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Lord Henley: My Lords, I wish to begin with a point made by my noble friend Lord Campbell of Croy. He asked for confirmation that in due course the Government

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will reduce the threshold. Obviously, I cannot give my noble friend that assurance but I can say that we are committed to having a review after four or five years, as he knows full well. If the review is to be of any substance I cannot comment on its likely outcome, but obviously we will look at all the available options. If after such a review it is believed to be desirable to reduce the number we would be quite prepared so to do.

I shall deal with the amendments in order, beginning with Amendment No. 17, which was introduced by the noble Baroness, Lady Hollis. It would make Clause 4 subject to the provisions of Clause 8. The amendment is intended to be taken in conjunction with the substantive Amendment No. 41. The effect would be to make sure that the definition takes account of the intended Amendment No. 41.

That amendment at the very least introduces considerable uncertainty; uncertainty for the employer with fewer than 20 employees and uncertainty for disabled people. On the one hand, employers with fewer than 20 employees will have a duty not to discriminate against people with disabilities. On the other hand, they will not have to do anything to remedy any substantial disadvantage a disabled person may experience.

The clause as currently drafted is perfectly clear. It recognises that small firms would face particular difficulties in complying with this complex and innovative legislation and excludes them from the employment part of the Bill. As my noble friend Lord Mackay of Ardbrecknish noted during the Committee stage of the Bill, small firms would face two burdens if they were not exempted from this part of the Bill. The noble Baroness, Lady Hollis, based her argument on those two burdens. They were the cost burden and the burden of administering the Act, understanding it and keeping it in mind on the few occasions when they might need to recruit a disabled person. The noble Baroness's amendment fails to address the latter burden.

That said, there is nothing in the Bill that prevents small firms employing disabled people and we will be promoting the employment code of practice to small firms and encouraging them to comply.

I turn to Amendment No. 30, which would introduce a new justification making it possible for employers with fewer than 20 employees to treat a disabled person less favourably if to do otherwise would put their business at risk.

I believe that the noble Baroness is aware that Clause 8 of the Bill exempts employers with fewer than 20 employees from the employment part of the Bill. We have included this exemption for a good reason. Small firms would face particular difficulties in complying with what I have described as complex and innovative legislation. The noble Baroness spoke of that regulatory burden. I have to say that many small firms do not have specialist personnel who can deal with the adjustments that a particular disabled person might need, nor are they likely to have access to the expertise required to make and maintain such adjustments. Furthermore, it could be disproportionately expensive for small firms to comply with these requirements when they might only occasionally affect any given small firm.

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I accept that small firms are covered by Part III of the Bill, but I believe that they will have disabled customers much more often than disabled employees or disabled applicants for work. I believe that they would be able to remain familiar with Part III much more readily than they would with the complex parts of Part II. A disabled applicant might contact a small employer only on an average of every year or so. It would be very hard—unreasonably, we believe—for firms to remain sufficiently in touch with their duties under Part II in order to have a chance of avoiding a tribunal complaint. Moreover, the degree of reasonable adjustment needed for a disabled customer under Part III is likely to be less than that required for a disabled employee under Part II.

There is a great deal of difference between what a business might have to do to help a disabled customer who might spend no more than a few minutes in a shop and what might be expected by way of help for a disabled employee who might be working for many years for the employer.

I believe that this amendment sends quite the wrong message. The Bill as drafted strikes a proper balance by recognising the legitimate interest of disabled people and the reality of the problems faced by employers. The noble Baroness's amendment implies that the obligations in the Bill could be so onerous as to bring small firms to the brink of jeopardy. Further, it would imply that larger firms can actually be put in jeopardy because it provides no similar justification for them. The amendment is an example of somewhat outmoded thinking. It ignores the realities of the burdens that may be placed on businesses and gives no thought to the implications. The noble Baroness has not adequately addressed the question of whether the Bill sends the specific message to employers that the obligations in it may bring their businesses to the brink of failure.

In practice, of course, any damage to employment prospects would be caused long before this precarious state has been reached, when difficulties of the kind indicated in the amendment would mean the business had to stop expanding and taking on any new recruits, including disabled people.

In any event, the amendments passed earlier by the House to Clauses 5 and 6 allow employers to justify less favourable treatment if the reason is material to the circumstances of the particular case and substantial. I can think of no more substantial a reason than the business being put at risk. This would apply to a firm of any size. The noble Baroness's Amendment No. 30 is unnecessary even in the context of small firms being included in the employment provisions.

I turn to the amendments in the name of the noble Lords, Lord Swinfen, Lord Rix and Lord Addington. Amendments Nos. 42 and 44 ignore the burdens that the employment provisions of the Bill could place on small employers. The Bill already provides for a power to vary the threshold by regulation. That will enable us to ensure that any changes made, and their timing, take account both of experience gained in operating the new right and other relevant circumstances. Such circumstances could include, for example, economic conditions affecting small firms at the time. We would, of course, look

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carefully at any evidence that smaller firms were treating disabled people unfairly and would take that into account in the review which we are committed to undertake.

