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We have set out an enterprise finance guarantee scheme—a £1 billion loan guarantee scheme, delivered through the banks, which will enable additional lending to businesses up until the end of March next year. The scheme provides a 75 per cent. Government guarantee on individual loans to viable businesses with less than £25 million of turnover through approved lenders. Some 26 businesses have taken up the scheme so far, with more in the approvals process. That is important in getting new credit to businesses, so that they can continue to operate and avoid the redundancies that the Bill seeks to address. That scheme is already operating. Loans are being made, and more than 80 per cent. of all applications registered by the banks are eligible for support.
The scheme is subject to sectoral restrictions, but my Department has succeeded in lifting restrictions from certain sectors, including the automotive, medical, health services and shipbuilding sectors. It is backed by the working capital guarantee scheme, which is on a larger scale. That scheme is not one to which individual applications are made; it allows banks to share more risk of lending with the Government, and thereby increase funds for lending. It involves businesses with a turnover of up to £500 million a year.
The guarantee is available to participating banks, and we are currently in discussion with Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland. They can use the guarantee to cover portfolios of lending to sound, creditworthy businesses with an annual turnover of up to £500 million. By guaranteeing portfolios of working capital, the package will release capital held by banks against those portfolios—capital that those banks have, in turn, agreed to lend to businesses with turnovers of less than £500 million. That will help to ensure that banks do not reduce or withdraw working capital lines on renewal; as those lines are short-term, they can be easy to cut. It will also ensure that banks have new capacity to lend to UK businesses, which are suffering from the withdrawal of certain lenders from the market. Those credit schemes are particularly important to restoring confidence and trying to avoid redundancies.
That is an important part of our response to the recession, but I come now to the specific response for people affected by job losses and what we are doing for them. A number of people are affected by job losses and short-time working. In essence, there are two elements to the context of the Bill: the economic circumstances that we face, and what we said we would do about the issue before the last election. I assure my hon. Friend and the supporters of the Bill that the issues raised by it are under consideration, although he will understand that I cannot set out the conclusions of Government discussions on these issues.
I share my hon. Friend’s belief that people should have a fair deal at work, and next month we will see further improvements to people’s employment rights through, for example, the extension of paid leave and the introduction of extended rights to request flexible working, to help people to balance the responsibilities of work and family life. I hope he does not mind me saying that, during the past week or so, we have discussed the fact that when pressing for a new or additional measure it is important not to ignore what the Government are doing for working people, which includes some significant changes that will come into force next month.
Mr. Hoyle: I am more than happy to put it on the record that I have been in discussions with my right hon. Friend, and with the Secretary of State. Quite rightly, we have been through this, and certain objections have arisen. I think the Minister will agree that we have to go a long way to meet those, which is why the Bill has changed. We were still in discussion as late as Wednesday night.
Mr. McFadden: We have had constructive and positive discussions, which is because we share an aim—
Mr. McFadden: We share a common aim, which is to ensure that people at work get a fair deal in our response to the recession. The context should be wider than the measures my hon. Friend proposes in the Bill.
This Government have introduced a number of measures that were attacked by the hon. Member for Huntingdon (Mr. Djanogly), but which I stand by. They include the extension of paid leave, the extension of flexible working, measures to help people to balance the responsibilities of work and family life, and measures to get lending flowing in the economy so that we can minimise the number of people who lose their jobs as a result of the recession. It is important to set discussion of the Bill in that context because, whatever happens to it—whether it proceeds or not—concern for working people will still be right at the heart of the Government’s response to the recession.
Mr. David Clelland (Tyne Bridge) (Lab): I am listening carefully to my right hon. Friend, but what is it about this Bill that would prevent the Government from pursuing those laudable measures in any case?
Mr. McFadden: The Bill would not block those measures, and I do not suggest that it would. I say to my hon. Friend, my hon. Friend the Member for Chorley and others that it is important that we remember those measures, talk about them and ensure that the public understand that the Government have a response to the recession that has their interests at heart.
I shall deal now with redundancies because they are at the heart of what we are talking about. There is no doubt that redundancies are growing in number at the moment. Sadly, that is a feature of the recession not only in this country but right around the world. In the fourth quarter of 2008, there were 263,000 redundancies—significantly up on figures from recent years, although well below the levels of the early 1990s. Whether the numbers are higher than those of the recent past, or lower, each redundancy is still the story of a career cut short, not out of choice but because of economic circumstances, with all the worry and uncertainty that that causes for the people involved and their families. It is important that the Government do everything they can to help those individuals and the businesses that they depend on for employment.
Redundancy can occur for a number of reasons and it is usually implemented only after alternatives have been considered. No business wants to lose people that it does not need to. We have heard stories in recent weeks, for example, of companies reducing their employment through voluntary schemes, by restricting
or suspending external recruitment, by reducing or eliminating overtime, or by seeking applications for early retirement. Employers can also try to avoid redundancy by maximising redeployment and training opportunities for those likely to be affected in the organisation. Sometimes, however, all those avenues are exhausted and, in such cases, employers turn to compulsory redundancy programmes, which is where people’s statutory entitlements come to the fore.
