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Mr. McFadden:
The hon. Gentleman is pursuing a dangerous argument. His party has spent the past two to three years trying to change its image and to say that it is no longer the nasty party, to quote one of his colleagues, yet he seems to be embarking on an attack on a series of measures that were all designed to improve the lot of working people. That raises an interesting question. Is he saying that at the next election, whenever it should come, his party will say that it wants to reduce
the rights to paid leave granted under the working time directive, for example? Will it reduce the rights to trade union recognition contained in some of the legislation that he cites? I do not know what was coming next in his speech, but I am sure that he will take my point. Is his party going to stand on a platform of taking those improvements away?
Mr. Djanogly: Again, the right hon. Gentleman generalises. If he thinks that we are happy with the Governments £10 million bung to the trade unionsthe so-called modernisation fundhe should realise that we are not happy with it, and we might well consider those issues following a general election. In the run-up to the 2005 general election, the trade unions won more than 60 commitments from the Government on employment legislation. Since 1997, about 20 Acts and more than 280 statutory instruments have been passed that directly deal with employment law. In other cases, such as that of the Legal Services Act 2007, the unions have been exempt from regulations to which other entities have been subject. The Conservative party supports the interests of businesses, which include companies and their employees, and so we will act in their wider best interests and not in the narrow interests of the unions.
It is of little surprise that the unions also represent a considerable source of donations to the Labour party. Since 2001, trade unions have donated more than £76 million to Labour, equating to some 61 per cent. of all the donations that Labour has received. In 2006, Labour received a total of £11.8 million of donations, of which £8.6 million came from the trade unions 73 per cent. of the total. As we move deeper into the recession, Labour has become more and more reliant on the unions for funding. It is against that backdrop and that of the more specific obligations in the Warwick agreement that we view this Bill with a degree of suspicion.
Mr. Dismore: Effectively, the hon. Gentleman is saying that he is going to take his red pen out and redact great swathes of peoples employment rights. This shows the real distinction between his party and ours. We believe in standing up for working people and protecting their rights, and he believes in taking them away.
Mr. Djanogly:
I hasten to add that it is the hon. Gentlemans party that has been having an internal row today in front of the nation about whether it has been keeping its manifesto pledges. I have not come here today to give manifesto pledges for my party. I have come here to debate this private Members Bill, and we believe that what has happened is indicative of Labours increasing isolation from economic and business realities. Red tape is already choking businesses that are struggling to keep afloat, yet Labour MPs and MEPs are seeking to place further hurdles along the path to recovery. Labour MEPs have even been speaking and voting against the Governments position. They recently voted to remove British workers ability to opt out of the 48-hour week. At a time when thousands are hoping to work as much as they can rather than face redundancy or poverty, Labour politicians are voting to reduce peoples ability to work. Neither are we the only force of dissent. Business organisations and even the unions that
the Bill seeks to placate have recently criticised the Government for failing to advance a unified, consistent strategy for tackling the recession. The Bill is another example of the Labour partys having lost its way.
The mass of new employment regulations over recent years has meant that the UK labour market has become increasingly inflexible, which will impact on our ability to come out of the recession. So we urge the Government to make the right decision and to be considerate of wider non-party political concerns. The narrow political interests of the trade unions and the outdated Warwick agreement should be irrelevant in the current economic climate. Will the Minister also confirm that the Government have no intention of getting around todays situation by invoking the time-bomb provisions of section 14 of the Work and Families Act 2006?
In looking to move out of the recession as soon as possible, we should be focusing on resolving the issues and challenges ahead rather than exacerbating the unfortunate consequences of past Government failures. The Bill is reactive, retrogressive and entirely inappropriate for the desperate economy that we have in this country today.
Lorely Burt (Solihull) (LD): I congratulate the hon. Member for Chorley (Mr. Hoyle) on sponsoring the Bill. As he said, it is Friday the 13th, and on a Friday I and the vast majority of my colleagues are normally working in our constituencies, so why are we here today? We are here because the Government have failed to deliver to the unions the promise that was made out before the general election and specifically in Warwick I. The promise to link statutory redundancy pay to average earnings was also enshrined in the 2005 Labour general election manifesto, so it is no wonder that we are here today. Labour failed to fulfil its promise to its paymasters and, specifically, to the direct sponsors of many Members who were on the Government Benches earlier and who now seem to have goneperhaps to the Tea Room. Business also donates large amounts to the Labour party, so the Government are between a rock and a hard place: if they please one paymaster, they will upset another.
The Conservatives, on the other hand, are not in thrall to two masters. They have only one: big business. Big business, as we have heard, does not like these proposals one bit, and nor should it.
Mr. Djanogly: Before the hon. Lady goes too far into how we are in thrall to big business, I want to point out that more than 50 per cent. of companies currently pay more than the statutory limit. She will find that those companies tend to be from big business.
Lorely Burt: I am grateful to the hon. Gentleman for that intervention, and I take his point. He said that big business should not like these proposals and I can understand that because they will increase the cost to business just when times are the hardest they have been for business in living memory.
