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Clauses 15 to 17 will change the enforcement of employment agency legislation. Under the Employment Agencies Act 1973, any breach of the Act or the regulations made under it that govern employment agencies is a criminal offence capable of being tried in a magistrates court. By making offences triable either way, as the Bill will do, we aim to increase deterrence against non-compliance by the prospect of the unlimited fines available in the Crown court for the worst offenders. Stronger investigative powers, including the right to take away documents to copy and to request financial information
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on non-compliant agencies held by financial institutions, should also enable more successful prosecution of the worst offenders.

Alongside the strengthening of the enforcement powers, we are doubling the number of inspectors appointed under employment agency legislation. That will provide important additional resources, both to help legitimate agencies that seek to comply with the law and to enable inspectors to crack down on non-compliance.

Finally, the Bill will amend trade union law to ensure that it complies with the European convention on human rights, following the judgment of the European Court of Human Rights in the case of ASLEF v. the United Kingdom. According to that judgment, the current limitations on the ability of trade unions to exclude or expel individuals on the grounds of their membership of a political party breach article 11 of the convention. Clause 18 will therefore amend the sections of the Trade Union and Labour Relations (Consolidation) Act 1992 that gave rise to the ASLEF v. the UK case. The case involved the inability of ASLEF to expel members of the British National party whose views were incompatible with those of the union.

Jim Sheridan: Will my hon. Friend perhaps expand on the ECHR ruling on European law? Given that most, if not all, trade unions have a rulebook agreed by the members and that, when someone joins a trade union, its rules are made perfectly clear, why is it not acceptable for trade unions to expel someone for breaking the rules when an employer can do so?

Mr. McFadden: The ECHR discussed such rights in the ruling. Of course, there are rights to expression and freedoms of association, and the ruling touches on both. During the Bill’s progress through the other place, there was much discussion of that issue, and the Government decided to amend clause 18 to add additional safeguards on the use of such powers. The version in the Bill also takes into account the views of the Joint Committee on Human Rights and others who felt that that the clause did not provide sufficient safeguards against possible abuse. They argued in favour of greater protection for individuals. The clause, although amended, still provides for compatibility with the judgment of the European Court of Human Rights. As long as trade unions act responsibly—I believe that they will—they should be able to act in accordance with the judgment.

The Bill makes important changes to key areas of employment law, especially with regard to the effective enforcement of the laws passed in this Parliament. It will save businesses and individuals time and money through a widely supported reform of the dispute resolution framework. It provides more rigorous enforcement of the minimum wage and employment agency standards to benefit both the low-paid and the law-abiding businesses. It also clarifies the position of cadet force adult volunteers, who do such valuable work in the community, and allows necessary expenses to be paid to individuals carrying out voluntary work. It also makes necessary changes, as a result of an ECHR ruling, to trade union membership law.

All in all, the Bill continues support for economic prosperity and fairness in the workplace, which we have promoted over the past decade. We have one of the
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highest employment rates in the G8 and among the lowest unemployment rates. We are rated by the World Bank as one of the best countries in the world in which to do business. We want to keep that record and to ensure that Britain is also one of the best countries in the world in which to work. I commend the Bill to the House.

5.6 pm

Mr. Jonathan Djanogly (Huntingdon) (Con): For the past decade, businesses of all sizes have had to cope with the steady drip, drip of employment legislation. Since 1997, the Government have introduced some 18 Acts and more than 280 statutory instruments dealing directly with employment, which have often left employers bemused, baffled and bewildered by the negative implications for UK employment. Last autumn, pre-credit crunch, a survey by the Federation of Small Businesses found that nearly 80 per cent. of small business owners handled paperwork themselves, and that a third of those businesses claimed that they would not be hiring new staff because of bureaucratic complexities. It is by that and other means that the Labour Government are continually damaging the flexibility of the UK’s labour market.

Only a few weeks ago, a further deal was done between Labour and the trade unions to tamper with the laws on agency workers, which could be very damaging for already overburdened businesses. The Government made that massive and costly concession to their Back Benchers. They have fought in Brussels against the European agency workers directive for the past five years, but the sad reality is that they could no longer handle the pressure back at home. It is a testament to the Prime Minister’s weakness that Britain’s economic interests are being weighed up as less significant than his political survival.

I am glad that the Secretary of State for Business, Enterprise and Regulatory Reform finally seems to recognise that the Government have gone too far. He recently admitted—of course, this was after the Government had passed 298 employment laws—that there was a

That is certainly something to support, but judging by the latest trade union wish list that has been floating around the media in advance of the Labour party’s Warwick discussions, he will have a big fight on his hands. As we enter this period of economic instability, it is critical that the Secretary of State ensures that flexibility remains a cornerstone of our labour market so that if unemployment begins to rise businesses have the proper flexibility to organise their work forces and can weather the storm. It is with that in mind that I shall examine the provisions of this latest Employment Bill.

