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Lord Campbell of Alloway: I apologise for having been extremely late and not being able to attend to the affairs of this very important Bill because of other commitments. I totally agree with what the noble Lord has just said, but he does not seem to understand that there is always disagreement in any dispute. In the courts there is disagreement in any dispute. Of course one side in this dispute wants a smaller bargaining unit and the other side wants to have, putting it simply, a larger representation on the bargaining unit.

Are we concerned to adjudicate at this stage on the strength or weakness of either case? Is it not a fundamental principle of justice that as soon as the dispute arises both sides exchange the essence of their cases? That is the principle of justice, so that both sides know what they have to meet.

As regards fair provision, surely the amendment secures fair provision within that fundamental concept. I may be speaking from the wrong side of the Committee, as I have only just arrived, but that does not really matter. I sympathise in many respects with the aspirations of the trades unions. In this regard, on a fair disposition the amendment is wholly appropriate.

Lord Triesman: Amendments Nos. 3, 4 and 5 all deal with the process and criteria for the CAC's determination of the appropriate bargaining unit. I shall therefore speak to all three together, as did the noble Baroness, Lady Miller.

I make a preliminary observation. In different ways the noble Lords, Lord McCarthy and Lord Campbell of Alloway, made similar points. This is an area in which there will be disagreements and disputes. The issue is how to deal with those in a way that is fair and even-handed on the basis of the exchange of the best possible information.

As regards Amendment No. 3, the Government are well aware of the concerns of employers about the statutory criteria according to which the CAC must determine the bargaining unit in those cases where the parties are unable to agree a bargaining unit between themselves. Amendment No. 3 seeks to change those criteria so that the CAC must choose a bargaining unit which is not just compatible with effective management, but the most compatible with effective management. The Government cannot support that view. Currently, in those cases where the CAC must decide the bargaining unit, it first considers whether the bargaining unit proposed by the union is appropriate. That is right and proper. It is the union that initiates the process. It brings forward the idea of bargaining rights that it wishes to have recognised for certain groups of people. Inevitably, its proposal should be considered first.
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The CAC measures the union's proposed bargaining unit against the statutory criteria, the most important of which is the need for bargaining units to be compatible with effective management.

The CAC will seek to ensure that the views of the employer on the appropriateness of the union's proposed unit are considered very seriously. The employer is, of course, permitted to argue that the union's proposal is inappropriate for some reason; for example, because it is incompatible with effective management. To illustrate its points, the employer can refer to other bargaining units that avoid the problems it may see in the union's suggestion.

If the CAC finds that the union's proposed bargaining unit is not appropriate, the CAC formally considers alternatives, including any which may be proposed by the employer. It is not the case that the view of the CAC always flows in one direction. So far the data show that in a third of the CAC's decisions on the appropriate bargaining unit it has decided against the union's proposed bargaining unit as not being appropriate and has therefore provided an alternative proposal.

The CAC's procedure was the subject of judicial review in the case of Kwik Fit. I do not know whether one should declare an interest if Kwik Fit has ever supplied one with tyres, but in case that is necessary, it has done so in my case. Therefore, I declare at least that much interest. The Court of Appeal found that the CAC had correctly interpreted the schedule. The Government are in agreement with that view. The Kwik Fit case did demonstrate, however, that there was some confusion about the procedure to be followed by the CAC in setting the bargaining unit. Clauses 1 and 4 of this Bill therefore seek to clarify this procedure, as the noble Lord, Lord McCarthy, just said, in particular the role that the employer's evidence is to have in the CAC's deliberations. We want to ensure that all the parties are clear about the procedure the CAC will follow and how their evidence will be treated.

However, we do not believe that there is a case for changing the criteria for an appropriate bargaining unit or the way these are applied by the CAC. Getting the criteria for the bargaining unit decision right was a crucial part of the settlement at the time of the 1999 Act. The 1999 Act struck a balance between the interests that were expressed at that time by the CBI and other employers' organisations and the TUC—a balance, at least certainly in the view of the CAC and others, that was held to be a strong and critical basis for the settlement that has been achieved. To require the CAC to choose from the alternative bargaining units placed before it the one most compatible with effective management would constitute a significant change to that balance. Candidly, I am not sure how it would ever arrive at a decision as people argued about them.

In one third of cases where the bargain unit has had to be decided, the CAC has chosen the employer's or some other unit, rather than the union's. So while the union's proposed bargaining unit has been judged to
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be compatible with the statutory criteria in a majority of cases, in a substantial minority of cases it has varied or taken a different view about the bargaining unit to be chosen. I think this demonstrates how the process creates a good balance.

