system of reimbursement similar to that for maternity allowance will be set up for low-paid parents on adoption leave. That will help both the low paid and those with breaks in their employment to qualify for payment during adoption leave.

However, I am less supportive of the proposals to help low-paid parents during paternity leave. While the Government recognise that those earning below the lower earnings limit would need some financial recompense to enable parents to take any time off work when a baby is horn, the benefits system is a very cumbersome means of obtaining financial support for a two-week period. It is not geared to accommodate those needing benefits for a short period with little or no notice of a start date.

There are 600,000 men who earn less than the lower earnings limit and the Government estimate that. of those, around 5,000 per year will wish to take paternity leave. That is a substantial number of people who will be affected. Often the lowest paid families are those in most need of support and the opportunity for a father to bond with a new baby and to support his partner during and after the birth will be the most valuable help to hold that family together.

There are many reasons why it is impractical for people on low earnings to claim benefits for a short time, however much they may wish to spend those important times with their families. Fathers will not know for certain exactly when the baby will be born and when they will need to take paternity leave, so it will be extremely difficult for them to apply for benefits appropriately. Even if it proves possible to improve the system to help prospective fathers to claim early, all experience of the benefits System indicates that it would be impossible for fathers to receive benefits immediately they went off work on paternity leave.

People who earn under £72 a week do not have savings. Nor do they tend to have access to any credit. They are unable to do without payment for two weeks, especially at such an expensive time as the birth of a baby. The Minister will be aware that claims for income support, for housing benefit and council tax benefit have to be made to different agencies and take several weeks to process. Problems with the housing benefit system have been well documented. People on very low incomes have no savings and simply cannot afford to wait for the benefit payment to come through, especially at such an expensive time as the birth of a new baby.

Under the current rules, claims cannot be made until the period of claim is known. The sad Fact is that, even if they could receive benefits several weeks later to make up for the lack of wages during paternity leave, for low-paid fathers that is not an option. They will therefore be unable to take their paternity leave.

In Committee in the other place the Government argued that keeping the necessary payroll records for those earning under the lower earnings level would be disproportionately burdensome for employers. However, employers have to keep payroll records already for many purposes, such as ensuring that people are paid correctly and receive at least the national minimum wage; to prove to Inland Revenue auditors that those people should not be subject to PAYE or national insurance contributions; P60s have to be provided for those who have more than one job so that their income tax can be calculated, based on their total earnings from all sources.

At the time that paternity leave is introduced, many of those earning less than the lower earnings limit will also qualify for the new working tax credit and, once they have children, for the children's tax credit as well.

Records of their pay throughout the year will need to be kept for those purposes. It would seem to me that the simplest method for reimbursing those people earning less than £72 a week would be for them to receive paternity pay at 90 per cent of the average weekly pay. That calculation is the same as that to be used for those earning between £75 and £111 per week, so it will be known to employers.

I sincerely hope that this issue will be looked at further. I hope too that, on reflection, the Minister will agree that the only disproportionate burdens that are being proposed are those to be imposed on low-paid fathers wishing to take paternity leave. Therefore I hope that he will bring forward amendments in Committee in line with the view I have expressed.

5.36 p.m.

Baroness Turner of Camden

My Lords, this is a complex Bill—really it is two Bills. The first section, dealing with maternity, paternity and adoption, is quite different from the second part and might almost be an entirely separate Bill. It is family friendly. It has rightly been welcomed by trade unions and even, although with some reservations, by the CBI. It is a great advance and although there are some issues—like affordable childcare and some of the issues referred to by my noble friend Lord Davies of Coity—that still present problems for some families, the Government are to be congratulated on having responded to widespread concerns about these matters and to have done so in so positive a manner.

I do however have some worries about the second part of the Bill dealing with conflict resolution. Like most former trade union officials in this House, I have considerable experience of dealing with employment tribunals. In my day we called them "industrial tribunals" and I am old enough to remember when they were first introduced. I believe that their existence has made an enormous difference to working lives. Once they were introduced, employers could no longer deal as they wished with individual work people; work people had rights and the means to enforce them.

The Government seem to have accepted complaints from employers' organisations that there has been an escalation in claims before tribunals and that a "compensation culture" has emerged with work people going to ETs without attempting to resolve issues internally—so there is a huge number of cases. The figure of 130,000 for last year was mentioned by the Minister and by the noble Baroness, Lady Miller. But out of a workforce of around 25 million that is surely not huge. Moreover, in recent years there have been quite valid reasons for the increase.

There has been a decline in manufacturing industry with large numbers of dismissals. There has, unfortunately, been a decline in union membership—hopefully now being reversed. If the CBI is anxious, as it says it is, to ensure that issues are resolved through internal procedures, it could do more to urge its members to recognise and negotiate with independent trade unions. ACAS has asserted that where there is union involvement and union-negotiated procedures, it is much easier to resolve issues internally, and I hope the noble Baroness, Lady Miller, will take note of that. There has been an increase in discrimination cases, perhaps due to the increased number of women in the workforce.

The proposals in this Bill, if passed unamended, will undoubtedly result in fewer cases before employment tribunals. The Government have said that there could be between 20 and 30 per cent fewer cases. and that bothers me. The percentage of vexatious or frivolous cases before ETs has been stated as being as low as 0.2 per cent. That must mean, therefore, that numbers of valid cases simply will not reach tribunals at all.

I shall now deal with the parts of the Bill which I feel could be reconsidered or amended. As I understand it, access to tribunals could in future be denied to an employee who has not complied with the statutory internal procedure or the compensation that he or she receives could be much reduced. That could be very unfair in the case of an individual who is no longer in employment, who has been dismissed or has made allegations of discrimination or harassment. I understand that it is intended that such employees would not have to comply with internal procedures before getting to an ET, but, so far as I can see, that is not on the face of the Bill. Perhaps the Minister will explain to the House how that is to he achieved. Incidentally, as I think my noble friend Lord Borrie mentioned, there is already provision for conciliation by ACAS before cases come before an ET. Frequently nowadays cases are resolved at conciliation. The statutory procedures make no requirement for the employer actually to investigate; nor is there any provision for the employee concerned to be accompanied. Both provisions are desirable in any fair procedure.

Several unions have raised with me what appears to be a reversal of the so-called Polkey judgment of the House of Lords. Under current law if an employer fails to follow appropriate disciplinary procedures before dismissal the dismissal may still be unfair even if the employer had some substantive basis for dismissal. It would appear that Clause 34 reverses that despite the fact that ETs accept that minor procedural lapses by employers do not necessarily cause a dismissal to be unfair. It is felt that a reversal of the Polkey judgment would have the opposite effect from that intended by the Government in that employers will not feel bound to follow internal procedures negotiated with unions.

Then there is the provision in Clause 22 which gives the Secretary of State powers to authorise tribunals to order that one party makes payments to the other in respect of time taken in preparing his or her case. Clearly, employers are much more likely to spend more defending a case than an applicant making it. Employers are likely to have personnel and other senior staff whose time could be costed and claimed as the cost of preparation. The measure also introduces the idea of double recovery as parties could get back their legal costs plus preparation costs. That could be substantial. It will be difficult for ETs to apply such an arrangement in a fair and equitable way and may well serve as a further deterrent to applicants considering taking a case.

A further cause for concern arises from Clause 25. It would appear that the Secretary of State may redesign the form of application to a tribunal. When tribunals were first introduced the idea was that they would be easy of access for people who would often be unrepresented and would therefore try to represent themselves. The form was intended to be simple to complete even for those with language difficulties. I am afraid that if it is left to government departments to draw up forms, they will resemble some of those to which I have objected in the realm of social insurance, or else tax forms which are many pages long and difficult to complete except by the educated and literate. I hope that failure to complete the form appropriately will not be another reason for denying or delaying access to a tribunal.

I turn to Part 4. Clause 43 gives union learning representatives statutory rights in all workplaces where independent trade unions are recognised by their employers for collective bargaining purposes. The unions will have to give the employer notice in writing that the employee is a learning representative of the union. but the measure does not give unions any new collective rights to bargain over training. There appears to have been some employer lobbying against that clause. The noble Baroness, Lady Miller, also expressed her disagreement with it. I believe that she is profoundly mistaken and that the lobbying is also wrong. Everyone now agrees that training and retraining are important. Arranging for employees to have information and encouragement to train is vitally important. The clause provides the basis for a sensible and constructive partnership between employers and recognised trade unions. The Government are to be congratulated on bringing that forward. I hope to persuade the noble Baroness, Lady Miller, of that during the course of discussion on the Bill.

Clause 45 refers to fixed-term work and seeks to implement the EU fixed-term work directive. This seeks to improve the quality of fixed-term working by ensuring equal treatment with comparable permanent workers and preventing abuse arising from the use of successive fixed-term employment contracts or relationships. I understand that draft regulations were issued by the DTI in January and that these are now the subject of consultation.

I have been approached by the Association of University Teachers which is concerned about certain aspects of the clause and the regulations. Generally speaking the AUT welcomes the regulations but points out that the use of fixed-term contracts in higher education has risen to a high level. The draft regulations propose that the maximum duration of FTCs should be four years. The AUT believes that it should he two years and that service prior to implementation of the regulations should be counted. It says that many employees in higher education have suffered years of employment on successive fixed-term contracts and for them to wait another four years after the implementation of the regulations to be able to claim their right to equality of treatment with permanent employees would be unfair. I was surprised to learn that 84,000 workers in higher education are employed on FTCs and that most had accepted an FTC only because contract work was the only form of work that was offered or was available. I hope that the Minister will say that these legitimate concerns will receive attention.

Other issues may well arise during the course of discussion in Committee and there are certainly some areas where I believe that the Bill could be improved by appropriate amendments. However. I welcome the Bill. As I indicated earlier, there is a great deal in it which is thoroughly to be welcomed. I congratulate the Government on introducing it.

5.46 p.m.

Lord Henley

My Lords, I begin by following my noble friend Lady Miller in offering my congratulations to the noble Lord, Lord Sainsbury, on his lucid and clear introduction of this fairly complicated Bill which, as all speakers have pointed out, covers a number of subjects. I am sure that the noble Lord will enjoy this Second Reading more than he did yesterday's debate tilting at windmills in Wales when he seemed to have considerably less support from his own Back Benches, these Benches or, for that matter, any Benches at all.

When my noble friend Lady Miller sat down, the noble Lord, Lord McCarthy, made an intervention to the effect that when this party was in government we regulated a lot. He referred to me as one of the regulating Ministers. I fully accept that we regulated and I fully accept that all governments have to regulate. The question is how much they regulate. I think that even the noble Lord would accept that there has been a great increase in regulation over the past four or five years. The important thing is to get the regulation right and to regulate at the right times.

I give an example from social security. When one has a Bill dealing with a new benefit it is right that there should be regulations in that Bill to allow that new benefit to be increased as time goes by. No one would think it right that those kind of things should be left to primary legislation. However, what is wrong is when the Bill itself merely acts as a framework for the regulation provided by the Secretary of State and it is then left to the Secretary of State to bring forward regulations creating the benefit. The benefit itself should be set out by the legislation but one can leave the increases to the annual uprating and all those processes which are quite right and proper matters for regulation.

Further, as regards the noble Lord's accusations that we over regulated, while we were in office we made great efforts to deregulate. As the noble Lord will remember, within this House we introduced a special committee to look at all delegated powers. While we were in government there was not one recommendation of that deregulation committee that we did not accept in its entirety.

I return to the Bill and the general attitude of the Government to their legislation. I refer to a briefing sent to me by the Engineering Employers' Federation which states: The Bill is largely enabling legislation that provides the Secretary of State with extensive powers to introduce secondary legislation through Regulations or Orders. This approach to legislation inevitably prevents detailed Parliamentary scrutiny of these important areas of new legislation". I agree wholeheartedly with that. That is why I wanted to make the point that one should regulate on some occasions but not on others.

During the passage of the Bill I also look forward very much to the Government tabling further amendments, as I believe they indicated in another place that they might do, in order to put more flesh on to the Bill and to take out some regulations relating to matters which quite properly should be dealt with in primary legislation. No doubt we shall be able to pursue those matters in due course as the Bill passes through Committee and later stages.

I now move on to the subject of paternity leave and associated measures. Perhaps I may refer back to 11 years ago this day when I introduced the Disability Living Allowance and Disability Working Allowance Bill. I believe that the noble Baroness, Lady Turner, took part in that debate. It was precisely 11 years ago today. I remember it well because I was extremely grateful to the noble Lord, Lord Carter—now the Government Chief Whip—who was then acting as social security spokesman for the Opposition. The noble Lord, Lord Carter, and no doubt the noble Baroness, Lady Turner, and others all kept their speeches admirably short. We finished the Second Reading in record time, allowing me to go across the road to St Thomas' where my only daughter was born later that evening. Therefore, as a result of actions by the now Government, I experienced a degree of paternity leave—albeit a very brief period—some 11 years ago.

