Orders of the Day — Redundancy Fund (National Loans Fund Advances)

– in the House of Commons at 12:00 am on 4th April 1968.

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8.0 p.m.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

I beg to move, That the Redundancy Fund (Advances out of the National Loans Fund) Order 1968, a draft of which was laid before this House on 25th March, be approved. If the House approves this Order, it already having been approved in another place, my right hon. Friend will thereby be empowered, in agreement with the Treasury, to receive temporary loans to the Redundancy Fund up to a maximum of £15 million. The House will know, because it debated the issue several times before, that Section 35 of the Redundancy Payments Act enables my right hon. Friend to borrow originally from the Consolidated Fund and now from the National Loans Fund. The Act itself makes provision for borrowing up to a limit of £8 million, which may be increased to a maximum of £20 million if both Houses approve Orders authorising additional amounts, and it is that approval for which I ask this evening.

Since the Act became law, two changes have already proved necessary to maintain the Redundancy Fund's solvency. The first was an increase in the weekly contribution from 5d. and 2d. for men and women, respectively, to 10d. and 5d. This change came into force in February 1967. On 24th July last year, the House approved a second change, an increase in the borrowing power limit from £8 million to £12 million, when I told the House why the greater borrowing powers were necessary. Tonight, I ask, for similar reasons, for a further increase, and, with the permission of the House, I intend to outline those reasons.

The House knows that when the contributions were increased to 10d. and 5d., it was the Minister's view that a contribution level of 1s. and 6d. would provide a more certain safeguard for the Fund's solvency. Had those figures been presented to and accepted by the House, a weekly income of about £830,000 would either have kept the Fund in balance or have returned it to surplus before the end of this year. Certainly, this Order would not have been necessary, nor would the Order of 24th July, but, as it was, the lower figures of 10d. and 5d. were proposed and approved.

Of course, the responsibility for that smaller figure and its approval is the Government's and the Government's alone, but we made our recommendation knowing that the view of both sides of industry, both the T.U.C. and the C.B.I., was that a weekly contribution of 10d. and 5d. would be adequate, and that both preferred it to the higher figure. We accepted their suggestion in the knowledge that, in a very real sense, the Redundancy Fund is industry's fund. Industry finances it entirely. Both sides benefit from its existence and their views on the level of contributions which are demanded to keep it in balance deserve proper recognition.

We also knew that if increases to 10d. and 5d. proved inadequate, temporary borrowing was possible. In the long run, of course, the Fund must be self-supporting. Contributions must cover the Fund's permanent outgoings, but borrowing powers were intended to make allowances for temporary short falls in revenue and we seek tonight to take further advantage of those powers.

The House will recall that in his Budget statement the Chancellor of the Exchequer said that the Government intended to increase the employer's contribution to the Fund by 2d. and 1d. from 2nd September onwards. It is our aim that the fund will move into surplus within 18 months or two years from that date, but, in the meantime, its solvency must be preserved and safeguarded.

The weekly income from the present contributions is £690,000. In exceptional weeks, payments from the Fund have amounted to over £1 million. Over the last nine months, the average weekly payment has been £799,000. As a result of this constant imbalance, the Fund now has a deficit of £11 million, and simple prudence demands that we should safeguard the Fund's position between now and September by allowing for the possibility that the deficit will rise beyond the £12 million ceiling which is at present allowed—

Photo of Mr John Page Mr John Page , Harrow West

On what date was the £11 million deficit recorded? I missed the date.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

It rose to £11 million some time during last month. The actual week, because these things are calculated on a weekly basis, I cannot tell the hon. Gentleman, but it was certainly during March—

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Could the hon. Gentleman tell us some time—perhaps he is coming to it—at what level the costs of outgoings from the Fund are now running?

Mr. Hatterlsey:

The hon. Gentleman clearly missed the point when I made it. I told the House just now that, in exceptional weeks, outgoings have been over £1 million. In the last nine months, the average figure has approached £800,000, at a level of £799,000.

Nine months ago, I told the House that the £12 million borrowing limit would probably not be reached, and I said just now that the Fund is already over £11 million in deficit. Since that means that the £12 million figure may well be passed, I am sure that the House will expect to be told what has happened since I made that forecast, which has proved manifestly incorrect.

