Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I beg to move amendment No. 79, in page 35, line 9, leave out subsection (b).

Mr Joe Benton (Bootle, Labour)

With this it will be convenient to take the following amendments: No. 50, in page 35, line 16, at end insert—

'(c) make provision for the Standard Procedures to apply in classes of cases specified for that purpose in the order and for the Modified Procedures to apply in classes of cases specified for that purpose in the order.'.

No. 51, in page 35, line 16, at end insert—

'(c) make provision for the Schedule not to apply to certain classes of cases'.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

Clause 29 provides for schedule 2 to have effect and subsection (2) gives the Secretary of State certain powers in relation to the way it takes effect. Schedule 2 provides the minimum statutory dispute resolution procedure. One of the abilities that the Secretary of State is given in subsection (2) is, in effect, to extend the application of the statutory dispute resolution procedure beyond employees.

That brings us to the now familiar debate about workers versus employees, which by the end of our proceedings will no doubt have become even more familiar. The subsection uses the rather bizarre means that were described in one of the briefings that I have received as ''impenetrable''. It provides, as only legislation can provide, that for the purpose of the Bill a person who is not an employee can be an employee and the person who is not his employer can be his employer. We move into an Alice in Wonderland world in which people are what they are not for the purposes of legislation.

It is not a small matter to treat someone as an employee when he is not, or to treat someone as a person's employer when he is not. I expect that other hon. Members will comment on the broader issues. I simply want to ask the Minister what classes of non-employees he intends to make employees for these purposes. Does he want to extend the scope of the clause to all workers? The term ''worker'' is perfectly well defined in law and we know what it means: we have had these debates before and we have legislation that refers to workers. If he is going to use the power to apply the statutory dispute resolution procedure to workers rather than to employees, and to the people for whom they work rather than to employers, he should have the courage of his convictions and say so now.

It is disingenuous to produce a Bill that refers to a procedure applying to employees and employers and that contains a clause that allows the Secretary of State to redefine the terms ''employee'' and ''employer'' so that they include people who are not employees and employers. If the Minister intends to use the power only at the margin to deal with hard cases or specific exceptions, we must understand precisely what he has in mind. If he intends to use it on a much broader scale to change the fundamental effect of the clause, we need to know that now, not later.

All of us as non-employee workers and Members of Parliament would like to know whether we will be caught within the scope of the clause. Many others who are not employees will also be interested to know that. To be honest, even more people who are not employers might be interested to know whether, for example, contractors to them will be brought within the remit of the statutory dispute resolution procedure. That would quite a startling change if it were to happen.

When we consider schedule 2, procedural questions may be raised about how the steps it describes would be carried out. We need to exercise our minds about the types of people who might be covered by any extension and how the procedure would deal with them. The Minister should—in the words of a trade union leader whom I quoted earlier—come clean about what he intends to do. If he intends to apply the procedure to workers rather than employees, he should use the word ''worker'' in the Bill.

Mr Tony Lloyd (Manchester Central, Labour)

I am delighted to hear the well-argued case for extending the scope of the schedule made by the hon. Member for Runnymede and Weybridge. We are right behind him. That statement—I will not say U-turn—on behalf of the official Opposition is welcome. He has come clean and I congratulate him.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

If I thought that the hon. Member for Manchester, Central (Mr. Lloyd) was right behind me, I would be exceedingly nervous. I have not made a case for extending the definition in the clause to workers. I have made a case for honesty in legislation and for the Government to come clean. It would be sneaky of the Minister to use the term ''employee'' and then redefine the word so that it incorporated a group of people who are not employees. That is not how legislation should be produced. I look forward to hearing the hon. Gentleman's contribution to the debate.

Amendment No. 50 deals with cases in which the standard procedure or the modified procedure are used. Schedule 2 contains a standard and a modified procedure for dispute and dismissal proceedings and grievances. It is not clear in the legislation—as opposed to the TUC brief, which may be authoritative but does not have the status of legislation—when one procedure or the other should be applied. Given the warnings that I issued to the Committee, I should be more careful, but I shall risk quoting the Law Society brief:

''The circumstances in which the Modified Dismissal and Disciplinary Procedure will apply are not specified in the Bill and this should be clarified. The government's response to Routes to Resolution suggests that it will apply in cases of gross misconduct. If this is the case then it is thoroughly misconceived. It mistakes what should be an exception for a very limited class of dismissals for gross misconduct for a general rule for all such cases. There will be cases in which it might be appropriate for an employer to dismiss without holding a hearing such as violence by the employee. But this will not be the case in the overwhelming majority of gross misconduct cases. In many cases the reverse will be the case—the very severity of the sanction of summary dismissal will require higher standards of procedural fairness before action is taken.