First, however, may I say that while the Bill’s passage through the Lords lasted for months, we were given only a few days’ notice of the debate, which was not ideal and not conducive to allowing Members to participate? Additionally, the Secretary of State has pulled out of leading on a Bill that he wishes to push through at such short notice, and we believe that that deserves some explanation from a Minister, perhaps during the wind-ups.

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Mr. Angus MacNeil (Na h-Eileanan an Iar) (SNP): I hear what the hon. Gentleman says about participation. Is it not indicative of what he says that only four Labour MPs are present to hear the debate on the Bill?

Mr. Djanogly: The hon. Gentleman makes a fair point. It is the second time that such a thing has happened; only a few weeks ago, the Secretary of State failed to lead the debate on the Regulatory Enforcement and Sanctions Bill. There are key Government Bills on deregulation and employment law, but the Secretary of State has not led on them. Business can draw its own conclusions from that.

Jim Sheridan: If, as the hon. Gentleman suggests, employment legislation can lead to high unemployment, why is it that when his party was in office, 3 million people were unemployed, but during our party’s time in government there has been very low unemployment? What does that have to do with employment legislation?

Mr. Djanogly: I will not answer that question, which is a thesis point, in any depth, mainly because I never said what the hon. Gentleman claims I said. My hon. Friend the Member for Mid-Bedfordshire (Mrs. Dorries) may have had a point when she said that perhaps the Government wanted to avoid a debate on abortion today because of the by-election on Thursday. We can only speculate.

Emily Thornberry: Will the hon. Gentleman assist us on one point? He seems to be saying that, on the one hand, flexibility is the cornerstone of our economy, but, on the other hand, we do not have flexibility. May I prod him a little more and ask him why, when we have the highest employment rates and the highest number of people employed, he continues to complain about the markets not being sufficiently flexible? Will he please explain that to us?

Mr. Djanogly: The hon. Lady talks as though there are absolutes of flexibility. There are no absolutes. The Conservative Government left a relatively flexible economy in place, but it has steadily become less flexible under this Labour Government.

The first aspect of the Bill that I wish to discuss is the clauses dealing with dispute resolution. Clause 1 repeals clauses and schedules of the Government’s Employment Act 2002 and removes the statutory procedures for resolving disputes in the workplace in their entirety. We support that conceptually, but it should be appreciated that that is a desperately embarrassing U-turn for the Government, who doggedly defended the procedures when the provisions in the 2002 Act were initially examined by the Standing Committee.

It would serve as a useful reminder of the cost of that change of heart, both in terms of the House’s time and taxpayers’ money, if I ran through some of the warnings that my hon. Friends gave the Government about the existing statutory procedures, and highlighted some of the Government’s reasons, now proven to be flawed, for implementing that legislation. In debate in the Standing Committee, on 13 December 2001, my hon. Friend the Member for Tatton (Mr. Osborne) quoted a number of parties’ misgivings about the statutory procedures. The Engineering Employers Federation argued that the

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The Law Society said that they would “undermine the ACAS...Code.”

ACAS has been in existence since 1975, and it is dedicated to preventing and resolving employment disputes. When the Employment Act 2002 was passed nearly 30 years later, it made reference to the ACAS code but did not implement it in full. That was clearly a mistake, and it has led to much confusion for both employers and employees.

Mr. Heald: Is not my hon. Friend being characteristically generous in his comments about the Government? Did not a 1994 Green Paper include the proposal, although the Conservative Government did not go ahead with the idea of internal procedures having to be dealt with first? Ian Lang, the Secretary of State for Trade and Industry, said at the time that the

In other words, he got it right three or four years before Labour came to power.

Mr. Djanogly: I thank my hon. Friend for his important contribution. The issue goes even further. If we look through the record, we see that even the trade unions, the Labour party’s close friends, had misgivings at the time. The TUC expressed its concerns over the “potential confusion” between the proposed legislation and the widely supported ACAS code.

However, the right hon. Member for Kingston upon Hull, West and Hessle (Alan Johnson), then Minister with responsibility for employment relations, was undeterred by such criticism. His response was to say:

He even implied that employment disputes would be simplified, as the Employment Bill as it was at that time had fewer provisions than the ACAS code. However, at some point the Government decided that the three-step procedure was not the right direction to take. The measures came into force in October 2004, and the Government spent the following years trying to undo the legislation that they themselves created.

In March 2006, less than two years after statutory procedures were introduced, the Government published a policy statement rather grandly called “Success at Work”, in which they announced that a review of the dispute resolution regulations was necessary. In the course of the next few months, they came clean about the fact that a full review of all dispute resolution procedures was needed. The then Secretary of State for Trade and Industry admitted that the time, cost and stress involved in settling disputes could be reduced by making changes.