I must make it absolutely clear that the increased calls on the Fund do not result from unemployment having reached a higher figure or having been at a constantly greater level than we estimated. Nor does our request for extra borrowing powers imply that we expect the fall in unemployment during the next five months to be less than we originally hoped. The level of unemployment alone does not determine the outgoings from the Fund. Payments vary according to the men and women made redundant as well as according to the numbers of redundancies at any one time. Their age, length of service in their last job and the pay which they received all determine how great their redundancy payments should be.

All these factors influence the size of each redundancy payment and complicate the forecasting of outgoings from the Fund with any accuracy. For example, 10 men under 40 with six years' service and average earnings of £20 per week receive from the Fund less than one-third of the payment made for 10 older men with 15 years' service, and average earnings of £24 a week. To forecast with any accuracy the calls on the Fund, we would need to predict not only the number of new redundancies but the ages, service and wages of those men who become redundant. This is one of the factors which has not only made predictions impossible but results in the fluctuations in the weekly outgoings from the Fund and in a figure which may be of the average of £799,000, but can fluctuate widely from that to an amount of over £1 million.

It is important to understand that the necessity to ask for approval for this new borrowing ceiling makes one thing very clear—that is, the fallacy implicit in the doctrine of the permanent pool of unemployed. Were the men who are unemployed this month the same as those unemployed two months ago, we should be making many fewer redundancy payments than now. What is clear from the pattern of redundancy payments is that there is movement both on to and away from the unemployed register. This is known as redeployment. The House has many times asked for evidence that redeployment exists, and I am happy to provide it from the Redundancy Fund this evening.

Finally, the need for increased borrowing powers in no way stems from calls on the Fund which amount to abuses of its provisions. Of course, a fund of this size and complexity runs the risk of occasionally making payments which are thy; result of fraudulent or semi-fraudulent claims, but this could not possibly account for more than a tiny fraction of the total expenditure. Many of the critics of the Fund who might attribute our need to raise the borrowing limit to £15 million to misuses of the Fund do so because they misunderstand the Fund's purpose and the scheme's value.

I should be out of order in dwelling on either of those two mistakes which are constantly made by critics of the Fund. All I can seek to do is ensure that its solvency is preserved until September in the intention that, after then, contributions will more than cover the payments which the Fund must meet.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

Will the increased contributions take into account past debt and pay off that?

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

Indeed, we are required to do that under the Act. In the long term, the scheme must be self-sufficient and preserve its own solvency. When I say that it is our aim that the Fund will move into surplus within 18 months or two years from September, when the increased contributions are made, it is our clear aim that it will do two things—first, that the contributions will more than cover the weekly outgoings, and, second, that the surplus of weekly income over outgoings will wipe out the present deficit of £11 million.

8.10 p.m.

Photo of Mr John Page Mr John Page , Harrow West

I was proposing to begin by saying that this must be a sorrowful and embarrassing occasion for the Parliamentary Secretary. Instead, in view of his remarks, I must call this a shocking occasion for the House, hon. Members having been told that the Fund has now run into a deficit £11 million.

The Parliamentary Secretary, with as much self-confidence as he could muster and with his usual debonair charm, presented this news to the House, but that was not enough to overlay the really dismal results which the Government have shown through the whole of their redundancy policy in the last few years. The arguments adduced by the hon. Gentleman were identically repetitive, apart from the figures, with the speeches he made in the previous debate. The same can be said of the remarks of his right hon. Friend on previous occasions. I do not see how hon. Members, the public or employers can have confidence in the hon. Gentleman's optimistic predictions about the future of the Fund.

The Government are tonight in the position of a man going to his bank manager to seek an extension of overdraft facilities. Like the prudent bank manager, my hon. Friends and I must ask some probing questions, such as why the new facilities are needed and, even more important, why the confident predictions made previously have been shown to be so inaccurate. The Order increases the aggregate amount that may be outstanding from £12 million to £15 million for the period up to 25th April, 1968. It was only eight months ago, in July, 1967, that the Parliamentary Secretary asked for the then available ceiling to be raised from £8 million to £12 million. On that occasion he said: I emphasise again that any problems of tiding over difficulties are in a sense hypothetical. Certainly they are hypothetical in terms of a £12 million ceiling. My right hon. Friend believes that that £12 million ceiling will never be reached. It is certainly possible that the existing ceiling of £8 million may prove adequate, but I am sure that the House will agree that prudent management of the Fund requires us to make sure that sums are available to bolster and buttress the Fund to keep it out of deficit."—[OFFICIAL REPORT, 24th July, 1967; Vol. 751, c. 275.] Eight months ago the hon. Gentleman confidently predicted that the ceiling of £12 million would never be reached. Having risen from a deficit of £5,300,000 at that date, we now have the staggering revelation that it was £11 million at mid-March. I was anticipating a figure of £8 million to £9 million, but I had no idea that it would be as high as £11 million.