Again, the circumstances in which the Modified Grievance Procedure will apply are not clarified in the Bill and should be. The Government's response to Routes to Resolution suggests it should apply where the person raising the grievance no longer works for the employer.''

Those are important issues. Other bodies have expressed other concerns, but the Minister should place on record when the modified procedure will apply. Members of the Committee may then wish to probe the effect of that.

Amendment No. 51—perhaps slightly provocatively—provides a power for the Secretary of State by order to make provision for the statutory dispute resolution procedure not to apply in certain cases. I note that there is a power in subsection (2)(a) to amend schedule 2 which would enable the Minister to apply or disapply it to any classes or groups. The purpose of amendment No. 51 is to probe whether he intends to exclude from the provisions of clause 29 either any class of employees or employer—the Crown, for example—or any class of application or jurisdiction. There will be more to say about all those matters after we have heard from the Minister.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

Let me start, as the hon. Member for Runnymede and Weybridge did, with amendment No. 79,which deletes subsection (2)(b). The statutory procedures currently refer to the ''employee''. As such, they do not apply to workers who are non-employees. The subsection gives the Secretary of State the power to issue an order that will extend the application of the statutory procedures to non-employees. On Second Reading, she announced that she would begin reviewing the law on employment status early next year. The Employment Relations Act 1999 says that the confusing distinction—generally, only decided by employment tribunals—should be reviewed.

The review will examine why certain parts of employment law apply to employees only, whereas other parts apply to the broader category of worker; sometimes there is no obvious reason for such a distinction. The review will give us an opportunity to consider the issue in its entirety. The hon. Gentleman asked me to come clean; I am coming clean about the review. The House has agreed to legislation that states that there should be a review.

The review could make recommendations about the application of the statutory procedures, or it could conclude that there should be no recommendations. As the Minister, I have no views at this stage. However, if it decides that the category of employee should be widened to include workers, it makes sense to retain flexibility in the Bill to cater for that situation.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I understand the logic of what the Minister said, but I disagree with his conclusion. If the upshot of the review is a decision that the term ''employee'' should be replaced with ''worker'' in all employment legislation, legislation will be needed to make that change in a whole raft of different statutes. There is no need to include a specific power in the Bill to make the change by order, because more general legislation will be needed if that is the review's conclusion. Independent of the review, does the Minister plan to make any order that would make someone who is not an employee subject to schedule 2?

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

We are setting out a procedure for people to pursue discipline and grievance cases in every workplace. Schedule 3 sets out what the grievance and discipline subsections may cover. Some cover workers, and others employees. Someone could be pursuing a case through the statutory three-step procedure, which currently applies to employees,

about a grievance that applies to workers. They would fall outside the statutory three-step procedure, which is why we must have the order-making power.

To give an example, the right to be accompanied at discipline and grievance hearings applies to workers, as does the national minimum wage. We have framed the legislation in accordance with all the employment tribunal legislation for employees, who are those who have a contract of employment. This is a murky area. The order-making power is designed so that, if the review recommends it and we decide to extend ''employees'' to cover ''workers'', we do not have to make a different provision on who can pursue grievance and discipline cases through the three-step basic procedure.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I do not agree with the logic of the Minister's position. Is he saying that no order will be made under subsection (2)(b) until the review is completed?

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

Yes, I am. The clause is focused on a review that will commence early next year.

Amendment No. 50 concerns the application of the standard and modified procedure, and the hon. Member for Runnymede and Weybridge raised pertinent questions about how we intend to deal with them. It is important that I take a little time to explain this. Schedule 2 contains four statutory procedures. Two deal with dismissal and discipline matters, and two with grievances. Within each pair of procedures, there is a standard three-step procedure and a modified two-step procedure. We recognise that grievance and disciplinary issues come in all shapes and sizes. One set of minimum steps may not fit all circumstances, which is why there is a need to set out two types of procedure. The modified procedures are shorter and reduce the need to meet or, in the case of grievances, cut out the need to meet altogether.