My party and I are not in thrall to the unions or big business and we seek to steer a path that achieves fairness and prosperity for all. That is not easy, and in times such as these it is probably not even possible, but I am going to try.
It is worth considering the decision that we are being asked to make today in the context of the history. When the Redundancy Payments Act 1965 was introduced, average earnings were £19.60 and the cap was £40 a week, which was just over twice average earnings. That cap remained unchanged until 1974, when it was doubled to £80. However, there was no automatic mechanism to operate the cap until 1999. In 1999, the retail prices index was introduced as that mechanism. As wages regularly surge ahead of the RPI by an average of 1 to 2 per cent. in most years, the cap has fallen behind average earnings. At £350, it is now worth only 57 per cent. of what it was in 1999. A person who has worked all their life for a company can be made redundant with a maximum of £10,500 in redundancy pay. I personally feel that that is hardly fair compensation for a lifetime of work and dedication to one company.
To put the system into context, it is interesting to compare how generous we are in calculating redundancy with how generous our European neighbours are. Indeed, the hon. Member for Chorley kindly provided examples showing that countries such as Italy, Spain and France are much more generous than the UK. That is interesting but not necessarily relevant, because to make sense those statistics would need to be related to the relatively large burden of social insurance paid by employers and employees alike in those countries. High taxes are not the only cost; inflexible employment rules also make it harder to fire and less attractive to hire employees in those countries.
Mr. McFadden: The allegation is frequently made that it is easier to fire workers in the UK compared with other countries and that it leads to higher unemployment in the UK than elsewhere. If that were true, would unemployment in the UK not be higher than in Germany and France? In fact it is lower, so it seems to me that the frequently made allegation that it is easier to fire people in the UK is not reflected in the unemployment figures for the various countries usually cited as examples.
Lorely Burt: I am grateful to the Minister for that intervention, although I wonder whether the degree of unemployment in other European countries is also related to other factors that are not necessarily linked to how easy it is to hire and fire. However, I take his point.
In the UK we have a relatively low-tax, more flexible economy, and that flexibility has gone against us in that the UK has sunk into recession faster than many of our European neighbours. My hope is that our flexible labour force and low set-up costs will enable us to be one of the first to climb out of the recession.
Let us consider the case against the Bill. For an employer it is the worst possible time to increase minimum rates of statutory redundancy pay. For the employee it is the best time; with more people being made redundant, they will need the money. In an intervention, the hon. Member for Bromsgrove (Miss Kirkbride) suggested that higher redundancy payments would make employers accelerate redundancies, but surely the opposite is the case. The more it costs to make someone redundant, the more likely it is that the employer will think twice.
The CBI says that the increased costs would reduce the savings made for each redundancy, so employers would have to make more people redundant. There is certainly a lot of wisdom in that statement. The CBI
also says that the annual increase is intended to reflect living costs, so the retail prices index is a more appropriate tool for uprating the cap.
However, we have seen what happens when RPI is used as a measure: the amount becomes out of touch with the general standard of living for those who are working. The current maximum is 56 per cent. of average earningsit was 200 per cent. when the measure was introduced. The rate paid to pensioners is now only 52 per cent. of what it would have been if Mrs. Thatcher had not withdrawn the earnings link during her reign. The Government have slowly but finally agreed slowly to restore the earnings link for pensioners. Surely the same principle should apply to redundancy pay.
The CBI cites the Governments Success at Work policy paper of 2006, and makes a point similar to that made by the hon. Member for Huntingdon (Mr. Djanogly): given that the Bill will take two years to come in and that it addresses only the upper limit, not the lower, it is not in keeping with the Governments policy of
protecting vulnerable workers, supporting good employers.
The Engineering Employers Federation takes things a step further. It would be minded to support a minimum rate for redundancy rather than a new maximum, and suggests that the minimum rate should be £200. However, would that not disproportionately affect employers at the other end of the scale? Would not even more of the lowest paid workers lose their jobs as a result? I should be interested to hear what the Minister thinks about the EEFs suggestion.
The EEF commented that the proposals would disproportionately affect manufacturers because they pay relatively higher wages. Surely the real factor is the percentage of total wage costs compared to overall costs. I suggest that the impact would be lower overall.
I turn now to the benefits of the Bill. I do not accept the argument put forward by the hon. Member for Bolsover (Mr. Skinner) that giving people more redundancy pay would stimulate the economyas in Keynesian economics. When someone has just lost their job and does not know when they will find another, the last thing they will do is splash out on a new freezer, carpet or conservatory. They will squirrel their money away. The rainy day has come and people need the comfort of knowing they have something to fall back on when the economic winter becomes even harsher.
Giving people some means of surviving economically until they can get back on their feet is right and fair. The Bill does two things. It promotes a method of calculating statutory redundancy pay that links it
in such a manner as the Secretary of State considers appropriate, to average weekly earnings
within 12 months. It occurs to me that there is a fair amount of wriggle room for the Minister or the Secretary of State to take fair and proportionate action. It would be above my pay grade to suggest exactly what that fair and proportionate action should be, but I am sure that the Minister has excellent advisers who could come up with some good suggestions.
