Orders of the Day — Redundancy Rebates Bill

– in the House of Commons at 12:00 am on 30 January 1969.

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Order for Second Reading read.

4.40 p.m.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

I beg to move, That the Bill be now read a Second time.

The Bill has one simple purpose and one major Clause. Its object is a revision of the rebates paid from the Redundancy Fund to employers who have made statutory payments to their redundant workers.

The House will recall that, under the Redundancy Payments Act of 1965, employers (except in those occupations which are specifically excluded) are required to make payments to redundant workers with more than two years' service. Workers receive half a week's pay for each year of service between 18 and 21, one week's pay for each year of service between 22 and 40, and one-and-a-half weeks' pay for each year of service over 40, subject to a maximum of 20 years.

The Redundancy Fund—financed by contributions levied from all employers—then pays the redundant worker's employer a rebate. The 1965 Act provides for a rebate of two-thirds of the payment for service under 41 and seven-ninths of the payment for service over 41. Clause 1 seeks to introduce a uniform rebate for all payments. It provides that the uniform rebate should be 50 per cent.

As a result, the Fund's expenditure will be reduced by rather more than £17 million a year. Half of this is needed to meet anticipated deficits on a full year's working. The rest will go to repay the Fund's accrued deficit.

This is the sixth occasion on which the House has debated the Redundancy Payment Scheme—and the Fund by which it is in part financed—since the original Bill became law in 1965. Inevitably, previous debates have been occasioned by the necessity to improve the finances of the Fund. During those debates, it was difficult to make more than a passing reference to the principles of the parent Act. Today, it is essential that we do so. The aim of today's Bill is to make the Redundancy Fund solvent. But solvency must be achieved in a way that is consistent with the principles on which the scheme is based.

Those principles are easily defined. The first is the provision of compensation for men who have lost their jobs. It is not a form of unemployment benefit paid in a lump sum. It is recompense for the disruption and uncertainty that redundancy must involve—even if another job is found immediately.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

It is a little early in my speech to give way to an hon. Member, but, since it is the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), I will give way to him.

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

I am grateful to the hon. Gentleman for giving way and for that flattering reference to me. Would he say why, in that case, the disruption is not equal, whether a man has worked in the same job for two years or 40 years? It seems a little odd to cut out those who have worked for only one year just because it is a short period, and not take account of what is an equal disruption.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

I will make three comments in reply to the hon. Gentleman. First, I did not intend to be flattering. Second, I would have thought that there was a clear disadvantage and a greater one for a man who has been in a job for 10 years to have to change than for a man who has worked in a job for only six or nine months. Third, if the hon. Gentleman wants to extend the provisions of the Bill, I hope that he will say so during the debate.

I was saying that it is not a form of unemployment benefit paid in a lump sum. It is recompense for disruption. It compensates for the uncertainty and loss of security, for the necessity to adjust to new habits and attitudes, for the need to undergo retraining, all of which are more difficult for a man who has been accustomed to one job for a long time than for a man who has briefly been in one form of employment. In the Government's belief, it is an insurance against redundancy to which all workpeople are entitled, although, until the Act was passed, it was one which was available only to a, very small fraction of the total labour force.

The second principle is the encouragement of industrial change. The 1965 Bill was intended to promote the smooth and peaceful movement of workpeople from old contracting industries into new expanding firms and between firms, as their needs change. All the evidence suggests that it his had this effect. It was with this principle in mind that the current state of the Fund was examined.

The House knows that outgoings from the Redundancy Fund have exceeded its income for almost two years. In July, when I asked the House to approve increases in contributions to the Fund, weekly outgoings were about £900,000. Income was little more than £650,000. By increasing the per capita contribution from l0d. for men and 5d. for women to 1s. 3d. for men and 7d. for women, weekly income was increased to about £1 million. But expenditure has so increased that it is now only a little less than that figure.

We regard the difference between income and expenditure as far too narrow. This is particularly true in the light of the need to liquidate the Fund's overall deficit and the particular problems of forecasting its outgoings with any great accuracy.

There are two distinct problems of estimation—to which I have drawn the attention of the House before as part of speeches which will no doubt be quoted not so much at me as against me as the afternoon wears on. First, the Fund's life, three years, is far too short to provide the sort of evidence on which actuarial forecasts can be based. Second, future expenditure is dependent on the relationship of four variables which determine the level of each individual payment. Certainly, outgoings from the Fund are not related only to the level of unemployment. That simply measures the unemployed register at any one time, not the number of men and women recently made redundant. Demands on the Fund are not even determined by the number of men and women made redundant during any one week or any one month. The payment they receive is dependent on age, length of service and take-home pay. To make an accurate estimate of the Fund's future expenditure we should need to predict each one of these factors, as well as the total number of new redundancies at any one time.

I give the House the same example as I quoted in July. Ten men with 15 years' service after the age of 40 earning £24 a week, would receive three times the redundancy pay made to 10 men under 40 with six years' service, earning about £20. There are so many variables that any prediction is bound to be approximate.

It might be argued that the impossibility of making a totally accurate forecast places the Government under an obligation to make the levy sufficiently high to cover all eventualities. I argue quite the opposite. That view will not be shared by those who speak, as the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) did last week, of industry having to "pay out again" because of the need to revise the levy. That is a view based on a misunderstanding of the nature of the Fund.

The total outgoings from the Fund are determined by the entitlement of men and women made redundant. Since the scheme began the gross cost of payments has amounted to about £140 million. Apart from the Fund's borrowing, industry as a whole has paid that sum and, of course, will eventually repay the outstanding loan. In part, it has been paid by industry in general, via its contributions to the Fund and through the rebates from it. In part, it has been paid by individual employers in making individual payments to their redundant workers. But no matter what the levy might have been the cost to industry as a whole would have been exactly the same. If, in 1965, we had proposed a levy which, over the past three years had, without alteration, raised exactly the expenditure of the Fund, we might have been congratulated on the accuracy of our estimating. But the cost to industry would have been unchanged.

What is more, we knew that, if we levied too little, temporary borrowing was possible up to a limit of £20 million, and that the deficits could then be repaid by future adjustments to the Fund and to the levy. If, however, we had levied too much, industry's money would have been tied up as a surplus on the Fund. In our judgment, it was, therefore, right to operate on a minimum estimate. Certainly, industry wanted us to act in that way. As I told the House six months ago, in February, 1967, we intended to levy 1s. for each man and 6d. for each woman. It was at industry's request that we lowered the figure to l0d. and 5d. I have no doubt that we were right to respond to that suggestion.

Though it is difficult to make predictions about the movements of those factors which will influence outgoings from the Fund in the future, it is possible to analyse the cause of past expenditure increases. The chief cause of persistently high expenditure is not the number of payments, but their average size. In the past two years the number of payments has remained pretty stable. The highest number of individual payments was made in November, 1967, and May, 1968; the lowest in July and September, 1967. There is no discernible pattern in their movement from month to month.

There is, however, a very clear pattern to be found in the alteration in size of average payments. They have steadily and constantly increased. In the first half of 1967 individual payments averaged £193: the average rebate from the Fund was £144. By the second half of 1968 average payment was £245 and the average rebate £183.

In part, this increase is the result of expanding earnings. The redundancy payment is based on the final week's wages, and as they increase so the payments increase. We calculate that about one-third of the rise is attributable to increases of this sort, but there are other less welcome causes. In part, the average rebate has gone up because the percentage of long-service workers in the total has increased—among them many workers over 40 receiving an increased payment calculated at 1½ weeks' pay for each year of service, as against the entitlement for the younger man of one week's pay. In 1963, the proportion of redundant workers over 40 was about 60 per cent. Last year, it was 70 per cent.

We have no doubt that the increase is, at least in part, attributable to the operation of the Act. It is the enhanced payment that helps to account for the older worker forming an increasing proportion of the total redundancies. When it is learnt that redundancies are to occur in a shop or factory, the older worker, anticipating a larger payment, is often willing to volunteer for redundancy.

Too often this is a short-sighted choice. A suitable job will be more difficult to find for him than for his younger colleagues. He will accept training less readily. But the employer faced with inevitable redundancies has no reason to reject the older worker's offer of voluntary inclusion amongst them. The extra payment for the older worker is paid entirely by the Fund, and the individual employer makes no extra payment.

Clause 1 aims at remedying this problem, at least in part. We cannot reduce the payment that the older man receives, for in our view this is the level of compensation needed to recompense him for the special problems he may face. We can, however, make the employer less willing to give him priority when redundancy lists are prepared. In future, the age weighting—an extra half week's pay for service over 40—will not be paid entirely by the Fund. The employer will receive rebates of the same proportion for older workers as he does for younger. The bigger the individual payment, the bigger will be the individual employer's contribution.

Having decided on a uniform rebate, the Government were left to decide how great a proportion of the total payment that should be. That decision amounts to the question of how, within industry, redundancy should be financed. We could have asked for a higher contribution, spreading the cost amongst all firms. The Bill proposes the opposite. We are reducing the level of rebate from the Fund to 50 per cent. of all payments, and thus concentrating the cost of redundancy more heavily within the firms in which the redundancies occur.

We made this choice for a variety of reasons. The smaller rebate, and the consequential higher cost to the individual firms, is certainly likely to encourage employers to concentrate their redundancies, when they come, amongst younger men with shorter service. This option will be open to all companies other than those completely closing down. It seems to be an option which they should be encouraged to take. For the firm going out of business this is not possible, but it is not inappropriate that other firms should pay less of the costs of their liquidation.

For all those organisations which are closing down plant in one area to set up a concentrated business more successfully in another it does not seem unreasonable that such a process—intended as it is as a first step to more profitable working-should be financed increasingly by the companies themselves, not through the contribution to the Redundancy Fund of their competitors and other companies.

On 26th April, 1965, my right hon. Friend the then Minister of Labour told the House that the basic idea of the Fund was to spread "the cost of redundancy over industry as a whole". That principle still holds good. All that we ask today is that the balance between the liability of the individual firm and the responsibility of industry as a whole should be slightly shifted. It is not inappropriate to point out that in October, 1963, right hon. Gentlemen opposite circulated a consultative document about the possibilities of a redundancy payment scheme which included the proposal that the individual company should be wholly responsible for the payment made to its redundant workpeople.