Was the hon. Gentleman sincere in what he said tonight and does not he think that the Fund will be knocking on the door of £15 million within another eight months? I do not see why there should be a dramatic change in pattern—and this is the weakness of his argument—when the proposed increase from September will be 2d. for a male worker and ld. for a female worker, since the Fund has gone galloping on and accelerating into deficit after the payments had been more than doubled, from 5d. to 10d. and from 2d. to 5d. Can we be given an estimate of the highest figure at which the hon. Gentleman expects the Fund to be within the next 12 months?

Returning to the analogy of the bank manager, he would ask what steps the customer proposed to take to get his overdraft back into balance. The completely inadequate answer given by the Parliamentary Secretary is that the Fund will be brought into balance again by further and greater contributions from the patient mulch-cow of the business community. Although I am not a farmer and while I do not represent a farming constituency, I suggest that this industrial mulch-cow will soon be getting dry and that the butterfat content of what it is able to give will be getting low. I would also not be surprised if this patient milchcow did not start kicking out a bit when the icy-fingered milkmaid from the Ministry in St. James's Square puts in her next appearance. The increase in the income of the Fund must be made up by new contributions from employers. They have been doubled once, in February, 1967, and now they are to be increased again.

The hon. Gentleman made great play with the fact that the real trouble was that his right hon. Friend had given way to the C.B.I. and T.U.C. representatives in agreeing that the figures should be 10d. and 5d. at the last increase, when he really wanted it to be 1s. and 6d. He tried to make out that if he had not given way quite so easily the Fund would not have run into debt in this way. But that is not what his right hon. Friend said. Having discussed in detail the 10d. and 5d. contribution, his right hon. Friend said: On the basis of forecast levels of expenditure, these increases should be sufficient to reverse the present adverse trend and bring the Fund into balance in the early part of 1968 and build up a small reserve about a year later."—[OFFICIAL REPORT, 15th November, 1966; Vol. 736, c. 373.] With all the information at his disposal, with a doubling of the contribution from employers and with the advice of the statistical department of the Ministry behind him, the Minister of Labour thought in November, 1966, that by now the Fund would be in balance.

It is at this point that we come to the speech of the Parliamentary Secretary. There has been a fashion in recent times for hon. Members to quote from their own speeches. That happened frequently in the Budget debate. I will, therefore, humbly quote from an intervention I made in the previous debate. I said: The Order and the speech of the Minister this evening are a frank admission of the colossal failure of Government planning and the complete punch-drunkennees of the Government."—[OFFICIAL REPORT, 15th November, 1968; Vol. 736, c. 382.] Those were prophetic words and they have proved absolutely true.

The Chancellor of the Exchequer in his Budget, and the hon. Gentleman tonight, threw away rather carelessly this new impost on all businessmen and employers of the country. It is a 20 per cent. increase in the contributions they have to make to the Redundancy Fund, resulting—I should like my mathematics to be correct on this—in a further increase of £4 million on the overheads of businessmen. This is at a time when the Government are introducing new controls on incomes, prices and dividends. This is the kind of action which makes businessmen weep for the failures of the present Government.

Photo of Mr John Page Mr John Page , Harrow West

Hon. Members on this side of the House have constantly queried the philosophy behind the operation of the redundancy scheme. Those of us who have an appreciation of the intellectual qualities of the Parliamentary Secretary hope that he is carrying out in the Ministry some alternative thinking on the whole philosophy of the scheme. The scheme provides a golden or a silver handshake to people when they are made redundant, but there is absolutely no—[Interruption]

Photo of Mr John Page Mr John Page , Harrow West

I do not need your protection, Mr. Deputy Speaker, from the hon. Member for Harrow, East (Mr. Roebuck). In the scheme there is no gauging of the need of the recipient. It is right that we on this side of the House, on an occasion when a vast new borrowing power of many millions is being requested, should be able to protest. We should be entitled to query the reasons for which it is used.

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

Order. The hon. Member cannot discuss the principles of the main Act on this Order. He can confine himself only to the reasons for the increase of £3 million.

