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For example, for each years service when the employee was aged between 41 and 64, 1.5 weeks pay are factored in. There is a maximum of 20 years service which counts towards the calculation. There is also a maximum limit on the amount that constitutes a weeks pay under the Act. It is currently set at £350. That means that the maximum redundancy payment is £10,500. Importantly for our debate, however, it should be noted that pursuant to section 34 of the Employment Relations Act 1999, under existing law these sums already increase in line with inflation on an annual basis. I am not entirely sure whether the hon. Member for Chorley made that claim in his opening remarks.
The Bill would serve to increase the statutory maximum limit on the sum applied for a weeks wage. It is currently capped at £350, but the Bill, in linking the cap to average weekly earnings, could increase it to as much as £500 on a one-off basis, and then maintain the link to average weekly earnings on an ongoing basis.
Mr. Djanogly: As I have saidand as the hon. Member for Chorley failed to say, I believethe current legislation provides for increases in relation to inflation. I have the figures to hand: in 1998, the sum was £220; in 2004, it went up to £270; in 2007, it was raised to £310; and in 2009, it became £350. I am not here to make the Governments case for them, but the fact of the matter is that measures that the Government brought in have been increasing the amount, and I do not think that came out in the hon. Gentlemans comments.
Mr. Hoyle: Of course I am going to try to do so. I made the point that there had been increases. In fact, I made the point that we are in the very dangerous situation of having inflation falling and every other economic indicator dropping, and statutory redundancy pay could drop, too, because it is linked in this manner. That is why we want to broaden the link. I am sure that the hon. Gentleman would not want to support a cut in statutory redundancy pay, but that could happen under the current terms.
Mr. Djanogly: The economic situation changes, but I assume that the hon. Gentleman is hoping that we do not move into a deflationary economic situation. We will leave that to those on his Front Bench, who are at present doing a pretty good job of taking us towards such a situation. That is something we may have to deal with, although I hope we do not.
I understand, although I do not agree with, my hon. Friends argument that statutory redundancy pay should not be increased in line with earnings because we are in economic bad times. As a demonstration of
good faith on the issues, can he identify an occasion of economic good times in which he did support such an increase?
Mr. Djanogly: One does not have to support such an increase, because it is in legislation that it happens. My hon. Friend just mentioned good faith. He has also discussed how clause 1(2) provides for the Government, in good faith, to bring in regulations over 12 months, and I must say to him that it is the looseness of the Bills wording that causes me great concern. Rather the opposite of what he maintains is the case, he should realise that the looseness of the Bills drafting will mean that business does not really know what is going to happen, and that problem causes much concern.
The hon. Member for Chorley made the point that because money is involved, the format of the private Members Bill makes it difficult for him to draft the measure precisely and he is therefore drafting on principle. He must appreciate that the Bills implications for business are significant, and that when loosely worded Bills are presented to Parliament, people will have concern.
Mr. David Hamilton: May I draw hon. Members attention to the current situation? Every hon. Member will have worries about their high streets. We face the possibility of an amalgamation of banks, and the tellersthe lowest-paid peoplewill be pushed into taking redundancy packages. How will the hon. Gentleman and other Front Benchers explain that although those at the top of the treethe people who created the problemare walking away with millions, we will make other people suffer, such as the young and the loyal workers who will walk away with the minimum redundancy arrangements?
Mr. Djanogly: The hon. Gentleman makes two important points. The first concerned the general state of the economy. I totally agree with him that this country, and its economy, is in an utter mess. We place the blame for that on this Government; their missed opportunities for reform over the past 10 years have led us to where we are now. His second point was that the poorest are having to bear the brunt of the situation. Of course it is very sad that working people are losing their jobs because of the failed policies of this Government, but it is also important to realise that the more wealthy one is, the more one suffers under these redundancy provisions.
Mr. Djanogly: Let me finish my point, because it is an interesting one. When I discussed the Bill with several employment law experts who do not act for unions, they told me that the main shocks that they see involve wealthier people who think that the law will provide them with some form of fair redundancyit does not. [Interruption.] But the law is right. Labour Members are maintaining that it works only against poorer people, but that is not the case, for the more wealthy someone is, the more the existing law is prejudiced against them. Someone earning a vast amount who asks their solicitor whether they are going to get a few months pay because they are being made redundant will get the answer, No, because it is capped. In our view, given the economic circumstances, that is right, but it is wrong for the hon. Member for Midlothian (Mr. Hamilton) to say that this is a problem simply for poorer peopleit is not.