The schedule does not specify in which cases the standard or modified procedure acts as the minimum. That will be set out by the regulations under clauses 30 and 31. The hon. Gentleman is right, and it would help the Committee if I explained Government thinking on the circumstances in which the two types of procedure will apply.

With grievances, we feel that the modified procedure should apply to former employees. Cases, most notably for constructive dismissal, are often taken after people have left their employment. It is impractical to insist that people in that group should return to their former place of work to discuss the issues in person. We must also recognise the fact that both parties will feel less need to invest time in dealing with grievances after the employment relationship has ended. For them, an exchange of correspondence should be sufficient as a minimum. That is the two-step procedure.

On dismissal procedures, the modified two-step procedure comes into play in dealing with the special case of instant, summary dismissal resulting from

extreme cases of gross misconduct. The circumstances may involve violence or serious criminal wrongdoing and will require an urgent response. The question at issue will be the fairness of the decision to dismiss. Reflecting that fact, the modified procedure provides for an appeal meeting to take place at the request of the employee concerned to review the decision. As I said, the regulations made under clauses 30 and 31 will define the circumstances in which the two sets of procedures will apply. The powers are contained in subsections 30(3) and 31(5)(a).

The hon. Member for Runnymede and Weybridge talked about impenetrable language. All of us who have to grapple with Bills would sympathise with that, but the powers are clearly set out. There is no need to use the order-making power in clause 29 for that purpose and the amendment is therefore unnecessary.

Amendment No. 51 deals with circumstances in which an employer or employee should not be obliged to follow the statutory procedures. Again, it is important to set out our thinking on that. The statutory procedures merely set out a minimum, and the schedule should therefore be seen as setting out the core elements of procedures that should be applicable in all or nearly all circumstances—I say ''nearly all'' because there will be rare cases in which it is inappropriate for parties to use even those minimum procedures. For example, it might be unreasonable to expect people to meet face-to-face in cases where a manager has assaulted or otherwise seriously harmed the employee—or vice versa, for that matter, since the exemption could work in the opposite direction, where the employee has acted violently towards the manager.

Exemptions might apply in other areas and we do not want to create unnecessary duplication of procedures. If an issue has been raised as a collective grievance, we see no reason why we should force parties to raise individual grievances on the same issues, such as in a sex discrimination case where a group of employees share a grievance about the employer's policy towards training or promotion, which has been taken up by their union as a collective grievance. In such circumstances, it would be more efficient to deal with the linked grievances collectively. In such cases, we would not want to require individuals to use the statutory procedure to bring separate cases.

We intend to set out special exemptions in regulations, again using the regulation-making powers in clauses 30 and 31 for that purpose. There is therefore no need to use the order-making power in clause 29, as the amendment seeks to do. All the orders and regulations in the clauses are subject to affirmative scrutiny. I am sure that no correction on that will be forthcoming; this time, I have the right part of the Bill. I hope that the hon. Gentleman will, in the light of my explanation, withdraw his amendment.

Mr Tony Lloyd (Manchester Central, Labour)

I hesitated about whether I should follow the hon. Member for Runnymede and Weybridge in discussing workers and employees because it might be more appropriate to do so at another stage, but it is an important debate. The purpose of the clause, and of schedule 2, is to provide a regime under which disciplinary and grievance

procedures can go ahead. The definition of employee and employer is narrow and restrictive under the present law. A broader definition is used in other legislation, such as on the minimum wage.

My hon. Friend the Minister gave a commitment to the hon. Member for Runnymede and Weybridge on timing, stating that he does not intend to use subsection (2) before the review is completed. That commitment has been given to the Committee and is now in the public domain. All of us recognise that those who fall outside the definition of an employee are often the most marginalised people in the work force—although other non-employees can be among the best paid and best protected. There is a huge range of conditions among workers who fall outside the formal definition of being employed. However, those who are entitled to only minimum levels of protection are among the most marginalised people in the workplace.

I hope that hon. Members on both sides of the Committee agree with that point. When the hon. Gentleman winds up, perhaps he will say whether he accepts that there is a need to consider carefully whether we have adequate disciplinary and grievance procedures for those who will not be covered if my hon. Friend does not at some point use the subsection.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I am grateful to the Minister for clarifying the issues raised by amendments Nos. 50 and 51. That was helpful, but he did not address the point raised by the Law Society. I deliberately quoted its brief, rather than paraphrasing it, because I wanted to put the Law Society's view in the forum of the Committee in the hope that the Minister would respond. I was not necessarily endorsing its view, but I quoted it in the pursuit of knowledge. The issue is still dangling and needs to be addressed.