Photo of Mr John Page Mr John Page , Harrow West

I will keep carefully to that, Mr. Deputy Speaker. One of the reasons for the increase is the obvious squandering of redundancy payments where they are not necessary. Very few hon. Members on either side of the House believe that we should make redundancy payments, which cost the Fund a considerable amount—possibly £500,000 or more—to the staff of I.T.V. companies recently, when they had merely lost a weekend between one employer and another and their employment was completely assured under the contract with their new employer. It is fair that this should be mentioned because payments like this, which, of course, are in accordance with the Act, cause such a run on the Fund that it gets into the state it has reached.

I hope that I shall be in order in asking whether, under this new borrowing power, the position of dock workers is being considered. Dock workers are one of the few groups of workpeople not covered by redundancy schemes, even though their employers pay contributions. In the docks redundancy schemes are urgently needed.

That brings me to the end of this disappointing little post mortem on the blatant bad management by the present Government in handing out large sums to individuals when they do not need it, which means—

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

Order. The hon. Member, I am afraid, is transgressing the rules of order by getting on to a discussion of the principles of the main Act.

Photo of Mr John Page Mr John Page , Harrow West

I take your reproof, Mr. Deputy Speaker. I hope that the Ministry of Labour will take a long, cool, reappraising look at the past performance of the Redundancy Fund, at where present policies are going and, if necessary, have the courage to come to the House with amendments which will completely change and revolutionise and make unnecessary debates such as this in future.

8.26 p.m.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

We are having an extremely good night in spending Government money. Prior to discussing this Order we were considering the nationalised Air Corporations Bill and the Minister told us that there is a prospect that he will be writing off the debts of B.E.A. to an unspecified tune. By this Order, like the National Plan, like Budgets introduced by the present Government and promises by hon. Members opposite, the money goes fast and furiously down the drain. The only consolation is that the Prime Minister is tonight apparently involved in discussions about reshuffling his Cabinet. The more of them who are made redundant the better. We would not be concerned if a certain amount of payment were made for redundancy of the Ministers involved by this kind of expenditure.

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

Order. I am afraid that none of these interesting matters is referred to in the Order. The hon. Member must come to the terms of the Order.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Does not my hon. Friend think that the Government have brought this Order forward in anticipation of the heavy drain on it—

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

We have only just been told by the Minister tonight the amount of this expenditure. The House is not very full at present, but that is understandable, for when this Order was laid, although it suggests an increase in borrowing powers up to £15 million, no one knew that the Minister would tell us that £11 million or more had already been spent. If the House had been given warning of this, certainly if the Opposition had been warned, there would have been many more present to deal with the Minister.

We on this side of the House accept that redundancy can be valuable and that redundancy payments are helpful to deal with it if the Fund does what the Minister suggests it is doing. Those of us who were involved in dealing with the Act when it was before the House expected that redundancy would assist in the redeployment of labour. The Minister tried tonight to suggest that much of this expenditure was caused by redeployment, and that it was not creating unemployment. I beg to differ. He probably believed what he said, but I do not see how he can tell.

Unemployment has been marginally going down anyway, and, looking at the figures of unemployment on the one hand and at the retraining situation on the other, I do not see that that can possibly be true, because if the £11 million or more had been spent in making redundancy payments available to people being redeployed the Government's retraining facilities would have had to be expanded to deal with the situation. Everyone knows that the retraining facilities available through the Government are limited, that their development has been slow, and that the numbers of people in their thirties and forties coming forward for retraining are too few.

The truth is that the Fund is being used to make redundancy payments to people in their fifties, in many cases in their late fifties. The Minister rightly said that there was very little question of die use of the money in a fraudulent way. We accept that. People are not fraudulently misusing the Fund; they are simply getting round the rules. They are taking advantage of the rules the Government laid down, and the Government should have anticipated this. My hon. Friend the Member for Harrow, West (Mr. John Page) mentioned the use of the Fund to make payments to staff of the independent television companies who were paid off by one company. They were made redundant although they were then taken on by another company. Their contracts were honoured and they were continuing in the same employment, but simply because the name of the company was changed at the head of the notepaper they received redundancy payments.