We have always rejected that proposition, and still do. On 23rd July the right hon. Member for Mitcham (Mr. R. Carr) told the House that there was a case for seeing whether the balance of direct contribution claimed from the Fund Wets right. We have examined exactly that contention. The Bill suggests that it is not, and that the balance should therefore be slightly shifted.

The hon. Member for Paddington, South (Mr. Scott) asked me a week ago about the widespread allegations, as he described them, of abuses of the scheme. I want to try to make more clear the relationship of those allegations to the problems we face today. Abuse in redundancy payments means two different things to two different sets of people. To the Government it means those occasions when an employee secures a payment and an employer secures a rebate to which he is not entitled under the rules of the Scheme. We have examined a sample of cases to see how often this happens, and have not found a single example of fraud. I am prepared to concede that with a scheme so complex and covering so many workers there will be isolated cases of fraud, but they are certainly insignificant in terms of the deficit we face today. Other allegations of abuse relate to something which is clearly not an accurate use of that term. They refer to men who, because of the expected size of their redundancy pay, volunteer to be made redundant when genuine redundancies must occur within their factory. This is not abuse, and it is in many ways a desirable operation of the Fund. The redundancy payments scheme has more than the negative virtues of relieving the shock to the worker when he is made redundant. It is intended to have the positive effect of influencing the worker's attitude to the point where he can see advantage in being dismissed from one job and taking up another.

One element of criticism is, however, legitimate—the criticism about what are called anomalies. Some certainly exist. Perhaps the best example—certainly the most frequently quoted—is the situation in which employees of a television company which lost its franchise were eligible for payments even though they were immediately re-employed on virtually identical terms by the new franchise holder. The way in which the Act defines associated companies probably need modification. The Contracts of Employment Act specifies that continuity of service shall be provided during what is term "temporary cessation of work". This has a direct bearing on the Redundancy Payments Act. What is meant by the term in this context needs to be clarified.

None of these anomalies materially affects the finances of the Fund, but as a matter of principle they need to be removed. We intend to begin early discussions on them with industry, and undertake to make what changes in the Act prove desirable and necessary after those discussions have been concluded.

I wish, finally, to say something about the alternative approach to refinancing the Fund. One alternative, perhaps the obvious alternative, would have been to cut expenditure drastically by a reduction in payment to workers made redundant. The C.B.I, argued that, at least in part, the deficit should be overcome in this way. It urged that the qualifying period should be extended from 2 to 3 years. This was in direct opposition to the views of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). The C.B.I. also urged that the enhanced payment to older workers should be deferred from the age of 41 to 51. The Government rejected this view entirely. No evidence has been supplied to us to suggest that the level of payment is too generous. It is difficult to put a precise figure on a payment which compensates a man for the loss of his job, but nothing has happened since 1965 to suggest that our original estimate was wrong. Certainly, the level of payment laid down in the Act has promoted frictionless redundancy in many industries. In our view, it would be reckless to risk losing the real industrial advantages by reducing the payment now.

All that is really changed is that the Fund has run into increasing deficit through demands being concentrated too heavily on the larger benefits. This in itself is not an argument for changing levels of payment under the Act. We are presented with a choice. We could increase the levy yet again and leave unchanged the undesirable concentration of redundancy amongst older workers. Alternatively, we could share the cost of redundancy more evenly between employers as a whole and the individual employers who are incurring redundancies, at the same time reducing the incentive to some employers to sack older workers.

The Government are in no doubt that the second alternative is the right course. It is an argument for encouraging redundancy to be concentrated amongst those workers who, because of their youth and number of years of service, are least likely to receive the largest payment. Concentration of redundancy among this group also has substantial and obvious social advantage.

The proposals in the Bill preserve the finances of the Fund and maintain the objects of the parent Act. I commend the Bill to the House.

5.2 p.m.

Photo of Mr Robert Carr Mr Robert Carr , Mitcham

The purpose of the redundancy payments scheme, the basis of our discussion today and the subject of the Bill, is very important. Effective action to reduce the fear of redundancy and to assist people, if redundancy unfortunately comes upon them, is valuable in human and social terms. That must be obvious to all. But it is also extremely valuable in economic terms.

The more that experts, both in this country and overseas, look at our economic problems and the cause of our troubles, the more often we hear the diagnosis that one of our most urgent needs is to make better and more effective use of our manpower. That leads to talk of the need for redeployment. It has led the Prime Minister, for example, on a number of occasions, to justify certain Government policies in terms of the need for a shake-out in industry to get people moving from industries where there is more employment than is required to expanding industries with growth and export opportunities for the future.

I am in little doubt that positive policies to increase mobility of labour are far more important to the health of our economy than repressive controls such, for example, as the statutory incomes policy. Therefore, I think that there is unanimous agreement on the importance of the purpose of the redundancy payments scheme which is dealt with in the Bill.

The question is: does the present scheme, particularly as it would be amended by the Bill, achieve the purpose on which we are all agreed in the most effective and economic way possible? That is where the doubts are great and are increasing both in industry and, I think, among the public at large. I cannot help wondering, when I look at the benches opposite, whether the doubts are also increasing among supporters of the Government.

Photo of Mr Robert Carr Mr Robert Carr , Mitcham

When I came into this House in 1950 one thing we could be certain about was that whenever subjects concerning the welfare of workers were being discussed—it was certainly one thing that impressed me, and I mean this genuinely—Labour Members were notable for their presence whether their party was in power or in opposition. I am sorry to say that when we discuss these matters now, Labour Members are notable for their absence, even to support a Labour Government.

The first thing that we should note about the Bill—[Interruption.] This is a Government Measure, brought in as a result of their crass incompetence. If my diagnosis is incorrect, I should have thought that the Under-Secretary would have expected, and received, more enthusiastic support from Labour back benchers. I leave the House and others to judge how enthusiastic is that support.

The first thing that we should note about the Bill is that it adds another £17 million a year to the industrial costs of this country. I should not say that with certainty, because that is the estimate in the Bill, and estimates in this sphere by the Government have hardly been accurate in I he past.

Last July, the most recent occasion on which we made an adjustment to the redundancy payments scheme, we were asked to approve measures which added £8½ million to our industrial costs. On that occasion the Under-Secretary said that, although he regretted it, it was, alter all, only about a tenth of 1 per cent. of the labour costs of the country. Now, only six months later, we are being asked to add £17 million, twice as much as we were asked to add last July, which, I suppose, is a fifth of 1 per cent. of the labour costs of the country. But, as we pointed out then, all these fractions add up.

In this same period the Government, by direct action, have increased by 50 per cent. the burden of S.E.T. and have taken other taxation measures, all of which keep adding to our industrial costs. This is the way that the precious competitive advantage, which was the only justification for the heavy price of devaluation, is being whittled away by direct Government action.

The Under-Secretary, towards the end of his remarks, talked about the possible alternatives. I think that, on balance, in a very awkward situation, the Government may have chosen the right alternative in not cutting payments to workers. But I think that the hon. Gentleman was showing less than his usual fairness when he said that employers wanted to cut the payments to workers. It was part of the package that they put forward, but I think that it should go on record in this House, lest the reports are inaccurate—and if they are, I am sure that the Minister will say so—that the Government took the initiative in suggesting to employers that this was one of the alternatives that they ought to consider.

Am I not right that the Government wrote to the C.B.I, and other organisations towards the end of October positively suggesting to employers that they should, among other measures, consider the possibility of solving the problem by cutting payments to workers?

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

The right hon. Gentleman has asked me a direct question, and since I am anxious as I hope he expects to be fair to both him and the C.B.I., I will answer it directly.

The Government sent to a number of interested parties—basically the Trades Union Congress and the C.B.I.—an estimate of what they thought the savings from the Fund needed to be. We also sent a number of schemes explaining how those savings might be achieved. Certainly, I meant it in no pejorative way when I said that the alternative that the C.B.I, chose involved cutting benefits to the workers. I meant it in as positive a way as I know when I said that although that was the scheme it was not a scheme which was ever acceptable to the Government.

Photo of Mr Robert Carr Mr Robert Carr , Mitcham

I am grateful to the hon. Gentleman. The only criticism of that is that if this idea was never possibly acceptable to the Government why did they suggest to industry that they should consider it? I do not want to labour the point, because what the hon. Gentleman has said has at least made it clear that he was not accusing employers of taking the initative in bringing this possibility into consideration.

The one thing which stands out is that neither industry nor the public have confidence that the scheme or the Bill will do the job efficiently and economically, and this lack of confidence has undoubtedly been greatly increased as the result of the Government's incompetence and bad management in dealing with the scheme, and by their repeated patchings and mendings. In three years of this scheme's existence the Government have made no less than nine different proposals for the rates of contribution, the Fund's borrowing powers and, now, the scale of rebates.

Contributions started in December, 1965, at 5d. for men and 2d. for women. Fourteen months later, in February, 1967, they were more than doubled, being raised to lid, for men and 5d. for women. In the Budget of 1968—a little more than a year later—it was proposed to raise the contributions to 1s. for men and 6d. for women, but before these proposals could be implemented the Government had to ask the House for yet a further increase, so that in the end the contributions were put up, last July, to 1s. 3d. for men and 7d. for women.

Similarly, in December, 1965, the Fund's borrowing powers started with a limit of £8 million. In July 1967 this limit was raised to £12 million, in April, 1968, to £15 million, and, three months later—in July, 1968—to £20 million. Now the Fund is bust again. This record is a monumental example of incompetence, lack of foresight, lack of reasonably sound management and of blind, last-minute patching and mending. How can industry and the public have confidence in a scheme with such a record hanging round its neck? The Bill is just another botched job. It is not the considered outcome of a proper review. It is a last-minute, temporary resuscitation of a Fund which is about to drown.

Even this Bill cannot be the end of the story. This is just a last-minute, eleventh-hour, patching and mending operation, such as we have had before. What is the cause of this trouble? It is obvious that the Government do not know and have not taken enough trouble to find out. They now talk about the difficulty—indeed, the near-impossibility—of forecasting. I agree that forecasting in this matter is immensely difficult. We can be generous and say that the difficulty of forecasting could be accepted as a reasonable excuse the first time things went wrong; but it becomes less of a reasonable excuse on each succeeding occasion. Yet the errors have got worse, and not better, and they have had to be corrected at more and more frequent intervals.