Having mentioned that, I want to turn to the issue of the introduction of paternity leave. I want to ask why on earth it is being introduced at all. What is the point? Who is clamouring out for it? Who needs it and, if it is needed, why should the leave be for only two weeks? The right reverend Prelate referred to the importance in the brave new world in which we live of fathers being at home learning how to change nappies. I am sure that for many that will take considerably longer than two weeks. He also referred to the vital importance of fathers being with their families. I fully agree with that. But is two weeks right at the beginning of a child's life necessarily the right way of going about this matter? Are there not far more important times in a child's life when some form of paternity leave should be on offer?

I also have considerable concerns that when a benefit such as this is introduced, there is the likelihood that, like Topsy, it will grow and grow. We are told that in this case the benefit will last for only two weeks more or less immediately following the birth of a child. I believe that we can all make a fairly strong prediction that over the years there will be greater and greater pressure to increase the rates and the times, all in the name of equality.

One should also refer, as I believe my noble friend Lady Miller did, to the effect of such a benefit on employers and, in particular, on small employers. We all know that the noble Lord, Lord Sainsbury, has great experience of large employers. We all know that his own family firm is well able to cope with the type of benefit that we have. Whenever a new benefit is introduced, we always hear many large employers or their representatives making the perfectly valid point that any good employer will introduce that benefit anyway and that any good employer can cope with such a benefit.

However, even with the allowance that is to be built in for the small employer—I understand that it is to be 105 per cent compensation—the benefit will not be that easy. Such an employer might easily be able to carry it but, in the event, it may be a key worker who is being lost, perhaps at a bad time. That is not a situation with which any good employer can cope. I suspect that it is far better to leave large employers to introduce the benefit if they so wish or small employers to introduce if they can. Why do we not leave it to the market?

I now turn to the issue of maternity leave. I have no objection to maternity leave. It is right and proper that we make appropriate provision for mothers to take leave at the time of a child's birth. But here we also see a further major increase. We are told that ordinary maternity leave will be increased to 26 weeks followed by an additional 26 weeks of unpaid maternity leave. Employers—again, small employers will find this particularly difficult—will have to keep jobs open in effect for a year, often with the added complexity of finding a replacement who, at the end of that year, may or may not have to be kept on, depending on whether the employee taking maternity leave decides to come back.

Again, when he comes to reply, perhaps the Minister can tell us approximately what proportion of those within his own department or within the department of the noble Lord, Lord Sainsbury, who take maternity leave return to work at the end of that leave. On anecdotal evidence, and certainly in my own experience, not all those who take maternity leave and say that they will return to work do so. It would be interesting to know what evidence the department has of the numbers who do or do not return.

That brings me to the subject of the rebate. I mentioned that I had noted that it was to be repaid for some small employers at 105 per cent. However, I understand that for the vast majority of employers the amount of rebate for both paternity and maternity leave will be only 92 per cent. Surely it should be 100 per cent with, in addition, some compensation for the costs that the employers incur in administering what is essentially a state social security benefit.

I turn to what I believe is Part 4—it may be Part 3— of the Bill concerning tribunal reform and the resolution of disputes. We all know that there has been an extraordinary rise in the number of applications to industrial relations tribunals. I should be grateful if the Minister could confirm the figures that I have; that is, that in the year 2000 there were some 130,000 applications. That represents a 25 per cent increase on the previous year and almost a 300 per cent increase over the past decade. According to CBI estimates, such applications bring an annual cost to business of some £630 million per annum in terms of management and legal and recruitment costs alone. I should be grateful for the Government's comments on the CBI figures as well as confirmation of the other figures.

With that in mind, I am very sympathetic to the Government's desire to reduce this burden and to try to ensure that disputes are resolved at an earlier stage. I noted the Minister's confirmation that more than a third of cases come to tribunals without any earlier in-house attempt to resolve the dispute. But, while I share the Government's aim, I am certainly concerned that the complexity of some of the proposed new arrangements will create only further confusion and uncertainty for employers. For example, a number of workplace issues, such as ill health and redundancy, do not fit neatly into either the proposed grievance or disciplinary statutory procedures. There is also likely to be uncertainty about the inter-relationship between the proposed new statutory procedures and the ACAS code of practice on that subject. As I said, I hope that we can pursue those matters in greater detail in Committee.

I end by saying that much of the Bill—certainly parts of it—is admired in different parts of the House. However, I believe that there is much in the Bill to provide us with a busy Committee stage and, I hope, later, a fairly busy Report stage and Third Reading as we try to add flesh to the Bill. I certainly hope that the Government will be prepared to add a degree of flesh to their own skeleton in due course.

5.58 p.m.

Lord McCarthy

My Lords, I want to make wo preliminary points in order to explain the attitude which my noble friends and I adopt towards this Bill. As my noble friend Lady Turner said, and as she demonstrated in the points that she made, we intend to be constructive in relation to the Bill. We intend to be helpful. You may be awkward; others may be wreckers; but we shall be as constructive as we can.

Secondly, although I do not intend to say much about these matters tonight for obvious reasons, we do not deny that parts of the Bill are excellent. It is not so much a curate's egg; it is more a manky meat sandwich. Parts 1 and 4 are first class, but Parts 2 and 3 leave a great deal to be desired. The Bill goes wrong in the middle.

The Government make no attempt to disguise what they are trying to do, although they appear to be moving away from that a little. It is there in Routes to Resolution. The middle part of the Bill is intended to force a reduction in the number of applications by between 23 per cent and 31 per cent, or by between 30,000 and 40,000 cases. Perhaps the Minister can tell the House whether that is to be achieved in a year, in 18 months, and whether the effect will be cumulative, so that in three or four years' time there might not be any cases at all.

The main objective of Parts 2 and 3 of the Bill is to bring about a significant reduction—about a third—in the number of hearings and, therefore, the number of applications. It is also clear why we must have such a reduction in applications. It is because there has been an unprecedented increase in litigation. The British worker is mad about litigation. He or she wants his or her day in court. Because of the unprecedented rise in litigation there has to be some way of stopping the flood. And the flood will be brought under control by the tough provisions in Parts 2 and 3.

We have four objections to that argument. First, there is no evidence whatever—not one scruffy piece of data—to support a rise in the propensity to litigate. Secondly, we can explain, with good reasons, the increase in hearings and the increase in applications that have taken place, for example, since 1990. There are good explanations for the rise. Moreover, applications will continue whether this Bill is enacted or not. They are inevitable. I shall say why that is the case in a moment, but it has nothing to do with an increased propensity for litigation. This Bill directs itself at the wrong objective.

Thirdly, the detail of the Bill, on which more will he said in Committee, will actually generate hearings and applications. That is what Judge Prophet said. In sc. far as it will have an impact, the Bill will add to disputes rather than reduce them. Fourthly, it will put the heaviest burden on the weakest, unsupported applicants.

I shall deal first in detail with the fact that there has been a 300 per cent increase in the number of applications since the early 1990s. In relation to what has been claimed from the Benches opposite, it is important to realise that there is nothing unusual about that. In some years, the figure falls: in some years, it rises. But it is swings and roundabouts. In the long term, there is a more or less steady rise in applications.

The reason the Government felt justified in introducing barriers to access was not the rise in the number of applications over the past 20 or 30 years but the fact that they have taken on board the argument that there has been a rapid increase in the propensity to litigate and that they have as evidence for that the survey, Findings from the 1998 Survey of Employment Tribunal Applications. I make it clear to the House that the survey has not yet been published. The report has not been professionally proof read. Last week, as a result of letters and parliamentary Questions, a few copies were placed in the Library of this House, but it is not available to the press and it has not been published. However, parts of it have been selectively quoted by Ministers. That is the problem.

For example, in Routes to Resolution, it is said: There is worrying evidence that employees are increasingly resorting to litigation to sort out work-based disputes". It is then claimed that, 64 per cent of applications to employment tribunals come from employees who have not attempted to resolve the problem directly with their employer in the first instance". But those words are not in the survey. To this day, we do not know where they came from. The survey poses the quite different question of.

whether or not there had been a meeting to try to resolve the dispute before the application was made". That is in the survey. I am quite sure that that is what the Minister now uses, but to this day where the mysterious business about going directly, not going past go and not collecting £200 came from, we do not know. Perhaps the Minister will tell the House.

Over the past few days I have noticed that the Government do not like the figure of 64 per cent—they make it 62 per cent—and now they have changed it to 37 per cent. The noble Lord, Lord Wedderburn, in an intervention to a Question that I asked a week or so ago, talked about the 62 per cent and the 64 per cent. On 5th February the Minister did not refer to 62 per cent or to 64 per cent, although it was actually 60 per cent as far as the applicants were concerned. He said that what was, absolutely clear was that in 37 per cent"— it has now gone down to 37 per cent— of cases there was no communication whatever". But noble Lords will not find that in the survey either. I do not say that there was an intention to mislead the House, but they never read the survey. That is not what the survey says. What the survey says is that in 37 per cent of cases the question asked was whether there was a meeting to resolve the dispute.

When one considers that question, one can see that any applicant could believe that there was a meeting but that it was not to resolve the dispute. The applicant could have thought that the meeting made matters worse. The employer could have refused to have a meeting. We cannot use such evidence—particularly when it is 37 per cent—as an indication of a rise in the propensity to litigate.

I do not apologise for making this point. But the Government should have advisers who tell them such matters. A trend cannot be taken from a single survey. After three or four surveys over a period of 10 or 15 years, one can then say that the figure is rising or decreasing. We do not know what people would have said if that question had been asked in the previous two surveys. So we have no trend.

However, we have some trends that can be used to see what is happening. For example, if there had been a move away from the use of conciliation so that the proportion of disputes settled by conciliation had fallen and the number of people who pressed themselves forward for a hearing had gone up—if it was 50:50 and not two-thirds—we could say that there was an increase in the propensity to litigate. But there is no sign of that.

Lord Wedderburn of Charlton

My Lords, on the contrary.

Lord McCarthy

On the contrary, as my noble friend says. If there had been an increase in frivolous cases, in vexatious cases, and it was not 0.4 per cent, but 5 per cent, 10 per cent or 15 per cent, we could say, "Ah, they are bringing bad cases, they are litigating more and more and they are getting worked up". There is no change whatever. One could say that more cases were being lost and that thousands of cases are being brought, but they keep losing them because they like their day in court, but the contrary is the case. In so far as there is a trend, they are winning more cases, which may be one of the reasons why the CBI is so exercised.

So there is no evidence of an increased propensity to litigate. It follows that there is no justification for an attempt to turn down the capacity of tribunals by at least a third over an immeasurable period of time.

I turn to the second case against the Bill. There is a considerable volume of respectable research, much of it paid for by the department, and much of it published since the survey and contradicting the survey. The survey was, of course, years and years in the wilderness. People carried out this telephone survey about four years ago. Somehow it never got published. Even now Ministers have not read it.

But Burgess, Propper and Wilson published a survey entitled, Explaining the growth in the number of applications to industrial tribunals 1972–1997. That survey covered a much longer period. It had a trend, of course. I think that my noble friend Lady Turner was referring to some of the evidence in that survey. I do not want to repeat that evidence because the House will know about it now. The weakness of the survey was that it did not really weight the various causes; it simply listed them.

My opinion is that there are two main reasons for the rate of increase over the past 25 years. The first is the increase in jurisdiction. Even when the Conservatives were in office, they could not stop having to implement all kinds of EU directives. Therefore, the jurisdiction and numbers of the tribunals went up. One can put a very close line between the spread of jurisdictions and the waxing and waning of tribunal cases. That is the fundamental relationship. Of course we shall get a lot more in the next few years or so when further directives come in.

The second reason is in some ways far more significant, because we can do something about it. It is the collapse of an alternative means of independently deciding a case. At the moment, outside small parts of the public sector there is no alternative for a worker to the employer's last word other than going to a tribunal. There is nothing else. The overwhelming majority of disputes procedures have no independent element. One has to take what the employer says. Even if one thinks that the employer is not giving one one's legal rights, one has nowhere to go except to a tribunal. That is the result of the collapse of collective bargaining and the decline in trade union organisation.

When I came into the business, large parts of the private sector had systems of arbitration, mediation and independent assessment which gave male manual workers, for the most part, some form of independent assessment which did mean that in the end they did not have to take the employer's last offer. But the only alternative now to the employer's last offer is to go to the tribunal.

While that remains the case, unless one can find a way of giving workers an alternative to the employer's offer without going to a tribunal, the number of cases will continue to increase. Of course one could make the way in which one restricts access to the tribunals absolutely lethal, but I do not suggest that the Bill does that.

So I come to my third argument. That is with regard to the statutory procedure. I should say that I am not against a statutory procedure. I think that it is a knacky little wheeze, but it depends what it says. The statutory procedure that we have, and the way that it is written in this Bill adds to the issues in dispute. We shall go into this matter much more in Committee. Judge Prophet is most persuasive on the issue. But then the TUC, the Law Society and Judge Prophet make the same argument. In writing to the Minister, Judge Prophet said: The Tribunal would be forced into considering whether or not internal strategy procedures have been completed. If not why not? And further forced into a straitjacket of having to find an automatic unfair dismissal when that is not based on a just assessment of the merits of the case. At every hearing where any right is being considered a formula must be applied, so complicated that even the judiciary who have looked at the clause are uncertain what it reads. Pity the ordinary employee and the small business. Even longer and longer hearings are inevitable". That is the case the way the Bill is framed. We should advance reasoned amendments in Committee to try to change that because it is not inevitable.