But that does not apply only to I.T.V. It was taking place in the shipyards some months ago, when the shipyards were without work and the order book was a bit thin—

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

Order. The hon. Gentleman is really discussing the principles of the original Act, and he cannot do that on the Order.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

I take the point, Mr. Deputy Speaker. But I am pinpointing the way in which the increased money to be borrowed will be used in the same way unless the Government do something about it. I am trying to cite an example—

Photo of Mr Sydney Irving Mr Sydney Irving , Dartford

Order. The hon. Gentleman is challenging the principles of the main Act, and he cannot do that on the Order.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

I accept that, Mr. Deputy Speaker. I return to the Order. The shipyards were using money from the Fund, and others will do it again, to pay off people aged 56 or 57, when the Parliamentary Secretary knows perfectly well that there is the peak payment under the Fund, a few years in advance of pension. Beyond that, the payment disappears altogether. The £11 million has been reached so quickly because many firms have been paying off people at that age. They have taken them on again within a matter of months. Their pension rights have therefore been kept intact and in due course they have retired on their pensions. The Government should look into this. They know perfectly well that this happens and it is not right that they should ask for borrowings of this kind when they know that that is going on.

I also ask the Government to look at the nationalised industries. I would guess that the same kind of thing is happening there. It is important to re member that it is completely useless to the country to spend as much money as this on redundancy payments to people of that age. Exceptionally, it can be justified because it helps the individual. But if it is happening on a large scale, we are not getting the retraining which the Government want. It is, therefore, not in keeping with what was expected when we passed the Act. The money is being misused. It is my guess that if this goes on the hon. Gentleman will have to come back to the House and have the sum increased from £15 million to £20 million. That is what we want to try and avoid.

This is in keeping with the lack of economic control. We have more Treasury Ministers than ever. We have more Ministers at the Ministry of Labour than ever. We have a Prime Minister who is supposed to be concerned with our economic affairs. Yet here is a little fund, a tiny little fund. The hon. Gentleman said it was concerned only with the employers. If that is so, the Government are being taken for a quick ride.

I can see how the Government have been taken in after the Budget we have had to suffer, with increases in taxation of £950 million, but I object as a taxpayer to being taken for a ride, and I am sure that everyone outside objects as well. The hon. Gentleman may think that I am making heavy weather of this.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

I accept that he does so. But he must understand that this kind of thing is duplicated in every Government Department. It is because of the additions of £1 million, £2 million, £3 million, piled one upon the other in a multiplication of deficits and debts, that we are in the state we are today.

8.37 p.m.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

My hon. Friend the Member for Harrow, West (Mr. John Page) and my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis) have been a little hard on the Joint Parliamentary Secretary to the Ministry of Labour in one respect, and only in one respect. In that respect, I want to thank him for coming to the House and taking this small extra borrowing—it is only £3 million—and not apply for the whole of the tranche of £8 million that he could have asked for by Order. We should also thank him in that when he last came to the House for more money, again he only took a small tranche—£4 million. This attitude at least gives the House an opportunity to check the progress of this rake, to check on the deterioration of the Fund which is taking place week by week.

When the Fund started, I began a graph. I marked the levels of expenditure and income two years ago. But the deficit curve went off the bottom right-hand corner long ago and the graph is of little use to me now because the scale on which I started was hopelessly inadequate to deal with the way in which the financial transactions of the Fund have developed.

I will go over this remarkable story. First, we were told that expenditure from the Fund would be approximately £350,000 per week—all these figures are in thousands of pounds a week. When it started in April, 1966, it cost approximately £450,000 a week; in November, 1966, the Minister increased the contribution from 5d. to 10d. and told us at the time that the cost was £650,000 a week. He said that it would drop to £600,000 a week and then would drop more until we would be in surplus. In July last year, he said that it was costing £700,000 a week. Last week he said that it was running at nearly £800,000 a week.

In consequence we had to increase the contribution. It started at 5d. per man, is now 10d. and, under the Budget, is to go up to ls. This is really the most appalling piece of estimating and it is not just the first time, for on no less than three occasions the Government have been absolutely haywire. How can they come along here without even an apology to the House? The hon. Gentleman admitted that his forecast had been wrong, but he did not seem to have any spirit of due humility about the magnitude of the error the Government have made; and I thought it was a bit mean of him to blame industry for this. He said it is the fault of industry, that it is for industry to keep it solvent, that industry thinks the fund is marvellous and therefore industry will be only too keen to support it.

