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Mr. Prisk: Two days.

Alan Johnson: The hon. Gentleman says two days. I am sure that that is right.

The hon. Member for Tatton (Mr. Osborne) raised some issues about the Ministry of Defence, and made the point that it and the armed forces are no different to other parts of business. They are different. Their circumstances are very different, as they are constantly on call. If other parts of business have the same problems, the Bill allows them the opportunity and the flexibility to quote those as reasons why they cannot accept the proposals.

Mr. George Osborne rose

Alan Johnson: I ask the hon. Member for Tatton to bide his time for a moment. The hon. Member for Runnymede and Weybridge suggested that the provision was related to the review of the Employment Relations Act 1999. As it is not part of the Employment Relations Act, it will not figure in the review of the operation of that Act. The hon. Member for Tatton will have an opportunity to argue that the provision has been such a roaring success that it ought to apply to the armed forces, however, when we review these measures in 2006, which was what the taskforce asked us to do, we will consider again whether to extend the provision, as I am sure that, in the meantime, it will have been a success.

Mr. George Osborne: The Minister says now that the armed forces are a completely different kettle of fish when it comes to this legislation. That is not what he said in Committee. Unlike my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), I have found the Hansard report of that Committee. The Minister was asked by my hon. Friend the Member for Boston and Skegness (Mr. Simmonds)—who, sadly, is not present to hear how perceptive his question was—whether the armed forces were different, and he replied that they were not. To paraphrase the Minister, he continued to say that they include many personnel who do not work on the front line, and that regulations will deal specifically with the problem of front-line troops, who would probably not have a request granted to them. Why has the Minister changed his mind so completely? Who has got at him?

Alan Johnson: The hon. Member for Tatton must have been dozing off. When he reads the Hansard report of this debate, he will read that, when I replied on this point about 10 minutes ago, I stated that I said in Committee that I initially thought that the armed forces could be included. Indeed, I well remember the hon. Member for Boston and Skegness (Mr. Simmonds) raising the issue as we belted through a series of amendments at 100 mph, and I remember saying precisely that. What I am saying again is what I said 10 minutes ago: our initial view was that the provision could be extended to the armed forces. Following consultation and discussion with colleagues in the MOD, we have decided that the exemption is right, but we will, of course, review that in 2006.

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4.30 pm

Mr. Hammond: I have just been rifling through the provisions to see whether there are any other exemptions in the Bill. The Minister will correct me if I am wrong, but I do not think that there are. Will he explain to the House why the position of service men is different, for example, from that of merchant seamen? It might seem obvious that merchant seamen should also be exempted from the flexible working provision. However, before we discussed this amendment, I would have expected him to have said that merchant seamen would not be exempt because their employers would rightly be able to deny a request for flexible working because of the nature of the work. Why is that argument used in the case of merchant seamen but not in the case of Royal Navy personnel?

Alan Johnson: The hon. Gentleman gave the answer himself. The armed forces are exempt because of their unique working conditions. Personnel are liable to be deployed operationally right across the world at little or no notice if the national interest requires that. They may also be required to be available at any time.

The position of the Merchant Navy and the fishing fleet is precisely as the hon. Gentleman suggested. Employees in those sectors can make claims for flexible working, but the employer can, if he believes that he cannot meet the terms, reject the request by referring to a number of reasons that are set out in the legislation. The armed forces are different. I genuinely believe that they are unique. As I said earlier, civilian members of the Army will be governed by the provisions, but the armed forces are in a particularly unique position—if one can have a particularly unique position.

The hon. Gentleman asked whether the provisions would be good for business. We think that they will be good for business. In a world of work that has changed almost unbelievably over the past 30 years, never mind the past 50, many businesses are dealing with other issues and do not necessarily focus their attention on how they are better able to improve staff morale and reduce absenteeism. That point was certainly made to the work and parents taskforce. The provisions will be good for business.

