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Pollard's book on social welfare law, one sees the problems that large employers currently have, which will be removed.Mr. Spellar : I cannot follow the logic. We are being told that the changes are broadly neutral financially, so industry will not save money. Therefore, using the hon. Gentleman's logic, some companies will create jobs, while other companies will lose jobs. It will not have the effect he says. The real effect may well rest on those who are applying for jobs, especially those middle-aged workers who have been made redundant and who will find it more difficult to get into work because, statistically, they will be seen as a higher risk. That is exactly what has happened in the United States.
Mr. Heald : The provision is better than neutral ; it provides £162 million extra for business, in the sense that its costs will be reduced by that amount. As for the hon. Gentleman's idea that employers do not currently consider the health of the people they take on, it is not true. Every employer already asks employees about their health before taking them on--91 per cent. of workplaces have health schemes for which the insurance companies require them to do so.
It is wrong to suggest that employers will suddenly become conscious of employees' health before taking them on--they already are. However, employers will be far more aware of the health of their existing employees and of those they have taken on, because it is in their direct financial interest to improve health and lower the absentee rate.
Mr. Rowe : As we drive up the training standards on which the future of this country depends, is it not the case that the present balance, which is already in favour of an employer much preferring to keep an employee at work than allowing him to be sick--however much he is likely to be reimbursed--will swing even further in that direction? The more skilled an employee, the more costly it is for him to be away from the business.
Mr. Heald : I am grateful to my hon. Friend for making that point, with which I wholly agree. The average training cost nowadays for someone in manufacturing industry is about £25,000, so £400 for four weeks' statutory sick pay pales into insignificance.
I was about to read from D. W. Pollard's handy guide to social welfare law to give a flavour of the regulations. It states : "There will be repaid by the Secretary of State or by the Commissioners of Inland Revenue on behalf of the Secretary of State to an employer the amount, or part thereof, prescribed in D. 1560, provided that the employer has requested the Secretary of State in writing to do so and that the Secretary of State is satisfied that either :
(i) after the employer had deducted all or part of the amount he or she was entitled to deduct by virtue of D. 1556, the amount of primary and secondary Class 1 national insurance contributions he or she is required to pay is insufficient to enable him or her to deduct therefrom all or part of the amount he or she"--
Mr. Malcolm Wicks (Croydon, North-West) : Regulations are intriguing but, for the sake of history, will the hon. Gentleman tell the House which Government published this regulation?
Mr. Heald : Clearly, these regulations were published by this Conservative Government, but, if there is to be a
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reimbursement scheme--something for which Labour Members seemed to be arguing barely a moment ago--one must have regulations of this type, because that is the only way to administer the scheme. The Government's view--rightly--is that, if the employers of 85 per cent. of the working population are taken out of the scheme, one can save a huge amount in administrative costs for the Government, the taxpayer and employers.The hon. Member for Garscadden also appeared to think so, because, during the debate on the money resolution, he said :
"It would not be unreasonable to expect a reduction in staff responsibilities, so why do we require the money resolution? After all, there will not be the substantial--I am sure that it must be substantial-- administrative coming and going and expense which is at present the consequence of paying the 80 per cent. of sick pay reclaimed by the majority of employers. Clearly, that must involve a great deal of paperwork. It must involve the monitoring, processing and satisfying of claims. If all that is to be swept away, that is a big plus which presumably would result in a reduction in the administration expenses for which the Minister is responsible."-- [Official Report, 14 December 1993 ; Vol. 234, c. 791.]
[Interruption.] I can hear the hon. Gentleman saying that I have taken his comments out of context, but it is clear that there are savings to be made, and that they could be considerable for the public purse and for large employers.
My second point is that employers need to have the lowest possible costs, so that they can compete. Large employers are for ever saying that to the Select Committee on Employment, of which I am a member, as are the Institute of Directors, and the Confederation of British Industry and various other bodies, but they cannot have it both ways. They cannot ask the Government to remove the burdens and regulations but, when the Government have done so, complain because they would like not only cuts in national insurance but not to have to bear any of the costs. The measure will therefore bring considerable benefits to large employers, and I have already dealt with small employers. On the question of the sickness and health of the work force, there are lessons to be learned from the experience of the London boroughs which were outlined earlier. It was possible for the level of sickness and absenteeism to be reduced from 17 per cent. to 14 per cent. in a relatively short period, merely by improving management practice.