Who makes the rules? Who decides on what scale payments are to be made? Who decides about stopping up the abuses which my hon. Friend has mentioned? Who is the arbiter of what is a fair situation in which to pay redundancy and what is not? Is it industry? No, it is the Government; it is the right hon. Gentleman himself. From these benches there have been pressures to stop this or that loophole and to deal with abuses, and we have been told all the time that it is absolutely wrong to do so and that we should not question this marvellous piece of legislation. There is an additional loophole which my hon. Friend did not mention, the example of Rootes when the older workers came to the management and said, "You are going to shorten things. There will be short-time working this winter. Will you give us the sack first so that we can get our redundancy pay and we will come back as soon as trade picks up if we may?"

Then there was the transfer from one subsidiary to another, with firms transferring workers from subsidiary A to subsidiary B, quite often at the request of those workers so that they could cash in on their redundancy entitlement. There was a great deal of connivance with examples of people leaving of their own accord and the employer saying he had sacked them so that they became eligible for the entitlement. The crowning argument was the hon. Gentleman's statement that this was very good evidence of redeployment, showing that redeployment was really taking place. But it is a mirage. We have been told all the time that there is to be a Promised Land of solvency and that the Fund will break even. Every time the hon. Gentleman comes back to the House he tells us that the oasis with its waters and surrounding palm trees is another few miles further on across the desert, and he has invited us to soldier on for a longer time. He says that in 18 months after September next the Fund will be in the black. That is two years from now. The oasis is a long way off and some of us are begining to believe that it does not exist at all.

The reason is that in creating this system we made available to everybody a retrospective extra amount of pay for every year's work they have then done. We put a price on the head of every man in the country who had been in employment; so we cannot blame them if they find ways of cashing in on the capital sum each of them is carrying. Indeed, I have every sympathy with them. But we have our priorities wrong now, because this scheme is costing £51 million a year. At the present rate of expenditure it may be a little more, but that was the figure the hon. Gentleman gave the last time he spoke about it.

The whole of the earnings-related supplement only costs £15 million a year. One could have had three and a half earnings-related supplements for one redundancy pay scheme. The priorities are not in order. This money for which the right hon. Gentleman is asking would be better spent in other ways, and there are many good causes for which the Ministry is short of money—retraining, unemployment supplement, many parts of the policy of mobility of labour where the money could well be used. To come to the House and to say: "I want to spend £51 million and I want a chunk of it now for redundancy payments", is a classic example of getting priorities wrong.

I do not propose anything drastic, but I hope that the Government will learn from what has happened, will listen to the points made by my hon. Friends, and will reconsider whether this is the right way to spend the money. The tone of the House after a stiff week will, I hope, convince them that there are some of us who still feel that Government expenditure should be scrutinised, questioned and criticised in this way when it is out of control, as this clearly is.

8.47 p.m.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

If I may speak again, with the leave of the House, and attempt to answer some of the questions; virtually the opening words of the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) were "that this was a good night for spending Government money". I do not know to what other issues he refers, but if he thinks that the Order which we are debating and the Fund of which this Order may form a substantial part is involved, he is mistaken. We are not concerned with spending Government money at all. The essential feature of the Redundancy Fund is that it is and must remain self-sufficient. All I am asking the House to do is to preserve its solvency between now and September. Increased contributions from industry will then make it self-sufficient again.

Whatever the rights and wrongs of the Government's case, and the Opposition criticisms, our debate is not concerned with Government spending in any way. A much more relevant question is that which all hon. Gentlemen have asked, and which I sought to answer in my brief introduction. This was whether the Government could legitimately have been expected to estimate outgoings from the Fund with a greater degree of accuracy and success. I have clearly made the point insufficiently clear, but I have already told the House that the outgoings from the Fund for each week over the last few months have averaged about £799,000. There have been exceptional occasions when outgoings have been as high as £1 million in one week. From those figures the House will see that there are very great fluctuations, which are not correlated simply with the numbers made unemployed, made redundant, in each week, but correlated with a number of factors which it was not possible and never could be possible for the Government to know.

These are concerned with the age of the men made redundant, with the time the men have spent in their last jobs and their average wage. To say that any Government should be able to predict with anything like accuracy, not simply the level of unemployment, in say the first week in April, 1968, but the level of new unemployment, the level of redundancies, and in addition the average wage paid to these men, their average length of service and their average age, is asking far too much of the Government—more than any Government could hope to do.

Photo of Mr John Page Mr John Page , Harrow West

In what way has the pattern changed during the period in which the scheme has been running? I would have thought that it would have been running long enough for some kind of pattern to emerge to give some guide lines enabling the Parliamentary Secretary and his right hon. Friend to stop having to make predictions which are later found to be completely false. Why is the pattern not more fixed?