Secondly, the Bill links the figure in subsequent years in
an annual comparison...with average weekly earnings.
We thus know that if we are to have a cap it must be linked to something that protects the relative prosperity of our society and not to the price of a loaf of bread.
In conclusion, something needs to be done in the interests of fairness. I should like the Bill to make its way to Committee where the Government can propose amendments to make it a fair and realistic proposition that employers can cope with, or I should like the Minister to offer enough comfort to the hon. Member for Chorley so that, in the knowledge that the Government will introduce their own Bill, he does not push for a vote. The Minister is a man of great talent, and I am sure that with his advisers he can come up with a solution that is proportionate and fair for all.
The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): I congratulate my hon. Friend the Member for Chorley (Mr. Hoyle) on his success in the private Members ballot. The issue he raises in his Bill is important, both in itself and in terms of our response to very difficult economic times.
I begin with a note of caution: in our attitude to the Bill, we should be careful not to make a judgment about the whole recession and the set of economic circumstances we face. It would be a mistake, particularly for my colleagues on the Labour Benches, to judge purely in terms of our response to the measure whether we were acting in the interests of the working people we care about. They are at the heart of everything we do in response to the recession. I will have more to say about that in relation to the help offered to people who are in difficult circumstances, having lost their job.
As my hon. Friend said, people expect the Governments response to the recession to be focused on the concerns of ordinary families. They expect it to be about real help for those at the sharp end. That has been the central concern in everything that we have done in recent months. He suggested that on the Governments side, there had been some attempt to encourage people to speak against his Bill. I was puzzled by that suggestion. I have tried to find out whether that was the case, and I am told that it was not; it is certainly not something of which I have any knowledge.
Mr. Dismore: It was not very successful, if there was such an attempt.
Mr. McFadden: As my hon. Friend remarks, the evidence shows that that was not the case. When we intervene in response to the recession, it is very much because the interests of ordinary, hard-working men and women who do their jobs faithfully, day in and day out, are at the heart of our concerns. There is sometimes confusion about that: when people see us intervening in the banking system, or see us acting as an insurer or a guarantor of lending risk, they may feel that we are doing that purely because we feel concern for the banks, or indeed the investment bankers who took some of the decisions that led to the problems that we face, but that is not the case.
We intervene because a properly functioning banking system is an essential prerequisite of a modern economy. It is a basic necessity for companies that employ millions of people. Of course, banks are the home of the savings of the hard-working men and women who are at the heart of our concerns, and the home of the savings that
those who have retired have built up over the course of their life. Although the intervention is in the banks, the concern is not for the bankers but for those who have invested their trust and their savings in the banks.
The same is true of the other measures that we have taken in response to the recession. We have taken a dual approach to the downturn, which involves both tackling its causesthe international banking crisis and the lack of adequate lendingand dealing fairly with the consequences. That means providing the right support for people and businesses. The Bill is concerned with support for people who are at the sharp end of what is happening in the downturn. For example, with regard to the credit crunch, we believe it is important to try to maintain lending to businesses, so that they can keep employing the people with whom the Bill is concerned, as well as lending to households, which is vital for growth and jobs.
The health of the economy also matters to banks, as growth and jobs determine whether borrowers can repay their loans, and whether the banks can make new loans. That is why the Government took decisive action in October and since then to ensure that the banking system does not collapse, and to ensure the certainty and confidence needed to get credit flowing again.
This is not just a British response. After the steps taken in October in the United Kingdom, similar action was taken by countries around the world. The detail of the response may differ from state to state, but across the world there is a common approach, which is to try to stabilise the banking system and engage in fiscal stimulus in order to restore confidence, get credit moving and ensure that the recession is shallower and less long-lasting than it might otherwise be. Our response is not just national; it is also about calling on other Governments to join us in taking action to get credit flowing again, because that is central to getting the world economy moving. Here in the UK, we have announced a number of measures to help businesses and employment. That is about delivering real help to businesses that are in urgent need of credit, which is important if we are to stop the job losses to which the Bill is designed to respond.
Mr. Dismore: My right hon. Friend is setting out a cogent case on the macro-economic position and the Governments overall policy, but will he nose his speech into the Bill? The Bill is not a red flag-waving measure; there is not a great deal of red meat in it. It is a modest measure. Will he please get on to the Bill, and say what he objects to in it, rather than giving a great macro-economic description of what is going on in the wider world?
Mr. McFadden: I will of course come to the specifics of the Bill, but the macro-economic context is important. I began my remarks by cautioning Members, and my hon. Friends in particular, not to judge the Governments response, or think that the public should judge the Governments response, to the recession purely in terms of our response to the Bill. That is why the wider context is of importance. I have great sympathy for the concerns that my hon. Friend the Member for Chorley outlined in his opening speech. It is absolutely right that working people should be at the heart of our response to the credit crunch. However, the issue has to be seen in a wider economic context.
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