I come to my fourth and final argument. It is the possible consequences of Clause 25. The problem with Clause 25 is that it is a pig in a poke. No one knows what the Government will put into Clause 25. This clause enables them to rewrite dear old ET1. There never was a form so sweet, simple and straightforward as ET1. The only thing that one could get wrong was one's date of birth. It is a form which anyone can fill in, as my noble friend Lady Turner said. Compare it to those terrible income tax forms that we have to struggle with or to the social security forms that people have to fill in. ET1 should be preserved in aspic. But it will not be preserved in aspic; it will be rewritten. We have asked but we are not told what will be put into the new ET1. Anything could go in.

I could write such an ETI. I do not suggest that the Minister is going to do so. But no one would apply. It would be elaborate and it would be plausible. One could say, "Well, we are going to have a statutory procedure so of course you have to make sure that this statutory procedure has been complied with". One would not just say, "Have you complied with a statutory procedure?" One would say, "Describe it. Tell me about it." Then one would say, rather like the Conservatives did about the strike clause, that people should know what the penalties were. They should know that they could be fined. Put that all in, and you could write a new ET1 which would cut applications by 50 per cent or more because no one would understand what it required. I would like to know—the Minister can tell me tonight—whether it is the case that ET1 is to be rewritten. The Law Society is very worried. If there is the intention to rewrite it, how will that be done?

The final point I make is that those of us who dislike the meat in the sandwich do not deny that the Government have a problem—the real long-term problem of the perception of rights of work inevitably expanding. All the time people are thinking of new rights at work that they should have. There are all kinds of forces out there in society, not merely in British society but in Europe and elsewhere, which are bringing new worker rights across the agenda.

If we are soon to have protection against discrimination on grounds of sexual orientation, religion, faith, age and so on—all of which I suppor—there will inevitably also be a demand for a rise in the adequacy of the procedures and arrangements for dealing with those rights. That is why it is ridiculous to talk about cutting tribunals down by 30 per cent. We are in it, and it will get bigger. There is only way that one can stop it or reverse it fairly, decently and properly, apart from suddenly reviving the trade union movement so that it can do everything that it did in the past. Even then, it did not do sex very well. It would not have done race very well, and it might not have done gay rights very well, but it was all right on unfair dismissal.

So some legal form of worker rights has to continue. But people must have real rights within a statutory procedure so that they are induced to move into a voluntary system of independent mediation and arbitration which gives them back what they have lost. If the Government are prepared to do that, then this Bill could be a first-class Bill. In Committee and on Report, we hope to offer a more civilised and more practical way out of the Government's problem.

6.19 p.m.

Lord Haskel

My Lords, I certainly agree with what my noble friend the Minister said about productivity. During a recent stay in the United States, I became more aware than ever of how increased productivity leads to increased prosperity for all. What will the Bill do for productivity in British industry? The answer is that no one really knows. As my noble friend the Minister pointed out, productivity does not depend only on industrial relations—letting people go does not improve productivity unless there is investment and change. Restrictive practices at work and restricted employers' rights to hire and fire do riot improve productivity. They probably increase costs and hence reduce wages to cover those costs.

Most people in industry instinctively feel that decent standards at work, a mechanism for resolving disputes, a procedure for airing grievances, protection for employers and employees taking lawful action and family-friendly flexibility at work must make some contribution towards improving productivity. Economists may not be able to measure it but people at work feel it.

That is why the Bill is helpful. It is helpful because it helps industrial relations move with the times. It brings them into line with modern thinking—especially thinking about the balance between work and family life. It reinforces the cultural changes that are taking place—perhaps the new rights of which my noble friend Lord McCarthy spoke. The right reverend Prelate the Bishop of Hereford explained how over the years we have become more aware of the needs of parents when children are born, and the Bill moves with the times in trying to satisfy those needs. Flexibility in hours worked, especially when children are young, is an important aspect of that modern thinking. Chapters 1 and 2 of the Bill acknowledge that.

The Bill also acknowledges that nowadays we understand that it is better to resolve disputes at the workplace than to let them become grievances at an industrial tribunal. The Bill encourages employers to use best practice in resolving disputes and employees not to pursue frivolous cases. Of course, good employers already have much of that good practice in place. A greater problem lies in the insistence by many financial institutions that shareholder value takes priority. Experienced managers balance the interests of staff, shareholders and customers equally. It is inexperienced managers who interpret family-friendly policies as weakness, as diminishing shareholder value, and are thus reluctant to introduce them. The Bill and the guidance in it should help to overcome that.

The Bill introduces union learning representatives. I agree with my noble friend Lady Turner that that must help productivity by addressing the shortage of skills. Surely, no one can object to that as long as it is effective. I welcome the proposed safeguard that the representative must be experienced and knowledgeable about skills, training and continuous professional development.

Of course, there is a lot of detailed provision about the workings of industrial tribunals and discipline and grievance procedures that may well benefit from the knowledge and experience of experts. We can certainly question whether eight weeks is a reasonable time for it to be unlawful to sack workers in the course of a dispute or whether two weeks of paternity leave is reasonable—as the noble Lord, Lord Henley, asked. But such matters are essentially a matter of compromise. No hard and fast rule can be laid down. Of course, there are those who will abuse the system. Industrial relations depend on a modicum of trust, but we cannot legislate for that. What is important is that the Bill recognises that it is wrong and impossible for the Government to impose unreasonable settlements.

That is all very well, but what impact will Bill have on small and medium-sized companies? Does it mean more red tape? After all, as the noble Baroness, Lady Miller, reminded us, small companies have had to absorb the social chapter, the Human Rights Act 1998, all the tax credits introduced by the Chancellor, the Employment Relations Act 1999 and now face the Bill. One can argue that the Bill will act as yet one more disincentive. I do not agree. I see in the Bill not a lot of meaningless regulation but a fair bit of guidance and best practice about what one has to do to be a good employer in a modern business. Most people want to be good employers because that is how they keep their best staff and their business thrives. It probably helps productivity, too.

The Bill provides guidance about what procedures work in modern industrial relations management. Many small companies welcome such guidance because not every employer has the time, expertise or experience to work it all out for himself. So if six months' maternity leave is being family friendly, fair enough. If a woman's skills are so valuable that a business cannot cope with her absence for six months, small company managers will find a way. They are used to wheeling and dealing. They will come to some sort of arrangement with her to come back part time, to do some work from home, or whatever.

Incidentally, it is a welcome gesture from the Government that Clause 21 says that they will pay maternity benefits in advance to small companies. Perhaps my noble friend the Minister can tell me whether that is a precedent and whether we can look forward to other payments in advance to benefit small companies.

Small companies know that it is good practice to have a procedure for resolving disputes. It saves a lot of pointless argument and discussion. I agree with my noble friend Lord Borrie that having to formalise procedure, as the Bill requires, and giving guidance as to what it should provide should be no real burden. Many companies which have not got round to doing that will welcome it. That should avoid disputes and grievances going to an industrial tribunal because of ignorance or omission. Any sensible employer or employee will prefer discussion to the cost of going to industrial tribunal, the stress and the cost of finding and recruiting new staff or of finding a new job. Of course, there is more to come in secondary legislation, but I hope that the government will frame it in the same helpful manner, encouraging progressive, modern management thinking.

My noble friend the Minister spoke about the work of the Advisory, Conciliation and Arbitration Service. The Bill should not diminish the importance of ACAS. It is a valuable resource for resolving disputes and getting people back to work. The real cost to the economy of disputes is not so much the lost time but the lost opportunities and output. So I hope that the Government will not use the Bill as a reason to cut back ACAS. ACAS does a wonderful job for small and medium-sized companies. I agree with the noble Lord, Lord Razzall, that its code of practice is sensible and balanced and acts as a valuable benchmark in disputes.

As my noble friend said, the Bill is an attempt to balance the rights and responsibilities of employers and employees. It tries to move with the times and put the point of balance where contemporary society thinks that it should be. I think that that judgment is fairly accurate; in fact, I think that it veers toward the more progressive side of the balance and I welcome that. The fact that our economic situation is reasonably sound demonstrates that we are moving in the right direction and at about the right speed with progressive employment policies. That is why I welcome the Bill.

6.28 p.m.

Baroness Sharp of Guildford

My Lords, I asked to speak in this debate because I am interested in two fairly narrow aspects of the Bill. The first concerns Clause 43 and the introduction of statutory learning representatives; the second concerns Clause 45 and the issue of fixed-term contracts. As always when speaking in a Second Reading debate in this House, one learns a great deal and I must say that I found the speech of the noble Lord, Lord McCarthy, extremely forceful and shall in future regard the Bill as, as he said, a manky meat sandwich, with the central part revamping employment tribunals being the suspicious part.

However, my real interest lies in those two more specific aspects: first, Clause 43 and the appointment of statutory learning representatives, which set an interesting precedent for the Government. I pick up the point that the noble Lord, Lord Haskel, made: it is about productivity. In his introduction, the Minister made it clear that that was what he was concerned about with regard to the appointment of the representatives. The whole issue of Britain's underlying productivity, the productivity gap and the need to improve workforce training underlies a great deal of the Government's present programme.

I shall remind the House of the wording used in the Pre-Budget Report. I do not know how many noble Lords read it in detail. There was much consideration of the issue of workforce training. Paragraph 3.98 reads: In Budget 2001, the Government also said: 'the current voluntary approach has secured increased participation in workplace training since 1995, but this is not enough—. In paragraph 3.102, it says: Level 2"— that is, the equivalent of five grades A to C at GCSE— is effectively the minimum standard that 19 year-olds are now expected to have acquired. The Government wants those in the adult workforce who, possibly through no fault of their own, have not attained level 2 qualifications to have the opportunity to do so". The following paragraph reads: The Government is already looking at possible fiscal measures to improve UK skills. The PIU set out a range of options to overcome harriers to training, one of which is a statutory right to time off for training and development. The Government is considering this suggestion as one of the possible ways of taking forward the commitment made in Budget 2001 and will carry out a full regulatory impact assessment and wide consultation on the development and implementation of any new policy". The Pre-Budget Report then proposes four specific suggestions as to how the matter might he taken forward. First, there is, financial support for employers whose staff take time off to train". Secondly, there is, free learning provision and accreditation for employees without level 2 qualifications". We saw that in the Learning and Skills Bill, when those aged under 19 were given the right to free tuition up to level 2. There is also reference to, some form of arrangement for individuals to take up training—such as a minimum entitlement for all employees who have not attained basic skills or level 2 qualifications to paid time off each year to train towards the standard". Finally, the report refers to, extended information, guidance and support. for employers and individuals … these could include arrangements along the lines of Union Learning Representatives". So, the Pre-Budget Report went a great deal further than the Bill.

Why have the Government backed off from including in the Bill possible time off for learning. up to level 2? When it exists for statutory learning representatives, why not carry it that bit further? I can immediately hear the noble Baroness, Lady Miller of Hendon, exploding at the idea. She was already somewhat unhappy at the idea of statutory learning representatives and thought that people might abuse that position.

Clearly, there is a genuine problem for small and medium-sized businesses—and other employers—with the potential avalanche of time off that might he given, but the Bill gives us one or two interesting precedents. First, we are already looking at payment for paternity and maternity leave and government compensation for small firms, in particular. Secondly, there might be a way forward by adopting the approach proposed in the Bill towards flexible working time. Should not employees who wish to take time off to study for a relevant level 2 qualification—I stress that level 2 is not high—have the right to ask their employers for such time off, as with the provisions on flexible working time in Clause 47? Employers should have a duty to consider such requests for time off and the right to refuse them if t hey can demonstrate that it would cause positive harm to business.

In their manifesto, the Government also suggested, alongside the commitment to introduce statutory learning representatives, that there should be: a commitment to introduce statutory training levies where agreement was reached between the social partners. A short while ago, we approved the Construction Industry Training Board and the Construction Engineering Industry Training Board orders. At that time, I asked the Minister—the noble Lord, Lord Davies of Oldham, was answering for the Government—what had happened to that commitment. He did not really give me a satisfactory answer.

I recognise that the issue of skills crosses boundaries between departments. It is partly the responsibility of the Department for Education and Skills, as well as of the Department of Trade and Industry. In these days of joined-up government, we need an answer to that question. I reiterate it: what has happened to the commitment? It was a manifesto commitment on the part of the Government, why do we see nothing of it?

The other issue is fixed-term contracts, which have already been mentioned by the noble Baroness, Lady Turner of Camden. Several times, I have spoken about the use of fixed-term contracts in higher education. There are something like 84,000 workers in higher education on fixed-term contracts. That is 42 per cent of the workforce in higher education and over 50 per cent of those working in what are called the pre-1992 universities—our research universities. I know that the noble Lord, Lord Sainsbury of Turville, knows well the problems posed by fixed-term contracts. In 1999, the Bett report highlighted the considerable abuse of such contracts by some in the university sector and especially the degree to which women were found to be disproportionately numerous among those working on fixed-term contracts and on lower pay than other staff.