There are two statutory definitions of redundancy, which are to establish the entitlement to a redundancy payment and to establish the right to be consulted collectively. Those are important because they are used to identify who is entitled to a redundancy payment and the amount that they will receive. If the employer is intending to make 20 or more employees redundant at one establishment during a 90-day period, the law requires the employer to consult employees. If the dismissal is wholly or mainly because of closure of the business, or a declining need for employees to do the work, the employee may be entitled to a redundancy payment.
Collective redundancies, as I said, occur where the employer needs to make 20 or more employees redundant at one establishment within a 90-day period. Under part 4 of the Trade Union and Labour Relations (Consolidation) Act 1992, there is a specific requirement in such circumstances for employers to consult appropriate representatives of the employees who may be affected. That means that where employees are represented by an independent trade union, the employer must consult a trade union official. Where employees are not represented by a trade union, the employer must inform and consult other appropriate or elected representatives. Issues that should be included in the consultation are the reasons for the proposals, the number of employees it is proposed to make redundant, the proposed method of selecting the employees who may be dismissed and the proposed method of calculating any redundancy payments that the employer proposes to make.
If an employer fails to meet the requirements of the legislation governing collective redundancies, an employee or the employee’s representative may lodge an application for a protective award with an employment tribunal. That award focuses on the employer’s failure to comply with the consultation requirements under the legislation. Employers should undertake meaningful consultation with a view to reaching agreement with employees’ representatives. It is not enough simply to go through the motions of a consultation. The consultation should be fair and transparent, and be a two-way process. It should begin when proposals are at a formative stage and encourage an ongoing dialogue between employers and employees. The employer is also required to notify my Department of the projected redundancies.
Where it is proposed to make fewer than 20 employees redundant, employers are not under a specific legal obligation to consult employee representatives or to notify my Department. However, employers must warn and consult individual employees who are to be dismissed, adopt a fair basis for selection and take reasonable steps to redeploy affected employees.
Mr. Dismore:
I am sorry to stick my nose into a fascinating speech, but the process for deciding who is made redundant and how it should be administered has
nothing to do with the Bill and the calculation of the weekly pay element of the multiplicand. What does my right hon. Friend object to about that?
Mr. McFadden: I will certainly come to how redundancy pay is calculated and how it has changed over the years, but I believe that it is fair first to set out the context of the redundancy scheme and how it works.
Once the employer has identified how many employees are at risk from redundancy, the next step will be to identify the pool from which to select those to be made redundant and develop the selection criteria. We believe that, as far as possible, employers should use objective selection criteria that are precisely defined and can be applied independently.
Mr. Hoyle: My right hon. Friend might not be aware that Sky News is carrying a story that the Prime Minister is more than happy with the Bill. Will he reflect on that, and does he now believe that he can support the Bill? Instead of skirting around the outside of the Bill, will he now go into the depth of it?
Mr. McFadden: Sadly, Sky News is not available in the Chamber, and the Prime Minister has not communicated that to me.
Employers should, as far as possible, use objective selection criteria that are precisely defined and can be applied independently. Objective criteria should also help a business to maintain a balanced work force after the redundancies have been carried out. Some examples of selection criteria could be attendance, disciplinary records, experience, capability, relevant skills, competence and so on. It is important, as I have said, that those criteria are applied in an objective and even-handed manner, as that will help to avoid any complaints of unfair dismissal or discrimination on prohibited grounds.
None of that decreases the pain of individuals and their families when a redundancy takes place, but there is a process in place to make the system as fair as it can be in what are always very difficult circumstances. The system is also designed to ensure that employees are not selected for redundancy because of their sex, marital status, race, disability, religion, belief and so on. Selection for redundancy on the basis of trade union or health and safety activities, or because the employee was pregnant or on maternity leave, is also unlawful. Part-time employees and fixed-term workers are also protected from being discriminated against during the selection process. Selecting employees for redundancy for such reasons, if challenged, would result in an unfair dismissal case. The employer would have to show that the selection was conducted fairly and that there had been an objective analysis of the gathered information about the pool of employees.
It is also important that, when possible, an employer proposing to make an employee redundant should attempt to offer suitable alternative employment within the organisation. An employee made redundant could be found to have been unfairly dismissed if a suitable alternative position existed and was not offered to them.
Once the employer has selected the employees to be made redundant, he must give them notice of dismissal by reason of redundancy. The length of the notice period will depend on the employees’ contracts of employment, subject to the statutory minimum periods. Those are at least one week’s notice if they have been
employed for between one month and two years, one week’s notice for each year if employed for between two and 12 years and 12 weeks’ notice if employed for 12 years or more. Once an employee is given notice of dismissal because of redundancy, they are entitled to reasonable time off during working hours to look for another job or to make arrangements for training or future employment. The time off must be allowed during the notice period, although employees are entitled to time off in that way only if they have two years’ continuous employment with the employer.