If one can introduce financial incentives, as the Bill would, one can make considerable inroads into the problem and make Britain one of the best countries in terms of absenteeism, rather than one of the worst. I am led to think that because, apart from the statistical evidence provided by the London boroughs, there is the obvious thought that, if there is money in it for the employer, the scheme is likely to work.
A woman came to my surgery recently to complain that her employer was putting pressure on her to remain off sick because he had a downturn at work and welcomed the fact that the state was paying for what amounted to a lay-off. She said that the same was true for three or four other employees in the same company near my constituency.
Mr. Spellar : Is that the upturn?
Mr. Heald : I hear the criticism.
I was lucky because it turned out that she was not one of my constituents, so I was not put in an embarrassing situation with a constituency company-- the company involved was just over the border. The lesson, however, is that it may not simply be a question of someone swinging
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the lead, as my hon. Friend the Member for Northampton, North (Mr. Marlow) suggested ; some employers may to some extent have connived in creating a higher level of absenteeism than is strictly right. I welcome the Bill, because it will help industry and jobs, and that is why I shall vote for Second Reading tonight.7.17 pm
Ms Liz Lynne (Rochdale) : I am delighted to be called, because the debate offers me the opportunity to raise many of my fears, especially those for people with disabilities, those with long-term health problems and ex-mental health patients.
Many of the measures in the Bill will debar many such people from obtaining work. Many employers will clearly not want to employ someone who has a bad sickness record and, by the very nature of their problems, people with disabilities often have to take time off work. I stress that that is not true of all people with disabilities, because some do not need to take time off. However, others do, and I believe that they will be strongly disadvantaged.
We have been led to believe that national insurance contributions were supposed to provide money for people when they were unemployed or sick. People have been paying into the scheme for years, but they now find that they are not getting the benefits that they have paid for from the Government.
Mr. Heald : Is the hon. Lady aware that it is not a contributory scheme?
Ms Lynne : Yes, I am well aware of that. The hon. Gentleman may wish to speak later, although he has already had the opportunity to make a speech. He did not make his points very well, so I do not think that it is worth while his intervening on someone else. It is just another example of the games that Conservative Members have played in the past few days. In the Budget, the increase in national contributions was 1 per cent., and a person earning £18,000 a year will have to pay an extra £150 a year. At the same time, the Government are dismantling the advantages of the welfare state. That is despicable-- [Interruption.] Conservative Members may laugh, but people in their constituencies will not be laughing quite so much. The Government are reneging on their side of the deal. It was a swift and deadly Budget, in which unemployment benefit was reduced to six months and statutory sick pay for many has been abolished. The Government attempted to compensate for statutory sick pay by reducing employers' national insurance contributions by 0.2 per cent. for large firms and by 1 per cent. for small firms. How do the Government know how many people will be off sick? How have they calculated that? Do they have a hot line to Russell Grant, or some other astrologer? Are they employing him to tell them how many people will be off sick and for how long?
The Government are saying that the Bill will compensate people, and that the compensation will be adequate. I do not think it will be. The Government have made an assumption that the decrease in employers' national insurance contributions will offset the bill for statutory sick pay. That is ludicrous ; it will not. It is not only Opposition Members who believe that, but small firms and larger companies.
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For example, the Federation of Small Businesses stated that, for "well-managed companies with low sickness rates, there will be a reduction in the cost of employing people."That is possible, but what about the people who, through no fault of their own, are employed by not so well-managed companies?
Mr. Andrew Hargreaves (Birmingham, Hall Green) : Will the hon. Lady give way?
People employed by not so well-managed companies will suffer ; they will not receive sickness pay, or they will lose their jobs when companies can no longer afford to employ them.