The European directive that is incorporated in Clause 45 offers us an opportunity to put such poor labour relations in universities behind us. Regulations have been published but, as the noble Baroness, Lady Turner of Camden, said, there are two fields of particular worry to the Association of University Teachers. First, although the regulations ban the use of fixed-term contracts for more than two consecutive spells of two years—four years in all—prior service on fixed-term contracts is not taken into account. Therefore, when the regulations come into effect in 2002, somebody who has already done something like 10 years on a short-term contract will still have to work out another four years. That is not fair. Secondly, as my noble friend Lord Razzall said, we are concerned that certain classes of employment may be exempted and that employers may seek sector specific exclusions on the grounds of what is called objective justifications. On what grounds would such an objective justification for an exclusion be made? Could it be challenged?

I have had a specific interest in the Bill. There are wider implications, and there is much in the Bill relating particularly to maternity and paternity leave, family-friendly policies, flexible working time and fixed-term contracts that I welcome. Having listened to the noble Lord, Lord McCarthy, I now have great doubts about the middle part of the Bill.

6.38 p.m.

Lord Lea of Crondall

My Lords, if any more noble Lords start their speeches by citing John Monks's agreement that the Bill has many positive features, I shall start to feel uneasy about the parallel with Mark Antony's funeral oration: they are "all honourable men".

I begin by accentuating the positive. There are many European influences, including the provisions on paternity leave and pay, adoption leave, improvements in maternity provision and, most recently, the provisions in Part 4 outlawing consecutive fixed-term contracts.

All of those, interestingly, are the consequences of and show the great benefits of social partner agreement. I am glad that those words have escaped the mouth of the noble Baroness, Lady Miller of Hendon. I hope that there will be other occasions when she will make that reference. They reflect a great deal of hard work on such issues as the gender pay gap and flexible working. In my judgment, union training representatives will mark an extremely welcome innovation, even though the noble Baroness, Lady Miller, may think that they could reflect a contradiction in terms.

Rights for fixed term contract workers mark a major reform, combined as they are with parallel rights for part-time workers. These kinds of workers form an increasing proportion of the workforce. If it is the case that the next reform for agency workers has been remarked on by some employers to be a bridge too far, then let me point out that that is what they always say about any reform. However, as a result, in the future, some employers may well wish to employ people on a regular basis, not on a fixed-term contract, a short-term or part-time basis or on an agency basis. They may wish to employ people on a proper, regular basis, which is all to the good. Indeed, a short visit to a pub these days is all that is needed to overhear someone saying, "I think that, for the first time, I am going to get a regular job in the construction industry. I am to have four weeks' paid holiday". Millions of workers have never had such rights. The reforms mark one of the incoming tides of history to which my noble friend Lord McCarthy eloquently referred.

I turn to a more general point about employment rights. Either Jung or Freud—I do not know which said that work is central to people's lives, both men and women. That is true of the membership of this House. Over the past 40 years, the tribunal system has considerably enhanced the quality of working life. It has de facto enhanced the quality of contracts of employment, a point to which my noble friend Lady Turner of Camden has attested.

We have to calibrate these points, as it were, but it is true to say that some of the recent increase in tribunal activity has been due to a reduction in the base of collective bargaining, a point made by my noble friend Lord McCarthy. It would be a logical desire on the part of Her Majesty's Government to reverse that process. I hope that it will be a moral that my noble friend on the Front Bench will underline.

The introduction of pro rata rights for so-called atypical workers—who have started to become rather less atypical and more typical—has marked a major reform under the Social Chapter which was and remains a very popular part of Labour's 1997 election manifesto. I recall vividly that it was also popular in the preceding campaign for the European elections. "Vote for the Social Chapter" proved to be a popular slogan.

Perhaps I may turn to the aspect of the Bill which has generated the most discussion; namely, the default procedure for dispute and grievance resolution. Those noble Lords with a background in the trade union movement—we should declare our interests; I do so all the time—believe that the extension of rights to which I have referred will create a larger workload for employment tribunals. Many of these new rights are to he accorded to workers who have not previously enjoyed them. As a result, and as a consequence of European legislation under the Single European Act signed by the noble Baroness, Lady Thatcher, and under the Social Chapter, we shall see an increase in the workload. I mention this because I hope that my noble friend on the Front Bench will comment on it. Whatever the percentage, such cases will not be of the kind often characterised as the modern "rush to litigation" or the rush to statutory procedures on the ground that individuals have suddenly become more litigious. Perhaps my noble friend will confirm that that is a point which may properly be made.

My noble friend Lady Turner also drew attention to a point to which I attach the greatest importance and believe is the main strategic question. Those of us with experience of industrial relations would, I believe, all agree on one thing: that if procedures could be satisfactorily agreed within a company or place of employment, settled there and the procedure taken forward and then finished on a basis agreed by both sides as the finishing point, that would require joint ownership of the procedures and thus fewer cases would be taken to tribunals. That is logical and correct. But that does not arise and is quite different from the scenario where an additional hurdle has been placed in front of issues going there, because it is quite different in terms of confidence in and the credibility of the procedure. I was very pleased to hear my noble friend Lord McCarthy make that crucial a nd fundamental distinction.

It is in this respect that some of us feel that the Bill has not got it quite right. I want to put forward a suggestion as to how to improve the sense of engagement of the workforce with the default procedure in the Bill as and when it is translated into action in the workplace. I suggest that if the criterion is that the procedure has to win the confidence of all those concerned, that will mean that, through the voice of their representatives—and they will have to invent some if they do not have them; how otherwise can they respond?—the workers will agree that they can settle matters through the internal procedure. The question I wish to put to my noble friend on the Front Bench is this: is that what the Government want? I think that they do want that, but I should like to hear it confirmed. Do they wish to see a procedure which will be capable of settling many matters in the workplace?

If the answer is in the affirmative, what will be conducive to achieving that? After all, we already have it in firms which recognise trade unions. Indeed, it is almost a definition of trade union recognition that there is a procedure agreement covering individual grievances, properly negotiated, just as is the case with regard to substantive terms such as pay, holidays, hours and pension arrangements. So the Bill sets out a benchmark procedure which in all cases will apply as a floor. Leaving aside whether trade union agreements are in place, what about the other 50 per cent or so of cases where the default procedure will be freestanding? Exactly how will it be introduced?

The role of ACAS has been cited, and rightly so, in a number of contributions made both here and. in the other place. What will be the relationship between the ACAS code and the default procedure set out in the Bill? I think that the Government intend to ask ACAS to revise the code in due course in order to ensure that it recognises the new statutory procedures. But there is a danger of best practice being driven out by the minimum terms. I do not say that; it is a point which has been forcefully made in today's briefing from the Industrial Society. I shall quote one paragraph: The Bill's dispute resolution provisions will undermine ACAS. The ACAS Code of Practice on Discipline and Grievance is widely adhered to and respected, but we fear that the lesser procedures in the Bill will instead become the norm amongst employers. The Minister's statement at Commons Committee stage, that ACAS will be asked to produce a new, in effect, lower level code, is shocking. Admitting it will be necessary as a result of the Bill is an admission that the procedure requirements are being downgraded". We need, as a minimum, to consider strengthening the Bill to provide for workplace consultation on the application of the default procedure, in the circumstances of each individual workplace. It should be made available in draft form to the entire workforce and an opportunity given to submit any feedback within, say, one month. Employees could then agree a reaction even if the trade union is riot recognised, which—to cheer up the noble Baroness, Lady Miller—is in the spirit of the information and consultation provisions agreed by the Council of Ministers and the European Parliament. If agreement is reached. that is fine. That is the trade-off. There is no way around it, quick fix or short cut.

One issue of practical application is the sense in which a grievance has been properly investigated—rungs one and two of the individual's right to a voice. There will be much greater acceptance of the procedure's validity if that feedback is taken into account from the start. If, for example, feedback included the request for every issue to be investigated at a certain level, that would lead to a more acceptable result. That also ties in with the right of a worker to be accompanied in a grievance by a legally qualified person, lay union representative or something in between. That also links to the need to retain the word "hearing" from the 1999 Act in place of "meeting", to avoid ambiguity in tribunals on the right to be accompanied. On that point, will my noble friend make a statement that would be seen in the courts as definitive?

On the Polkey principle, and despite the slight adjustment made in the other place, I will quote not the TUC but today's briefing from the Industrial Society, which advocates removing Clause 34(2)(2): This Clause provides that a dismissal will not be unfair for the reason only that a procedure has not been followed. It is inconsistent with strengthening the adherence to procedures and reverses the House of Lords decision in Polkey v. AE Dayton Services 1988. HR managers have told us that it will be even more difficult to persuade managers to follow a procedure if they think they can get away with it by arguing that the employee would have been dismissed anyway. Nor is it clear when Polkey will not apply nor the weight of the burden of proof. If this is to be left to the tribunals, then it can only result in more claims to clarify the uncertainty. Clause 34(2)(2) should be removed altogether. Failing that, it should be altered so as to limit its effect to the 100 per cent contribution cases—where the employee gets no compensation: Delete: 'if he shows that he would have decided to dismiss the employee if he had followed the procedure'. Insert: 'if he shows that the fairness of the dismissal was not affected by his failure to follow the procedure.'". I will mention some of the other questions that I shall be raising so that my noble friend the Minister can consider where some of us are coming from before the Committee stage.

One area of concern is the new power to award costs in relation to the time and resources committed by the parties in preparing a case. We must avoid the problem of double recovery. If we are to achieve a level playing field, we should not include a whole army of employer representatives ticking up costs, which would scare off the applicant if only on the issue of costs. Employers' costs are much easier to quantify, as they are likely to have human resources directors and other senior staff whose time and salary can be taken into account. I draw attention also to the opposition of the Law Society to Clause 28, which gives tribunals powers to strike out cases at preliminary hearings, before any evidence is heard.

Irreversible trends in society create a demand for the exercise of rights. Unlike King Canute, we ought to recognise those trends.

6.54 p.m.

Lord Wedderburn of Charlton

My Lords, I congratulate my right honourable friends and my noble friends on bringing forward proposals in the Bill on family-friendly leave, equal pay questionnaires, which is a most important issue, and the implementation, albeit the rather inadequate implementation, of the directive on fixed-term work. I say that not because the fixed-term work directive is European. I never understand why just legislation cannot be passed by this Parliament, leaving aside the problems of the European Parliament, to which my noble friend referred.

I congratulate my right honourable friends and my noble friends also on the important provisions for union learning representatives. The Conservative Opposition in another place, in a rare Division in Committee, voted against statutory rights for learning representatives in Part 4. They see that as some sort of promotion of the emergence or infiltration, as the noble Baroness, Lady Miller, said, of a gang of Jacobins coming through the tunnel, with whom an employer might one day be forced to discuss training and further education for workers.

Those are all prudent and admirable provisions but I have a large number of doubts about others. I add my voice in support of the noble Lord, Lord Davies of Coity. The provisions for low-paid workers to which he referred are quite inadequate and must be looked at again. I share the doubts of some noble friends, the Law Society, the Industrial Society, the TUC and a number of trade unions, in respect of Parts 2 and 3 and the crucial Schedule 2, which has been widely sensed as the price of acceptance by employer organisations of the Bill's welcome features.

Some of us will want to test Parts 2 and 3 in Committee, which unhappily will not take place in this Chamber, not least because those parts were not tested in another place. The Government's objective, as stated in their response to consultation, is, an estimated reduction of between 30,000 or 40,000 applications compared with current levels". Those are not vexatious or unreasonable applications, of which 247 were penalised last year. Forty thousand cases must go.

The Government's overall objective is to settle industrial problems and grievances at the level of the workplace, without litigation. No one with any sense of adequate industrial relations could oppose that objective but the key issue is how that should be done fairly and sensibly. Small employers should be compelled to have grievance procedures but that reform should have been enacted years ago. Should that aim be pursued by attempting, as the Bill does, to ban workers even from applying to tribunals and penalising those who dare to apply contrary to new and unfair conditions? The Bill's method of restricting access to justice must be unjustified, unless it can be shown that workers are abusing access to enforce their rights and that the conditions imposed are fair. The case has not been proved on either limb.

Since the publication of the surveys that I shall mention later, the case has become more tenuous. I have never believed that employment tribunals and litigation should be or can be a substitute for proper negotiation in the workplace and a strong trade union movement to represent work people. But the provision of a backstop legal process in the form of tribunals for individual grievances had become, one thought, a bipartisan policy since 1970. It is now central to the culture of our working life. It was not possible for another place to debate the proposed restrictions on workers' access to justice, even though some probing amendments were eventually tabled. The information was not available, so Members of another place had not read it—like the Opposition. I understand that the noble Baroness has not seen the SETA survey which is in the Library. She will correct me if I am wrong. Secondly, the Government's guillotine fell upon the few amendments that were put down on Report. In the light of those two features, the responsibility of this House is to look again at Parts 2 and 3 of the Bill.

Since September 2001, my noble friend Lord McCarthy and I have asked for discovery and publication of two full reports—first, the Survey of Employment Tribunals, or SETA, and, secondly, the Awareness of Employment Tribunal Rights survey carried out slightly before it. Both were available to the department early in 2001. Last Monday, in the depths of the Recess—and it gives me no pleasure to say this, but it is not a day when facts should be obscured—the SETA report was deposited in the Library of the House. The "awareness report", as I shall call it, was, I understand, deposited at five o'clock on Friday. That is not the way in which policy should be made.