The amendment before us may go further than that, however. It implies that the CAC must choose the bargaining unit which is most compatible not just from those which are presented by the parties, but from all possible bargaining units. I would be loath to land the CAC with what I suspect would be an impossible and time-consuming task. It would have to satisfy itself that the bargaining unit could not be improved on even at the margins if this or that worker were added to or taken away from the bargaining unit. The permutations involved would be innumerable.

There is no one way of managing a business effectively. Anyone who has managed one will know that—I know that the noble Baroness, Lady Miller, has. There is no single model for what constitutes an appropriate bargaining unit. Collective bargaining can be effective in the context of bargaining units of all shapes and sizes as the range of collective bargaining arrangements which exist all over the United Kingdom will testify. The Government are of the view that the statutory criteria are working well and strike the right balance and that it is not appropriate to make a change.

Amendment No. 4 touches on matters similar to those we have discussed in Amendment No. 3. It would seem to reflect a concern that an employer's bargaining unit should be considered alongside that proposed by the union—a point made again by the noble Lord, Lord Campbell of Alloway—and that they should be given equal consideration. For the reasons I have outlined, the Government do not believe that would be appropriate.

However, that is not the effect of Amendment No. 4. The amendment would alter the criteria against which the CAC must test the union's proposed unit. It does not alter the fact that the union's proposed bargaining unit is accorded priority, in the sense that it was the first proposal, under the schedule. Furthermore, it amends those criteria in a way I have argued would be unnecessary.

Paragraph 19B(3) lists the matters, in addition to the need to ensure that bargaining units are compatible with effective management, which the CAC must take into account in deciding whether a bargaining unit is appropriate. The first of these is the view of the employer and of the union or unions. Amendment No. 4 would add that the views of each party should be given equal consideration.

I believe that this is an unnecessary addition as it is already clear in new paragraph 19B(3)(a) that the views of the employer and the views of the union are to be given equal consideration by the CAC. The Government are not aware of any suggestion that the CAC has failed to take properly into account an employer's views when considering whether any given bargaining unit is appropriate. Of course, the CAC
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may be more persuaded by the views expressed by one party, but that does not mean that it has not given each party's views due consideration.

The Government acknowledge that employers may be uncertain of the role of their evidence in the CAC's deliberations. That is why new paragraph 19B(4) seeks to clarify that when considering the appropriateness of any given bargaining unit, the views of the employer, which must be taken into account by the CAC, include any alternative which the employer thinks appropriate.

I turn finally to Amendment No. 5. The statutory criteria in the schedule for assessing bargaining units currently oblige the CAC to have regard to the desirability of avoiding small fragmented bargaining units within an undertaking. The new paragraph 19B of the schedule, inserted by Clause 4, repeats that obligation with no change in the wording. This amendment seeks to change that criterion so that fragmented bargaining units within an undertaking must be avoided, rather than small and fragmented units.

The intention behind the "small fragmented bargaining units" criterion was to avoid the proliferation of small bargaining units within a single firm. This could lead to complicated and costly bargaining arrangements.

However, it was recognised that there would always be specialist groups for whom a small bargaining unit was appropriate. Some of us will have seen them in professional life where a professional group has particular professional requirements. However, there is a group whose level of technical expertise and involvement puts it in a quite different marketplace for bargaining purposes from the generality of the people within the firm in which that group works.

Insisting that there must be a single bargaining unit covering all workers in a given undertaking would prevent the establishment of sensible bargaining arrangements which reflected the natural differentiation between groups of workers of the kind that I have just instanced. Certain categories of worker may have quite separate interests and may be represented by different unions from those that represent the majority of the workforce.

The criterion that small and fragmented bargaining units within an undertaking should be avoided allows the CAC to take into account the natural differentiation between groups of workers. At the same time, it respects the need to offset that against the inefficiencies of a single employer having to put in place excessively convoluted bargaining structures.

The Government are of the view that to delete the word "small" from this criterion would compromise the provisions of the law securing that bargaining arrangements can respect the differentiation. The amendment would restrict the ability of the statutory procedure to put in place arrangements which reflect the real world of industrial relations.
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The Government are not persuaded of the need for any of the changes to the statutory criteria for the appropriate bargaining unit or the CAC's procedure in applying them. I therefore respectfully ask the noble Baroness to consider withdrawing her amendment.

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