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

There is a rough and crude pattern, but it is not a pattern that has a picture so specific that it enables us to predict within close tolerances. The hon. Gentleman will, I am sure, understand when I say that during the last two months the net figure of unemployment—I do not refer to the seasonally-adjusted figure—has fallen, but there is not an equally substantial reduction in the outgoings for the Redundancy Fund. It is not possible to make that sort of precise prediction.

Having said that, and knowing that from the inception of the scheme the Government prepared for this specific contingency by enabling my right hon. Friend to borrow, should that prove necessary, during periods of abnormally high outgoings, the hon. Gentleman was wrong to say the Government are in the position of a suppliant going to his bank manager and asking for yet another loan. At worst, we are in the position of a man going to the bank manager and saying "We always knew or always feared, or were always prepared and we told you we were prepared, to ask for £20 million. We were prepared for it because we were a prudent customer of this bank. However, we are not asking for that full sum but for something appreciably short of that maximum. It is not a maximum of which you are not aware; it is a maximum which we told you about at the inception of the scheme."

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

This is an interesting point. In the first place, the hon. Gentleman said I was wrong in suggesting this was Government money. He would not be discussing it tonight if this were not Government money. The Government are borrowing; the hon. Gentleman has accepted that. If he borrows more and comes back for more after this, clearly the only way he can recoup is by getting it back either from the employee, or the employer, or the taxpayer.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

As a statement of the obvious truth I cannot argue with that, but as a statement relevant to what I have just said it is a good deal easier to argue with.

If the Fund remains in permanent deficit, two alternatives are open to my right hon. Friend: one is to increase the borrowing limit to £20 million. It is not open to him to go beyond because the Act specifies that sum. The second is to increase the contribution. The second alternative is the one we are going to take—the alternative which my right hon. Friend has said we were going to take during the Budget speech.

This leads me to the third question which amounts to the suggestion that since our estimates have fallen so short in the past, since we have had to ask the House twice for additional borrowing powers—I am obliged to the hon. Gentleman who reminded the House of the convenience of asking for a lot at one time rather than minimum sums twice; I am sure he agrees with me that the Government did the right thing on both occasions in asking for the minimum when they thought necessary—how can the House accept my assurance that no further sums will be needed? The answer is this: Even during the period of maximum outgoings the average over the past six or eight months has been £799,000 a week. By 2nd September, when the increased contributions are due, the weekly income will be £830,000 per week. Even if outgoings persist at their present level, which I am sure the House will agree is an unlikely eventuality, there will be a weekly surplus on the fund.

What I am suggesting to the House is that by offering the knowledge that the contribution is to increase, I am offering the certainty that the borrowing powers at present asked for will pay the Bill until that time.

The only part of the entire debate to which I take violent exception is the suggestion by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) that in some way I blamed industry for the deficiencies in the Fund and the necessity to ask for greater borrowing powers. I was careful in my original statement to express the simple and obvious fact that the responsibility for the contribution being at its present level rather than at the level of 1s. and 6d. was the responsi bility of the Government and the Government alone. I have taken that responsibility and have accepted that blame, if "blame" is the right word.

I go on to say that in my view we were absolutely right, first of all, to discuss the level of contribution with industry and, secondly, pay great heed to what they strongly recommended. The House will know that at the National Joint Advisory Committee some months ago we again discussed with both sides of industry the level of contribution to the Fund. I have no doubt at all that in the knowledge that were our predictions to prove incorrect, and were the new contributions to prove inadequate, borrowing was available to provide temporary cover, we were right to agree to the smaller contribution and to the smaller outgoing from industry. Since the Fund is solely financed by industry, and since most of the benefits of the scheme flow to one side of industry or the other, it is no less than just that their voices should be almost paramount in deciding how the Fund is financed and raised.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Does the Fund pay interest to the National Loans Fund on the borrowings we are discussing?

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

Of course, it does. Otherwise it would not be possible for me to say that this was not a charge on the public purse. The National Loans Fund and the Redundancy Fund are in something like a commercial relationship.

I turn, with some difficulty, to the allegation that the exercise is, in part, necessary because of payments which amount to abuses of the Fund's spirit, intention and, sometimes, its rules. I say "with difficulty" because of the rules of Order covering the consideration of this matter. However, two things must be said. First, clearly we are asking for increased borrowing powers for the Fund as it exists, not for the Fund with additional sectors, like the docks, included or for the Fund changed out of recognition by amendment and alteration. Secondly, as I said originally, if there are abuses, if there is some system whereby men are receiving payments to which they are not entitled in law, those abuses and illegal payments are so infinitesimal that they do not influence the total outgoings from the Fund to any appreciable extent.

