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Lord Hodgson of Astley Abbotts: My Lords, I thank the Minister for his explanation. As this is a separate piece of parliamentary business, I declare my interest as a non-executive director of a regional brewer that operates on a tenanted or managed basis about 1,500 public houses.

As I understand it, and as the Minister explained, this revocation order arises because the original beer orders no longer have any force. They applied to brewers and brewing groups that owned more than 2,000 pubs, but none of them any longer fulfils that condition. The Minister explained the background to the emergence of "pubcos" and the change in the retail trade, which we have been discussing during proceedings on the Licensing Bill.

In debate in Standing Committee in the other place, the Liberal Democrats seemed to get very excited about the impact of this revocation. Whatever the rights and wrongs or strengths and weaknesses of micro-brewers, regional brewers or national brewers, their relative position is not affected by the revocation, as no brewers fall within the provisions. I may be missing something; if I am, the Minister will, no doubt, enlighten me. Against that background, it is a de-regulatory measure, and we support any measure of de-regulation.

I shall ask the Minister one question and draw his attention to one lacuna. The question concerns the parallel statutory instrument, which is to be revoked by the negative procedure. It is clear that the whole instrument is going. The Minister said that about three provisions remained and that, after the Whitbread sale, it was to be revoked in its entirety. Am I right in assuming that?

The lacuna relates to the impact of the progressive beer duty, to which the Minister referred, on small, family brewers. It has been brought to my attention that the progressive beer duty applies only to breweries that produce fewer than 30,000 hectolitres a year. That is the size of a micro-brewery. As I understand it, the European legislation permits a maximum of 200,000 hectolitres per annum. That ceiling is applied widely in European Union countries. The limit of 30,000 hectolitres is a

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significant barrier to growth in the micro-brewery sector. It has been calculated that a micro-brewery producing 30,000 hectolitres would have to produce 45,000 hectolitres—50 per cent more—to achieve the commercial return to compensate for the loss of the duty abatement.

There are, of course, revenue implications. As I understand it, the full cost, if the figure were to be raised to 200,000 hectolitres, would be about 3 million per annum. However, it might be worth the Minister's while to consider it, in the interests of stimulating economic activity and encouraging diversity and consumer choice—I have heard him speak of both from the Dispatch Box many times—especially given the 12 billion annual revenue from the sale of alcoholic drinks.

I look forward to hearing the Minister's comments. We support the proposal to revoke.

Lord Addington: My Lords, as has been said, some of my colleagues in another place got quite excited about the issue. Basically, they thought that we were getting rid of a system that had worked. I think that that was their attitude to the move. The Minister has made a convincing case that we are dealing with a change in culture, but I still appreciate the view expressed by my honourable friends that the system has worked as a long stop and to stop the problems from recurring. However, I shall not delay the House.

I want to support the Conservative Front Bench in their new-found Euro-enthusiasm with regard to micro-breweries. The suggested approach sounded sensible and, if it is a small loss to the Treasury, as the noble Lord, Lord Hodgson of Astley Abbotts, suggested, our palates might gain from greater diversity in our national alcoholic product. We could look forward to that. It is probably a matter for another day, but the noble Lord made a good point. Other than that, I have no strong objection to the order.

Lord Sainsbury of Turville: My Lords, I am thankful for the points made.

The noble Lord, Lord Hodgson of Astley Abbotts, is right: the move does not affect anyone. The concern expressed in the other place was that we might go back to a situation in which a few brewers dominated the market. That is extremely unlikely, but, should it occur, the Director-General of Fair Trading has strong powers under the Competition Act 1998 to take action. The noble Lord is also right to say that all the beer orders will go. The final decision was that we should get rid of them in their entirety on the grounds of de-regulation.

As far as duty relief for small brewers is concerned, a judgment simply has to be made on the level at which it should be put. I believe that the view was taken that if brewers produce 200,000 hectolitres and have a turnover of 25 million they can no longer be said to be small brewers. In these particular circumstances, it is the small brewers that we want to help.

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As I said, I believe that this is a sensible and useful piece of deregulation. I am pleased that it has the support of the House. I commend it to the House.

On Question, Motion agreed to.

Flexible Working (Procedural Requirements) Regulations 2002

3.55 p.m.

