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6 July 2009 : Column GC155
Grand Committee
Monday, 6 July 2009.
Arrangement of Business
Announcement
4.02 pm
The Deputy Chairman of Committees (Viscount Simon): Before the Minister moves that the first statutory instrument be considered, I remind noble Lords that in the case of each statutory instrument the Motion before the Committee will be that the Committee do consider the statutory instrument in question. I should perhaps make it clear that the Motion to approve the statutory instrument will be moved in the Chamber in the usual way. If there is a Division in the House, the Committee will adjourn for 10 minutes.
Work and Families (Increase of the Maximum Amount) Order 2009
Copy of the Order
16th Report from the JCSI
Considered in Grand Committee
4.03 pm
Moved by Lord Young of Norwood Green
That the Grand Committee do report to the House that it has considered the Work and Families (Increase of the Maximum Amount) Order 2009.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Young of Norwood Green): This Government want to do all they can to help hard-working people who have been affected by the current recession. Although levels of redundancies have not reached those seen in the recession of the early 1980s and 1990s, the devastation caused to communities by that experience, when whole industries were wiped out, are still fresh in the nation's memory.
Recently, we have had the sad news that 2,000 people in the steel industry in the UK are going to lose their jobs. Each redundancy is the story of a career cut short, not out of choice but because of economic circumstances. For those individuals and their families, redundancy comes as a massive shock. When it happens, the Government have to be there for people. They have to help them through that situation and into another job. So it is right that, at this time, we do all we can to improve the situation for hard-working men and women.
We have made considerable progress in this area during the past 10 years. When we first came into office, the weekly limit had increased by only £5 a week over the previous six years, yet the annual uprating formula that we introduced back in 1999 has meant that the weekly limit has almost tracked average earnings for the past 10 years and increased by 6 to 7 per cent for the past three years-well above average earnings
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In addition to this financial support, we have introduced measures to help business and avoid the need for redundancies, but that is not all. We believe that you cannot simply stand aside and watch from the sidelines when people are losing their jobs. You have to step in and say, "We can help you to get a second chance". That is why we have made it easier for people to get access to training to help them get back into work as quickly as possible. That is what we will be doing in the case of those steel workers. Those are just some of the things that we have already done to make a difference but we know that we have to do more.
The evidence might show that many people find work quickly after being made redundant, but that period between jobs can be tough-especially for those with families or loved ones to support. So, in the April Budget, we committed ourselves to raising the limit for statutory redundancy pay by £30. This order implements that commitment by providing for a one-off uprating to the statutory redundancy limit using a power contained in the Work and Families Act 2006. It increases the limit from £350 to £380 on 1 October 2009 instead of waiting until the next annual uprating round in February 2010, thereby giving immediate help to employees.
For the benefit of those noble Lords not fully acquainted with the intricacies of redundancy pay, I shall give a brief explanation of how this benefit is calculated. There are two elements to the calculation. First, you work out the number of weeks' service that are payable to the person made redundant. That figure depends on their age and length of service. Up to the last 20 years' service can be counted. Once you have worked out the number of weeks' service that are payable, you multiply that figure by the weekly limit or actual pay, whichever is the lesser. Secondly, the capping mechanism is introduced. The limit is currently capped at £350. In other words, anyone earning that amount or more will have their number of weeks' service multiplied by £350. So today's proposals put an extra £30 a week into the redundancy calculation and, therefore, directly into the pocket of those most in need during this time of economic woe.
Besides the immediate help that an increase in redundancy pay will provide, the order has a number of associated benefits. First, it does not simply apply to the redundancy calculation alone, because other payments are linked to the weekly redundancy limit, including unfair dismissal awards and payments made to employees where their employer has become insolvent. Our order retains the link with these payments, effectively increasing their limit, too. This assistance is worth around an additional £15 million of support per year, provided directly from the Exchequer to redundant employees.
Secondly, our order addresses the problem of deflation. As things stand under the annual uprating formula, if deflation continues until the autumn, the limit could fall by £10 per week in February 2010 due to it being linked to the retail prices index. I am sure that noble
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So there are a number of clear benefits to the order. However, I am sure that noble Lords will also want to know the costs associated with this measure. We have calculated that the Exchequer would have to pay out from £15 million to £29 million per year, while the cost to business is estimated at between £51 million to £77 million per year. We accept that these are significant costs, but it is absolutely right to provide additional help to employees who are made redundant while keeping the additional costs on employers and the Exchequer to an acceptable level.