Mr. Clelland: I cannot help noticing that my right hon. Friend has a considerable sheaf of papers in front him. If the Prime Minister does support the Bill, will that in any way alter the content of the Minister’s speech? Should he be sending out a runner to find out what the latest news is?
Mr. McFadden: I think that my hon. Friend will find that I am always happy to be guided by the Prime Minister, as are all Ministers of the Crown.
I was talking about how the redundancy scheme works. Upon making any redundancy payment, the employer must give the employee a written statement indicating how the payment has been calculated. If the employer fails to provide that statement without reasonable excuse, they could be guilty of an offence and fined up to £200. The Business Link website, which is an important source of information for all employers and the general public, particularly during the recession, hosts information that will help employers to calculate statutory redundancy payments due to their employees and produce written statements for each employee showing the amount of redundancy pay and how it was calculated.
It is automatically unfair and sex discrimination to select an employee for redundancy for a reason connected with maternity leave, birth or pregnancy. If the reason for redundancy is connected with other family leave—paternity leave, parental leave and so on—that is automatically unfair and may be sex discrimination.
I have outlined an individual’s rights when faced with redundancy. As I said, redundancies have sadly risen in recent months. I told the House a few moments ago that, in the last quarter of 2008, there were more than 260,000 redundancies reported in the labour force survey, which is the highest level for some years. The quarterly redundancy figures in the recession in the early 1990s reached about 350,000—significantly more than we are now experiencing—but I do not seek to deny the urgency of the redundancy situation facing many people or the good motivation of my hon. Friend the Member for Chorley in bringing the matter before the House and asking what can be done.
Past recessions were sometimes felt in different ways around the country. At the moment, the highest proportions of redundancies are occurring in the south-east and the west midlands. As an MP who represents a constituency in the west midlands, I am sad to say that the largest increase in redundancies since the fourth quarter of 2007 has been in that region. The regional redundancy rates show that the north-east now has a rate of 15.8 per cent., up from 6 per cent. in the fourth quarter of 2007. That is followed by the west midlands, Wales, the north-west and Yorkshire and the Humber. The west midlands has seen the largest increase in recent times.
I am afraid that redundancies are increasing among all age groups. They are all experiencing more job losses compared with the same period a year ago. However, it appears that those in mid-career are often the worst hit. Men are experiencing more redundancies than women. Almost 70 per cent. of all redundancies are among the male work force. That figure, too, is increasing, and relatively young men are experiencing significant numbers of redundancies. The situation is affecting various regions and groups of people.
Sadly, people with lower levels of academic qualification are also being badly affected by redundancy. There has been an increase in redundancy across all qualification levels, but the biggest increase in the fourth quarter figures that I have quoted was among those with no qualifications. This reaffirms our view that one of the significant challenges in the labour market is to reskill and re-equip workers and to offer them one-to-one help in training. That is a significant part of our response to the recession, which is why I asked the hon. Member for Huntingdon whether he supported such measures in that regard and about his stance in opposing the Bill.
People with higher qualifications—those with NVQ level 4 or above—accounted for 27 per cent. of all redundancies before the recession really began to bite, but the proportion is 19 per cent. in the most recent figures. There has been a major increase in the number of job losses for those with qualifications that are not at degree or higher education level. Job losses for people in those groups increased from 9,000 in the fourth quarter of 2007 to 28,000 in the fourth quarter of 2008.
Probably the greatest concentration of job losses is in the construction industry, which saw an increase of just over 38,000 over the period—from 9,500 job losses in the fourth quarter of 2007 to 48,000 in the fourth quarter of 2008. The industry now accounts for 18 per cent. of all recent redundancies, up from 9 per cent. a year before. We also have large proportions of redundancies in manufacturing, and almost a fifth of all redundancies are in part-time positions. Some 49,000 part-time employees lost their job in the fourth quarter of 2008, up from 17,000 a year before.
One of the silver linings in this picture is that the labour market is still dynamic. Most people who lose their jobs find another one within six months. Nevertheless, it is important to set out to the House that this problem affects significant numbers of people and important industries in our country. We are, of course, particularly concerned with the long-term unemployed; that is why we have concentrated much additional help on those who have been unemployed for six months or more. We know that the longer people are outside the labour market, the more difficult it will be for them to find a new job.
In the constituency of my hon. Friend the Member for Chorley, and certainly in my own, memories are still fresh about the devastation caused to communities in the 1980s and the 1990s, when whole industries were wiped out. It is important to say that we will not take the same approach to this recession as was taken by the previous Government to the recessions that happened before.
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