I was interested in what the hon. Member for Manchester, Central said about amendment No. 79, and I was pleased that he raised a concern that Conservative Members have had for some time. There is a myth that everyone who is a worker but not an employee is part of the downtrodden and oppressed. I could give examples of people who fall within the definition of worker and are not employees who are far from downtrodden and oppressed, as the hon. Gentleman made clear.

In an increasingly flexible and fast-moving economy, there will be people who, for their own interests and those of the companies for which they work, wish not to be employees. Admittedly, the Paymaster General recently made the attraction of not being an employee somewhat less than it was for a number of those people. If we are going down the route of reviewing the distinction between worker and employee, I agree with the hon. Member for Manchester, Central that there needs to be a clear distinction between people who, according to any reasonable interpretation, have the character of employees but have been excluded from that definition by subterfuge, and people who are genuinely not employees.

The National Minimum Wage Act 1998 uses a definition of worker. Although interesting philosophically, the issue is not particularly important

in practice, because by definition those highly paid people who are not employees but are workers will not be caught by the minimum wage. As I recall, we had various interesting discussions about whether people such as computer programmers were covered by the minimum wage, which will always be of purely academic interest unless the supply and demand balance in the market changes dramatically.

When we consider employment law more generally, however, that point will become more important. My colleagues and I resist the temptation offered by some Government Members to go with the broader definition of worker for everything. However, I think that I can safely say that in doing so, we are not seeking to defend those who artificially exclude people from the protections of the status of employee by subterfuge that the Inland Revenue should be seeking to unravel.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

IR35.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I am sure that you would not welcome a broad debate on IR35, Mr. Benton, but it is massively over-simplifying matters to suggest that that debate is only about people trying to avoid tax.

Our concern is primarily to avoid creating sclerosis in a fast-moving economy in which sectors are changing and evolving quickly, and where employers need to engage the services of highly skilled individuals in a flexible way but, for all sorts of legitimate reasons, may not be able to burden themselves with the continuing obligations of employment imposed by the full panoply of employment protection laws.

One would hope and expect that those individuals would be suitably remunerated for not having the kind of protections and security that someone with employee status would have. That concern with maintaining flexibility at the cutting edge of the economy drives Opposition Members' arguments.

Mr Tony Lloyd (Manchester Central, Labour)

I am tempted to ask whether the debate on the minimum wage was academic, as the hon. Member for Runnymede and Weybridge said. I freely confess that I did not sit through consideration of the Bill in Committee, but I am well aware that tortuous debates took place. I could ask whether that was a valuable use of parliamentary time, but let us move beyond that.

The Opposition are often characterised as being hostile to those in the work force, whether they are called employees or workers, as they seek to offer levels of protection to those in an employment role. I do not want to get involved in the legal definition of ''employment role''. We are making progress this morning, and it is helpful to place that on the record.

I concede that there is an argument about how we maintain flexibility in the work force and what is the right balance. In what circumstances would the hon. Gentleman consider it right and proper for someone, who by all reasonable definitions has an employment relationship with someone who seems to be an employer, to buy access to adequate disciplinary and grievance procedures? That is a worrying issue. Disciplinary and grievance structures are fundamental

to the workplace, as is the right to protection against abuse, whether someone is well paid or badly paid, flexible or inflexible.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The hon. Gentleman makes an interesting point. I have no doubt that we will have the opportunity to debate it in some depth. One would expect a self-employed contractor—for example, an information technology specialist—to have a contract that gave him the protection that he needed and that defined his obligations. That contract would not be a contract of employment, but would give him appropriate remedies. Those remedies would not be available through an employment tribunal, unless the Minister were to use the powers under discussion to broaden dramatically the scope of the definition of employee, but they would be available to him through the usual operation of contract law.

Opposition Members may not have argued the case in the past, but we have reached a consensus that where the contract is a contract of employment, it is proper for the general law to underpin the standards and procedures that will be followed in that relationship. In other words, there is a broad acceptance that statute law should intervene and override the contract between the employee and the employer. The Bill also implies something that is defined in a statute into the terms of a private contract between employer and employee. I hope that we will not start implying all sorts of general law into the terms of other types of contracts.