Little snippets from these reports were quoted again and again in another place, but no one could refer to them to see whether the quotes were correct. I add my voice to that of my noble friend Lord McCarthy in saying that not even what has now been published shows that the Government's figures are right or even sustainable. Indeed, a social scientist in higher education who used the statistics as they have been given would really have to reconsider his position.

I turn now to my objections to Parts 2 and 3 of the Bill. I appreciate that the Opposition are making some play of this, but I am not sure that they have much standing to do so in view of their record. My first objection is to the wide regulation power in the Bill. There is far more than is needed to meet the stated objectives and assurances given by my honourable friend the Minister in another place.

My second objection is to the unfair and uncertain set of conditions which will operate as implied terms and will be imposed on all workers employed under the 25 million contracts of employment in the land, banning them from applying to tribunals or penalising them for doing so under new admissibility criteria—even when they have been treated illegally by an employer—unless certain unreasonable conditions are completed. The unreasonable conditions are contained, of course, in Schedule 2, to which so many people have now objected.

I pause to say that anyone familiar with tribunal work knows very well that disputes about whether these conditions have been fulfilled may well increase by thousands in pre-hearing reviews, if people get the opportunity. The president of the Employment Tribunals Service, who, contrary to the letter distributed to Members of the House from the Minister in another place, has maintained full consultation with the Secretary of State and Ministers on this matter, said that these conditions are, frankly absurd and will be a nightmare to administer". These unfair provisions respond to years of pressure by the CBI, the chambers of commerce, the Federation of Small Businesses and the Institute of Directors. There is no supportable reason for this change of policy—it is a radical change of policy—icon the Government's part.

As to the first objection—the width of the regulation-making power for secondary legislation—I must admit that I rather expected my noble friend the Minister to introduce these parts of the Bill with a spirited rendering of "I'm Henery the Eighth I am" because so many clauses give the Secretary of State power to interpret them. In the new Clause 33, which was inserted at the last moment in another place, there is a provision that it will not be the courts which will decide whether there has been compliance with the new unreasonable conditions but the Secretary of State. He will say whether there has been compliance with the provisions set out in the Bill.

I leave it there because that leads on to Committee points and I want to restrict myself today to Second Reading points. But they are points that must be put on the record at this stage. We shall certainly press the Government to be rather more exact and to give the Bill—which is at the moment, in many ways, a skeleton—a rather more respectable physiognomy and add some flesh to the bones.

I repeat, the Bill's method of promoting workplace settlement by means of restricting access to justice can be justified only if it can be shown that workers are abusing access to justice in the tribunals. That is the key issue. That is why the Minister in another place constantly referred to these figures.

In 1968, the Donovan report—which is a better starting point than Franks—made quite clear the principles which were to be observed, not only in this country but in many European countries. Tribunals must be easy to access, cheap, not subject to the usual regime of costs and sensibly run—that is, informal. Unhappily, the Bill threatens a host of those principles.

It threatens a new cost regime—we do not quite know what—even though the Leggatt report said that nothing should be changed until more research was done. It proposes new awards for management's estimated "preparation" time—a proposal obscure in its terms which we shall have to amend. This is an opening which will clearly be used to intimidate workers with a good case who want to take action against illegal management acts, making them fearful of approaching the tribunal. Imagine if your case had crossed the desk of the noble Lord, Lord Simpson, at Marconi, and you were told that you had to pay for his preparation time. That would cost you a pretty penny. This provision must be looked at.

The provision in the Bill to abolish the principle adopted by the courts—the Polkey rule—that employers must observe all relevant contractual procedures before the dismissal of a worker could be fair must be jettisoned.

Of all things, the Bill aims to cut down the duties of conciliation officers from ACAS. Why? As my noble friend said, conciliation has increased faster than applications. The Bill will impose new rules whereby a worker with a good prima facie case will never even get to a tribunal or could be penalised for doing so. Most of the new rules are based on the statutory grievance and discipline procedures in Schedule 2 and are implied in every contract in the land. They are unfair and not, as the TUC wanted and made clear, based on the more fair procedures of the ACAS code, which is not perfect but is obviously more fair. Indeed, the ACAS code will not survive. It was made clear by the Minister in another place that it will have to be rewritten after this Bill.

It is admirable that the Bill will compel small employers to adopt grievance and disciplinary procedures, but the new rules are not even handed. They give the employer the last word in every dispute; they do not even require investigation before a dismissal; and they tell a worker who is thrown out of the works, told to clear his desk and go, that he must come back and use the procedure. It is a fantasy land. I agree with my noble friend—I doubt whether the Bill will save 40,000 cases. But the Government are determined on this matter; otherwise they would not include it in the Bill.

How did this sorry story come about? It is necessary to say a word about how this has happened because it is so unlikely, especially for my Government. How did it come about? We know that the CBI and employers' organisations have been grumbling since 1980 about the cost to business of workers enforcing their individual rights at work. They complain of the cost of tribunals enforcing workers' rights. They spent years demanding more law in industrial relations and now they have it they do not like it being enforced. A right which is not enforceable is an exercise in frustrated rhetoric. It is not surprising that the claim about costs does not take account of the justification of the claims.

Let us be clear. British employers are not alone. The French employers' organisation, MEDEF, has now launched a campaign to cut down the jurisdiction of the Conseils de Prud'hommes in France and the Italian employers have convinced the Berlusconi government to accept demands to slash employment protection rights. It is a fairly general phenomenon. Yet research shows that of the applications made in this country, those that succeed at a hearing have remained at a fairly steady rate since 1988. I thank the Minister who not only sent me by post a copy of the SETA survey, which saved me half a day, but also for sending me in the middle of this debate a reply to a Parliamentary Question which shows that since 1986 the proportion of successful applications has scarcely varied. Indeed, it increased again last year.

So where are the indefensible demands by applications to tribunals launched in a frenzy of litigious fever? As my noble friend has said, they do not exist. Employees' applications for remedies in the employment tribunals have been steadily increasing for two decades. Of course, one can gain a percentage increase according to where one starts. The Government are right that between 1990 and 2000 the number has tripled, but if one starts in 1990 and goes to 1996, the figure is multiplied by 2.5. If one considers the years from 1996 to 2001, the increase is by a factor of 1.3. There has been no marked recent increase.

Here I depart slightly from my noble friend Lord McCarthy. The research by Dr Earnshaw and her colleagues in 1998 and by Dr Burgess and his colleagues published shortly thereafter, have given us five factors which are the reason for the steady increase in applications to tribunals and which the Government actually recognise in one of their documents. The five factors are these. First, discrimination cases increasing related to increasing female participation in the workforce. Secondly, unfair dismissal cases increasing because of growing employment in small enterprises, where there are inadequate or no procedures. Thirdly, redundancy cases related to the decline in manufacturing employment. Fourthly, cases related to the decline in trade union membership. Fifthly, the steady extension in the jurisdictions of the tribunals over the years. That is important.

But in 2001, the leading scholars in the subject, Professors Deakin and Morris, concluded: The perception that the system is being abused by unmeritorious applicants is based on anecdote rather than research". They knew very well what the research said. Why did the Government change it? Why did they begin by saying 64 per cent, which was subsequently revised to 62 per cent on a reworking of the data lost or unavailable for a long period? The Government said: Sixty four per cent of applications to the employment tribunals come from employees who have not attempted to solve the problem with their employer directly in the first instance". One should read the SETA document which I see that my noble friends on the Front Bench have been doing assiduously throughout the debate. They will not find it there because that is not what it says. We have been able to study this document for eight days in the Recess, but it is not there. It states: When combined, these findings suggest that, in 62 per cent of cases, the applicant did not meet with the employers to try to resolve the dispute. These findings have to be interpreted with some care". In some cases, contact may have been made in writing or by telephone. In other instances a representative might have intervened on the applicant's behalf. Alternatively, the grievance may have only arisen after the employment relationship had been terminated, when the applicant did not have access to the use of an internal procedure. Alternatively again, the applicant may have felt the internal procedure was not a suitable mechanism. We all know of those cases, which are cases of sexual and racial harassment and so forth, where the applicant would have to approach the same manager.

But the Minister in Committee in the other place— this is crucial to the issue—returned again and again, like a dog with a bone, to the evils of the 62 per cent and 64 per cent of applicants who had done nothing to try to solve the dispute. Noble Lords may wish to refer the reports of 11th December and 18th December and to many other parts of the proceedings. But suddenly, after the Bill had been published and long after the new policy on access to justice had been formulated, the Minister suddenly produced another figure. He said, In 37 per cent of applications there was no attempt to resolve the problem before the application was made". Even on what we knew then, that seemed very strange because the Government themselves had quoted from the Awareness Survey: Around 7 per cent of people who have experienced problems (with employers) did not seek advice or make contact with their employer to resolve the problem—The remaining 93 per cent of employees who had experienced a problem said that they had tried to resolve the problem". For the convenience of my noble friends on the Front Bench, that is from page two of the background paper.

There appears to be something very odd about the ministerial arithmetic: 37 per cent had not tried to resolve the problem, but 93 per cent had. That was enough to make one search the published evidence, when it was made available, and to look very carefully at what was said at page 24, where three sets of questions and answers are combined. My noble friend on the Front Bench shakes his head, but if he looks at that page he will find—

Lord McIntosh of Haringey

My Lords, I was not shaking my head as the noble Lord, Lord Wedderburn, believes. I was shaking my head al the suggestion from the Opposition Front Bench that the noble Lord's speech was too long.

Lord Wedderburn of Charlton

My Lords, I am sorry if the Opposition or anyone else believes that my speech is too long to set out the facts. These are not Committee points. I use Second Reading for Second Reading points. Noble Lords will find on page 24 of the report that three sets of questions and answers are combined uniquely in the report, without there being a table giving the individual questions and answers. That is unique.

The re-worked answers are combined to show that no attempt to try to resolve the dispute took place between the parties. What do the researchers say? They do not say that the employees failed to try to resolve the dispute, but that: This is probably the most comprehensive indicator of lack of dialogue available from the data". I agree that there is a lack of dialogue. Small employers should be made to have procedures. But that is no reason whatever to impose a prohibition on access to justice to a worker who is told by his employer, "Clear your desk. I am not having a meeting with you".

That case falls within the statistics. Yet it is on the misinterpretation of these two re-worked statistics that public policy has been reversed. Access to justice will be denied to workers if the Bill goes through. I beg the Government to think seriously about what we shall press for in Committee and on Report—that Parts 2 and 3 of the Bill must be revised and reconstructed. I beg the Government to think again and give us a Bill all parts of which we can support.

7.20 p.m.

Lord Moynihan

My Lords, I have a number of substantive points on the Bill that I should like to make. I should also like to make a few general points about employment legislation. However, I should, first, declare my interests, which are threefold: I am both an employee/employer with Consort Resources Ltd, and a parent. Therefore, the changes proposed in the Bill will affect me on all three counts.

The Government have said that the aim of the legislation is to, deliver a balanced package of support for working parents, at the same time as reducing red tape for employers and making it easier to settle disputes in the workplace". It is against that bench-mark, as the noble Lord, Lord, McCarthy, rightly implied, that the Bill must be judged. On a practical day-to-day level we have come a long way since I studied McCarthy texts in detail and the days of belligerent industrial relations. Yet today there are still two interests and often two agendas at stake.

On this day-to-day level, as we know, the interests of employers and those of employees do not always coincide. When it comes to employment legislation, a fine line must be negotiated between them to achieve best practice results. This line is the difference between what must be enforced by regulation and what is best left to a voluntary approach, though accept that that is a hard one to tread. Sensible measures to raise standards in the workplace are always welcome. While governments can have a role to play in that respect, it must be remembered when drafting legislation that there is a very strong link between good employment relations and success in the market-place. After all, productivity depends on employers and employees working together in an effective partnership. Regulation is rarely the best way to achieve that partnership.

The Bill before us is no exception. From the effective reversal of the Polkey decision to the right for parents to request flexible working, it is a delicately balanced package. The stakes are high, especially for a Bill whose impact will be felt at the same time as the cold shadow of darkening economic skies. A harsher climate is facing British businesses today. Get it wrong, ignore the gloomier economic forecast, allow the sharp edge of Britain's competitiveness to be blunted and not only employer and employee, but every British citizen, will be the loser. Get it right and we will have equipped our workforce—employer and employee alike—with the tools to ride out economic downturns.

Businesses are increasingly concerned about the growth and complexity of new employment rights and about the rise of what has been termed "the compensation culture". In that context, regulation does carry a health warning with it, and that is particularly so with over-prescriptive regulation. That is why I advocate a light touch approach, working with the grain of existing best practice, regulating where unavoidable and taking particular account of the needs of small firms. All of those measures are necessary.

That is the context in which I have considered Part 1 of the Bill, which concerns statutory leave and pay. I should like to place on record my unreserved support for family-friendly working—a point eloquently summarised by the right reverend Prelate. Family-friendly working practices make sound business sense when it comes to retaining skilled staff. On that basis, I do not believe that they are an optional extra for the majority of employers. A seismic shift has taken place in our society. The workplace has lagged behind; but, like other areas of our national life, it, too, must adapt to the reality of the modern family.