The Chancellor of the Exchequer claims to be a friend of small businesses, and has said that they will benefit from the Bill. Small businesses with a national insurance contributions bill of less than £20,000 will receive state paid statutory sick pay if an employee is off work for more than four weeks. That is an inadequate measure. Many employees are certainly not off for more than four weeks, in which case the employer has to pick up the entire bill.
The owners of small businesses are extremely worried about these measures, and fear that they will cause them severe financial difficulty. For example, if a company with a work force of eight or 10 people has two workers, 25 per cent. of its work force, off sick for up to four weeks, how will it be able to afford to bring in temporary staff if it does not receive statutory sick pay? It will not, and in those circumstances it will be forced to close. The Government say that the compensation is high enough. I have had a communication from a company called Goldwood (Moulton) Ltd., which employs 15 people. Last year, its national insurance contributions were £11,449.59 ; it got back £114, but it paid out £580.20. The true cost to the company will be £464.16 extra.
Mr. Lilley : How much will the company save on NI contributions--or was that included in the hon. Lady's figures?
Ms Lynne : The true cost will be £464.16. I will be pleased to let the Secretary of State see the communication after the debate, if he wishes.
Mr. Lilley : Does that take account of the reductions in national insurance contributions?
Mr. Deputy Speaker (Mr. Michael Morris) : Order. If the hon. Lady is giving way, she should sit down. If she is not, the Secretary of State should not stand up. Is the hon. Lady giving way?
Ms Lynne : No, I have already given way once. I will give the figures to the Secretary of State after the debate, and if he cares to contact the firm, he is at liberty to do so. It will tell him far better than I of the problems that small businesses up and down the country are facing.
Mr. Richard Spring (Bury St. Edmunds) : Will the hon. Lady give way?
Ms Lynne : No, I will not give way. I am fed up with Conservative Members trying to score party political points, as they did last night when they disrupted the
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business of the House and prevented many hon. Members from taking part in the Consolidated Fund Bill debate. I am not prepared to give way to Conservative Members.Big businesses have also voiced concerns. IBM is looking into the measures, and has said :
"We will suffer more from a decision to stop reimbursing sick pay than we will benefit from the reduction in national insurance contributions."
It fears that it will have to cut back on perks such as generous occupational pensions.
If IBM, one of the best run and economically sound companies, is contemplating such moves, even with its 0.2 per cent. reduction, the mind boggles about what other companies will do to cope. They are already reeling from the recession that has been caused by this Government's policies.
The Bill will have a prejudicial effect on the work force and society. Many employers are bound to ask about the sickness records of people looking for work, and about how much time they have had off work. If they have had too much time off work, they will not be employed. These measures will have a devastating effect on people with disabilities. Already, 40 per cent. of disabled people are out of work, and the Bill will ensure that that figure will increase. This is no way to run an economy. In addition to wasting the talents of many thousands of people, the Bill will increase the social security bill by putting people out of work and making them dependent on the state. The Bill is not a radical attempt to reform the welfare state ; it is intended to dig the Government out of the PSBR hole that they have dug for themselves.
7.28 pm
Dr. Robert Spink (Castle Point) : I welcome clause 1, because it encourages British industry and commerce to become more effective, improve unit labour costs and become more competitive. The Bill is cost-neutral, as was its predecessor, the Statutory Sickness Payment Act 1991, and contains broadly compensating reductions in employers' national insurance contributions.
The most significant financial impact of the Bill will be to encourage employers and employees alike to reduce sickness absence and improve working conditions. That will reduce the direct cost of absenteeism, and, more significantly, reduce the indirect costs of sickness absence.
Let me explain that for the benefit of the hon. Member for Glasgow, Garscadden (Mr. Dewar). Hon. Members who know British industry will understand that the negative impact of sickness absence is not only lost productivity and the cost of sickness pay for the absent worker. Of equal, or even greater, importance is the disruptive impact on the balanced production line, on delayed and duplicated administrative work, and the learning curve effects.