Moreover, the excuse about the difficulty of forecasting is a recent one, because Ministers used to speak with relative certainty. I cannot refrain—and this will not surprise him—from quoting the Under-Secretary's own words on a number of occasions. I start with what he told the House on 24th July, 1967. He said: My right hon. Friend believes that the £12 million ceiling will never be reached."—[OFFICIAL REPORT, 24th July, 1967; Vol. 751. c. 275.] That was only 18 months ago. There was no diffidence or uncertainty then. But that £12 million borrowing power ceiling was reached—and very quickly. Eighteen months later, the ceiling had to be increased to £15 million.

Once again the Under-Secretary was full of certainty. On 4th April, 1968—less than a year ago—he told the House: The new rate of contribution in September will make solvency permanent."—[OFFICIAL REPORT, 4th April, 1968; Vol. 762, c. 723.] Where was the difficulty of forecasting—or the uncertainty—there? That was less than a year ago.

But only just over three months after that certainty, namely, 23rd July last year, the Government and the Under-Secretary once again had to ask the House for permission to increase the borrowing powers from £15 million to £20 million, and to recommend—indeed, they said that it was essential—that a further increase should be made in the contribution levels above those proposed as recently as April and which there had not been time to implement.

But if the Government could not see it, other people could, and did. In the debate on 4th April last year, when the Under-Secretary was so certain about permanent solvency, my hon. Friend the Member for Harrow, West (Mr. John Page), wound up the debate for the Opposition, warned the Government, and said specifically to the Under-Secretary: … 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 …"—[OFFICIAL REPORT, 4th "April, 1968; Vol. 762, c. 707.] My hon. Friend was proved right within three months, and the Government once again were proved wrong.

In the debate on 23rd July, 1968, we again warned the Government when we said that even in the context of the increased, contributions and increased borrowing power which the House was being asked to grant—and this was only six months ago—there was danger of further trouble. My hon. Friend the Member for Paddington, South (Mr. Scott), who opened the debate for the Opposition, then said: We are absolutely at the limit of the borrowing powers. One wonders whether the Government ought not to be thinking of foreshadowing a new Act in the Gracious Speech for next Session, because it seems that the powers under the existing Act have been exhausted."—[OFFICIAL REPORT, 23rd July, 1968; Vol. 769, c. 365.] How right was my hon. Friend and how wrong, once again, were the Government! If they could not see, others could, and told the Government what they could see.

No notice was taken of them. Once again we have the same last-minute emergency action, and the same botching. Once again I warn the Government that it will not last, and that further action will be needed. This is an appalling record, and the House ought not to allow it to go on. On merit, the Bill deserves to be thrown out as a censure on the Government for the incredible incompetence that they have shown in this matter over the last three years.

That is what I should like to advise the House to do; the difficulty is that, without this Bill, the scheme will be bankrupt by March and the Government have nothing to put in its place—and, quite obviously, would not be able to find anything to put in its place in such a short time. Therefore, if we reject the Bill, we leave the country and those who will become redundant thereafter with no means of meeting this need, which is most important not only in human but in economic terms. However much I hate what is happening, I would regard that as irresponsible. Thus, however reluctantly, and almost only because the House has been blackmailed by the Government's past incompetence and present irresponsibility in bringing the Bill to the House only at the eleventh hour, I must advise my hon. Friends to let it go through.

But I warn the Government that this is the last time that they can get away with it. I demand—I repeat the word "demand"—that they now put in hand a fundamental and searching review of the working of this scheme and that they publish a report of this review before the end of this year. I demand that that report should not only cover the financial aspect, but should include a considered judgment of the Tightness of the scheme in priniple and of its working in detail. I demand that the Government give an answer to that question tonight.

I hope that the Government will not turn down that request. If there are good reasons for what has been happening, if this is, in spite of all the growing doubts, the best way of meeting what everyone agrees is an important need, then, after what has happened, the public needs satisfying about this. I beg the Government to accept what I have asked them to accept. If they do not, we shall have to consider carefully our attitude on the remaining stages of this Bill.

I should like to conclude by mentioning some of the points—obviously, they can only be some of the points—which the inquiry and report for which I have just asked should cover. First is the method of financing. There are two subsidiary questions under this head. First, we should at least ask ourselves again whether the Redundancy Fund should be wholly the responsibility of industry. According to our present thinking in the Opposition, we believe that it should—I want to make that clear—but some industrial opinion thinks that the Fund should be linked in some way to the National Insurance Fund. Although we do not, at least as at present advised, agree with that, we do think that it is a point which deserves looking at and answering.

But even more important, under this head, is the argument of the flat rate versus the graduated contribution. Here, surely, there can be little doubt. Let us be honest: I think that we all got it wrong when this scheme started. I find the argument for financing by a graduated contribution, a percentage of earnings, rather than a flat rate, to be unanswerable. As the hon. Gentleman himself said, one of the causes of many of the uncertainties and the calls for much higher expenditure than has been repeatedly expected is undoubtedly the fact that the payments are tied to current earnings at the time of redundancy, and those earnings rise.

It therefore seems inevitable that the Fund is always liable to go into deficit. if the number of redundancies does not fall dramatically, unless the contributions are tied to the change in earnings by making them a percentage and not a flat rate. This should certainly be considered. The prima facie case for it is so strong that it should be adopted unless the inquiry and report for which I have asked shows strong reasons to the contrary, which are not apparent to me.

The second major question which the inquiry should consider is the matter referred to by the Under-Secretary, the appropriate scale of the rebate. This is a matter of judgment and a matter in which judgment can justifiably change in the light of experience. The hon. Gentleman said that, when the Conservative Government, way back in 1963, first started thinking about this scheme, we thought in terms of putting the weight on the individual company. Although we had not introduced the Bill by the time we left office, I believe that our thinking had changed or was rapidly changing on that matter. But I do not apologise, in any event, for taking a different view in 1968 from that preliminary view in 1963.

In this Bill, after all, we are reducing the rebate, but I question whether that is right. It increases the burden on a company at the moment of redundancy, when the company may be in financial difficulties. Even if it were not, but had recognised that it had some surplus manpower which it should shed humanely in the interests of efficiency, reducing the rebate is a disincentive and not an incentive to that company to do what the national interest requires. Of course, from the point of view of the total cost to industry, the same overall financial result and burden could be achieved by raising the contributions and maintaining the rebate. That, of course, raises the problem that the cost would rise for the whole of industry and not just those companies where redundancy took place.

This leads me to the third question which I think that the inquiry should look at. That is—here, I should like to pay a compliment to the hon. Member for Cornwall, North (Mr. Pardoe), who has taken a close interest in this subject—should we not consider a second, additional form of rebate, a sort of "no claims bonus" to those companies which, over a period of years, make no claim on the Fund? That would obviously be a much smaller rebate than the rebate when paying for actual redundancy.

If this were found practicable, the rebate would be an incentive to proper manpower planning and would also discourage—this is important—any tendency on the part of companies to make an improper, even if strictly legal, use of the scheme when getting rid of people—one of those uses which are suspected and which are not technically an abuse but which certainly go rather wide of the purposes for which this scheme was intended.

The fourth question which this review should consider is what influence the age weighting rebate formula should have on the company's selection of employees to be made redundant. Surely, because older employees have more difficulty in getting new jobs, because there is a waste to the national economy from the unemployment or underemployment of older but perfectly capable and fit people, and also because the cost to the Fund is much greater when older people are made redundant, we should if anything, give a bias towards making the younger people rather than the older redundant when that choice arises.

Until now, the scheme has given a bias, if anything, towards getting rid of older people and that was wrong. The Bill makes it at least neutral and we agree that that is better; but the sort of fundamental inquiry for which we are asking should at least ask whether the bias should not be tilted even more, so as to give a greater incentive to choosing the younger rather than the older worker when, unfortunately, the need for redundancy arises. I deliberately say that the question should be asked and I refrain from giving an answer, because these are proper matters to be reviewed and reported, with all their pros and cons, to Parliament, so that we can form our view about them.

The fifth question which keeps on arising in connection with this scheme and which should be reviewed is the possibility of abuse. The Minister keeps saying that the abuse is minimal, and he may be right. However, we are all aware of individual cases—and as we go about the country we are made aware of the widespread feeling on this point—which must make one wonder whether the abuse is far worse than minimal. It is not sufficient for Ministers merely to say in general terms that it is minimal. For this reason the whole matter should be the subject of an inquiry.

The sixth question on which we need a full report concerns the definition of "redundancy". Should it be changed to reduce the anomalies which occur? Even if one discounts the tales of widespread abuse, one cannot deny that anomalies exist. One need only think of cases of people who get large redundancy payments when under the scheme as it was originally thought up, it was never envisaged that they would be receiving such payments. As the Under-Secretary said a classic example was that of people employed by television companies, and another arises out of a change in the status of associated companies. There are many others.

We should also recognise that there are cases of the reverse kind; that anomalies occur in both directions. We can think of cases where tribunals have ruled against the payment when on all normal grounds of natural justice the applicant would have seemed entitled to a payment.

There is also a more general problem of great economic importance. When a worker feels that he is in a dead-end job and can see other opportunities—perhaps can foresee his company or industry declining—he should in in his own and in the national interest be encouraged to change his job. However, the scheme as at present set up discourages that because unless such a worker waits until he is made redundant he does not get a lump sum payment. I do not want to exaggerate the effects of this, but it must be admitted that this acts as a disincentive pressure on people doing what they should do in their own and in the national interest.

Last and perhaps the most important question into which the review should look, is whether the present system of lump-sum redundancy payments is the best way of spending the money in the fund. Prima facie the present system seems absurd, because the redundant worker gets an amount which is related entirely to the chance of his past record of service and not in any way related to his difficulties and needs in finding good alternative employment. How can that be right?