Of course, the order is not a panacea. No Government can ever say that they can stop a recession having an impact in terms of people losing their jobs or companies experiencing its effects. In the long term, the best way of avoiding redundancies in the future is to ensure that businesses are strong and able to take advantage of the opportunities offered by new technology and from increasing competition abroad. But future plans do not influence what happens today. Today, we must ensure that adequate provisions are in place during this time of unprecedented economic turmoil and that those made redundant are properly and fairly compensated for their service. For those reasons, I commend the order to the House.
Lord De Mauley: I thank the Minister for introducing the order. We on these Benches are acutely aware of the effect that redundancy can have on people, and we have great sympathy with anyone made redundant. This order increases the weekly limit for a second time in six months; it has gone up since 1 January this year by over 15 per cent. It also removes the annual reassessment of the weekly cap, due in 2010, as the Minister said, when a fall is forecast in the RPI. So we think that there is a real risk that employers will in future have to make more redundancies than they would otherwise have had to in order to make the savings that they need to avoid being pushed into insolvency. That seems to us to be of questionable wisdom on the part of the Government. Furthermore, the Government have created an additional real and unnecessary problem for the many employers who offer enhanced redundancy schemes, which are based on a multiple of statutory redundancy pay. So what are the Government, who have created the problem for them, planning to do to assist them? With this order, the Government, in their anxiety to please their paymasters, are doing something that they may later regret.
Lord Razzall: From these Benches, I welcome this order. The two fundamental points that the Minister made are absolutely germane in the current situation. First, it is extremely important that with the uprating there should be an acceleration of the payments being made to those worst hit by what is happening in the economy. That acceleration is welcome. Secondly, the statement being made that the Government will ensure that an uprating, which might, in a deflationary world,
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Lord Young of Norwood Green: We believe that we have a good case for increasing the limit to help employees made redundant, particularly during the current recession. It is absolutely right for the Government to take action to prevent the collapse of the banks and to support business through the recession. It is right for us to help ordinary people as well as those people in difficult times. We have carefully considered the impact on employers, and the estimate is that the £30 increase would cost them an additional £51 million to £77 million per year. We accept that those are substantial additional costs, but stand by our view that we have struck the balance about right. There were calls to increase by an even larger amount, but we believe that we have got the balance right. We feel that we have had an excellent record over the past decade and that we now stand in the middle ground between those calling for no increase at all and those calling for a very substantial increase. We do not believe that the £30 increase is too onerous a burden for business. It is right to point out that businesses are vulnerable in what is a difficult economic climate. However, we weighed up the small increase against the needs of employees, who have shown loyalty to a company and deserve to have that loyalty recognised. We believe that the order strikes the right balance for both employer and employee.
It is unfortunate that the noble Lord, Lord De Mauley, used the derogatory phrase paymasters, as we are acting in the interests of fairness, not meeting any vested interests. We have also ensured that we are doing our best to help businesses in a number of different ways, whether it is the £270 million of guaranteed loans that have been offered to 2,855 businesses under the enterprise guarantee scheme, or the 135,000 businesses that we have helped to retain more than £2.4 billion of working capital by deferring tax payments. We have done our best to stimulate the automotive sector via the vehicle scrappage scheme, which has resulted in 50,000 orders since going live on 18 May.
I think that I have covered all the comments made. I welcome the comments made by the noble Lord, Lord Razzall, which are absolutely germane to the current situation.
European Communities (Definition of Treaties) (Cariforum Economic Partnership Agreement) Order 2009
Copy of the Order
16th Report from the JCSI
Considered in Grand Committee
4.15 pm
Moved by Lord Young of Norwood Green
That the Grand Committee do report to the House that it has considered the European Communities (Definition of Treaties) (Cariforum Economic Partnership Agreement) Order 2009.
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The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Young of Norwood Green): The Cariforum EPA will bring together 14-soon, we hope, 15-Caribbean nations with the European Union to promote development-friendly trade. It means that the Caribbean countries will receive duty-free, quota-free access to EU markets. Without it, some countries have faced tariffs on up to 25 per cent of their exports, including on critical industries such as bananas.