The disruption impact--the secondary impact on efficiency--is of great financial consequence, greater even than the direct cost of sickness absenteeism. Unlike other forms of absenteeism, sickness absence cannot be planned. Its impact affects the whole organisation, inhibiting the effective achievement of the organisation's objectives, whatever they may be, and drives up the costs to the organisation out of all proportion to the direct costs of the statutory sick pay. The latest sickness absence statistics are very telling. According to the labour force survey on absenteeism, 170
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million working days are lost each year to the United Kingdom economy as a whole : that represents 3.8 per cent. of total working time, and an average of eight days per employee per year. As we have already heard, the duration of sickness absence is typically very low ; some 40 per cent. of absentees are absent for fewer than four days.Internationally, we perform very badly : we have the second highest absenteeism rate in the European Community. I had thought that we were under-performed only by the Netherlands. Our rate of sickness absence is about half as high again as that of the United States of America. That is not acceptable ; it is draining our competitiveness, and acting as a permanent leech on our economy. It is therefore right and proper for the Government to make a change that will focus employers and employees on the need to reduce unnecessary sickness. The CBI states :
"incentives to reduce the costs of sickness absence are not necessary in the private sector where lost productivity provides sufficient incentive."
Members of the CBI are reverists if they really believe that there is no room for improvement in sickness absence rates.
Ms Angela Eagle (Wallasey) : Did the hon. Gentleman read what the CBI said about the Bill in The Independent on Sunday :
"It would impose costs on the employers which would be partly hidden and would damage competitiveness"?
Dr. Spink : According to a briefing that I received from the CBI today, it supports the Bill. I shall make that material available to the hon. Lady immediately after my speech. The CBI cannot really believe that there is no unnecessary sickness absence in this country ; it knows there is.
There are interesting differences in sickness absence in the United Kingdom economy, which serve to highlight the fact that a good proportion of such absence is indeed unnecessary. For instance, in small companies--where management have a closer and much clearer understanding of employees, where the money often comes straight out of the manager's back pocket and where loyalty is strongest--sickness absence is much lower than in larger organisations.
In Japanese companies operating in the United Kingdom, sickness absence is running at about half the average. It is notably lower in the private sector than in the public sector--hon. Members will know the story of the public-sector employee who asked his colleague whether he had managed to save any of his sick leave for Christmas shopping this year. The CBI and Industrial Society surveys do not, however, have large enough sample sizes to distinguish reliably between regions and industries.
It will be clear to all hon. Members that, in bringing pressure to bear on the problem of sickness absence, the Government will drive up competitiveness. Let me point out to the hon. Member for Warley, West (Mr. Spellar)--although, unfortunately, he is no longer in the Chamber--that that pressure will improve employment, reducing the burden on the taxpayer and the size of the bureaucracy.
I see nothing wrong in that ; I consider it a great benefit. The moribund nanny state will be pushed further back : I welcome that development, and will ask the Government to go further along the same line. I see the Bill as an element of the virtuous circle that will yield benefits to everyone, and I am delighted to support the Government.
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Ms Eagle : In its parliamentary brief, the CBI says that it does not want the Government to go any further. It appears that the hon. Gentleman agrees with one part of what it has said, but not with the other, more crucial, part.
Dr. Spink : The hon. Lady is being very selectiv1i Mr. Spring : This is an important point. In its briefing, the CBI says : "In the context of the overall Budget package"--
which was enormously welcomed by the CBI--
"and the reassurance provided by the welcome proposals to reduce NI contributions to offset the cost of transferring SSP, the CBI does not wish to oppose the SSP Bill."
It could not be put more plainly.
Dr. Spink : I am indebted to my hon. Friend for that clarification.
Mr. Peter Mandelson (Hartlepool) : In all fairness, the hon. Member for Bury St. Edmunds (Mr. Spring) did not do the House the service that he might have done had he read the entire paragraph. The CBI goes on to say :
"there are real concerns that some employers will not be adequately compensated, for example those in construction or heavy engineering, who face higher absence rates for reasons beyond their control. It may also hurt the small employers with around 20 employees disproportionately".
The entire brief should be read in context, not just selective extracts.
Dr. Spink : I agree with one implication of that statement. The construction industry, along with a number of others, needs to examine its working conditions and its safety record very carefully. They are appalling : there are far too many fatalities in our construction industry. Perhaps the Government's move will draw attention to that, and focus employers' minds on improving working conditions.