I wish to make it clear that I accept as well as know the case for making good payments on the termination of a job and for having them related to past service. In principle, this is already covered by the Contracts of Employment Act and if the provisions of that Measure are inadequate they should be amended. That would be the proper way of meeting this need. Indeed I notice that the Government's recent White Paper, "In Place of Strife", makes some suggestions to that effect. We must therefore accept that there is already overlapping and confusion in this matter.

Even more important perhaps for hon. Members in considering the Bill and the scheme is an awareness of the fact that the purpose of a redundancy scheme in social as much as in economic terms should be to make easy the free movement of labour from one job to another. Payments should be related as far as possible to the difficulty which faces a man in changing his employment and not to what has happened to him in the past. That need appears to point to a number of questions.

The first is the need for generous mobility pay—as we might call it. We already have this principle accepted to some extent in the wage related unemployment benefit, but is the scale and implementation of that right? The second is to set up a more effective and professional placing service. I do not wish to throw bricks at the Department which performs the task of the old Ministry of Labour—as a former Minister at St. James's Square I take pride in and have an affection for what the placing service does—but I suggest that it could now be made more effective and professional.

The third need towards which the primary purpose points is for a massive adult retraining programme going far beyond the present Acts and provisions. The fourth need is for the compulsory transferability of pensions.

These matters should be the priority objects for attention and expenditure if we wish to make our redundancy payment scheme both as humane as possible and as economically effective as possible. In Sweden, an employee who must change his job—for example to avoid overmanning—is guaranteed continuity of income and maintenance of his living standards provided he is willing to be retrained and if necessary work elsewhere, and is given full help to move elsewhere. Is not that the direction in which we in Britain should be moving? The inquiry for which we are asking should take a close look and report on the principles and methods of operation of the Swedish labour market policy.

The Bill, unfortunately, seems to us to be a sorry further chapter in a sorry and incompetent story. It is only tolerable to pass it if the Government will now promise the House the sort of far-reaching inquiry and report which I have been suggesting so that the next similar Bill—I am sure that we will have another one and not in the far distant future—is a properly thought out and well constructed Measure instead of just another last-minute botch-up.

5.37 p.m.

Photo of Mr David Mitchell Mr David Mitchell , Basingstoke

We are asked today to give a Second Reading to a Bill which is merely a rescue operation for the Redundancy Payments Act, 1965. I will confine my remarks to three points in an endeavour to see whether we should be doing something more radical than the proposals which the Government have put before us.

I want to know, first, whether in terms of cost effectiveness the 1965 Act is good value for money; and, secondly, whether the Bill is a step in the right direction or is, as I believe it to be, the opposite. I intend, thirdly, to suggest what we should be doing. I begin by quoting some words used by the then Minister of Labour in 1965 in moving the Second Reading of the Redundancy Payments Act. He said: In the White Paper on the Economic Situation, published last October, the Government undertook to carry out an active policy to make it easier for workers to change their jobs in accordance with the needs of technological progress …"—[OFFICIAL REPORT, 26th April, 1965; Vol. 711, c. 33.] Repeatedly during his speech it was made clear that that was the main purpose of the legislation. The first question which one must ask, therefore, is whether the Act is giving good value for money.

One must remember—and it is easy to forget—that this is an additional charge on industrial costs. The Minister will appreciate as much as any hon. Member how important it is for British industry to be competitive. It is essential, therefore, to look at the built-in overhead costs of industry, of which this is one, to see whether they are giving really good value for money.

This Measure gives payment according to the past and does not deal with the problems of the future. It enables a man to be paid when he may not even be unemployed. He may walk out of one job, cross the road and step into another. He may even walk out of one job and cross the road to a better paid job. In spite of that, he is entitled to draw on the Fund. Indeed, he may walk out of one job and into another in another factory belonging to the same group, but he is entitled to the payment.

Equally, a young man who has not been long in his job, and who has children and other built-in costs, suffers far greater hardship when he must move jobs because he gets very much less out of the fund because of the shorter period he has been working. This man may be involved in moving from the North of England to the South of England or vice versa and having to meet major costs. He gets less than the older man who has been longer in his job but who crosses the road to a new job. This cannot be a soundly based cost-effective way of using industry's money.

The House passed the 1965 Act on the clear basis that it would take a long time for wage-related benefits to be introduced They have now been introduced and the Government do not seem to have taken account of them and the effect that they have in relation to this scheme. I would have thought that the passing of the 1966 earnings-related benefits provisions created a new situation which the Minister should bear in mind.

My second question is whether the Bill improves or worsens the situation. It will certainly increase the cost, from one-third to 50 per cent. for an employer who wishes to dismiss a man. I understand that during the operation of the Act payments have averaged £250 per worker. If we consider the case of rationalisation in an industry involving the shut-down of a factory employing, say, 2,000 workers—this example might occur in an area in which there are many jobs available and in which, therefore, no great hardship will be caused—the cost to the employer will be about £⅓ million in terms of redundancy payments, assuming that about three-quarters of the labour force is eligible.

This must have a substantial bearing on the decision of an employer in considering whether to close a factory, when the economic case for it is clear and necessary, when the economic position of the nation requires mobility of labour, which should be encouraged, but when the provisions of the Bill detract from giving such encouragement—indeed, to the tune of £17 million.

We should be thinking more in terms of something like sickness benefit, for which one pays while one is well and which one draws out only when one is sick. Because employers and industry are committed to contributions under this scheme, there is insufficient incentive for us to do as good a job as we should be doing by way of wage-related benefits.

I come to my third point, which is to consider what we should be doing. The House recognises the urgent need for mechanisation, modernisation and rationalisation in British industry. This is nationally recognised, but it is individually opposed and resisted in factories. One can understand the reason for this. It is the legacy which has come down to our generation from what happened in the 'twenties and 'thirties—the legacy of a period when unemployment varied between 1 million and 3 million. One can understand men's feelings when a new piece of machinery was installed, so causing redundancy and adding to the pool of unemployed. In those days it meant being unemployed for months, if not years. Men clung together to find ways of spreading work. Where two men could be employed on a piece of machinery when only one was really necessary they tried to keep up the labour force and so prevent a few men from being on the dole.

We appreciate and understand what happened in those days. But what in the 'thirties saved men's jobs is today doing desperate damage to the nation's prosperity. There is, therefore, an urgent need to take away the fear of unemployment; indeed, to do what the then Minister said in 1965 when moving the Second Reading of the Redundancy Payments Act.

As an aside, I would say that I do not think that that fear has been helped by the present Government's record of unemployment, standing at over 500,000 for 19 to 20 months, and the Prime Minister's elasticity of phraseology, when he maintains that there is full employment. The urgent need is to remove the causes of resistance to change, to make adequate payments, to prevent a change of job meaning a drastic lowering of a person's standard of living. As so many people today are heavily pre-empted and mortgaged on their pay packet with hire purchase, it is even more important to look precisely at the sort of causes, to which I have drawn attention, where hardship is caused in moving from one job to another. The need is not for payments related to past services, but to the costs that the man will incur, for the period for which he is unemployed, for the cost of retraining, and moving, if that should be necessary.

These are the things which Government policy ought to be doing. I am aware that there are Measures on the Statute Book in this connection, but we have not been able to deal adequately with these things, because of the preemption of available money on this scheme. If one looks at earnings related benefits, where a man is earning £24 a week, not far from the national average, he can calculate that £15 of his earnings are within the range of the Act, and he will receive approximately £5 supplement. A man earning £30 a week receives a maximum supplement of £7. We ought to look carefully to see whether those figures are adequate, especially in relation to the sort of problems to which I have drawn the Minister's attention.

There is a case for the amalgamation of wage-related benefits with redundancy payments, relating it to the previous standard of living and the period in which the man is unemployed, with what I would call a "no claims bonus" for long-service employees who have not been drawing unemployment benefits. In this way, we can tailor-make the payments to the size of the problem. The trouble with the Act as it stands, and the Measures before us tonight, is that instead of tailor-making the payments to the problem, they tailor-make the payments to past service, which has no bearing or relationship to the size of the problem affecting the man. This is, as my right hon. Friend said, a miserable Measure and the Government ought to have a careful search for a new way of dealing with this problem, which I and my colleagues recognise ought to be dealt with to help the mobility of labour, so essential to the country.

5.47 p.m.

Photo of Mr Ernest Thornton Mr Ernest Thornton , Farnworth

With all the criticism so far levelled at this Measure, the House is tending to lose sight of the fact that this redundancy payments scheme is one of the most efficient economic reforms passed by this House in many years. The recent announcement that during 1968 we had, for the first time for many years, a rise in productivity and an improved balance of trade is, to a substantial extent, attributable to the working of the Act, with all its shortcomings.

The overriding difficulty in forecasting accurately to bring the Fund into balance stems mainly from the Government acceding to the pressures of the Opposition in Committee, and increasing the basic payments from the Fund from 50 per cent. to 66⅔ per cent. That was done after Opposition pressure, and requests from the C.B.I. I know that the C.B.I, has come to recognise that that percentage was too high. If my memory is correct, and I had a little bit to do with the progress of the Bill, the request was that the payment from the Fund should be 75 per cent. or 80 per cent.

There was a slow realisation among employers that generous payments could be extracted from the Fund in respect of long-service employees. For the worker with 20 years' service, all after 40 years of age, seven-ninths, or almost 78 per cent. is paid from the central Fund. If one takes into account the fact that the employer is paying approximately only 22 per cent., then it is obvious that the employer can be very generous. For each such worker made redundant, or arranged to be made redundant, he can be paid £100, at a net cost to the employer of about £10 when the employer's tax is taken into account. That is the reason why it has been difficult to fore- cast correctly. This trend has been some time in emerging and being pinpointed.

My guess is that now the Minister has gone too far in the other direction. I confess that my estimates, like everyone else's have been wrong. I make a guess on the assumption that if one does so often enough, sooner or later one must be right. My guess is that this Fund will now swing very rapidly into surplus, after eliminating the £17 million deficit. That will mean that there will be a considerable time before there is a need to review contributions.

I want to refer particularly to the older workers. There is a lot to be said about a scheme which helps the older worker, in preference to the younger worker, who is more mobile. One thing not overlooked in devising this system of the extra half week pay for each year of service for workers 41 years of age or more, was that it might become an additional deterrent to employers to engage workers in their forties or fifties. Certainly this was in my mind. If we are not careful this Bill will add to the many deterrents against employing these older men.

