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Lord Sainsbury of Turville: This amendment seeks to amend the reimbursement rate of statutory maternity pay payable to large employers. The current rate of reimbursement is 92 per cent. By replacing that rate with 105 per cent, the noble Lord wants to ensure that all employers can get back all the statutory pay they have paid out, plus a little extra. The noble Baroness would be a little less generous but, as she said, politics is the art of the possible, or perhaps the impossible in this case, and her amendment would extend reimbursement to just 100 per cent.
It may be helpful if I start by explaining that when the SMP scheme was first introduced in 1987, all employers received full 100 per cent plus compensation for the employers' share of any national insurance paid on SMP. As the noble Lord said, the 92 per cent reimbursement for larger employers was introduced in 1994. However, we see no reason to change that.
It is perfectly reasonable to expect larger employers to demonstrate their commitment to employees taking leave to care for new families by funding a small amount of payments made to them while on maternity leave from work. After all, those employees who qualify for statutory maternity pay from their employer will have started work for that employer before their pregnancy began and many employees will have worked for the employer and contributed to the success of his business for some years before starting a family.
The contribution employers make to maternity pay is an investment for the future as mothers will be more likely to return to work if they have had an adequate period of time to recover from childbirth and arrange suitable childcare. Many of the best employers recognise this by topping up the statutory scheme and are happy to bear the cost of so doing.
Perhaps it would be helpful if I were to give you an idea of the kind of money we are talking about here. Let me focus on an individual woman earning £255 a week on average. She will be entitled to SMP worth £229.50 for the first six weeks of her maternity leave and then 20 weeks at £100 a week, a total of £3,377 in SMP. The employer is also liable to pay employer's national insurance contributions of £143.54 on those payments so, altogether, he pays out £3,520.54. Currently, he can recover 92 per cent of the SMP paid out, so he gets back £3,106.84. If he could claim back 100 per cent as under the amendment of the noble Baroness, he would get £3,377—an additional £270. If he could claim back 105 per cent, he would get back £3,545.85, more than he has paid out in SMP and national insurance.
We feel that to enable all employers to recover their payments in this way is not right. It is different for small employers whose cash flows may be sensitive to even a modest additional cost. We believe it is right to protect them and that is why we are extending small employers' relief from April 2002 to bring in another 10,000 small and medium-sized employers a year. From 2002, 60 per cent of the employers who pay SMP in a year (or 40,000 out of 70,000 employers who pay SMP in a year) will qualify for small employers' relief and be entitled to receive 100 per cent reimbursement plus compensation for employers' national insurance.
You will note that the recovery rate for small employers is divided into two elements—100 per cent reimbursement of the SMP paid out and additional compensation which is intended to compensate the employer for the employer's share of national insurance contributions paid out on SMP. At the moment, the compensation rate is 5 per cent but in April 2002 is being amended to 4.5 per cent. This rate is reviewed annually and, if appropriate, adjusted in line with a long-standing formula that is set out in regulations.
The noble Lord's amendment is in fact flawed. By replacing 92 per cent with 105 per cent, the amendment would ensure that larger employers would be able to recover more than smaller employers whose reimbursement would still depend on the two separate elements of 100 per cent reimbursement of SMP plus an additional amount which is subject to annual review. I do not believe that this is the effect which the noble Lord wishes to achieve.
The amendment of the noble Baroness still leaves employers somewhat out of pocket by ignoring the national insurance costs. I am not sure if that is her intention. However, the real issue is whether or not a larger employer should be expected to make a contribution to help their own employees. I believe they should.
Overall, with the improvements we are making to both statutory maternity pay and maternity allowance, the Government will be investing an additional £355 million a year in payments to pregnant working women. In total each year we will spend nearly £1 billion on maternity payments. The additional cost to a large employer in extra SMP and national insurance is around £25 million. Overall we are asking them to meet around 7 per cent of the costs of SMP payments for their employees.
As I have explained, we think this is reasonable—as did the previous Conservative government—for employers to meet a small amount of the costs of supporting their employees on maternity leave. I therefore invite the noble Lord to withdraw the amendment.
Lord Henley: I am sorry that my amendments were protective and I will certain have a further look at them to see how they can be made non-protective before I come back to the subject again on Report. I am grateful to the noble Lord for spelling out just how much the amendment would cost, and I take it that last figure of the cost to the employers of about £25 million indicates what the cost to the Government would be if the amendment of my noble friend, Lady Miller, were to be accepted. Therefore, I presume that the costs of my amendment being accepted would probably be something like half as much again.