I am not a lawyer, and I stand to be shot down, but my perception is that where our continental colleagues have gone wrong is in the introduction, through the commercial codes that many European countries have as part of their civil law, of certain implied conditions and rights into contracts that are in this country freely negotiated between parties—for example, by the supplier of a specialised service to someone who wishes to contract that service. I have worked in Germany, and on one occasion benefited from the fact that the German commercial code in civil law gave me rights that I had not negotiated in my contract, but I do not think it is a helpful route to follow.

I should be happy to have a debate with the hon. Member for Manchester, Central about where the boundary should be between employee-employer relationships that are properly regulated by statute, and relationships that should not be invaded by statutory interference in terms of the right to enter into a private contract bargain. I suspect from the tone of our exchanges this morning that that debate might not be as acrimonious and adversarial as some might expect.

Mr Tony Lloyd (Manchester Central, Labour)

Let us put it to the test, as this is a good time to have that part of that debate. Most people would understand intellectually what the hon. Gentleman said. I suppose that his defence of amendment No. 79, which I accept is a probing amendment, would be that it is an objection in

principle to widening arbitrarily the scope of the law, not necessarily specifically about schedule 2 and grievance and disciplinary proceedings.

The hon. Gentleman makes an important statement on behalf of the Opposition in the reasonable tone that he has used throughout our proceedings. Is he saying specifically that he would accept—this is the nub—that a minimum grievance in disciplinary procedure should be there for all people in the workplace who have something that looks like an employee-employer relationship, whether that is defined by law or otherwise? Should that be one of the minimum basic standards? That is not a trick question, and the hon. Gentleman may want to reflect on it and answer it on Third Reading. It would be an important part of progress because my experience is that Conservative Governments were not of that benign view. There was a concerted attempt to erode standards, and disciplinary and grievance processes were open to erosion like everything else. It would be helpful to all sides of the political debate.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The hon. Gentleman is asking one question that is easy and one that is difficult to answer. The easier question is whether people who are employees have certain minimum standards of protection, and the answer is clearly yes. There is consensus on that issue. The more difficult question is where is the boundary. When the hon. Gentleman talks about people in the workplace who have the characteristics of an employee, we may be in some difficulty.

I said during the National Minimum Wage Bill debates that having been a self-employed person, I am acutely aware that the body with the greatest and most penetrating interest in where the division lies is the Inland Revenue. It was difficult for Ministers during the passage of that Bill to argue that a person whom the Inland Revenue was prepared to regard as a self-employed contractor was, for the purposes of that Bill, more akin to an employee. I know from experience that the Inland Revenue is fairly aggressive in seeking to define out self-employed people if it thinks that they have the characteristics of being employed. The Inland Revenue has a fairly long checklist that one is supposed to use to test whether the relationship is one between employee and employer or pertains to a self-employed contractor.

My starting point would be that of the Inland Revenue, which has clear fiscal self-interest in defining people as employed. If it concludes that a person is self-employed, it would be difficult for the Minister or the hon. Member for Manchester, Central to argue that he should be treated as an employee. IR35 notwithstanding, the Inland Revenue has sought to extend that boundary for reasons related to national insurance contributions.

Mr Mark Prisk (Hertford & Stortford, Conservative)

For people who are earning a living to have the best standards, the challenge must be to improve best practice, not seek more legal processes. The Industrial Society says:

''The best means of ensuring management improves its performance is to promote awareness of the cost benefits of good management and to provide guidance on good practice especially among small employers.''

Does my hon. Friend agree that promoting best practice is often the better way?

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

My hon. Friend makes a good point that applies across the piece. On Second Reading, the Secretary of State told us that business should not worry about the new procedures because they would be good for business, despite the fact that they resembled burdens. That is patronising. It is incumbent on government to persuade. I am sure that my hon. Friend the Member for Hertford and Stortford (Mr. Prisk), who has knowledge of small business, will agree that changes in management practice beneficial to employers and employees create a win-win situation. The Industrial Society is dedicated to promoting those changes and we welcome that.

Mr Joe Benton (Bootle, Labour)

I have gone on at some length—

Mr Ian Pearson (Assistant Whip (funded by HM Treasury); Dudley South, Labour)

Yes.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

It is disappointing to hear the Government Whip say ''Yes'' in such a grudging tone when I make self-deprecating remarks.