Mr. Hoyle: The hon. Gentleman has slightly missed the point, which is that the arrangement used to represent and help 90 per cent. of the working population, but it now helps only 40 per cent. That, in itself, tells him that the measures have been eroded over the years and that they have not helped in the way they should. Perhaps he would therefore like to reconsider what he has said. I respect his views and I know that he is more liberal than most on the Conservative Benches. I would have thought that there had never been a more appropriate time for this Bill than now, when people are struggling. Surely it is when people are struggling that one should give them help. He knows, as I do, that money is being found for family allowance increases and so on. This is a case where we ought to help those people now, just as we did with the minimum wage. There is no difference here. We should annually review these arrangements in the way that we stated. Why can he not support us?
Mr. Djanogly: Providing help to working people in this country means making sure that we have an economy that will create and sustain jobs, and that includes getting credit moving in a way that this Government are consistently failing to do. We simply believe that this proposal would be damaging to our economy, to our companies and to the workers who drive our economy.
Judy Mallaber: The hon. Gentleman has said that part of his opposition to the Bill relates to its vagueness and the fact that he does not know what would happen as a result of its introduction. Will he re-read it and note that it provides that the Secretary of State is required to make further regulations within twelve months and that those would be in the form of statutory instrument that would come back to this House and could be considered by it? Does he accept that that means that the Bill is not vague and that it contains procedures that would enable him and all other hon. Members to consider fully any proposals that come forward under it?
The Secretary of State must, within twelve months of the day,
Before making regulations under subsection (2) the Secretary of State must
(a) have regard to the desirability of including in the mechanism an annual comparison,
and so on. That is pretty vague stuff; it is one set of possibilities backing up another set of possibilities, and she must realise that as far as business or indeed anyone else is concerned, it effectively means nothingit means what the hon. Member for Chorley said in his speech and what might transpire; it does not mean what is in the Bill.
Regulations under this section shall be made by statutory instrument.
Mr. Djanogly: That introduces a third level of what might happen; using statutory instruments means that things are basically decided by Ministers. I had thought that the idea of a private Members Bill was to have the House decide things on the Floor of the House.
Mr. Dismore: I see red when I hear Conservative Members advance this argument that somehow the wealthy peoplethe Sir Freds of this world, whom we hear the hon. Gentleman standing up for noware the ones who are going to suffer as a consequence of such a proposal. The fact remains that this measure is primarily aimed at helping the less wealthy. The numbers that the hon. Gentleman read out earlier are not significant sums to the wealthy, but they are significant to the less well-off people, who are less likely to have skills, more likely to be made redundant and more likely to be out of work for a lot longer than the wealthy people for whom he is making special pleading. The wealthy may well have resources to fall back on, unlike poor people who live from hand to mouth, and they are more likely to be able to be re-employed more quickly. His special pleading is a bit out of place.
Mr. Djanogly: I totally disagree with the hon. Gentlemans assertion that someone who earns more is more likely to walk into a job more easily in this current climate. It is possible that the opposite is true. In his earlier remarks he made an interesting point which I shall analyse later in my speech.
Jim Dowd (Lewisham, West) (Lab): On that point, I would assert that the person whom the hon. Gentleman has described would be the least likely to rely solely on statutory redundancy payments, and it is those at the lower end of the earnings scale who will be most likely to be entitled only to statutory redundancy arrangements if and when they lose their jobs. The higher up the pay bands one goes, the less likely it becomes that someone will rely solely on statutory redundancy payments.
I maintain that the increase from £350 to £500 is considerable, and its impact on thousands of vulnerable employers and businesses could be substantial, with a possibly devastating knock-on effect on workers. The measures in the Bill would further burden employers, who will often have no choice but to make more redundancies as a result, in an attempt to consolidate their position and stimulate a revival. The British Chambers of Commerce has calculated that this one-off increase would cost businesses nearly £200 million this year. Revenue needs to be injected into businesses to encourage their long-term prospects rather than diverted by Labour in a short-term bid to appease the unions. If cash is clawed away from where it is most necessary, even more businesses may collapse, leading to even more redundancies and unemployment.
Like my hon. Friends, I am horrified that the hon. Gentleman spends so much time worrying about the better-off, who will clearly have other resources on which to rely and far more opportunities to find further employment. He must surely agree that the trade unions have often improved conditions for their people, and the concern under this Bill is for those
people who have not had the benefit of good trade union agreements, perhaps because they are in temporary employment or areas of under-representation by trade unions. The point of the Bill is to look after the very people who miss out most because they are not part of good, strong collective agreements.