Lord Sainsbury of Turville rose to move, That the draft regulations laid before the House on 21st November be approved [3rd Report from the Joint Committee].

The noble Lord said: My Lords, the subject matter of these regulations will be familiar to those who took part in the debate on the Employment Act earlier this year. I thank those who contributed to that discussion. The approval of the flexible working hours clause provided working parents with children under six, or disabled children under 18, with the right to request flexible working patterns and for their employers to have a duty to consider the request. Since that time, there has been a three-month public consultation on the draft regulations to ensure that the final details we are debating today are a true reflection of the views and concerns of all interested stakeholders.

There are two sets of regulations for this new right: the procedural requirements which outline the procedures which employers must follow are subject to the affirmative procedure and are being debated today. Once these have been approved we shall lay the second set, which are subject to the negative procedure and detail the eligibility criteria, the breaches of procedure and the level of compensation.

I should like to place those new regulations in the context of the other provisions that the Government have recently introduced as part of a package of measures for helping working parents. These include the extension and enhancement of maternity leave and pay, the introduction of paid paternity leave and the introduction of adoption leave and pay which mirrors maternity provisions as far as possible. Regulations on all those measures were debated and approved by the House last month.

Flexible working was highlighted as a key issue in the workplace when the Government consulted on the Green Paper Work and Parents: Competitiveness and Choice. Both employers and employees wanted flexibility that they could tailor to their circumstances rather than a fixed automatic right for parents to reduce their working hours. This was investigated by the Work and Parents Task Force, whose central objective was to design a legislative approach which built on existing best practice models, and to provide parents with opportunities for flexibility in a way that was both compatible with and beneficial for business. Key to this commitment was a focus on developing a policy designed to be specifically workable for small businesses.

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We identified parents with children under six and disabled children up to the age of 18 as being the group which faced the most challenges regarding the need to balance work and childcare responsibilities. For them the dissemination of best practice is simply not happening fast enough, which is why the Government are legislating in that area. We are aiming to create a minimum standard across the board and to speed up the process of cultural change in the workplace. However, we recognise that it is not only "natural" parents who face those difficulties. Therefore, those rights will be available to all working parents, including adoptive and foster parents, and their partners.

The regulations set out the detail of the procedure which employees and employers must follow when making and handling a request under the right. They set out the time periods for each stage of the process, allow for mutually agreed time extensions, and an automatic extension of up to 28 days where the employer is absent due to illness or annual leave.

The process is straightforward with both parties having responsibility for ensuring a satisfactory outcome. The employee has the initial responsibility to make their application in writing, specifying how they meet the eligibility criteria and the date from which they would like the new working pattern to start. They must also detail the working pattern that they wish to adopt, stating what effect they think it will have on the employer and how any such effect might be dealt with. The next step is for the employer to arrange a meeting to discuss the request and, if necessary, consider alternatives to the proposed pattern.

The regulations also allow for the employee to be accompanied at the initial meeting, and at any appeal meeting. The companion is defined as,

    "a worker employed by the same employer".

That allows for a local trade union representative to be the companion, but not outsiders to the business. This was a key concern of small businesses during the consultation and we believe that this definition is the closest to the recommendation of the taskforce, that the companion be,

    "a fellow employee, friend or appropriate recognised trade union representative".

Businesses and unions were unanimous in their concern that "friend" was too vague a term and so that has not been included in the regulations. However, in the interests of reaching a satisfactory outcome and to facilitate productive dialogue, we are encouraging employers through guidance to be as open as possible as to whom they allow as companion. Under Regulation 15, if an employer denies an employee the right to be accompanied, an employment tribunal can award up to two weeks' pay as compensation. This award is separate from the compensation that may be awarded for a breach of the procedure.

Employers can reject an application only on one or more of the eight business grounds specified in the Employment Act. In cases of refusal, the employer must set out his reasons fully in writing to the employee, with an explanation of why the grounds

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apply in the particular circumstances. Employees have the right to appeal a negative decision and can go to an employment tribunal where the employer has either breached the procedure set out in these regulations or has based the rejection on incorrect facts.

