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Orders of the Day — Reduction of Redundancy Rebates Bill

Part of the debate – in the House of Commons at 12:00 am on 7th February 1977.

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Photo of Mr Barney Hayhoe Mr Barney Hayhoe , Hounslow Brentford and Isleworth 12:00 am, 7th February 1977

I think there is little doubt that there is a relationship between the numbers becoming unemployed and the numbers becoming redundant. I have not done the necessary mathematical analysis, but if one looks at the figures one sees that there was a larger outflow from the fund, a larger number of payments to those becoming redundant, in 1975–76 than in 1973–74. The last sharp rise in the number of redundancies in any one year was in 1971. My hon. Friend will remember that there was rising unemployment then, which peaked in about the beginning of 1972.

An inspection of the figures would lead one to believe that there was a relationship between unemployment and redundancy, but I hope that the Minister will be able to get from his Department a more carefully worked out mathematical judgment of this. In dealing with statistics of this kind it is always wise to look at them extremely carefully because sometimes a superficial relationship does not hold up if one looks at the situation over a longer period. At a time when unemployment is rising sharply and when, as a result, firms are losing employees, the numbers coming forward and calling for redundancy pay are likely to be much higher.

From an economic point of view there is no justification for the Bill, because there is a question mark hanging over the figures upon which it is based. The argument is that in some magical way the Bill will affect public expenditure, whereas in fact it is a self-contained fund. The revenues raised by the charge on all employers are more closely tied to the fund than are most moneys that flow through the Government. One could describe them as assigned revenues, because they can be used only for payments made out of the fund—unless, of course, deep within the Government there is the idea that this is a way of reducing their borrowing requirement, of building up a profit out of the Redundancy Fund. Alternatively, they may believe that the outflow from the fund will increase considerably because of increased redundancies. If that is the situation, the Government have been less than frank with the House.

I think that the Bill will have an adverse effect on local authorities throughout the country. No doubt the Minister will have received, as have many hon. Members, representations from the Association of County Councils. It may be that the association reflects a view that is shared by other local authorities. Members of that association have expressed concern about the possible effects of the Bill upon local government finances. They think that it will place additional costs upon local authority employers, to the relief of the Exchequer, and they point to a particular case where they think there will be an extra burden of £4,000 a year on a county council. They regard the whole proposal as particularly unwelcome at a time when Government expenditure restrictions make some redundancies inevitable in local government. The association has, therefore, placed on record its reservations about and opposition to the Bill.

Another argument that has been produced by some commentators is that the Bill may help to save jobs. This is standing logic on its head—but that is no new thing for Ministers to attempt. What is being suggested is that by amending the provisions of the Redundancy Payments Act it will be made less likely that people will become redundant. Even by the Government's standards this is a curious argument, although it may well be that some believe that this scheme, by its nature, has made it more difficult for firms facing cash-flow problems to achieve the redundancies they believe to be desirable. Perhaps firms will maintain their employees and gradually run themselves into insolvency as a result of this Bill.

It is an unjustified, irrelevant, irritating Bill, which, I hope, the Government will withdraw, and I hope they have second thoughts about the whole basis upon which it is built. Why do the Government not hold proper consultations about the vital questions of overmanning, retraining and labour mobility? Let them have consultations with the CBI, the TUC and others concerned. It must be reasonable to ask why no other industrialised country has seen fit to follow our example of a redundancy payments scheme. It is not because other countries are not concerned about the problem of redundancy. It is because, in their judgment, they have found better ways of dealing with the human misery and the dislocation in industry and commerce which can follow redundancies.

Since the Redundancy Payments Act has been in being for over 10 years, I believe it would be sensible to carry out an intensive review to see whether it has achieved its purpose. Kenneth Barnes, now Permanent Secretary at the Department of Employment, is reported as having said of the Act in May 1975 at a PEP conference: It is impossible to say if it has been a success. If that was translated out of Civil Service-speak it might even be accounted as an outright attack on the measure. To say that it is impossible to say whether it has been a success may well be an indication that there are grave doubts within the Department as to the usefulness of this measure. It would be a good idea to have a review of the way in which the Redundancy Payments Act has worked for the past 10 years. Of course it has worked to some extent; all hon. Members will accept that. The preparations for the Act were made by a Conservative Government and the measure was introduced in 1965 by a Labour Government. Over the years it has been changed, generally by agreement.

The time has come to look at the way in which we deal with redundancy. Over £1 billion has been paid out in the past 11 years. It is estimated that between 7 per cent. and 10 per cent. of those who are unemployed have received a redundancy payment, but cash payments are by no means the only way or even the best way of dealing with redundancy. That is the experience of other countries. Job placements and transfer arrangements are of great importance. There should be particular emphasis laid on the older worker who, when he becomes redundandant, often finds it much more difficult to get another job. Although he might get a high cash payment under the scheme it may be that we are not being sufficiently flexible nor taking full account of the increased difficulties facing such a person. Have we got the right balance between the amount paid in cash to the redundant worker and the resources available for retraining? During a recent visit to Sweden I was impressed by the comprehensive action taken there by the local Labour Market Boards to deal with the redundancy situation. It is possible that we could benefit from the experience of Sweden and other countries with which we have close ties.

This Bill threatens the basis of the present Act without putting any constructive alternative in its place. The economic arguments for the Bill on public expenditure grounds are nonsensical. All the evidence points to the fact that the Bill arose from a misconception as to the state of the balances in the Redundancy Fund. If the Minister does not have the good sense to withdraw the Bill, think again and hold proper consultations with all concerned, the Opposition must register their criticisms in principle and in detail of this unnecessary and unwanted little Bill.