Many people who say that the Fund is liable to abuse do so because they mistake its purpose and intention. Since we have heard at some length about what was described by the hon. Member for Cirencester and Tewkesbury as "the Rootes loophole", I possibly have the right, and almost the obligation, to comment on it and to tell him whether I think that a loophole of that sort and perhaps of that size is making a contribution to the deficit which we are discussing.

If there is a company—and I refer not to Rootes but to a hypothetical motor company—which discovers that it can produce in 1968 as many motor cars as it produced in 1965 with a smaller work force, and if it is in the national interest that it should do so and that that reduction in work force should be carried out with a minimum of industrial friction and a total absence of industrial dispute, and if when that reduction in work force is made a number of men say, "We will not resist redundancy, as we might have done, because we know that at our age, on our salary and with our length of service there will be a substantial redundancy payment", and if they go on to say, "If somebody is to be redundant, I hope that it is me", does the lion. Gentleman think that that is a payment which is not in the national interest? I believe that it is a payment which could be a help to the company and to the economy and a positive boon to the national industrial interest.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Would the hon. Gentleman deal with the case in which there is an added condition that when trade picks up they will be the first men taken on again? That is the loophole to which I refer, not the one to which the hon. Gentleman is referring.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

The rules of order again prevent me from describing the complications of making it impossible for that situation to come about. But, having hypothesised that far, I hope that the hon. Gentleman will consider the alternatives. In that situation in which a reduction in the work force is necessary and there is no means by which the redundancy can be cushioned and by which the blow can be softened, the balance of industrial advantage comes down fairly and squarely on the side of having a redundancy payment.

But that is not the only advantage and benefit which we get from the existence of the Fund and from the need to increase the borrowing limit to £15 million. This is the second debate in which I have spoken on this subject and, if my memory serves me right, it is the second debate in which hon. Gentlemen opposite have said hard things about the Fund, but have not found it in their hearts to say a word about the advantages which accrue to many hundreds of thousands of redundant men who have found redundancy less painful because of the existence of this Fund.

The hon. Member for Rutland and Stamford asked what conclusions can be drawn from these employment and redeployment figures. He suggested that I was over-stating the case when I said the evidence of the Fund suggested that redeployment was a reality and not a political slogan. Over the last six weeks to two months, the simple unemployment figures, not the seasonally adjusted figures, have been falling. If it were simply a matter of a few of the unemployed men entering new jobs and the rest remaining permanently or semi-permanently unemployed, no redundancy payment would be made. The redundancy payments have continued to average £799,000 a week over the last months. Substantial numbers of new redundancies have occurred. If substantial numbers of new redundancies have occurred, although the overall figure for unemployment has remained the same, the conclusion we must draw is that a substantial number of recently redundant men have found new occupations.

If redeployment does not mean leaving one job and, after a short period of unemployment, taking on a different job, I do not know what the definition of that word is. That is clearly what it is, and all the evidence presented by the Redundancy Fund shows that this is so.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

I appreciate the attempts of the hon. Gentleman to answer the arguments I have put. He was not suggesting the case of a man leaving one job, receiving a redundancy payment and going into another job of the same type. This is not what he was suggesting happened. It is not what should happen; it is not what we want to happen. We want the man to retrain. The point I am making is that the men may be getting redundancy payments, and they may be getting other jobs in the same category, but they are not being retrained.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

I look at you, Mr. Deputy Speaker, with apprehension as I endeavour to answer the question. The hon. Gentleman has fallen into error again when he assumes that men moving from one job to another must be retrained after the first job and before the second. More often than not, in a ratio of thousands to one, men are re-trained after entering the second job. If training is necessary for redeployment, that training may be carried out when the man is re-employed.

Clearly, the House is in agreement that solvency must be, and clearly is, the Government's principal concern. The £15 million ceiling will preserve that solvency. The new rate of contribution in September will make solvency permanent. I hope we all agree that our intention to maintain solvency with minimum borrowing powers is the right step to take.

Question put and agreed to.

Resolved,That the Redundancy Fund (Advances out of the National Loans Fund) Order 1968, a draft of which was laid before this House on 25th March, be approved.