It is always important to know what the costs of any amendment would be. Certainly back in my days in social security when the Lords seemed not to believe me—I did seem to suffer defeat after defeat—one used to keep a tally of the costs of all the amendments of the Opposition, so that one could point out occasionally how irresponsible they were being in terms of the expenditure of public funds. Similarly, on this occasion I will consider this very carefully before I come back to it. I am grateful for the explanation given to me by the noble Lord.
Lord Sainsbury of Turville: Can I just point out so that everyone understands, the £25 million is really just the result of the improvement in the terms that we are talking about. If the noble Lord's amendment were accepted, it would in fact cost £120 million.
Lord Henley: I understand. I appreciate that £120 million is a much bigger sum than £25 million, and I am always highly responsible about use of government funds. Nevertheless I will consider this amendment and that of my noble friend very carefully to see where and how they are defective before I make any decision as to whether to come back to them at a later stage. With that in mind, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Miller of Hendon moved Amendment No. 58:
- Page 30, line 25, at end insert—
The noble Baroness said: The Bill introduces a large number of additional burdens on employers, particularly small employers, because the Government do not seem to realise the difference between what the Americans call a "momma and poppa" business and giant firms such as Tesco, Ford and Zeneca, for example. The Bill also confers additional rights and some additional responsibilities on employees. Nothing comes free in this field, such as the provisions that are included in the Bill.
I would like to remind Members of the Committee that the Opposition have in general terms welcomed the principles of the Bill, and in both Houses promised the Government their support. It does not detract from that support when we ask for an accounting of the cost to commerce and to workers of the new measures. I am not detracting from that support when I point out to the Committee some of the consequences that will or may ensue from the implementation of the provisions of the Bill.
Those consequences could include: greater wage expense to employers, with consequential loss of international competitiveness and trade; reduction in the number of jobs or even the potential and possibly unprovable discrimination against employing certain categories of people; an increase in administrative costs to employers; an increase in the number of officials and staff at ACAS to administer and enforce the new regulations—I will be returning to the ACAS situation later—and a rash of increased litigation before tribunals engendered by the currently growing compensation culture, although on the plus side the conciliation procedure proposed in the second schedule may head off some of that, as may my amendment to Clause 23 if the Government or the Committee accept it.
Of course, this list is not exhaustive. I simply wanted to illustrate the point that I have just made; namely, that the benefits of the Bill will not come free of cost and consequences. The Government have introduced the Bill without, I believe, any idea of what the cost will be to employers and employees alike; nor do they have any idea of what the benefits will be in cash terms. The personal social benefits to employees are perhaps much more easily discernible.
The amendment seeks simply to require the Government to account for what is happening and to show that the benefits obviously outweigh any of the
Lord McCarthy: I support a subsequent amendment tabled by the noble Baroness, Lady Miller, which relates to ACAS because at least it is relatively precise. I am not against attempts to try to work out the cost of Bills. In fact, we are now supposed to do that. However, she and the Government should understand that these assessments cannot be made with any degree of accuracy, and not only because the Treasury cannot count—we all know that that is true.
If one looks, for example, at the lunatic attempts in Routes to Resolution to assess what would happen if we managed to get rid of 40,000 cases, one will find that it is absolute nonsense. The figures are all based on averages of averages of guesses. Those assessments are quite silly. The figures—even more exaggerated—produced by the CBI do not fit with those produced by other employers' associations. Those figures always look on the downside because, in principle, they should be measurable. The data are not available but they should be measurable. They never look at the upside because no figures are available. One cannot compute what that might do for the welfare, security, morale or productivity of workers. It is an act of faith. We can rearrange the figures, but we really must not believe in them.
"167A REQUIREMENT ON THE SECRETARY OF STATE TO ASSESS IMPACT ON EMPLOYERS
(1) The Secretary of State shall, prior to the laying before Parliament of regulations under section 167(1), publish an assessment of the impact on—
(a) employers in general,
(b) employers of five or fewer employees, and
(c) employees in general,
of the provisions of Part 7.
(2) The Secretary of State shall, on each anniversary of the date of publication of an assessment under subsection (1), publish a revised and updated assessment under subsection (1)."
7 p.m.
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