Of course we must all welcome any move that reduces bureaucracy, as the Bill does. It will greatly simplify the administration of the statutory sick pay system. Only a small business man--or, indeed, a large business man, or rather, a business man in a large organisation--who has had to grapple with the complexity of SSP would fully appreciate the importance of that point. Indeed, a third of small businesses do not even bother to use the system, because it is so complicated.
The CBI says that the measure will increase non-wage labour costs. However, if it works well--as I expect it to--it will reduce overall non-wage labour costs, thus reducing unit labour costs, making us more competitive and helping us around the virtuous circle that the Government are trying to pursue. I am sure that, on reflection, the CBI will accept that.
I agree with the CBI on one key point. It seeks an assurance that "there will be a radical overhaul of the present complex and burdensome administrative procedures for the SSP scheme. The present Bill only relieves employers of the burden of claiming compensation!"
I trust that the Government will give that firm assurance ; I also hope that they will give careful consideration to what the hon. Member for Rochdale (Ms Lynne) said about the potential impact on disabled employees.
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7.38 pmMr. Peter L. Pike (Burnley) : The speech of the hon. Member for Castle Point (Dr. Spink) underlined the problem that the Government have caused by rushing into the legislation. He gave one reason for his belief that the Bill would encourage employers to improve the health of their employees, thus reducing the sick pay bill ; his hon. Friend the Member for Hertfordshire, North (Mr. Heald), however, could cite a clear case of an employer's suggesting that, because production was not as good as it should have been, employees should take more time off work in view of the sick-pay subsidy that enabled employers to pay their workers. Two very different reasons were given. The Opposition would welcome genuine measures by employers to improve the health of workers, but I do not believe that that is the purpose of the Bill.
Mr. Heald : Does the hon. Gentleman accept that the point that I was making--at the moment, there is a possibility of fraud occurring of the kind that I was outlining, and this measure will stop that? Does he not agree that Opposition Members, as well as Conservative Members, want to stamp out fraud of that kind so that taxpayers' money is properly spent?
Mr. Pike : We, too, welcome the stamping out of fraud, but I bet that the employer that the hon. Gentleman was speaking about was a Tory voter and was looking at ways that he could abuse the system--tax evasion and the rest. The Opposition do not want to see the system abused. We share with that objective in mind. I do not believe that that is the principal objective of the Bill.
I believe that we must look seriously at the implications of what is going to happen. I have no doubt--my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) made the point, as did other hon. Friends--that the Bill encourages the employer not to employ people seeking employment who are older or perhaps have health problems. Therefore, those people will become perman-ently unemployable. Employers will be given a licence to get rid of workers who have an above-average record of quite genuine sickness. Many people quite rightly interpret the Bill and the Budget proposals that relate to it as a charter to sack the sick.
Mr. Rowe : The hon. Gentleman must admit that probably one of the most distressing features of the present employment market is the extraordinary difficulty that people over 50 have in even getting seen for jobs, and the Bill would not make any difference to that. What is required is a real understanding among employers that people over 50--or even over 45 these days--are more likely to have a good employment record and are more likely to turn their backs on minor illnesses. If anything, the Bill will highlight the present totally disgraceful situation and not affect the market in the way that he claims.
Mr. Pike : The hon. Gentleman makes a good point. I have no doubt that there is a bar to people above the age of 50 and that many conscientious workers who should be considered for employment at the present time are barred. I believe that the proposal will extend the number of people aged 40 and over who will not be considered for employment because of their sickness record. Although I have some sympathy with part of his contention, I certainly would not go the whole way with what he was saying.