If they become redundant they will be an expensive proposition for the employers. There are many possible computations. To revert to the original proposition of 50 per cent. for the basic week from the Fund is correct, and we should look again at how the extra half week for each year of service from 41 years of age and over could be met.

We might consider making a contribution from the central Fund for this half week of two-thirds of the amount. That would have the net effect of a minimum payment of 50 per cent. from the central Fund and five-ninths, if my arithmetic is correct—between 55 per cent. and 56 per cent.—from the central Fund in the case of years of employment for which qualifications are met from the age of 41. I should like the Minister to look at such a proposition. One of the problems in industry is getting into employment men in the late forties, fifties and early sixties. I am afraid that this Bill will be an additional deterrent to employing them. With these qualifications I commend the Bill, and hope that at a later stage the Minister will look at my proposal.

5.56 p.m.

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

As my right hon. Friend said, this is about the sixth occasion upon which we have discussed this subject, and in this time we have had about nine changes. If the Minister ever becomes redundant, and I suppose that in a couple of years we would hope that he will, he is well qualified to be the director of a nationalised industry, because I know of no one who can put forward an adverse balance with such buoyancy and do it with such persistence.

On a number of occasions the Minister has told us that this has nothing to do with the ordinary taxpaper. We accept that, but lie has a lot to do with industry, which has to pay the Bill. Unhappily, industry is in a position where it has to pay the bill but the Government direct. The hon. Gentleman is running the Fund and telling industry how much it shall pay in, and in the long run the Government are responsible for the balancing of the Fund. When the Fund ceases to balance, and in so far as it ceases to do so, the burder is bound to be imposed upon industry. There was an excuse at the beginning for the Government getting things wrong, because this was something new and the Department concerned was bound to be uncertain as to how it would work out; but to have to come back six times to the House and make nine changes is allowing a good deal more scope than would be justified for any administration which pretends to be competent.

The correct use of the Fund is important for mobility of labour and the general efficiency of industry. It would seem, from the trends that this Fund is being used as a kind of extra "dole" payment; the social service aspect of the Fund is pre-eminent to both the recipient and the employer. I am not sure that it is not pre-eminent in the Government's thinking. Ministers talking about this Fund frequently boast that they alone have introduced a Measure which, at last, gives to the worker the block payment, the golden egg which used only to be available to the director.

I am not averse to lump sums being paid to help people who lose their jobs, particularly if they are over 50. To a man over 50, the social service aspect of the Fund is important. If the usefulness of the Fund is to rest there, however, it clearly makes less contribution to the nation's industrial well being or to the improvement of efficiency. This is where the Government must examine where they are going. This is why my right hon. Friend's suggestion that there should be an inquiry is important. Unless, arising out of the Fund we are getting, together with the social security payment, mobility of labour and retraining, and unless we are providing new industries with the people that they need, clearly the whole idea behind the scheme will fail.

The Minister was kind enough to quote something I had said against met At least, he imagined that it was against me, though I may not accept that. I have looked up some of the other things which I and others has said on this subject. On 15th November, 1966, I said that the over-50s appeared to be increasing in number as recipients of these payments and that if the Minister did not take action to change this trend he would be faced with a serious situation.

The Minister has now made a late change which seeks to persuade employers to make people redundant in their 40s or below. I wonder whether this is not another miscalculation, because there are two things to which regard must be paid when we are considering the attitude of an employer to those to whom he is going to pay redundancy money and the attitude of an employee as to whether he will accept such a payment. Those who are in their 40s and their 50s are not in any different situation. I think that, on balance, the over-50s are more able to move than the 40s and under-40s, because the man of 40 or under is at the time of life when he has a young family. The man of, say, 41 down to about 30 has probably just bought his house and got his children's schooling settled and is not very anxious to move. Therefore, it is possible that the change announced by the Minister will have no material effect.

This Fund is valuable only as long as it runs alongside many other changes which are required, which the House has been calling for over a number of years, which are sometimes difficult to institute, but which, nevertheless, are essential if people are to be persuaded to move from one place to another. The Times Business News today contains an article on the closing-down of the A.E.I, factory at Woolwich, which wiped out 5,500 jobs. Two things are clear from the article. First, many of the workers went out of Woolwich and travelled some distance to get new jobs. This is the pattern in the South of England, and it is generally acceptable. I will return to this point later, because it is not acceptable elsewhere. Secondly, there were others who were prepared to move to other parts of the country but were unable to get housing. Unless housing arrangements are made which will encourage the mobility of labour, no "top hat" payments will help to persuade the worker to move, because he cannot move.

The first essential is that, in another sphere, the Government must try to persuade councils increasingly to provide houses, or persuade industry itself to provide houses, where they are required, so that a worker who has received a redundancy payment will know that when he goes to a new job in another part of the country he will have a home. The second thing, which is very simple—I come back to what I was saying about Woolwich—is that if in the provinces a man has to go two or three miles to work he considers that to be a long way. In London, if he has to go 15 miles to his work, he does not consider it to be very far.

The Government must think in terms of whether, if they want a worker to travel a distance to work—it could be 20 miles a day, because it is better to travel 20 miles there and back in a day than to have to uproot one's home and get a new house—they would not be well advised to pay additional travelling expenses to facilitate this.

The question of schooling is important. It is not easy for a worker with children to transfer them from one school to the right kind of school in a new area.

The question of old people is even more important. It is surprising how many men in their 30s and 40s would not think of moving because they have an old relative—an elderly parent of the man or his wife—living close to them, and they just cannot find an old people's home for that parent to go to if they themselves move. An inquiry is necessary into the whole aspect of how the Fund is working out in relation to its main objective, not the objective of providing simply an additional social payment.

Finally, my right hon. Friend suggested that we might have to look at the whole question of the payment of lump sums. As we have started the Redundancy Fund in this way, I should not wish us to end the payment of lump sums. That would produce a situation where certain people, having received a lump sum, would have done very nicely, while those who came afterwards did less well. There is a case for making payments to compensate people on a purely social basis.

Any Government who are looking at the reform of this Fund and future changes which have to take place may have to consider whether they should provide extra payments to workers of any age—whether they are 30, 40 or 50—who seriously intend to move, have indicated that they will move, and can prove that they have new jobs to go to elsewhere; and also to people who are ready to be retrained. A plus payment for such people might provide the kind of incentive which would get us the freer flow of labour which we must have if we are to increase industry's efficiency.

6.9 p.m.

Photo of Mr John Pardoe Mr John Pardoe , North Cornwall

I have no intention of going through all the horrific details which have led to this occasion. We have been through them often enough before. Indeed, I have itemised them in print elsewhere. The whole purpose of redundancy pay, which all hon. Members accepted, was that we should encourage the mobility of labour. The Bill is one step in trying to solve the problems into which we have got ourselves as the result of our attempts to overcome the difficulties of labour immobility.

I thank the right hon. Member for Mitcham (Mr. R. Carr) for mentioning a suggestion which I have put forward in the House on two or three occasions and which, I am sorry to see, is not incorporated in the Bill, namely, that we should follow the American practice of experience-rating. Under the American unemployment compensation fund, it is a common factor that firms which have a long-term record of bad unemployment and bad redundancy—I stress long-term—are rated accordingly, there are no-claim bonuses and, on some occasions, even the whole of a company's payment to the fund is waived if its record is good. We could in this way ensure that payments to the Fund were increased if a company's record was bad.

It may be thought by the Minister—I hope that he will not do so—that his policy of charging the employer rather more at the time of the redundancy, or making him pay a higher part of the total payment, is a move towards my suggestion based on the American experience. I hasten to say that it is not. At no time did I suggest that we should increase the employer's liability at the time when he wanted to make the redundancies. That is the wrong time to increase a penalty.

Also, I never suggested—and I certainly do not do so now—that we ought to judge an employer's labour record in the short term. It would be necessary to use not just the information available from the Redundancy Fund, which has been going for only a few years, but the records which, I should have thought, would be available from unemployment payments over a much longer time.

I have repeatedly emphasised the need for redundancy insurance, because it oils the wheels of labour mobility. However, my first comment about the contribution to the fund—I relate it to the contribution as it will be after the Bill—is that, right from the start, it ought not to have been a flat-rate contribution. One of the problems today—the Minister mentioned it, and it is obvious to all who have followed the course of the scheme in recent years—is that with a flat-rate contribution, if wages rise and payments rise accordingly because they are related to wages the Fund is always likely to go into the red from time to time, and progressively on a permanent trend, not just occasionally so that one could cope with it by deficit financing. It would have been better, therefore, if we had from the start ensured that employers paid into the Fund by means of a percentage payroll tax. This would have been clearly related to increases in wages and, therefore, would match outgoings.

I welcoms the Government's decision not to reduce the total payments to redundant workers. It is important that these payments should remain high, whatever part of them the Government meet. I should have preferred the alternative of increasing the contributions coming from employers, though, as I say, on a percentage basis, and, moreover, relating them to their long-term unemployment record.

Several hon. Members have raised the whole question of the lump-sum payment. In my view, in the light of the experience we have, the termination grant is mistaken. It would be much better to move towards the Swedish or French system under which much more emphasis is placed on removal costs, housing policy and housing priorities. One of the major obstacles to the geographical mobility of labour is the shortage of housing. We ought to try to create a housing system which does not discriminate against the mobile, which is what our present system does.

I represent in North Cornwall a development area. A great deal of industry has recently moved in, and one of the first questions which an industrialist asks on moving into an area is, "What sort of houses may we have for our key workers?" I know of the considerable prejudices which are stirred up among those who are on the existing housing lists. People write to their Member of Parliament, and the Member stirs it up with the local council. But we must devise a subsidy policy which persuades local authorities to be tough about this and to overcome the prejudices. At present, as I say, we discriminate in favour of the immobile.

We must look at our unemployment policies as a whole. I have always regarded the redundancy payments scheme as only a temporary measure until we had our unemployment scheme brought to the level at which we would wish to see it. I have said before that unemployment pay during retraining should be at least 100 per cent. of normal earnings. I shall come back to that. There is a desperate need to incorporate redundancy pay within a new system of unemployment pay, and these policies should be tied to regional manpower needs and regional retraining policies.