The EPA allows the Caribbean countries to remove their own tariffs gradually, over 25 years, and contains safeguards so that they can protect infant industries and prevent import surges. It also-at the Caribbean's request-includes provisions on services. Services are a key opportunity for growth in the Caribbean, particularly in tourism, leisure and the creative industries. No nation can achieve prosperity by closing its borders to trade. In the World Bank's Global Monitoring Report 2008, it was calculated that removing all trade tariffs can reduce the headcount poverty index by 5 to 6.5 percentage points over a 10-year period.
I would like to quote the honourable Bruce Golding, the Prime Minister of Jamaica, who a month ago spoke publicly in support of the EPA. He said that the Caribbean's hopes for growth are inextricably tied to trade and to its ability to penetrate and maintain markets where the demand is exponentially greater than Caribbean countries will ever be able to create themselves. What he said is equally true of the UK. The benefits from duty-free, quota-free access and from improved rules of origin are where the EPA will most quickly bring benefits.
The Dominican Republic is already moving to exploit previously enhanced market access for cocoa, bananas and textiles. However, in the longer term, the biggest benefits will come from the regional integration that will flow from all countries in a region signing.
This financial year, the Department for International Development has invested £5 million into a new trust fund known as CARTFUND to increase growth and deepen economic integration. To secure these benefits for the Caribbean we need to ratify the EPA. By agreeing to the order today, the Committee will be allowing us to proceed.
Lord De Mauley: I thank the Minister for introducing the order. It is welcome news that 14 Caribbean nations and, we hope in due course, a 15th, will have duty-free access to EU markets. I have a few comments and questions for the Minister. First, does he have an anticipated date on which he expects Haiti to sign to make it a total of 15 countries? Perhaps he can expand on why he is confident that Haiti will indeed sign. Does the treaty come into effect whether or not Haiti signs?
Secondly, there was a debate in the other place on Monday about why no impact assessment had been produced. The Minister there admitted that none had been produced, but said that the Government have worked with Caribbean countries and with their partners in the Commission to ensure that they assess the impact of provisions concerning the organisation of EPAs. I shall not ask the Minister to set out the results of that now, but it would be helpful to noble Lords if
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Thirdly, Christian Aid has written to the Merits Committee, as the Minister will well know, saying that it believes that the likely results of the EPAs will be negative for the developing countries involved. Although the Caribbean nations have signed the EPA, it believes it should be renegotiated to reflect the development needs of the Caribbean. Could the Minister address the issues raised in its letter?
Lastly, there are a number of questions about the EPA and the WTO. While the Cotonou agreement, which preceded this agreement, was deemed non-WTO compatible, this agreement is said to be compatible. Can the Minister say what brought about the reconciliation? The need for small, under-resourced Caribbean nations to engage in the time-consuming negotiation process while dealing with the WTO process has made life extremely difficult for some of them, especially in terms of physical negotiating capacity. Does he have a response to the suggestion that bilateral agreements of this kind are an unwelcome distraction from a further Doha round?
Lord Dykes: I thank the Minister for proposing this order and welcome it from these Benches. I join in the questions asked by the noble Lord, Lord De Mauley, and hope for answers on the three points that he made. This is the end of a lengthy and somewhat painful process of negotiation, for the reality is always that moving from high protectionism to free trade is normally much easier for advanced countries than for less developed countries, particularly countries with very small Administrations, as has already been mentioned. It has taken quite a long time. We remember the very bitter criticisms of the President of Guyana last year, and there were objections from other countries as well. There were considerable discussions about the speed of opening of the Caribbean markets and other matters. None the less, these Benches welcome the agreement.
The EU Commission was very upbeat when the agreement was concluded, emphasising that the order was opening up complete front access to EU markets for Caribbean exports. In return, penetration into those Caribbean countries by exports from the EU would be over a long period to allow them time to adjust. The EPA allows Caribbean markets to protect sensitive sectors and local jobs where necessary. The service sector is also included, and the Minister might like to say something briefly about that because the EPA does not relate just to physical trade. The co-operation and innovation programmes are bound to be important for developing countries. Helping Caribbean countries meet exacting EU and international standards for foreign trade merchandise is a key part of this agreement, and perhaps the Minister will refer to that. Can he let us know the latest position on these matters with Cuba? I repeat the welcome of these Benches for this order.