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I want now to deal with the 0.2 per cent. reduction in national insurance contributions, which has the same effect as all general reductions on a one-off basis ; some employers will gain and some will lose. I must say to the Minister, and to the Secretary of State who is not with us at the moment, that they should give consideration to employers who employ a large percentage of their workers in types of jobs which, by their nature, are prone to creating sickness. My hon. Friend the Member for Garscadden referred to construction workers, but, as he will know, many industries equate to that one example. People who work outside-- people working on the roads, and in many other jobs--are at high risk of having health problems and are more likely to have time off work. Some people work shifts. Shift work creates conditions for health problems. There are a number of situations that need to be taken into account.I believe that the generalisation of the 0.2 per cent. reduction will penalise some employers. The Secretary of State should consider that position carefully. If the Bill is forced through, it will have unfortunate effects for some employers.
The Secretary of State referred to the situation in Germany and Holland. In some way, he was referring to the situation with regard to employers. If I understood him correctly, he was saying that the workers got a much better deal in Holland and Germany than they do in the United Kingdom. I make no apology for saying that I believe that the Government always fail to take into account the needs of workers. That is why they are opposed to the social chapter and a national minimum wage and why they abolished the wage councils. We must ensure that the right to sick pay is protected.
I want the Minister to look at how we can ensure that when the employer has to meet 100 per cent., bad employers will not try to evade it. I know that these things are covered by previous legislation, but there is a growing trend of employers trying to get away with such things. Unfortunately, many employers fail to recognise trade unions. Many workers dare not complain and will not get the sick pay to which they are entitled.
I want the Minister to assure us about what steps workers can take if they feel that they are not getting their entitlement to statutory pay. The Secretary of State underlined the fact that it is statutory sick pay, and, therefore, I hope that the Minister will accept that, if an employer dodges that responsibility, there is some statutory responsibility on his Department to ensure that that payment is made.
Mr. Hargreaves : I have some sympathy with what the hon. Gentleman has been saying, as I have been part of a large organisation and have had various connections with small organisations, particularly clubs. I ask him to consider that there appear with this measure to be two angles : the first is the medium and large company and the employees thereof ; the second is the growing number of much smaller companies which, as my right hon. Friend the Secretary rightly said, find the form filling so horrendous that they dispense with the system altogether. To be honest, they are being very good employers in that they continue paying irrespective and are not reimbursed for it.
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Mr. Pike : The hon. Gentleman makes a valid point, but, on the point that I am making, I seek assurance from the Minister that his Department will give assistance to people if they do not get the statutory sick pay, to which they are entitled. Now that the employer will have to pay 100 per cent., I think that we may see a greater evasion of the legal responsibility by the bad employer. However, we must accept that there are good employers as well as some bad employers.
Finally, I shall refer to the rating. Again, the point was made by my hon. Friend the Member for Garscadden. The Secretary of State said that he would use wise judgment in that situation. I hope that we get some assurance from the Minister who is winding up that although statutory sick pay does not have to be increased by the rate of inflation, or any other factor, we will not see it effectively frozen.
I accept that we are moving up from the lower to the higher rate. However, let us not hide from the fact that there will be a problem if that higher rate is not uprated in the years to come. I hope that the Minister will assure us that the Government have no intention of allowing the real value of statutory sick pay to be eroded even though they are shifting responsibility to the employer.
The Government must accept that they have a responsibility, particularly for those workers who depend on statutory sick pay and who do not receive sick pay from their employers. Those people depend on that money and its value must not be allowed to fall in real terms. I hope that the Government recognise that they have a genuine responsibility. It is always said that we have reasonable Secretaries of State, but we all have different views about what is reasonable and about wisdom. I hope that the Government will assure us that they intend the value of SSP to be maintained in the years ahead. 7.49 pm
Mr. Richard Spring (Bury St. Edmunds) : I am aware of the problems of absenteeism, as I have run a business. On a national scale, up to £13 billion a year is lost to British industry in terms of additional costs as a result of absenteeism. That is a truly enormous and frightening figure.
I have also conducted business in the Netherlands. Absenteeism is a particularly endemic problem in that country and it has provoked considerable national discussion there. Happily, we are not as badly off as they are in the Netherlands, although the record in the United Kingdom is not particularly good. On average, we lose eight days a year through sickness.
Smaller companies are easier to manage from a personnel point of view. The level of absenteeism is twice as high in larger companies as in smaller companies. That is indicative of the scale of the problem.
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