I know only too well of the occasions on which constituents of mine in the South-West have been retrained, at the generosity of the Government, but who, unfortunately, all too often find that there are not opportunities open to them in the area. In fact, they went into the retraining never intending to move from the area. It is wrong that within a region we should retrain people who do not intend to move out of the region, who are firmly set against doing so, if at the end of the period no jobs are available for the skills in which they have been trained.

Hon. Members frequently mention abuses of the Fund. I shall not harp upon the abuses, save to observe that the Minister writes off their effect too easily. They prejudice people against the whole scheme, and that is rather more important than the cash value involved. As a result of an article on redundancy pay which I wrote in The Times in December last, I received two extremely interesting letters which disclosed what I regarded as flagrant abuses of the scheme. One came from the personnel manager of a large company in Cardiff. He said: Earlier this year at my company we carried out a reorganisation of the Traffic Department with the result that two or three foremen, staff salaried employees, became surplus to requirements. They were informed that every effort would be made to find them suitable work, and eventually they were transferred to other sections with the same status and salary.One of these men indicated that he wished to be declared redundant, but this was refused. Following this, he went to his doctor and obtained certificates to the effect that he was unable to follow his employment and continued to receive his salary in accordance with the conditions of his employment. We were surprised, therefore, when we received a claim for redundancy payment from this man, which we opposed on the ground that he was still employed by the company at the same salary and status as previously.However, the claim went before the Tribunal and the man was awarded £400 because the company had not tendered to him four weeks' notice of their intention to transfer him from the Traffic Department to another department. I do not believe that the Redundancy Payments Act was passed to deal with that kind of situation.

Here is another example, again of flagrant abuse, this time concerning a farmer. He wrote to me as a result of my article, saying that he had, just over a year previously, relinquished the tenancy of the farm which he had worked for 29 years. He relinquished it to his landlord who intended to farm it himself. Some weeks before the changeover took place, he went to the landlord and arranged with him that two of his men should carry on working for the landlord. He even made arrangements that they should start work for the landlord before the official change-over took place, since the two farms were adjacent and it was easy for them to do so.

Although they left his employment on a Saturday and started working full-time for the ex-landlord the following day, they claimed redundancy pay. Naturally, my correspondent opposed their application, but it went before the Tribunal and they were paid it. In fact, they had not lost a day's work. All the arrangements had been made for them. They were working on the same farm and doing precisely the same work. The payment was made just because the employer had changed. It seems ridiculous.

I mention those abuses because I do not consider that the Minister can run round them quite so readily as he sometimes seems to suggest. They are flagrant abuses of the scheme, and I should like to have his comments on them. I shall pass the letters and full details to him if he wishes.

If an adequate policy of unemployment pay were in operation, there would be no need to take care of the income loss in this situation. After all, we are dealing with three things—poverty, income loss after redundancy, mobility of labour and retraining. I am convinced that there is very little need to deal with the first outside of an unemployment policy. I have already referred to geographical mobility. There is a considerable need for the improvement of the regional and inter-regional dissemination of information about jobs and about the various grants for moving and for housing which are available. It is important that there should be retraining for jobs which exist and it is also important to encourage firms contemplating making older workers redundant responsible for the retraining of those workers within the firms before redundancy occurs.

I wish that before the Minister had introduced the Bill, to which I am totally opposed, he had read the work of a supporter of his, Professor Jack Wiseman who sent me, again as a result of my article, a reprint from the spring, 1965, issue of the Moorgate and Wall Street Journal, in which he made an extremely comprehensive case in an article entitled "A positive approach to redundancy policy". This is totally different from anything the Government have proposed in the Bill. I would not be so opposed to the Bill if many of these suggestions had not been made in the House already, particularly by myself. My colleagues and I voted against the last round of increases. We said then that they were an example of disgraceful forecasting and maladministration by government, and I hasten to say that I said by government and not by the Government.

I remind right hon. Members on the Conservative benches that the Economist this week begged progressive M.P.s of all parties to vote against the Bill. I was delighted to receive the support of the Economist for I derided it earlier in the year, but it left the Conservatives with a get-out from voting against the Bill by saying that many Tory questions on Monday managed to be more silly than the Minister's replies. That presumably is why they will not join us in the Lobby tonight v/hen we divide against the Second Reading, as we undoubtedly shall.

6.23 p.m.

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

I go a long way with what has been said by the hon. Member for Cornwall, North (Mr. Pardoe). I only wish that 60 per cent. of my party would come into the Chamber to hear what I had to say when my name appeared on the annunciator.

The Government have had an extremely bad afternoon. They have been properly Knocked about with their scheme for redundancy for all the Under-Secretary's buoyancy. He should have appeared before us in sackcloth and ashes but he was extremely jaunty and I do not believe that he had appreciated the strength of the criticisms to be made against him.

I do not want to waste the little time which remains to me by going over the ground of the incompetence of the forecasting and the budgeting for this scheme, but it is important to underline what my right hon. Friend the Member for Mitcham (Mr. R. Carr) has said. The time has come when this kind of thing cannot go on any longer. We now have to hammer out a proper policy for redundancy pay which does not contain the anomalies and abuses of the present scheme and which will be acceptable to the world outside and to industry. The reason why the scheme keeps drifting into the red—and it will do so again—is that we have put a price on the head of every man and woman in employment, amounting to so many £s for every year in employment. This sort of Tantalus situation makes it almost inevitable that people will try to get hold of that large capital sum on their heads.

I feel rather strongly about the position of those who merely retire. It is indefensible that a man who is 64 and made redundant may receive up to £1,200. whereas a man who just retires and who is not made redundant receives nothing. That is by far the worst anomaly and by far the most objectionable part of the whole scheme. Others simply cannot wait until they are made redundant and they provoke redundancy. The hon. Member for Cornwall, North and my hon. Friends have given examples of such instances. There is collusion with the employer, jumping the gun on change of ownership, or switching between subsidiaries, and the rather odd principle of "first in, first out" in some of the cyclical industries, like the motor car industry, where people are only too keen to be made redundant.

The whole concept of a capital sum based on the number of years worked is totally wrong. It would be perfectly right and proper for there to be a capital element in wages to be saved for a man's retirement or dismissal. In other words, a small percentage of the weekly pay packet would be put aside and would be the employee's by right at any time he was dismissed or retired. This would be an extension of the old gold watch principle, although I would hate to label it with that sort of annotation.

Mixed up with this is the need to provide money for those who are displaced or made redundant and who greatly suffer from unheaval and the need to find a new house, or a new job and perhaps have retraining. But the two are not the same. The basic anomaly is that we are trying to make one capital element cover two totally different sets of circumstances. Those who go through life and eventually retire should be able to expect a little capital nest egg but those who, through no fault of their own, are made redundant, not just once, but twice, or three, or six times, will get only one proper nest egg, although they might earn a second entitlement. But that is not related to need. We have to decide whether in wages there should be what might be called a capital element which accumulates, and whether we must make proper arrangements for redundant people.

I go the whole way with the hon. Member for Cornwall, North in saying that the first step is to make unemployment pay entirely adequate, and that probably means making it 100 per cent., and certainly 90 per cent., of past wages. It might even be necessary to make a small capital grant at the same time to cover the expenses of being made redundant, which probably vary very little from case to case and involve travelling to find a new job, travelling to find a new house, moving furniture, moving house and perhaps the expense of retraining. All those things might be rightly accompanied by a severance grant, but it is perfectly clear that the attempt to combine the two is failing to meet the case and at the same time is producing an ever-increasing bill—another £17 million this afternoon—as well as public hostility to the whole concept of the Redundancy Payments Act.

People talk about trying to engineer their payments and there are all sorts of jokes about this scheme, which is becoming a sort of music-hall farce. Parliament cannot go on voting more money and the Minister cannot keep asking the House for changes without expecting some criticism. In the existence of the scheme so far there have been about 650,000 payments and it is a sobering thought that there may be as many as 25 million people who may try to find ways and means of realising the price on their heads. That is why the Minister has to keep coming back for more money. It is high time that he accepted my right hon. Friend's suggestion of a complete overhaul of the scheme, preceded by a careful inquiry into all these complicated economic and social questions which have been discussed today, so that the next time he introduces such a scheme it will be much less crude, much more sophisticated, not so extravagant and better designed to aid labour mobility.

6.30 p.m.

Photo of Mr Nicholas Scott Mr Nicholas Scott , Paddington South

When we last debated this subject in July, I opened by asking the Under-Secretary of State whether he had managed to borrow the suit of sackcloth and ashes which, it was reputed, the hon. Member for Poplar (Mr. Mikardo) had obtained for the celebration party on the Prices and Incomes Act. I assume that the reason why the hon. Gentleman was in his usual ebullient mood today and was far from being in a sackcloth and ashes mood was that the suit is being used by the same hon. Gentleman to celebrate the White Paper on reform of the trade unions.

The second thing which should be said about the Under-Secretary of State is that again we are to have the pleasure of hearing him speak twice in one debate. Whether he has great keenness to discuss this subject and will not be denied, or whether there is no other Minister available who is able to make a contribution on this subject, I do not know. However, it seems a remarkable state of affairs that in two successive debates the hon. Gentleman should open and wind up the debate.

Like my right hon. Friend the Member for Mitcham (Mr. R. Carr), I accept, as all of us on this side of the House accept, the social and economic needs for a redundancy payments scheme, severance payments scheme, or whatever one might call it, which broadly achieves the objectives of the present Fund—to bring about mobility and to take away the stress, strain and bitterness which can result from redundancy. We accept, too, that it is right in this reform to remove the distinction based on age in the amount of rebate given. It is fair to say that, having removed that distinction, we have, by definition, a slight bias the other way, because the amount which the younger workers who are made redundant will draw from the Fund will be smaller than the average amount. Whether we should be thinking about shifting the balance still further is one of the issues to which I hope the Under-Secretary of State will turn his mind tonight. Our attitude to the Bill has been made cystal clear by my right hon. Friend the Member for Mitcham. We regard it as inadequate and unsatisfactory, but we have no intention of dividing the House against ii. I was surprised to hear that the Liberals were to repeat what I regard as their i responsible folly in dividing the House on the last occasion that we discussed this matter by, in effect, saying that if they had their way and this Bill were thrown out they would be happy to see the Redundancy Payments Fund go swifty into bankruptcy and there would be no provision for payments to be made to people declared redundant.