I say to the hon. Member for Manchester, Central that we have started the debate on a sensible basis and that I look forward to furthering it without relying on the dogmatic positions that have characterised debate in the past. I hope that we can find a solution that deals with the mischief of employees being otherwise categorised for dishonourable purposes. Furthermore, I hope that we can do so without creating inflexibility in the economy, which I have experienced elsewhere in Europe. I shall withdraw the amendment so that we may debate that later.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

My very good and hon. Friend the Member for Dudley, South (Mr. Pearson) was being mean-spirited. That is a prerequisite of working in the Whips Office, so we do not blame him for that. It was an interesting debate. For a moment, I thought that if we could lock the doors and carry out the review of employee versus worker, we could reach a good settlement. Unfortunately, we cannot.

The hon. Member for Runnymede and Weybridge will be aware that the law of contracts predates the Inland Revenue, and taxation itself, by several centuries. The Inland Revenue is not going to help us in that area. My hon. Friend the Member for Manchester, Central raised a crucial issue in relation to the grievances and discipline procedure. Previously, groups of workers have been treated like second-class citizens in the workplace. This applies to both sides. My former union categorised part-time workers as class B members. Full-timers were class A; that is a message about how much those workers were valued.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

As the Minister is talking about the recategorisation of workers, perhaps he would like to say something about the Post Office's proposal that some of its employees should become self-employed if they wish to remain in service.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

No, I would not like to, though I am tempted. It has nothing to do with amendment No. 79.

I was interested to hear the hon. Member for Runnymede and Weybridge say that workers should have basic minimum standards of protection; that is certainly progress on the previous approach from Conservative Ministers and Opposition spokespeople. My hon. Friend the Member for Manchester, Central raised the important point that if we agree that people in the workplace should have recourse to airing grievances and resolving discipline cases because it makes them feel valued as part of the work force, we must ensure that we do not exclude certain groups.

We are making this provision on the basis of a review that has not yet taken place. An important facet of that review must be where and how those currently categorised as workers, not employees, who are therefore not covered by some of the provisions set out in schedule 3, deal with a grievance. How does a discipline case apply to them? That is why the Secretary of State has made this provision to ensure that we can feed the review's conclusions into the basic three-step procedure.

Mr Mark Simmonds (Boston & Skegness, Conservative)

Will the Minister mirror the review's conclusions in the regulations or will he make a decision based on its conclusions?

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

I have given an assurance that we will do nothing before the outcome of the review. Where that review goes and how we deal with it is a matter for another debate. That would come under the Employment Relations Act 1999 rather than the Bill. The hon. Member for Runnymede and Weybridge raises an important point. We have had a fascinating debate on a matter to which we shall probably return at a later stage. I am pleased that the hon. Gentleman has agreed to withdraw his amendments. We can proceed on that basis with my categorical assurance that I will not pre-empt the review's outcome.

Mr Joe Benton (Bootle, Labour)

I take it that the hon. Member for Runnymede and Weybridge still wishes to withdraw the amendment.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I am sorry, Mr. Benton. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I beg to move amendment No. 45, in page 35, line 18, at end add

''and any other organisation representing persons appearing to the Secretary of State to be likely to be affected by the order.''.

On reflection, I am not entirely sure that I agree with the Minister's assertion that the law of contract predates taxation. That would be pushing it a bit. It takes us into another philosophical debate that goes back about 10 centuries.

Amendment No. 45 is simple and in line with the previous amendment. It would require the Secretary of State, before making an order under clause 29, to consult not only ACAS, but those representing persons or classes of persons likely to be affected by the order. In practice, that would be employers' organisations, tribunals user groups, and so on. I suggest to the Minister that, in the spirit of openness and consultation in framing secondary legislation, that is entirely reasonable.

If we are to depend increasingly on secondary legislation, as apparently we are, there must be a process of consultation with outside bodies. When a Bill receives its Second Reading, outside organisations are galvanised into sending briefings to Members. By and large, regulations do not provoke the same awareness and interest outside this place. Admittedly, even Bills do not always provoke the awareness that they should. In the past two weeks, I have spoken to two senior governing members of one of the country's major employers' organisations, neither of whom was aware of the proposal to introduce extended statutory maternity leave, which is in the Bill, although their organisation has said that it will accept the proposal. We have a problem with awareness among people outside the House who might have useful and important views to put forward.