Lord Renton: My Lords, I thank my noble friend for giving way. I wish to make a point that is quite relevant. When making the regulations for exemption will it be possible to deal with one particular type of industry differently from another type of industry?

Lord Henley: My Lords, I do not know whether I can answer that point immediately. I would like to consider it, just as I would the general point that he asked us to consider during the summer; that is, whether we could look at other definitions of businesses which might allow for the point that my noble friend was addressing.

In relation to earlier proposed amendments to the clause I have argued about the disproportionate impact on very small companies. We accept that the concept of reasonable adjustment would take costs into account. But that does not take into account the amount of work that a given small employer would have to do to become familiar with the legislation which he or she might never, or very rarely, need to apply within that firm. It contains quite difficult concepts to protect disabled persons against discrimination—concepts which are unnecessary under sex and race legislation and therefore unfamiliar to employers. It would also be burdensome to investigate and decide on the appropriateness of the adjustments. Even in health and safety legislation, thresholds have been used to exclude small firms from provisions which are administratively onerous.

I accept that noble Lords have argued that they are still excluding small firms but are merely changing the starting point from 20 to 10. I believe that my noble friend Lord Swinfen talked about a common sense definition of a small firm having 10 employees rather than 20. There is a degree of subjective judgment about that. There are a number of different definitions of a small firm. My noble friend quoted the example of the Americans with Disabilities Act which now has a threshold of 15, although it was originally 25. The Department of Trade and Industry uses the figure of 200; the European Union uses 150; and the Companies Act, for some accountancy purposes, uses 50. The noble Lord, Lord Carter, may remember the Statutory Sick Pay Act of some five or six years ago. The definition that was eventually arrived at in that Act did not include the number of employees at all but was based on the size of the national insurance bill. Therefore, it is extremely difficult to get those matters right.

However, it is our clear view that the figure of 20 which we are used to in disability legislation—the Disabled Persons (Employment) Act 1944—is about right. Firms with more than 20 employees already have experience of that legislation. But the matter can be reviewed in years to come. Therefore, I hope that my noble friend will not press that amendment.

With Amendments Nos. 46 and 47 my noble friend Lady O'Cathain is hoping to ensure that before the Secretary of State seeks to change the threshold in Section 8 by order, she must hold a review, whether the

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order is to be made within the first four years of the operation of the section or at any later time. At the moment, the Bill ensures that a review would precede such an order before the fourth anniversary. It also ensures that a review is held immediately after the fourth anniversary if one has not been held beforehand. I believe that my noble friend has a point. It seems to me that the Government should always hold a review before deciding to change the threshold, and so if she will withdraw these amendments, I am prepared to consider the issues and return with any necessary amendment at Third Reading.

On Amendment No. 48, however, I am not sure that I can be quite so helpful. In the first part of the amendment, my noble friend is seeking to ensure that any review takes account of the effects of Part II of the Bill and regulations made under it—such as any on the duty of reasonable adjustment—on the employers who would be brought into coverage by Part II should the threshold be lowered. However, the second part of the amendment commits the Secretary of State to amending regulations to reflect the circumstances of such employers. The Government are not prepared to commit themselves to being obliged to change regulations when it is not clear who should judge it necessary to make changes and when we are not convinced that there would be circumstances that changes to regulations, because of the inclusion of smaller firms, would be necessary.

I can give my noble friend these assurances. It is inevitable that any decision on whether to make an order reducing the threshold will have to take due account of the effect this would have on the employers who would be brought into coverage. That must be an important factor in any decision of this kind. Secondly, if an order were to be made, it would also be appropriate to consider the effects of the current regulations and whether adaptations were required or provision for any special circumstances that might be thrown up by the extension of coverage. But it seems much more likely that we would wish to change—and much more helpfully so—the code of practice. This would obviously be reconsidered at the time if, as I say, we were to be convinced that it was appropriate to lower the threshold following a review. In the light of those assurances, I hope that my noble friend will withdrawn her amendments.

I hope that I have dealt with all the points raised principally by the noble Baroness, Lady Hollis, and other noble Lords and I hope that they will feel that on this occasion it is not necessary to press the amendments to a Division.

4.30 p.m.

Lord McCarthy: My Lords, I am trying to follow the Minister's argument. I think that he said that it is all right to impose the burden of non-employment requirements on small employers because they would have many disabled customers. However, it is not all right to impose the employment conditions on them because they might have few disabled employees. He went on to say at the same time that it is reasonable to impose the non-employment burdens because that

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would not cost much and it was not much bother, but if there are a lot of disabled customers, surely it would cost quite a lot and cause quite a lot of bother. He then went on to say that it is unreasonable to impose the burdens in relation to employment conditions because it would cost a lot and cause a great deal of bother, but he has said already that there would not be many disabled employees. How does he square all that?

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