Photo of Mr John Pardoe Mr John Pardoe , North Cornwall

That is not what I intend to do by dividing the House against the Bill. By dividing the House I shall be showing that this is a hateful and inadequate Bill, and if the Fund is allowed to sink further into the red, the Government will eventually have to do something sensible about it.

Photo of Mr Nicholas Scott Mr Nicholas Scott , Paddington South

The Liberals rarely have to take into account the consequences of their action. It is only their intentions which are relevant. However, it seems to me that for once they might take the effects into account.

I will not go over the abysmally inaccurate forecasts which have been made by the Government during the history of the Fund. One might almost refer to the rake's progress of the Fund since it was introduced. The forecasts have been vastly wrong. They do not quite compare in scale perhaps with the inaccuracy of their forecasts in other fields, but one is interested to observe that, wrong as they have continually been proved to be, the Government still make, in the Explanatory and Financial Memorandum to the Bill, surprisingly concise forecasts about the effect of this reform. Time alone will tell whether this exercise of forecasting is any more accurate than their previous attempts have been.

The other point which I should like to make by way of introduction is that previously the Government have been at pains to proclaim that the Redundancy Payments Scheme is industry's scheme: it belongs to industry, they pay for it, and their views should be taken into account and respected when decisions are being made about the scheme. When at Question Time on Monday I said to the hon. Gentleman that industry's views had been disregarded, he responded by saying that one side of industry's views had been disregarded. I remind him that it is the side of industry which pays the bill whose views have been completely disregarded.

The Under-Secretary of State must face the fact that there is considerable lack of confidence and respect in the Redundancy Payments Scheme in the country, in industry and in commerce. It is regarded as poor value for money and, even if it is not regarded as a fiddle—and we frequently hear references to it as being a fiddle—it is completely off-beam and has many anomalies and much scope for abuse. I view this with sadness because the underlying aims of the scheme are right and should be achieved.

I appreciate that the Bill is just a life-saving operation to tide the Government over until, as we now hear, we come to the next chaper when the anomalies and abuses are tidied up. But if, as the Government said, they have kept the operation of the scheme under continuous review, why could not Clauses have been put in the Bill dealing with the anomalies and abuses? Why must we wait for yet another chapter in the history of the scheme and yet more legislation to tackle the anomalies and abuses which are so widely talked about in industry?

It is all very well for the Under-Secretary of State to shrug off the abuses and anomalies. I would not wish to complain unduly about the circumstances in which certain numbers of men will be redundant and some men volunteer to be included in that number. Abuses were referred to by the hon. Member for Cornwall, North. There is the collusion which occurs when men have already obtained other jobs and then go to their employer and ask to be declared redundant. Men due for retirement in the near future take out their nest egg. There may well be scops for the concept of the nest egg in our society. But it should not be tackled through a system of redundancy payments which is designed to compensate people for loss of their job.

I am sure that the Under-Secretary of State takes the point that even small-scale abuses can discredit the scheme. Rather than simply giving the House bland assurances about how little impact abuses and anomalies have had, it is up to him to do his best to quantify them and to show, if he can, the impact which they have had on the Fund.

When we last debated this matter on 23rd July, I said that the Estimates Committee or the Public Accounts Committee should look at the scheme, and particularly at the anomalies and abuses, and should try to establish the facts and recommend action to overcome the anomalies and abuses.

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

The Estimates Committee has the right to select its own subjects for consideration. We can recommend that this is a subject which would be worth looking at. But any inquiry set up by the Government would be quite separate because the Estimates Committee, in view of its already fixed programme for this Session, would not be in a position to conduct an inquiry into this matter.

Photo of Mr Nicholas Scott Mr Nicholas Scott , Paddington South

I take that point. In July, I was expressing the hope that one of these Committees might take this as a subject. Now I think we need a much more fundamental and far-reaching inquiry on the lines called for by my right hon. Friend, and I trust that the Under-Secretary, in winding up the debate, will announce that such a fundamental review will take place.

We have presented to us today a Bill which as the Economist put it, will fine those employers who decide to make their contribution to the Prime Minister's more purposive use of labour. Those who try to shake out their employees and have redundancies will be fined for doing so. The impact of the Bill will reduce the effectiveness of the scheme. Reducing the burden upon employers who declare men redundant is bound to reduce the overall effect of the scheme and its benefit to the economy. It is a controversial patchwork, additional to the patchwork of the Redundancy Payments Scheme, but I am sure that it is not the end of the story. I hope that the Government will announce a fundamental review to look at the real problem which the scheme is supposed to tackle.

The then Minister of Labour, the right hon. Member for Southwark (Mr. Gunter), speaking on the Second Reading of the original Bill, spoke of the concept of an employee having in his job a capital asset, in the same way as an employer has an asset in his property. If this concept is true, it should be completely separated from the Redundancy Payments Scheme, which produces the inexplicable situation that a man who actually completes his term of employment loses all right to the nest-egg which he has been building up within the scheme.

We must clear our minds about how the scheme is to be financed, whether we continue with flat-rate financing, with all the problems which have arisen, or whether we move on to financing by a percentage of the payroll, as my right hon Friend the Member for Mitcham suggested.

Secondly, it would be wrong to look at this in isolation. We must look at redundancy payments as they fit in to the overall scheme of encouraging mobility of labour and of coping with those who lose their jobs; how it relates to earnings-related unemployment pay; what impact the Government's decision to introduce transferability of pensions will have on the need for redundancy pay; what impact the policy of training grants and incentives will have on redundancy pay.

The hon. Member for Cornwall (Mr. Pardoe) mentioned housing. When we were in office we introduced a scheme in Scotland whereby a special housing association built houses for those who needed to change their jobs, thereby overcoming the political difficulties associated with local authority building. All those, together with redundancy payments, need to be welded together in a comprehensive scheme to cope with mobility and with the human problems involved in redundancy. Thirdly, we must overcome the lunacy of a situation whereby a man who has the initiative to look for and obtain a job loses all right to redundancy payments, whereas a man who waits until the bitter end to be declared redundant obtains a redundancy payment.

Fourthly, whatever scheme comes out of the review, it must be linked not simply to the man's record in work but to his needs, the obstacles which he has to overcome before he is able to obtain further employment and to his age. The hon. Member for Farnworth (Mr. Thornton) mentioned refining the scheme in the direction of helping older workers. It is still much too crude an instrument which needs to be closely related to the personal needs of the man who has to re-establish himself in another career after losing his job.

The Bill is unsatisfactory; as my right hon. Friend has said, it merits a defeat in the House; but would he accept the need for such a Bill and believe that it would be irresponsible to vote it out at the moment. I repeat the demand of my right hon. Friend that, unless we receive an undertaking that a report on the future of the scheme will be produced during 1969, we shall have to reconsider our attitude to the remaining stages of the Bill and to the future of the Fund.

6.45 p.m.

Mr. Haftersley:

I am sorry that I must seek to weary the House a second time during the debate—

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

The hon. Gentleman must ask leave of the House.

Mr. Haftersley:

With the leave of the House, Mr. Speaker, I regret that I must attempt to weary the House a second time, and I particularly regret that I am unable to do it in a sufficiently gloomy and subdued fashion to meet the demands of the right hon. Gentleman. I am always anxious to meet his wishes, and, therefore, I would try, but when I turn myself from his speech to the facts I realise that penitence would be an inappropriate emotion. I hope that in the few moments left to me I shall be able to convince the House of this.

The right hon. Gentleman complained in strong terms about the Government's previous forecast. I pass lightly over this, but I must remind him that he in no way adequately dealt with the problems of the forecasting of the Fund. I acknowledge that the Government have made estimates which in the event turned out to be wrong. This has been done on several previous occasions, but the right hon. Gentleman does the Government less than justice by failing to acknowledge the almost insuperable difficulties of making the assessments which are necessary. He certainly does himself less than justice when he says that what we are doing today has added an extra £17 million to industrial costs. I repeat, as I did in my previous speech, what I said a week ago when I made my statement, that what we are doing today in no way influences industrial costs. The facts of redundancies influence the cost of redundancy payments. What we are doing today is determining how that cost should be met.

The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) yesterday asked a Question about the total of redundancy payments. We told him that the complete cost of payments was about £138 million. I cannot remember whether or not he asked, but had he done so we should have told him that the Fund contributed about £104 million of that. Those two sums are determined by the inter-action of two factors, one the total liability on the Fund and the other the distribution of those liabilities between individual companies and the Fund as a whole. That is what determines the total level of payments and industry's liability, not what we are deciding today. All we are deciding today is how that distribution should be brought about.

Photo of Mr Robert Carr Mr Robert Carr , Mitcham

If one goes on paying contributions on the same level out of industry but reduces the amount of receipts back into industry from the accumulated Fund, the costs must go up.

Mr. Haftersley:

The right hon. Gentleman persists in misunderstanding the nature of the Fund. He speaks as if the Fund were financed by the Government, the country, the Treasury. The Fund is financed by industry, and one is increasing the cost to industry only in the sense that the redundancy payment costs as a whole have gone up. All we are doing this afternoon is determining how the cost shall be distributed in industry.

If the right hon. Gentleman thinks for a moment about the principles underlying the Fund, he will understand that the only ways of reducing the outgoings from the Fund are either by reducing the rate of benefits, which no one in the House wants to do, or by trying to concentrate the redundancy payments among recipients who receive lower average benefits than has been the case over the last two years. The latter is our intention.

The right hon. Gentleman went on to make three demands of the Government, and he justified his three demands by six reasons. I hope the right hon. Gentleman will accept it as a compliment, as I intend it to be, when I say that I find his demanding moods less convincing than his reasoning moods. I will, with the permission of the House, comment on his reasons and then answer his demands.

The right hon. Gentleman's three demands were for a searching review, for the review to be published and for the entire operation to be completed before the end of the year. To those, I must give an answer which he may think is a partial one but which I hope will be regarded by him as satisfactory at least in part.