Lord Young of Norwood Green: We are fairly confident that Haiti will sign, because we believe that it has a vested interest in doing so. The order will come into effect if Haiti does not sign; but if it does not, we would need to amend the order as a result.
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In relation to an impact assessment, a Caribbean study published this year found that the EPA would boost productivity and cause the economy and standard of living to rise by a few percentage points. It concluded that the ultimate effect on the domestic economy would be tiny and that the loss of tariff revenue would be compensated for by a small increase in indirect taxes.
On Christian Aid's view that there would be negative impact, and with regard to the WTO, we cannot go back to that. The existing agreement was not compatible, whereas this agreement is, and we believe that it is a fair deal. As I said in my opening contribution, it allows the Caribbean countries to remove their own tariffs gradually over 25 years and contains safeguards so that they can protect infant industries, as mentioned by the noble Lord, Lord Dykes, and prevent import surges. Also, at the Caribbean's request, it includes provisions on services. Services are seen as a key opportunity for growth in the Caribbean, particularly in tourism, leisure and the creative industries. The agreement establishes a free-trade area by substantially liberalising all trade. We liberalise 100 per cent and the Caribbean liberalises 80 per cent, so we think that that is a reasonable balance.
We funded the Caribbean regional negotiating machinery to help negotiations-the noble Lord, Lord Dykes, or the noble Lord, Lord De Mauley, raised that point. However, we definitely gave assistance to help negotiations. The fact that 14 Caribbean countries signed is an indication of their support for the agreement. Cuba is not involved at all. The EU is also giving more than €150 million in aid to the Caribbean and we will provide something like 15 per cent of that.
I do not think that I have covered bilateral agreements and distraction from Doha. The instantaneous answer provided by my team is that we are still committed to Doha. That is just for the interim, so to speak.
National Minimum Wage Regulations 1999 (Amendment) Regulations 2009
Copy of the Regulation
17th Report from the JCSI
Considered in Grand Committee
4.28 pm
Moved By Lord Young of Norwood Green
That the Grand Committee do report to the House that it has considered the National Minimum Wage Regulations 1999 (Amendment) Regulations 2009.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Young of Norwood Green): The 2009 national minimum wage regulations make three changes. First, they increase the hourly rates of the national minimum wage and the maximum amount for accommodation that is
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First, I shall deal with the increases in the national minimum wage rates and the accommodation offset that are contained in Regulations 2, 4 and 6. As noble Lords will be aware, we are currently celebrating the 10-year anniversary of the national minimum wage. Despite the controversy when it was introduced, and a few dire predictions, it has become an accepted and vital feature of the British employment landscape. It continues to provide a floor below which wages cannot fall and therefore gives a certain level of protection for all vulnerable individuals.
To ensure that national minimum wage rates properly take account of economic circumstances, they are reviewed annually by the Low Pay Commission, an independent body made up of employers, trade unions and academics. The aim of the commission is to have a minimum wage that helps as many low-paid workers as possible without any significant adverse impact on inflation or employment.
This year, in the wake of the worst financial crisis since the 1930s, the commission has been doubly concerned to make sure that it gets its recommendations right. The Government therefore considered it right that the commission should be allowed to delay its report for several months. The delay gave the commission time to access additional data, including a further inflation report from the Bank of England, jobs figures for December 2008, gross domestic product data for the fourth quarter of 2008 and average earnings information up to January 2009. In addition, the commission was able to conduct further analysis of the current recession and seek more views from stakeholders.
The commission's recommendations were published in May. It suggested that the adult rate, for workers aged 22 years and over, should increase by a modest 1.2 per cent. It also recommended that the other rates-that is, the rates for 18 to 21 year-olds, for 16 to 17 year-olds and the maximum amount for accommodation that is allowed to count towards pay for national minimum wage purposes-should also increase between 1.1 per cent and 1.3 per cent. We agree with the commission's recommendations. They strike the right balance and ensure that low-paid workers are treated fairly. We estimate that nearly 1 million people stand to benefit from these increases.
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