Mr. Djanogly: If the hon. Lady thinks that I and the Conservative party are not concerned about the 2 million unemployed, she has seriously misunderstood what I have said. We accept that the unions have a part to play in the life of this country and in negotiating employment conditions. The question is whether legislation should be drafted purely on the basis of the unions interests. I shall maintain that the interests of the country go beyond the narrow union interests that are on display today.
The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): I am interested by the hon. Gentlemans line of argument. I accept completely that if the House is interested in helping people who face losing their job as a result of the recession, the redundancy pay package is only one part of the picture. But it is also the case that the Conservatives have opposed the extra Government spending in other areas, such the rapid response servicefunds for which have doubledand training places. If he opposes the redundancy pay increases in the Bill, is he also opposed to the extra expenditure elsewhere in the system for those who lose their jobs?
Mr. Djanogly: We cannot group every single Government measureI should say proposed measure, because most of them have not actually been implementedtogether and say that we support them. As the Minister knows, we have supported some, but not others. More importantly, we have made our own proposals, not least on loan guarantees, to which the Government came rather late in the day. They said that they would put similar proposals in place, but they have not yet delivered on that. It is not fair to say that we have been doing nothing or that we have failed to address the Governments proposals.
We are hugely concerned that, in this economic downturn and with unemployment already predicted to rise to 3.5 million, this diversion of cash will only add fuel to the fire. Essentially, the Bill could damage those whom it seeks to protect. Although some redundant staff will enjoy a short-term monetary gain, it could also have negative effects. First, the additional financial strain on companies could lead to more businesses becoming insolvent, so there could be fewer businesses to offer jobs once the economy begins to recover and, perversely, there could be more workers to compete for those limited job opportunities.
Secondly, the Bill may lead to employers ceasing to offer more generous contractual provisions in case of redundancy. As we have heard, some 50 per cent. of organisations offer workers more than the statutory minimum. In an attempt to improve conditions for those who enjoy only statutory protection, the Bill might indirectly harm a host of other workers. Thousands could potentially be put under pressure to renegotiate their contracts, and many new workers would simply be left with the statutory minimum.
Thirdly, the Bill might lead to employers looking to avoid its provisions. For example, they might seek to avoid potential payments by increasing staff turnover so that workers do not qualify for statutory redundancy, or through complex contractual means. More worryingly for workers, employers may simply be unable to pay the enhanced sum. Fourthly, the Bill might also lead employers to make workers redundant pre-emptively, for fear of incurring far higher costs by delaying the process in the hope of recovery. Young and newer workers, who are comparatively cheap to make redundant, would likely be sacrificed. Rather than softening the blow of redundancy, the Bill might actually make it more frequent and more financially painful, particularly for newer employees.
Finally, we need to appreciate that this measure is not designed to help the poorest employees. That is because increasing the maximum weeks pay would provide no increase in statutory redundancy pay for the lowest paid employeesthose earning less than £350 a week. To that extent, this Bill seems to be out of line with the Governments policy of protecting vulnerable workers and supporting good employers. Indeed, it is quite feasible that the poorer workers who receive nothing under this Bill could have less job security because of the benefits given to higher earning employees.
So why would the hon. Member for Chorley introduce a Bill that supports only the better-paid employees? Let us put the potential negative impact of the Bill on workers to one side for the moment and consider the motivation for the Billthe trade unions. It is clear that they are the driving force behind this Bill. The Warwick agreement made between the Labour party and the trade unions contained a promise to increase the maximum statutory redundancy payment, and the Bill is a belated attempt to fulfil that commitment.
The Bill has scant regard for the economic crisis facing Britain, and comes despite disastrous figures for businesses and the economy generally. It is nothing more than a thinly veiled attempt to save Labours blushes in failing to honour the foolish promises made during the peak period of Labours boom and bust era. Since coming to power in 1997, the Labour party has made concession after concession to the trade unions that fund it. During the boom years, the publicand, to some extent, businesspaid little attention to that fact, while all appeared to be rosy with the economy. So despite the Governments obedience to union demands, businesses were willing to turn a blind eye while the economy remained stable. We need only look at legislation forced through by the Labour Government to see this. Among other measures, the working time directive and the Employment Relations Act 1999 are examples of legislation that is extremely favourable to the unions. For example, the 1999 Act introduced protection from dismissal during the first eight weeks of an official strike for workers taking part in industrial action.
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