If a case reaches an employment tribunal, employers will need to demonstrate that they have followed the procedure and held a meeting and provided proper written explanation as to the grounds for refusal. The role of the tribunal will be to verify whether the procedure has in fact been followed, and to examine any disputed facts. Tribunals will have the power to send the case back to the employer for reconsideration and to order compensation where appropriate. They will not be able to overturn the business decision.

The level of compensation for a breach of procedure is detailed in the parallel regulations, Flexible Working (Eligibility, Complaints and Remedies) Regulations 2002, which will be laid once these regulations have been approved today. Compensation will be up to a maximum of eight weeks' pay, with a week's pay subject to a cap, currently set at 250. We believe that this level of compensation will provide an incentive for employers to take the request seriously and ensure that it is given reasonable consideration.

It is our aim that most cases where a request is disputed will be solved amicably in the workplace and the procedure looks to facilitate this. Recourse to an employment tribunal is both costly and time consuming, and we hope that this will always be a last resort. In the regulatory impact assessment we estimate that only 1 per cent of all cases will end up at tribunal and that the vast majority of cases will be settled at the initial meeting. As an alternative mechanism to the employment tribunal, we are intending for ACAS to widen its arbitration scheme to cover flexible working and regulations detailing this will be laid once these regulations have been approved.

As I said earlier, these regulations have been designed for small businesses, and the Small Business Council has played a large part in the development process to ensure that their needs and concerns will be met.

I believe that the regulations we are debating recognise that every business and every request will differ. We are not offering a "one size fits all" solution, but through this light-touch legislation, we are aiming to facilitate dialogue in the workplace and build on existing best practice.

Alongside this new right, we will be introducing a package of support to ensure that both employers and parents have a full understanding of the process. A key part of this will be guidance containing a variety of examples of how the right will apply in practice.

We have also considered carefully the costs and benefits to employers of implementing this new right. In the regulatory impact assessment we estimate that this is likely to cost around 296 million a year. This may sound a lot, but spread over the 500,000 requests we expect to be made, this works out at an average of 160 per request. It is likely that many requests will be of minimal or no cost to implement. For instance, a

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shift of half an hour to an employee's start and finish time each day, to enable him to drop his child off at nursery before coming to work, will probably not cost anything other than the time it takes to read and process the application.

There are many benefits to flexible working. Some are quantifiable: for instance, better staff retention leading to savings on recruitment costs of an estimated 90 million per year; and reduced absenteeism, which costs business around 500 per employee each year. There is also the benefit of reduced sick leave, which in the first quarter of this year cost over 2 million working days each week, equivalent to 2 per cent of the total scheduled working days.

In addition to these benefits, there are others that cannot be measured in the same monetary terms but are nevertheless significant. These include improved employee morale, loyalty and commitment; an increased ability to cope with changing market decisions and to provide better customer service; and improved motivation and productivity.

As an illustration of how simple changes to prescriptive working patterns and the introduction of flexible working practices can have a huge impact, let me give the example of Rothwell & Sons Limited, a family-owned mushroom-growing business in Lancashire. It was awarded a grant from the DTI's Work-Life Balance Challenge Fund, which gives grants and consultancy advice to businesses wanting to implement flexible working practices. Within six months of receiving this help, it reported a 9 per cent improvement in productivity, a 20 per cent reduction in the cost of overtime, a 44 per cent reduction in staff turnover and a 46 per cent drop in overall absence rates.

To conclude, the regulations we are debating detail the process for making and handling applications to work flexibly. Parallel regulations subject to the negative procedure cover the eligibility criteria, the right to appeal, grounds for complaint and the level of compensation. They will be laid separately.

It is important to see this new right in the broader context of the Government's commitment to provide working parents with more choice and support to balance their work with childcare responsibilities. No one should have to choose between their children and their career. This new legislation endeavours to enable working parents to balance both work and family in a way that benefits business and contributes to the wider economy.

These policies have been developed in close consultation with stakeholders and have received broad support. The regulations are kept as close as possible to the original recommendations of the Working Parents Task Force. I believe that they are both right in principle and workable for all businesses, however small. I commend the regulations to the House.

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Moved, That the draft regulations laid before the House on 21st November be approved [3rd Report from the Joint Committee].—(Lord Sainsbury of Turville.)

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