However, in offering that support for the Government for many aspects of Part 1, I hope that I shall not inject too much of a controversial note into today's debate when I raise two reservations that also emerge from this part of the Bill. The first is with regard to ensuring that these measures have the desired effect in improving the position of women in the workplace; and the second is with regard to the effect that they will have on small businesses.

The provisions of the Bill will give mothers a choice on how to combine their work and family responsibilities. It will allow them to fulfil their role as parents without compromising their role as employees, and vice versa. Any measure that increases the supply of skilled workers by making it easier for women to return to work should be welcome. However, it is very important that this provision does not backfire and have the negative and unlooked-for effect of discriminating against the very group that it is intended to help. I hope to explore that point further during detailed discussion in Committee.

In particular, small businesses will find it difficult to comply with the Bill's provisions. It will be genuinely difficult for some of them to keep jobs open for up a year and to train temporary staff, with no guarantee that their employees will return. I must emphasise that I am not arguing against these measures in the Bill, but I believe that employment legislation must, above all, be realistic and not idealistic.

I take further the points made during this debate on small businesses. I believe that it is important to acknowledge that the Bill's provisions affecting small businesses are not cost free. That does not mean that those costs are not worth paying; and, indeed, that the long-term gains from them will not benefit society far more than the short-term costs. However, all regulations in the workplace impose costs, both direct and indirect, on employers, other employees and society as a whole. It does not mean that regulation is wrong, but it means that choices and priorities will sometimes have to be made. Businesses are not infinite shock absorbers. They can only absorb so much in the way of cost burdens.

At this point in my remarks it is sensible to say a few words about flexible working, although, as we know, this proposal appears later in the Bill. In principle, I support the moves to implement the recommendations of the Work and Parents Taskforce, so that parents of young children are given the right to ask for serious consideration of flexible working arrangements. Employers will have a duty to find a solution, wherever possible, that suits both the worker and the business.

Clause 47 was originally tabled under a schedule of "minor and consequential amendments" in another place. However, there is nothing minor about it. It is perhaps one of the most significant clauses in the entire Bill. As has been pointed out, the drafting of this new clause has caused concern. Some of the language in it is very odd, and that is a matter that must be addressed in Committee.

I should also like to make a few comments on Parts 2 and 3 of the Bill, especially with regard to employment tribunal reform and dispute resolution. There has been a general welcome for the measure to modernise the employment tribunal system, particularly outside the Chamber and this evening's debate, and to encourage dispute resolution in the workplace through dialogue rather than litigation. I, too, share that welcome. There is no doubt that it is a step forward for employees to use internal grievance procedures to resolve disputes in the workplace without going to tribunals. Any measures that help to deter trivial or vexatious applications are both necessary and desirable.

I have a number of major reservations about Part 4 of the Bill. The clause to place trade union learning representatives on a statutory footing, which the CBI has called a "step in the wrong direction", falls into that category. The idea of increasing the amount of training in the workplace is a good one, but the mandatory requirement imposed by the Bill for employers to recognise and provide time off to an unlimited number of union learning representatives, without having any say in their appointment or selection, is not. Indeed, although the proposal could have benefits, which I certainly recognise, compulsion sends all the wrong signals. The point about compulsion should be at the centre of our debates. Learning representatives will add value only when they work in partnership with employers. Compulsion is only likely to add to costs.

The proposals on fixed-term working are also an area of concern. Here I should like to echo the words of the noble Baronesses, Lady Turner of Camden and Lady Sharp. They will have far-reaching implications for university teachers, given the endemic use of FTCs in higher education. It is clear from this evening's debate that we shall be returning to that point in Committee. I welcome that clear consequence demonstrated by the speeches that focused on the issue.

However, the Bill will also give fixed-term employees equivalent rights, including rights involving pay and pensions, which were not covered by the original EU directive on which this part of the Bill is based. As my noble friend Lady Miller mentioned, there was considerable debate in Committee in another place on this "gold-plating"—to use her words—of the EU directive. Moreover, these regulations can be brought in at a later date. The point about introducing the regulations at a later date by statutory instrument causes me concern. It means that they are unlikely to be subjected to widespread debate or consultation.

In that context, does the Minister accept the CBI's belief that the introduction of pensions under the fixed term regulations will be extremely complex and costly to administer? How will the proposed new rights for employees on fixed term contracts be implemented in a way that imposes minimal burdens on businesses?

Finally, I want to refer briefly to the use of information for or relating to employment and training, which is dealt with in Clause 50 and in Schedule 6. This raises some important issues of confidentiality—even perhaps of human rights—which I should like to flag now as matters to be raised in Committee. I should like to know whether such confidential information will be shared with the private sector contractors who do the work. If it is not, they will have no way of validating the assessment by the Department for Work and Pensions of how much money is owed to them. If that is the case, anyone who has contact with the department will have to accept that their earnings patterns thereafter will become something of an open hook. I understand the underlying need for the provision, but I consider it to be a drastic step and one which smacks of a Big Brother state tracking private citizens as a result of engaging with the Department for Work and Pensions or one of its contractors.

The Bill was described earlier as a "curate's egg"—good in parts, and I agree with that assessment. It is a well-intentioned Bill. Although its individual parts may not appear to impose an onerous load, taken as a whole its cumulative effect will be to add to the burden of new regulatory compliance, administrative obligations and organisational flexibility.

Moreover—this is a key point—the Bill depends greatly on enabling secondary legislation for its effect. As has been mentioned, again eloquently, before us we have a skeleton the bare bones of which have yet to be fleshed out. Such leap in the dark legislation only contributes to my concerns.

At the beginning of my remarks, I made it clear that employmenl legislation must tread a very fine line. The Bill is in danger of crossing that line. I do not believe that it does so yet, but any further concessions risk destabilising the employer-employee relationship, to no one's advantage and at the expense of our economy as a whole.

7.32 p.m.

Lord Gladwin of Clee

My Lords, at this time of night when you are the last man in, you become aware of two things. One is that most of the things that you want to say have been said. The other is that the Chamber is usually peopled by Members who have already made their speeches and are anxious to hear the Minister's reply and get on with the next business. I have been crossing out large chunks of my remarks so I shall detain the House for only a few moments.

I declare an interest. I was formerly an official of the GMB trade union and spent 30 years infiltrating British industry—in most cases, I must say to the noble Baroness, Lady Miller, at the invitation of the employer. My experience which is more germane to this debate is that I have been a member of two employment tribunals and am currently a member of the Employment Appeals Tribunal—which experience brings me directly to those parts of the Bill that give me and many others cause for concern.

I firmly believe that all employers should have in place a fair procedure for resolving disputes in the workplace. Unfortunately, as the Minister in another place remarked, there are 600,000 workplaces where no such procedure exists. That is why I welcome the proposal in the Bill to require employers to adopt such procedures. However, these statutory requirements are skeletal—a word used by a number of speakers.

Frankly, if the Government wanted to increase the number of workers covered by in-house grievance and disciplinary procedures, all they had to do was to make the ACAS code of practice the statutory requirement. The Minister in another place said that the jump from having no grievance and disciplinary procedure to being legally required to observe the provisions of the ACAS code of practice would be too much for many small employers. If that represents some of the pressure being exerted on the department, why not do it in a staged way, according to the number of employees—requiring the large employers to apply the ACAS code immediately, which most follow anyway, but allowing smaller and medium-sized employers to follow suit at a later date?

We have considerable experience of staged legislation being introduced in order that employers can catch up with the requirements. That proposal was suggested in debate in the other place. Perhaps I may be forgiven if I am wrong, but I believe it was supported by the leading spokesman for the Conservative Opposition, Mr Philip Hammond, and also by members of the Labour Party. The suggestion was turned down by my honourable friend Alan Johnson—but not in a very convincing way. Noble Lords have only to read the Committee stage proceedings to see the point I am making.

The problem with the proposals in the Bill are, as I have said, skeletal. For example, there is no requirement for an employer to carry out a proper investigation before proceeding to discipline or dismiss an employee. Such a procedure would in itself be unfair. Another example is the absence of any reference to the right of a worker with a grievance or of a worker facing possible disciplinary action by the employer to be accompanied at the meetings referred to in the statutory procedure. The third example is the use of the word "meeting" in the three-step procedure. The final stage is an appeal and should, therefore, be described as a "hearing". That is a point to which we shall return in Committee. The details of the interpretations of the clauses will, as I understand it be set out in regulations, but the three examples I have given are important omissions which should he remedied and set out on the face of the Bill.

I have two further concerns on which I should welcome comments from my noble friend. The first relates to cases of alleged gross misconduct where the employer can use the modified procedure set out in Schedule 2 to the Bill. But again there is no requirement for an investigation before dismissal. In these circumstances the sacked worker is appealing from outside the workplace. In my experience that rarely, if ever, leads to reinstatement if the appeal is successful. My worry is that some rogue employers will see the modified procedure as a way of sacking people and thinking afterwards; and that we shall see an increase in unfair dismissal claims coming before tribunals.

At this point I must declare a further interest. I am a member of the council of Public Concern at Work. My final concern is the impact of the Bill, particularly Clause 30, on the Public Interest Disclosure Act 1998. The noble Lord, Lord Borrie, referred to the issue, and I shall not repeat his remarks. However, I ask the Minister for an assurance that there will be no conflict between the statutory procedures for dispute resolution set out in the Bill and the safeguards for whistle-blowers in the Public Interest Disclosure Act.

7.39 p.m.

Lord Sharman

My Lords, in the spirit of the noble Lord, Lord Gladwin, I shall endeavour not to detain your Lordships too long in winding up. It is difficult to disagree with the stated objectives behind the Bill. Patricia Hewitt, Secretary of State for Trade and Industry, said that the Government's priority was, to deliver a high-skill, high-productivity economy". She went on to say: Productivity is not about working people into the ground; it is about skilled people in high-performance workplaces, where employers and employees work together in an effective partnership".—[Official Report, Commons, 27/11/01; col. 864.] The question is whether the Bill takes us down the road towards achieving that stated objective, with which, as I have said, it is difficult to disagree.

I welcome in particular the family-friendly provisions in Part I. It is generally accepted that the modern British economy faces some potential longterm problems of increasing the supply of skilled and unskilled workers. Much of that supply will have to come from older workers who have retired prematurely or from women, who traditionally have taken long and often involuntary absences from employment. Any provisions, such as maternity or paternity rights, that make it more comfortable for women to return to work should be welcomed and encouraged, as long as they are properly balanced. The provisions in Part 1 go a long way towards achieving that objective.

However, as the Law Society's commentary on the Bill says, the Bill is a wasted opportunity to clarify the existing problems of definitions in maternity provisions, such as the right to accrue holiday entitlements under the Working Time Regulations during periods of statutory leave, or the haphazard and unfair treatment of bonus payments". Those problems of definition will now be replicated in paternity and adoption situations, when the Bill could have provided clarity across the board. I ask the Minister to consider introducing amendments in Committee to clear up some of those problems.

As the noble Baroness, Lady Turner, rightly said, that brings us to the end of what could have been a nice separate Bill, which I am sure that my party would have worked diligently to help the Government pass through this House at record speed. However, we then come to what the noble Lord, Lord McCarthy, referred to as the "manky meat"—Part 2 on tribunal reform. Why the provisions have been introduced in this Bill at this time is puzzling at best and incomprehensible at worst, when the Leggatt report is sitting on the table. I am not a lawyer, but I understand that the report applies to all tribunals, with the stated aim of simplifying their processes. Why could we not wait until some of that was implemented?

Secondly, as my noble friend Lord Razzall remarked, we have an Employment Tribunal System Taskforce which is also studying the problem. Why not wait until it has reported? I shall not go on about the problem of tribunal reform. Many people who are much better equipped to comment on those provisions have done so. However, it seems to me that the provisions will not achieve what is stated in the priorities. They will not make things better between employers and employees. I entirely endorse the contention that any procedure that requires the filling in of a form—even a simple form—immediately puts people in the hands of lawyers and the legal process. I have grave reservations about that.

Part 3 deals with dispute resolution. The noble Lords, Lord Lea and Lord Razzall, have referred to the grave concern expressed by the Industrial Society that the process of ACAS will be undermined by the procedures. My party has some significant reservations about Schedule 2. The absence of any requirement for employers to investigate before decisions are taken is incomprehensible. Good management would always want to find out the facts. An overall requirement that any hearing should be conducted fairly would be an added benefit.

I can think of some genuine reasons why employers might have to dismiss employees without a hearing. In such circumstances, they should not be penalised. However, the provisions as drafted might well encourage employers to dismiss employees for gross misconduct even if it is not appropriate. We shall need to look at that carefully in Committee.

Clauses 33 and 34, which deal with the failure of applicants and employers to follow procedures. need fundamental re-examination. In both cases they may well achieve the opposite of what is intended.

We then come to Part 4, on which my noble friend Lord Razzall has already expressed our concern that the flexible arrangements envisaged in Clause 45 should apply to all workers, including agency workers and others. We shall need to look at that in some depth.