That problem is even worse when it comes to regulations and secondary legislation because of the lower profile. Therefore, the Secretary of State should be obliged to consult those whom it appears to him would be likely to be affected. That is not terribly onerous or prescriptive. Indeed, I am picking my words from my memory of—I think—the Care Standards Act 2000, in which the relevant State of State was comfortable with the concept of having to consult those who would be affected by the order before making it. The Secretary of State does not have to follow their recommendations, but we believe that he should consult them as well as ACAS before introducing proposals. That is reasonable, sensible and in the spirit of conciliatory employment relations. It recognises that ACAS is not the only player on the field.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

I am sorry to tell the hon. Gentleman that I will resist the amendment, although I understand the logic behind it. We consulted widely on the proposals and the three-step procedure, and it is rather depressing to hear his comments. The statutory procedures represent a major innovation. This is the first time that such procedures have been set out in statute, and we recognise that we may need to amend them in future.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The Minister is making my case for me. He just said that he consulted widely on the procedures in the Bill. I am objecting to him having the ability to amend them without consulting widely again.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

I wish that the hon. Gentleman would be patient and let me finish the various points that I have to make. It was important to make it clear that there was wide consultation before we set the three-step procedure in legislation. It is important also to emphasise the radical change that is taking place. About 900,000 micro businesses will be affected by the change, as well as many small businesses.

If the Secretary of State wants to change the procedure, he or she would have to consult ACAS before introducing an order. ACAS has unparalleled knowledge of employment relations practices. Its views and procedures are always instructive and rooted in its wide experience of workplace behaviour. I am not suggesting that the hon. Gentleman is saying that there is anything wrong with that, but he is suggesting that the Secretary of State should consult more widely on every change. As a general rule, I would expect the Government to consult other organisations as well when exercising the powers. That would certainly be the case if major changes to the procedures were envisaged. However, the amendment would require us, unnecessarily, to undertake such consultation on each and every occasion that changes were made. Consulting business about minor drafting changes would impose an unnecessary burden, to coin a phrase. We wish to avoid consultation overload—that is an expression that we can all understand.

We also have practical problems with the broad-ranging wording used in the amendment, which requires us to consult any organisation that represents people ''likely to be affected.'' Our intention is to undertake consultations with as many affected groups as we can identify. However, many thousands of organisations—large and small, national and local—could fall into the category.

Any Government would almost certainly fail to meet a statutory consultative requirement such as the one in the amendment. In principle, there is nothing wrong with the suggestion that we should consult widely, particularly if major changes are taking place. We will always consult ACAS, which has representatives from business and a variety of groups and organisations. However, we do not feel that the amendment helps at all; instead, it would create problems. With those assurances, I ask the hon. Gentleman to withdraw his amendment.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The Minister spoke about consultation overload. The Opposition are more concerned about legislative overload. If he would address that, consultation overload would take care of itself.

The Minister quoted selectively from our probing amendment. Its purpose is not to require the Secretary of State to consult every person who might be affected—that would be absurd—but to consult

''any other organisation representing persons appearing to the Secretary of State to be likely to be affected'',

which is less onerous. I did not expect the Minister to accept the amendment. However, I hoped that he would say that, in practice, his intention would be to undertake appropriate consultation whenever an order was proposed, not only with ACAS but with others. I accept that he cannot consult with every organisation and person, but he should try to get views other than those of ACAS only.

Furthermore, consultation should take place before an order is drafted, not when it is a fait accompli. In a completely different area of the brief, I have recently become aware of a statutory instrument that had been drafted in final form and was ready to be laid. It had not been discussed with a major player in the industry, which identified a serious flaw in it. I understand that negotiations are taking place to amend it. We must bring expertise from the outside world into the process at an early stage to avoid badly drafted regulations.

The Minister has not assured me that he will consult appropriately whenever a substantive change is proposed. If he were to confirm that, I would be happy to withdraw my amendment.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

Let me say again that the Government would expect to consult other organisations if major changes to the procedures were envisaged.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

That invites the question of what is a major change. However, I suspect that we will have to be content for the time being. The amendment has served its immediate purpose of getting the Minister to confirm that consulting ACAS is not an alternative to broader consultation. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I do not question the definition of a minimum statutory procedure. However, several briefs supplied to Committee members raise the question of interaction between statutory procedures and the ACAS code. Before the Committee agrees that the clause stand part, the Minister should explain how the statutory procedure and ACAS code will interact.