However, there is a point about individuals and we touched on it in Committee. Plenty of people in a time of low unemployment and a tight labour market—the so-called "war for talent"—have the skills and qualifications that allow them virtually to dictate their own terms and conditions. That point was made time and again in our consultation with companies. However, another group of people are not in that happy situation. We are trying to take people who are not particularly well qualified off benefit and into work, but such people might be feel less empowered to go to their employer to make suggestions. For example, we must legislate for parents with small children, because they often have a greater need for flexibility and for a job that will enable them to tackle social and financial exclusion. That group is important, too.

It is not a question of competitive advantage. We are seeking to bridge the productivity gap between this country and our main competitors, so the issue is the United Kingdom, rather than individual companies, having a better competitive advantage. For all those reasons, I hope that the House will agree to the Lords amendment.

Lords amendment agreed to.

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Clause 22

Employment tribunals

Lords amendment: No. 26.

Alan Johnson: I beg to move, That this House agrees with the Lords in the said amendment.

Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 27 to 30.

Alan Johnson: The amendments concern the ability to pay employment tribunal and employment appeal tribunal cost orders and preparation time payments. The other place discussed a recent Court of Appeal case, Kovacs v. Queen Mary and Westfield college and the Royal Hospitals NHS trust, which ruled that a tribunal cannot take into account a party's ability to pay when making an award of costs.

It has long been a feature of the employment tribunal system that ability to pay can be a consideration in deciding whether to make a costs award or in setting the level of an award. The Court of Appeal decision effectively removed the tribunal's discretion in that respect, but we believe that it should be able to take ability to pay into account if it considers that appropriate.

Throughout our deliberations, we heard that tribunal rules and procedures differ from those of other courts because their nature is different and distinct. A large number of applicants may be in a vulnerable position because they have lost their jobs or are pursuing redundancy or wages complaints. We must be careful to ensure that the costs regime takes proper account of that.

Amendment No. 26 provides that tribunal regulations may include provision authorising a tribunal to take ability to pay into account when making a costs award. Amendments Nos. 28 and 30 do the same for preparation time awards and the employment appeal tribunal respectively. A tribunal will have the option of making a full award of costs, no award or a reduced award as it sees fit.

We have provided for a discretion, not a requirement. Making it a requirement that the tribunal must take into account a party's ability to pay when making a costs award would mean that a party of very limited means could bring or conduct a tribunal case wholly unreasonably with absolute impunity. That cannot be right. There would be no deterrent to unreasonable behaviour, we would weaken the tribunal's powers to control such behaviour and there would be no means of compensating a party who suffers as a result.

There may be circumstances, albeit rare and extreme, in which a party of limited means has behaved in such an unreasonable or vexatious way that a costs award may still be justified. I mentioned in an earlier debate that a tribunal concluded that a woman had brought a costs case against her husband purely as an extension of their matrimonial dispute. Such cases are of course rare, but they happen occasionally and tribunals must be able to deal with them.

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Amendment No. 27 is a technical amendment to the new provision for preparation time awards. It replaces


It has always been our intention that awards of preparation time that are made to respondents who employ staff should be able to take account of time spent by those staff who work on the case. Although the original wording of the clause would have allowed for that in the case of a corporate respondent because it can only act through its employees, the position of a sole trader who employs staff was less clear because it might imply that the provision for preparation time would apply only to time spent by him or her personally. The wording has therefore been amended to read "that other party's case" rather than "his".

The new wording also refers to "time spent" rather than "the time spent". That is a minor change. It reflects the fact that although parties will have to show that they have spent time on a case in order to be eligible for an award, they will not be required to produce detailed evidence of the actual time spent on it.

Amendment No. 29 is a substantial amendment. It provides that if regulations are made on costs and preparation time, they must include a provision that the tribunal may not award both costs and preparation time to the same person in the same proceedings. Throughout the Bill's proceedings, we heard from a number of highly respected organisations who work with applicants, such as the National Association of Citizens Advice Bureaux, the Law Society and the Trades Union Congress, that the threat of costs is increasingly being used to intimidate applicants into withdrawing their complaints regardless of whether the case is without merit or whether the applicant's behaviour has been unreasonable. They are concerned that awards could be higher as a result of the new provision for preparation time and that representatives would use that to intimidate applicants genuinely seeking redress for an infringement of their employment rights.

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