As my hon. Friend the Member for North-East Hertfordshire (Mr. Heald) has noted, the consequent review, undertaken by Michael Gibbons, found that the procedures, as they stood at the time, involved a high
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administrative burden for both employers and employees; that they resulted in the need to use formal mechanisms such as the laying down of red tape, although previously disputes could be informally resolved; and that they were over-complex and the penalties for failing to observe them resulted in employers and employees seeking external legal advice earlier than in the past. That last consequence is of particular interest as the Government claim in their explanatory notes to the new Employment Bill that it was unforeseen. We beg to differ.

In a Committee discussion on 18 December 2001, my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) pointed out to the Minister with responsibility for employment relations that the Government’s dispute resolution procedures

My hon. Friend continued his warning to the Minister by arguing that there existed a need

He then questioned the suitability of the proposed and subsequently implemented legislation for achieving that certainty. The Minister’s response was that the procedures were designed to be simple and easy to understand and that uncertainty should not arise. At least now, by proposing to repeal said statutory procedures, the Government are admitting that that over-simplistic assessment was utterly wrong.

The problem is that this is yet another occasion on which Labour has got it wrong. Last week’s Regulatory Enforcement and Sanctions Bill, which the Minister and I recently debated, was its third attempt at reform, and this is its second attempt on dispute resolution procedures. What the Secretary of State said about less employment legislation is the opposite of the case—not only are we seeing more and more employment legislation, but a good part of it is an attempt to patch up previous, failed labour laws.

We support the existence of a national minimum wage and the continual monitoring of the legislative provisions dealing with it. We also support action to ensure that workers who receive the minimum wage do not lose out in real terms when they are owed arrears as a result of underpayment. The current law gives almost no deterrent to underpayment, and we would welcome its amendment.

However, we have concerns about certain aspects of this area of the Bill and we would like to hear more from the Government. They claim that they expect the new penalty measures under clause 11 to increase the deterrent effect on businesses that do not currently pay the national minimum wage. The Minister has said that some 1,600 employers were found to be non-compliant, but last year only very few cases of underpayment were deemed bad enough to lead to the issue of one of the Government’s penalty notices. Other cases led to the employer paying arrears, but in no way being punished for the illegal underpayment. The Government have also said that only 5 to 10 per cent. of cases will result in the imposition of a penalty under the new legislation; it is therefore unclear to us how the new penalty, applied to only a small fraction of cases, will act as more of a
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deterrent than the currently rarely applied penalty notice. The Minister shook his head at my figure of 5 to 10 per cent., and I would be grateful if he put me right on that. While the proposal to allow enforcement officers to be able to withdraw and replace notices of underpayment is beneficial as errors may be corrected, the potential disadvantage, as with the current penalty notice regime, is that there are no real incentives for officers to get the notice right first time. Officers may issue an incorrect notice, put the employer to the trouble and expense of appealing it, and simply start again when they recognise their error. As with so many of the Government’s attempts to make things better, there is potential for red tape and bureaucracy to mar the process.

We strongly oppose the suggestion made in the other place on 13 March that the national minimum wage be extended to foreigners working on British ships and foreigners working on any ship at any time when it is within British territorial waters. Broadly speaking, we are concerned that those changes could be made prematurely, and we shall look to the Minister to address those concerns. I note that he did not comment on the report by the TUC’s commission on vulnerable employment. Perhaps he could comment on the Government’s findings on that report in relation to the proposals in the Bill. I urge that any changes that are made be implemented with maximum publicity. All employers must be given the opportunity to assess their companies and to correct any failings in payment of the national minimum wage before the new penalties are imposed. Have the Government yet given any indication of the expected costs of the new powers in enforcing the minimum penalty? If not, it is difficult to assess whether the proposals are the best way forward in protecting low-paid, vulnerable workers.

The Minister concluded with the provisions on trade union membership, and I shall do the same. I therefore turn to clause 18, which, as he said, represents a response to the judgment made on 27 February last year by the European Court of Human Rights in the case of ASLEF v. the UK. The clause enables trade unions to prohibit or expel from their organisation an individual who belongs, or has belonged to, a particular political party. It amends the relevant sections of the Trade Union and Labour Relations (Consolidation) Act 1992. To our mind, the clause represents yet another rewrite of inadequate provisions that the Government introduced just four years ago.

Jim Sheridan: The hon. Gentleman clearly has a jaundiced view of trade unions. Perhaps I could point out that his party’s candidate in the Glasgow, East by-election goes out of her way to tell people that she is a member of a trade union and has said as a matter of public record that trade unions are a force for good. What does he say to her?

Mr. Djanogly: I can only tell the hon. Gentleman that the shadow Secretary of State for Business, Enterprise and Regulatory Reform and I joined the TUC’s commission on vulnerable employment, contributed to its report and attended one of its evidence sessions. We have taken an interest in the trade unions’ viewpoint on this matter, which is why I ask the Government to do likewise. Perhaps they are embarrassed and do not want to bring them into the discussion. I am helping the hon. Gentleman by bringing the unions’ case on to the Floor of the House.

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