First, some of the questions which the right hon. Gentleman asked to be examined in the review have been examined already and the answers have been made public. He asked the Government, for instance, to consider whether the contribution to the Fund should be graduated rather than flat-rate. If he looks at paragraph 58 on page 21 of the Social Security White Paper calculation published this week, he will discover that already, as part of the new social security provisions, a quarter per cent. of the total employer's contribution is to be allocated to the Redundancy Fund, thus making a graduated rather than a flat-rate contribution. One of the aids to mobility to which he referred, the preservation of pension rights, appears in Chapter 6 of the White Paper. If time permitted, I could give other examples of questions which have been answered already. Indeed, some of his questions were answered in my first speech. He asked about the searching review of abuses, and the hon. Member for Paddington, South (Mr. Scott) asked if that review could be quantified. I thought that I had made it clear that the Government have had a review of literal, fraudulent abuses, and have been unable to find a single example of fraud of that sort.

What right hon. and hon. Gentlemen opposite are asking for in part is not a review of abuses but a review of anomalies, and I could hardly have been more forthcoming than I was on that subject. I said in specifying that a review of anomalies was necessary, and I said that it would be carried out. I went even further, and stipulated some of the anomalies which we anticipated needed revision, and I committed the Government to look at them specifically.

The hon. Member for Paddington, South asked: Why not now? The answer is again simple. I said in my opening remarks—and I am sure that it was right to do so—that our first obligation is to discuss the anomalies with both sides of industry, who have already drawn our attention to some of them. The illustrations I gave to the House owe something to this source. There are many hon. Members on both sides who could give further examples.

Clearly, what right hon. and hon. Gentlemen want is a comprehensive review of the situation. That must mean discussions with the C.B.I, and others. I give the undertaking that the discussion will begin and, when it is completed, a Bill will be put before the House in an endeavour to eradicate these obvious anomalies.

When I say that, I should make it clear that perhaps we are still over-stating the extent to which anomalies are a problem. Certainly anomalies exist, and they need to be tidied up, but there is a tendency for some people who, perhaps unlike hon, Members on both sides of the House, do not even share support for the principles of the Act to use the occasional anomaly to discredit its entire operation. While I totally absolve the hon. Member for Cornwall, North (Mr. Pardoe) from any such motives, he mentioned in his very interesting and constructive speech an agricultural anomaly which was exactly that when it was referred to him some months ago. It arose because of a decision of an Industrial Tribunal. I am sure that he will be happy to know that, as a result of a Court of Appeal decision, the ruling has been reversed and the anomaly rectified. I am sure the hon. Gentleman will understand why I have dealt with that fairly fully, because he will share my wish that anyone who happens to read my speech tomorrow should not be left with the impression that the anomaly continues. But anomalies there are, and the Government intend to mount an inquiry into them with a view to remedying them when the inquiry is completed.

Clearly, the fundamental question raised by many right hon. and hon. Members was the entire basis by which the redundancy payments are calculated, whether we were wise to calculate them on earnings, length of service and age, or whether there should be a different calculation. The hon. Members for Basingstoke (Mr. David Mitchell) and Cornwall, North, the right hon. Member for Mitcham and the hon. Member for Paddington, South all asked that question.

I must explain that in the Government's view the other criteria—post-redundancy needs rather than what happened before redundancy—fail to meet all the intentions of the Bill. The Government believe that they have a social as well as an industrial content. One of the aims of the Bill is, at a time of need, to meet the problems that a redundant man faces. It is difficult to imagine how an assessment of his post-redundancy needs could be made easily in terms which would be socially acceptable to the Government. It is difficult to imagine how an assessment of his post-redundancy needs could be made with any great accuracy, other than estimating and providing services which enable him to get another job. The preservation of pensions is one, and the provision of adequate training is another. All these seem to the Government to be matters which we have to operate side by side with the Redundancy Payments Act, rather than as alternatives to it.

As well as risking the social intention of the Bill, were we to operate a payments system which was not related to earnings, length of service and age we should destroy one of the fundamental

industrial purposes of the Bill, which is to reduce resentment at and refusal willingly to accept redundancy when it comes.

The man in a job for 10 or 20 years, the man aged 55 rather than 35, the man on high earnings rather than low earnings, often is reluctant to accept redundancy, to the point of refusal. Without the incentive to accept it which the Bill provides, he might only accept the need to obtain another job after considerable industrial disruption. The undoubted increase in efficiency in the motor industry over the last three years, associated with reduction in the labour force, would not have happened anything like as peaceably had it not been for the Act.

In part, that is a rejection of some of the right hon. Gentleman's points, but certainly we concede his principal contention that there are anomalies which need to be investigated. I made the concession, if concession it be, in my opening remarks. This is a matter on which we shall report to the House and prepare a Bill when we are ready to do it.

In the meantime, the solvency of the fund must be preserved. The Bill does that, and that is why I welcome the assurance that, while not supporting it in its entirety, right hon. and hon. Gentlemen opposite at least acquiesce, perhaps reluctantly, in this stage of its progress to the Statute Book.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 146. Noes, 5.

Division No. 52.]AYES[6.58 p.m.
Anderson, DonaldDavies, Dr. Ernest (Stretford)Freeson, Reginald
Archer, PeterDavies, Harold (Leek)Gardner, Tony
Atkins, Ronald (Preston, N.)Dewar, DonaldGray, Dr. Hugh (Yarmouth)
Atkinson, Norman (Tottenham)Diamond, Rt. Hn. JohnGriffiths, David (Rother Valley)
Bennett, James (G'gow, Bridgeton)Dickens, JamesGriffiths, Eddie (Brightside)
Bidwell, SydneyDobson, RayGriffiths, Rt. Hn. James (Llanelly)
Bishop, E. S.Doig, PeterGriffiths, Will (Exchange)
Booth, AlbertDunnett, JackHamilton, William (Fife, W.)
Bottomley, Rt. Hn. ArthurDunwoody, Mrs. Gwyneth (Exeter)Hamling, William
Boyden, JamesDunwoody, Dr. John (F'th & C'b'e)Harper, Joseph
Brown, R. W. (Shoreditch & F'bury)Eadie, AlexHarrison, Walter (Wakefield)
Butler, Herbert (Hackney, C.)Ellis, JohnHaseldine, Norman
Butler, Mrs. Joyce (Wood Green)English, MichaelHattersley, Roy
Cant, R. B.Ennals, DavidHazell, Bert
Carmichael, NeilEvans, loan L. (Birm'h'm, Yardley)Heffer, Eric S.
Coe, DenisFaulds, AndrewHilton, W. S.
Crossman, Rt. Hn. RichardFletcher, Raymond (Ilkeston)Hobden, Dennis
Dalyell, TamFoot, Michael (Ebbw Vale)Hooley, Frank
Darling, Rt. Hn. GeorgeForrester, JohnHoughton, Rt. Hn. Douglas
Davies, G. Elfed (Rhondda, E.)Fraser, John (Norwood)Howarth, Harry (Wellingborough)
Howell, Denis (Small Heath)Marks, KennethShaw, Arnold (Ilford, S.)
Howie, W.Mellish, Rt. Hn. RobertSheldon, Robert
Hoy, JamesMendelson, JohnShinwell, Rt. Hn. E.
Huckfield, LeslieMikardo, IanSilkin, Rt. Hn. John (Deptford)
Hughes, Emrys (Ayrshire, S.)Millan, BruceSkeffington, Arthur
Hughes, Hector (Aberdeen, N.)Mitchell, R. C. (S'th'pton, Test)Slater, Joseph
Hunter, AdamMoonman, EricSmall, William
Jenkins, Hugh (Putney)Morgan, Elystan (Cardiganshire)Snow, Julian
Jones, Rt. Hn. SirElwyn (W. Ham, S.)Morris, Alfred (Wythenshawe)Stonehouse, Rt. Hn. John
Judd, FrankMorris, Charles R. (Openshaw)Taverne, Dick
Kerr, Dr. David (W'worth, Central)Moyle, RolandTinn, James
Kerr, Russell (Feltham)Murray, AlbertTomney, Frank
Lawson, GeorgeNewens, StanTuck, Raphael
Lee, Rt. Hn. Frederick (Newton)Ogden, EricWalden, Brian (All Saints)
Lewis, Arthur (W. Ham, N.)O'Malley, BrianWalker, Harold (Doncaster)
Lipton, MarcusOrme, StanleyWallace, George
Luard, EvanOwen, Will (Morpeth)Watkins, David (Consett)
Lyons, Edward (Bradford, E.)Page, Derek (King's Lynn)Wellbeloved, James
McBride, NeilPannell, Rt. Hn. CharlesWhite, Mrs. Eirene
McCann, JohnPavitt, LaurenceWilley, Rt. Hn. Frederick
MacColl, JamesPeart, Rt. Hn. FredWilliams, Alan (Swansea, W.)
MacDermot, NiallPerry, Ernest G. (Battersea, S.)Williams, Clifford (Abertillery)
Macdonald, A. H.Perry, George H. (Nottingham, S.)Wilson, Rt. Hn. Harold (Huyton)
McKay, Mrs. MargaretPrice, Christopher (Perry Barr)Wilson, William (Coventry, S.)
Mackie, JohnRankin, JohnWinnick, David
Mackintosh, John P.Reynolds, Rt. Hn. G. W.Woof, Robert
Maclennan, RobertRichard, Ivor
McMillan, Tom (Glasgow, C.)Roberts, Gwilym (Bedfordshire, S.)TELLERS FOR THE AYES:
McNamara, J. KevinRobinson, Rt. Hn. Kenneth (St. P'c'as)Mr. J. D. Concannon and
MacPherson, MalcolmRoss. Rt. Hn. WilliamDr. M. S. Miller.
Bessell, PeterSteel, David (Roxburgh)TELLERS FOR THE NOES:
Davidson, James (Aberdeenshire, W.)Thorpe, Rt. Hn. JeremyMr. Eric Lubbock and
Crimond, Rt. Hn. J.Mr. John Pardoe.
Bill accordingly read a Second time.
Bill committed to a Committee of the whole House.—[Mr. McBride.]
Committee Tomorrow.