Finally, 1 repeat my party's opposition to Clause 49. Dr Vincent Cable, the Liberal Democrat spokesman on trade and industry in another place, said on Second Reading: the provisions are not only inappropriate, but extremely reactionary… The clause will mean that, in future, the partners of disabled people in receipt of a variety of disability benefits will be required to submit to the work test. If they fail that test, as currently defined, benefit sanctions will ensue. That worries us deeply, because there is no evidence that the process will encourage disabled people's partners to work. However, there is a lot of evidence to suggest that many such partners, although they are not being paid, are working, in the sense that they are carers. Driving those people into work would be inhuman in some cases, and enormously costly to the state, which would have to fulfil the caring responsibilities".—[Official Report, Commons, 27/11/01; cols. 886–87.] I am not sure whether the Bill is a curate's egg or a manky meat sandwich, but I am sure that we have enough to get our teeth into in Committee.

7.49 p.m.

Lord Rotherwick

My Lords, I declare an interest in that I run a small business and also own and manage office accommodation that is home to a number of small firms. Oxfordshire is one of the most successful counties for small businesses in Great Britain. I also declare that my wife and I have a 15 month-old baby. I am not sure that I would like to be thought of as a new father with nappy-changing abilities, as the right reverend Prelate the Bishop of Hereford said, but over the past 15 months I have become only too aware of the importance of paternity leave and the challenges that parenthood imposes on a husband and wife.

I therefore consider the Bill with a balanced mind, both as husband to a mother who is a key worker in an IT industry and requires maternity leave to nurture a newly born child and as an employer concerned about the Bill's impact. I should also say that I hope that a few noble Lords will agree with me that it is disappointing to see that the Bill does not deal with the paternity leave of Whips in your Lordships' House.

As the noble Lord, Lord Razzall, said, this is a mishmash of a Bill that has a number of aims, some of which we can accept, some of which we have reservations about and some of which we cannot accept. My honourable friend in another place, Mr Hammond, said: It is largely an empty box—a skeleton of primary legislation—the full impact and effect of which we shall not be able to judge until we see the regulations that should accompany it".—[Official Report, Commons, 27/11/01; col. 921] My noble friend Lord Moynihan also alluded to that point.

It should also be said, on a brighter note, that the accompanying Explanatory Notes are exemplary in their clarity. Sadly, they will have no impact on interpretation of the Bill once it becomes law.

We hope that when the Bill becomes law, our businesses, especially small businesses, do not lose too much of their competitiveness in relation to their world competitors. Undoubtedly some groups, including the trade unions, would wish the Bill to go further. Employers may be anxious to give less away. Trade unions have done much good, but businesses must be competitive to continue to employ and expand. We must not go back to the old days of the state continually being required to hail out failing businesses that have become uncompetitive due to had work practices.

As my noble friend Lady Miller said, the Government state that the Bill's aim is to, deliver a balanced package of support for working parents, at the same time as reducing red tape for employers and making it easier to settle disputes in the work place". Those are admirable aims. However, no matter how worthy the Government's aims in reducing red tape, their rhetoric does not reflect their action.

It may be of interest to the noble Lord, Lord McCarthy, to hear that there has been a torrent of legislation in this area. Indeed, there have been more than 3,856 new directives this year alone—the highest number ever. It must come as no surprise to the Government that—although the move was popular, as the noble Lord, Lord Lea, said—since they signed up to the social chapter, Britain has fallen from ninth to 19th in the world competitiveness league. More worryingly, our productivity growth has gone from being above the G7 average to below it.

We should always remember that small businesses comprise 99 per cent of all businesses in this country, employ 44 per cent of the private sector workforce and generate 37 per cent of the output. They also create almost all new jobs in the economy. If British industry is to live successfully in an ever-changing economic environment, there must be a cessation of the indirect costs on business that the Government have created in successive waves of regulation. Those regulations impose both direct and indirect costs on business. We may not have gone as far as some of the countries in the European Union in creating disincentives to job creation, but it is important that we strike a fine balance between employees' rights and a loss of competitiveness in Britain's firms.

As a Fellow of the Industry and Parliamentary Trust, I have spent a number of days with BAE Systems. In those days I have become more aware than ever before of the importance to a firm of being able to recruit, train and retain skilled workers. Employees tend to be dedicated to the firm they work for not only because they enjoy the working environment and the challenges of the workplace, but because the firm recognises the employee's requirements to have a fulfilling family life as well. Families that have time to nurture their children give their children a good start in life and offer them the best chance of growing up to be contributors to society.

It is clear that the proposed extension of rights to paid and unpaid leave for maternity, paternity and adoption will increase the opportunity for families to create a caring and secure environment for children. The higher rates of statutory pay and longer periods of entitlement will help employees who are fortunate enough to benefit. Time will tell, however, whether the legislation has over-egged the pudding and whether in times of economic downturn firms will find these rights to be the straw that breaks the camel's back.

Professor George Bain—who is much quoted by Labour Members in another place, and also by the noble Lord, Lord Sainsbury—said that, very often it is a case of employee versus employee because one person's flexible working is quite often someone else's inflexible working". Last November, we saw a high-profile tribunal case in which WPC Michelle Chew of Avon and Somerset Police was refused permission to work the same days each week so that she could take her children to nursery school. Avon and Somerset Police said that all officers had to work varied shifts, while critics believe that special treatment would lead to a backlash against working mothers by men and childless couples. The tribunal ruled that the force had breached the Sex Discrimination Act 1975. One should obviously consider the effects of giving benefits to one section of society that might have negative implications for another section of society. Why should one section of society shoulder the burdens created by the flexibility requirements of another section of society?

We are glad to be able to welcome the Bill's other main strand—proposals to improve disputes, resolutions and tribunal procedures. It must be right to have as much clarity as possible in this sphere, thus one hopes improving the number of disputes resolved in the workplace. Can the Minister tell us whether ACAS will receive further resources to ensure that it can provide a more comprehensive and more effective service?

As my noble friends Lady Miller and Lord Moynihan outlined in their speeches, in Part 4 the Government propose to impose on employers a requirement to recognise and provide time off to unlimited numbers of union learning representatives without giving them any say in their selection or appointment. Like my noble friends, I am concerned about this part of the Bill. One wonders whether it is simply a pay-off to the Government's union paymasters. Although we believe that union learning representatives can play a valuable role in the workplace, it is respect for them by their employers that will make their roles worth while.

We accept the Bill's broad objectives, which are most well intentioned. Taken individually, the objectives may not seem to constitute an unacceptable burden. However, given all the other new burdens of regulatory compliance, administrative obligation and organisational inflexibility that the Government have imposed, we must take the utmost care in placing further burdens on our businesses. We should also put the debate in context. The Government's proposals are being presented after three successive quarters of manufacturing recession, and businesses across all sectors are reeling under the seemingly unstoppable flow of new regulation. At a time when the global economy is heading towards a sharp downturn and jobs are being lost at an accelerating rate across the UK, we must ask whether this is the time to impose new burdens which will make Britain's economy less competitive.

8 p.m.

Lord McIntosh of Haringey

My Lords, perhaps I may take the analogy of my noble friend Lord Lea of Crondall and say that I do not believe I have heard so many Mark Anthonys in the course of an afternoon and evening in any debate in this House before. I rather liked the formulation of my noble friend Lord McCarthy, which he did not quite finish. He is not in his place! I have pages of reply I am not supposed to give.

Lord Razzall

My Lords, perhaps I may suggest that the Minister omit those pages of reply.

Lord McIntosh of Haringey

My Lords, I am supposed to omit them.

Lord Wedderburn of Charlton

My Lords, if my noble friend will allow me to intervene, I understand that my noble friend Lord McCarthy was urgently summoned by Hansard.

Lord McIntosh of Haringey

My Lords, I am not criticising him in any way. I see he is back in his place and that has added five minutes to my speech!

I wanted to say that his formulation was rather apposite and which I can paraphrase as being: I engage in constructive criticism; you are critical and he is a wrecker. There were not quite any wreckers here, or at least not in the open. So it becomes particularly complicated to respond to the variety of interesting and well thought-out points that have been made.

Let me start by referring to what the noble Lord, Lord Henley, said in relation to small employers. There was an implied criticism of my noble friend Lord Sainsbury for being a large employer. The noble Lord. Lord Henley, should know that we have divided the work between us. I spent 30 years as a small employer, starting with no employees at all and ending up with only around 35.

Lord Henley

My Lords, if the noble Lord will give way, there was no criticism whatever of the noble Lord, Lord Sainsbury, for having been a large employer in the past. I have every admiration for large employers. I just think that their interests are different from those of small employers.

Lord McIntosh of Haringey

My Lords, they may well be, which is why we have representatives of both kinds of employer on the Government Front Bench on this occasion.

However, leaving the personal qualifications on one side, let me immediately turn to the open criticism expressed particularly by the noble Baroness, Lady Miller, about the ethos of the Bill, which she described as being the ethos of a compensation culture. That is far from the analysis that we make of the Bill.

Baroness Miller of Hendon

My Lords, I thank the noble Lord for giving way. I thought I made it perfectly clear that we welcomed Parts 1, 2 and 3 of the Bill. We had some problems with Part 4. When the noble Lord reads Hansard he will see that I was talking about the number of tribunals. I referred in part to compensation and in part to the shortening of the qualifying period. I did not describe the Bill in that. way at all.

Lord McIntosh of Haringey

My Lords, indeed I accept that entirely. I noted with great pleasure that the noble Baroness was supporting Parts 1, 2 and 3, though not all of her colleagues were quite as favourable to significant parts of the Bill.

The noble Baroness, Lady Miller, asked specifically about the development of the tribunal system. She was worried about the tribunal system being over-loaded and its capacity being increased by the size of the claims. But the median award for unfair dismissal, for example, was only £2,700 in the last full year. When we consider that the average week's pay is £450, the noble Baroness will agree that that is a very low figure. If anybody is tempted to go to a tribunal on the basis of the possibility of large profits, they will be sadly disappointed. I do not believe that that is a significant basis for people going to tribunals.

A number of noble Lords—the noble Lord, Lord Henley, and my noble friend Lord McCarthy from a rather different point of view—commented on the increase in the numbers of tribunal cases and their costs. I can confirm the figures given by the noble Lord, Lord Henley, in relation to the increase and my noble friends Lord Wedderburn and Lord McCarthy spelt them out. But that is not the Government's fundamental concern in putting this legislation forward. That is not the reason why we are doing it. That is not the way in which we understand the increase in tribunals' business and I shall be coming to that point in more detail later.

Lord McCarthy

My Lords, I thank my noble friend for giving way. Can he explain why in Routes to Resolution it says it is?

Lord McIntosh of Haringey

My Lords, I shall spend a good deal of time discussing exactly that matter. I am introducing it only in the context of the burdens on business which was the starting point of the first speeches.

I shall move on immediately—clearly noble Lords are impatient for later parts of my speech—and deal with the family-friendly aspect of the Bill. It is good to say that that achieved wide support from virtually everybody in the House, with the exception of the noble Lord. Lord Henley, who appears to be opposed to the paternity leave provisions. I notice that his opposition is not shared by his own Front Bench and I take some comfort from that.

The right reverend Prelate the Bishop of Hereford made some particularly welcome remarks in relation to paternity and adoption leave. He made an interesting point about the possibility of an extension to extended family adoption. I can see there may be difficulty in the definition of that. But he will know that in November last year the Government announced an examination of civil partnerships—what the French call "pacs". Clearly there are wider implications, not just for the issues covered in this Bill, but also for issues such as benefits and pensions. It is better that that review takes place and he taken into account.

I understand the concern of the right reverend Prelate about both parents working and the consequent effect on family life. But there is considerable misunderstanding on this shared by the noble Baroness, Lady Miller, and the noble Lord, Lord Sharman. Alan Johnson made it clear at Second Reading in another place that there is nothing here which will force anybody into work. When the work focus interviews include partners, they are designed to improve the match between the potential labour force and jobs available. There is no element in the Bill of what the Americans call "work fare".

The noble Baroness, Lady Miller, made a point about the contributions and benefits Act. That is the Social Security Contributions and Benefits Act 1992. It is spelt out in full in the previous clause in the Bill.

My noble friend Lord Davies made some interesting points about the issue of payment during paternity and adoption leave for those earning below the lower earnings limit. He suggested that there should be a percentage of average weekly pay. It is not possible to deal with that problem in the Bill, but we believe that the solution is an amendment to the existing benefits system. We will amend the income support regulations for those entitled to paternity leave but riot to statutory paternity pay. In relation to the problem of speed of settlement, the target for the Benefits Agency is 12 days, though their average is actually better than that.

The noble Lord, Lord Sharman, wanted us to take the opportunity to clear up anomalies in the maternity regulations. The working time regulations apply to all of those situations—maternity leave, paternity leave and adoption leave—and in particular they provide for the accrual of holiday entitlement, which was one of the issues with which he was concerned.