The consensus is that the statutory procedure is weaker than the ACAS code, which is as it should be because that procedure provides a minimum acceptable baseline. The explanatory notes were particularly unhelpful on that. The parliamentary Labour party brief, which is occasionally illuminating, states explicitly that the ACAS code will have to be modified to include the statutory procedure. Will the Minister outline the modifications to the ACAS code? Will he also explain how the two systems will work in tandem, given that the statutory procedure relates to employees and the ACAS code relates to workers? How will those difficulties be resolved?

I am unhappy with the Secretary of State's power in subsection (2)(a) to amend schedule 2 by order. I did not table an amendment because my unhappiness did not arise until after the rise of the House on Tuesday. That power makes a mockery of including the original procedure in the Bill, because the Secretary of State can delete and replace it. He could delete the contents of schedule 2 and replace it with the ACAS code. Some of his hon. Friends may urge him to do so. We must know whether the Minister has such radical intentions. We are considering the minimum statutory procedure in schedule 2, but lurking in clause 29(2)(a) is the power to amend by order the whole procedure. The Minister should be up front about his intentions. If he intends to bow to pressure placed on him and the Secretary of State to go further than schedule 2, or extend it in the direction that I suggested, the Committee must know. Schedule 2 is the procedure intended, which makes me nervous about the powers in subsection (2)(a).

Mr Rob Marris (Wolverhampton South West, Labour)

The hon. Gentleman referred earlier to the risk of sclerosis in industrial relations and the economy. Schedule 2, when the Bill is enacted, will be implied in every contract of employment for every employee. If for reasons unenvisaged in the House or Committee it was found not to work, we would face sclerosis unless the Secretary of State had the power to amend it. It would be quicker for him to use such a power than to go through the procedures of the House.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The hon. Gentleman makes an interesting point. The power to change things by diktat is always quicker than the power to change them by persuasion and democratic discussion. It is that balance that we must address. Some of us on the Opposition Benches feel that the tendency over the past four years to include provision for Secretaries of State to amend virtually everything in every Bill is quite dangerous. The hon. Gentleman makes a valid point. If something is not working or circumstances have altered and it is agreed that a change is needed, powers for the Secretary of State are an efficient means to rectify that. Democracy is often the enemy of efficiency and we must ensure that we get the balance right.

The purpose of raising the issue, and it has not been raised as an amendment, even a probing one, is to invite the Secretary of State to make it clear that he has absolutely no intention of using subsection (2)(a) to make wholesale changes to schedule 2 and that it is a reserve power to deal with minor changes that might be required. Ideally. I should like to hear that the Secretary of State would regard it as morally wrong to use that power to come back with changes to schedule 2 that changed its effect, meaning or impact. It is right to use the powers to make marginal and technical changes, but it would be wrong to use them to change things in a way that is so fundamental that it renders our consideration of the Bill meaningless.

Mr Rob Marris (Wolverhampton South West, Labour)

When the hon. Gentleman responded to me earlier, he talked about the balance between democracy and efficiency. I do not accept that there is one, although there can be a difficulty striking a

balance between democracy and speed. My understanding is that under the proposed subsection the Secretary of State would make any changes to schedule 2 by order. Perhaps the Committee will forgive me as I am a new Member, but I thought that that meant, since we are on part 3, that the affirmative procedure would have to be used.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The hon. Gentleman is right, technically. Changes would be subject to the affirmative procedure. I do not know whether the hon. Gentleman has attended any Standing Committees on a statutory instrument but once he has he will realise that it is not an effective scrutiny process in any meaningful sense. Taking 90 minutes in a Committee Room is not the way to scrutinise any substantive changes in legislation. That method is quick and effective for minor technical and tidying-up amendments or when a problem has arisen and there is a consensus about the solution.

The Minister would help the Committee a great deal if he could confirm that he will rule out using the power under subsection (2)(a) to perform any dramatic transformation of schedule 2 that would upset outside bodies that have said that they are broadly happy with it. I do not want the Committee's unopposed approval of the clause to sanction a Bill that says on its face, ''We will do X but we reserve a power to change X into Y if the Minister has any intention of doing that.'' I know that the Minister has come under pressure to look at that point. Does he have any plans to use the power to amend schedule 2 to substitute parts of the ACAS code for the schedule?

Mr Tony Lloyd (Manchester Central, Labour)

I am probably doing the Minister a favour by rising now. I doubt whether he will be able to answer those questions before we adjourn. The hon. Gentleman has raised a number of important issues—

It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Two o'clock.