I turn to what is the major area—justifiably so—of controversy in the Bill. I was asked by my noble friends Lord Lea, Lord McCarthy and others whether we want fewer cases going to tribunals. We do. But we do not want that at the price of anybody's individual rights nor at the risk of employees not being able to make valid and reasonable claims. We do not want the reduction because we feel that there is a large number of vexatious claims. The figures are well known on that. Nowhere in the Bill is there a proposal that there should be a denial of the right to go to employment tribunals. We do however think that where possible—I stress the words "where possible"—there should be settlement by agreement. We believe that that is to the benefit of both employers and employees. To that extent I hope that our intentions are the same as those of the noble Lords, Lord Wedderburn, Lord McCarthy, and others who have spoken. But I must emphasise in particular to the noble Lord, Lord Lea, that resolution by agreement in the workplace does not prevent a tribunal claim. He used the phrase "prohibition on access to justice" and the noble Lord, Lord Wedderburn, talked about unmeritorious applicants. Unmeritorious applicants do not, and never have, constituted a significant feature in our thinking. What we want is off-line settlement of as many disputes and claims as possible, as I say, for the benefit of both employers and employees.

There has been—

Lord Lea of Crondall

My Lords, I am sorry to interrupt at this point and I am grateful to my noble friend for giving way. However, when he says that there will be an emphasis on making provision for agreement, will he not reflect that that may well require some amendment to the Bill as it stands at the moment?

Lord McIntosh of Haringey

My Lords, I do not believe so but we shall study with great care any amendments that are tabled, as we do with any subject. I ought now to turn to something which exercises the minds of a number of noble Lords; that is, the evidence on which it is claimed we are putting forward this legislation. The noble Lord, Lord Razzall, said that we had claimed that 62 per cent of cases could have been resolved outside tribunals.

The noble Lords, Lord McCarthy and Lord Wedderburn, both gave considerable expositions of the survey of employment tribunal applications as if that was the fundamental reason and justification put forward by the Government for this legislation. I am a survey researcher by trade and I read the survey with some care. I do not believe that the interpretations which have been put on the survey by noble Lords this afternoon stand up or are justified. Some other interpretations may have been made in public which are not justified, but my noble friend Lord Sainsbury made it clear on 5th February in response to a Starred Question just what that survey does and does not say. The survey is a survey of applicants to employment tribunals. It says nothing, because it knows nothing, about cases which have not gone to industrial tribunals. If I were to make decisions about industrial tribunals, I should want to know about the cases which did not get there. The survey is not adequate for that purpose.

Lord McCarthy

My Lords, will the noble Lord tell me then which survey he is using? He is making policy. He says that the surveys to which we have been given access are not a basis for policy so he must have some other secret surveys that we still do not know about.

Lord McIntosh of Haringey

My Lords, that is a conspiratorial view of history which is not worthy.

I said no such thing. I propose now to say what that survey says. The survey comprised interviews with applicants to employment tribunals, both employees and employers. It asked what happened before the relevant case came before the tribunal. Some 62 per cent said that there had been no meeting. The survey did not say why that was. That question was not asked. As I say, 62 per cent said that there had been no meeting and 37 per cent said that there had been neither a meeting nor a written communication nor any other form of communication between the employee and the employer. That is all it says. It makes no further claim than that.

Lord Wedderburn of Charlton

My Lords, does my noble friend therefore not agree with the proposition—as I take it he does not—that over three in five of the applications to tribunals come from applicants who have not attempted to resolve the problem directly with their employer in the first instance? Those are not my words but those of the Minister in another place who introduced the Bill as a central reason for stopping these applications.

Lord McIntosh of Haringey

My Lords, I challenge the view that it is a central reason for stopping the applications. As regards the word "attempted", I cannot tell from the wording of the survey whether such attempts took place or not. I imagine that in a large number of cases if a meeting had been attempted it would have been achieved, or certainly if written communication had been attempted it would have been achieved. I do not believe that significant numbers are involved in that regard. This is a distinction without a difference. Frankly, the issue of this survey has been taken as far as it can be taken. It has little significance in policy making terms and I do not think that we should spend any more time on it.

Of course, there are all kinds of reasons why there should be no communication between employees and employers. As Judge Prophet said, that could be because some people left employment before they had an opportunity to start any communication. That is a legitimate reason for not entering communication. I am not saying, and the Government are not saying, and have never said, as the noble Lord, Lord Razzall, claimed we had said, that 62 per cent of cases could have been resolved outside tribunals. That is not the case that we are making. We are making the case that communication between employees and employers is greatly lacking and that if we could find ways to encourage communication between employees and employers that would be to the benefit of employees and employers and may also have the effect of influencing the number of cases which come before tribunals.

I turn to a matter where I hope that the noble Lord, Lord McCarthy, and I will be more in agreement. He gave a number of reasons for the increase in tribunal activity, in particular the increase in the jurisdiction of tribunals and the fact that there is no alternative to tribunals with what he described as the collapse of collective bargaining. The noble Lord, Lord Lea, referred to the new rights which employees have which can be put before tribunals. The noble Lord, Lord Lea, also referred to the Deakin and Morris research. All of those are good reasons—which are not and cannot be influenced by this Bill—why there has been an increase in tribunal activity. However, that is not a reason for our failing to do what we can—that is what we are trying to do in the Bill—to achieve ettlement outside tribunals. I believe that any fair and objective judge of this debate will also come to that conclusion. I am not saying—

Lord Wedderburn of Charlton

My Lords, will my noble friend allow me to make a legal point?

Lord McIntosh of Haringey

My Lords, I hope that I may be allowed to finish this point. I am not saying that there are not possibilities of amending the legislation in Committee which may make a difference to its effectiveness. However, I hope that the noble Lords, Lord Wedderburn, Lord McCarthy and Lord Lea, will agree that what we are trying to do is the right thing,

Lord Wedderburn of Charlton

My Lords, I am most grateful for those last few words on which we shall ponder deeply. I interrupted my noble friend only to be quite sure about the position. Does he accept that now still, as the Government accepted in their Routes to Resolution document and in the background paper which preceded it, the five reasons given by Dr Burgess in his research carried out for the department are still the five reasons which basically are the cause of the steady and regular increase of applications to tribunals? I accept that and I am sure that my noble friend should. I hope that he does.

Lord McIntosh of Haringey

My Lords, there are many reasons why there have been increases in applications to the tribunals. I have no doubt that the research of Dr Burgess and the Deakin and Morris research and the Earnshaw research and all of the other research which has been carried out have made positive contributions to that. My point about all of those is that the object of this exercise is not to impose any restrictions on access to justice through the tribunal system. That is the fundamental principle which must be accepted here. We are trying, first, to improve what happens between employees and employers. If we are doing it in the wrong way, I have no doubt that my noble friends Lord Wedderburn and Lord McCarthy will seek to show us how to do it better. We shall listen with respect, as we always do, and we shall seek to come to a proper judgment.

It was also claimed—by the noble Lord, Lord Razzall, in the first instance—that we are jumping the gun with regard to the taskforce. The noble Lord, Lord Sharman, claimed that we are jumping the gun in relation to the Leggatt report. The taskforce simply does not have those terms of reference. It is concerned with the operational efficiency of the tribunal system and, therefore, could not deal with the matters dealt with in the Bill. The Leggatt report—the noble Lord, Lord Sharman, had to wait a year for a response to his own report; therefore he knows what I am talking about—concerns unifying all the tribunals, and it may take a considerable time to come to fruition. I do not believe that he would wish that to happen.

Lord Sharman

My Lords, I thank the Minister for giving way. Is he aware that I have not yet received a reply to my report?

Lord McIntosh of Haringey

My Lords. I saw it a month ago. I am completely astonished. I believed that it came through on a normal public mailing. I apologise to the noble Lord. Certainly a late draft is available and I shall inquire into its status.

I wanted to say a brief word to my noble friend Lord McCarthy about ETI. I believe that he would also wish me to say a word about ET3. We have no objection to the wording of ETI and no particular objection to the wording of ET3. There is no desire to make any of them more complicated. But ETI and ET3 are usually in application at present and we believe that, by prescribing them, we can bring them into use in every case. We consider that to be an advantage. A minor problem in relation to Eli is that it is not available by electronic means, but I am sure that that can be overcome without major difficulty. In any event, the task force is looking at the application form. Thus, a further stage is taking place in relation to that.

I turn now to the issue of ACAS. A number of noble Lords believe that there is somehow a diminution of ACAS's powers, influence and contribution in what is proposed in the Bill. Certainly the statutory three steps do not comprise competition to the ACAS code. They are not intended to do so. They do not replace the ACAS code; they simply provide a bedrock. They provide what can be provided within the context of legislation. Legislation must be considerably more precise, more definitive and more unchallengeable in the courts than a code of practice.

We have the greatest respect for the code of practice but it does contain a very large number of words such as "reasonable" and "normal". We need both the code of practice and the statutory bedrock. There is no intention whatever by either ACAS or the Government to weaken the ACAS code—I say that to my noble friend Lord Lea—or certainly—I say to my noble friend Lord Gladwin—to make the ACAS code statutory. I say to the noble Lord, Lord Rotherwick, that the ACAS funding is not at issue in this Bill. If more funding is required, no doubt that can be discussed.

I shall say a brief word about unfair dismissal. Again, I disagree with those who claim that the Bill brings about a reversal of the Polkey judgment. I disagree with the noble Lords, Lord Razzall and Lord Moynihan, on that point. The "no difference" defence does not guarantee that an employer acted reasonably. Dismissal will still be unfair if an employer behaves unreasonably.

My noble friend Lady Turner raised the valid and interesting point about harassment and violence. She is, of course, right to say that it would be wrong for us to demand a complaint to employers in harassment or violence cases. Those will be dealt with in regulations under Clauses 30, 31 and 33.

My noble friend Lord Borrie brought up the issues raised by Judge Prophet about staying the tribunal rather than changing the penalty. We want these procedural changes to take place before a matter comes to a tribunal rather than when it is at the tribunal. What happens at the tribunal is, indeed, a matter for the taskforce. But the point here is that we are not requiring applicants to take up their grievances first.

The only changes that are being made—I say this to my noble friend Lady Turner in particular—are not a widening in the cost regime in general but changes to particular aspects of paid representatives and case preparation. My honourable friend Alan Johnson made it clear that he will consider a limit on compensation for case preparation if that is necessary. I believe that that should answer the claim in relation to double recovery.

I turn to the issue of gross misconduct and the modified procedures on gross misconduct. My noble friend Lord Gladwin and the noble Lord, Lord Razzall, both want investigation to be carried out before a dismissal takes place. I have had to dismiss people for gross misconduct by saying, "Just go. Get out. Clear your desk and be out in half an hour", because the situation was desperate and staff morale would have been destroyed if I had not done so. But, of course, not all gross misconduct results in instant dismissal. Clearly when it does not, it is desirable and necessary that an investigation takes place.

I believe that I can give my noble friends Lord Borrie and Lord Gladwin the assurances that they want on the matter of public interest disclosure. First, most whistle-blowing, as the Public Interest Disclosure Act provides for, is not in the form of a grievance between an employee and an employer. Nevertheless, the Bill and the accompanying regulations will ensure that there is no conflict with the Public Interest Disclosure Act.

With regard to the issue of "employees" versus "workers", the definitions of both those are in the Employment Rights Act 1996. There is a government review of employment status in process. Meanwhile, we did not consider it advisable to use the concept of "workers" here rather than "employees" as we are, for example, trying to match paternity regulations, which are based on employees, with maternity regulations, which are also based on employees. We should encounter problems if a different definition were used.

With regard to equal pay questionnaires, the issues raised were those of confidentiality. I do not deny that they are significant issues but they are no different from those which have already been raised in race discrimination, sex discrimination and, above all, disability discrimination regulations. I do not believe that there is any new cause for concern.

I was astonished by some of the things that were said from the Opposition Benches about union learning representatives. I believed that we had all agreed that the improvement of skills in the workplace was a priority for improving productivity in this country. The offer of trade unions to participate in that by providing, as they already have done. 3,000 union learning representatives, even when they do not get time off from work, seems to me to be an offer which should not be looked at askance. The Bill only says that the time off should be compulsory; it does not say that trade unions must provide union learning representatives. Of course, none of the employer organisations is unequivocally in favour of the representatives, but nor are the trade unions. This is a perfectly reasonable compromise.

I do not disagree with what was said by the noble Baroness, Lady Sharp, with regard to what is provided for in last year's Pre-Budget Report. Clearly we shall continue to pursue those matters. They were pursued in the November PIU report on training and learning and they were in our election manifesto. We shall not let them drop. The advantage of pursuing them here and now is that consultation was carried out by the Department for Education and Skills in May last year and we have an opportunity to bring the measures into force.

On fixed-term working, it is claimed that we have here gold-plating in the sense that we include pay and pensions. I agree that including pay and pensions is not in the directive, but in doing so we shall not be alone in Europe. Clearly, it is important that we should provide equal treatment for fixed-term employees as is provided for in the directive, not just for those in universities, but also for those in all sectors of employment. I understand the concerns about successive contracts, but surely the most important point is equal treatment. which is provided.

I am sorry that I have broken all the rules, but with interruptions, I have tried to answer questions. I look forward not to a two-sided debate, but a multi-sided debate in Committee and at later stages of the Bill. I commend the Bill to the House.

On Question, Bill read a second time, and committed to a Grand Committee.