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Statutory Redundancy Pay (Amendment) Bill

Prayers – in the House of Commons at 9:30 am on 13th March 2009.

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Second Reading

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley 9:46 am, 13th March 2009

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

Today is an interesting day—Friday the 13th, red nose day. I hope that we do not have too many red faces on the Front Bench, let alone red noses. I am disappointed that, despite what seemed to be—and what I hoped would be—the sympathetic line being taken by my Government, some strange tactics were being used earlier in the week. Letters in the name of the Whip have gone out to certain Members asking them to come and speak against the Bill. I find that quite appalling and quite underhand. It is a very strange thing to do, especially when the Minister and I were still in negotiations on the Bill and had not yet met to come to an agreement. For somebody to prejudge those discussions is quite appalling, so I hope that there are some red faces.

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Photo of Andrew Dismore Andrew Dismore Labour, Hendon

As my hon. Friend knows, I am a regular attender on Fridays. I have read no letters of that kind and I can assure him that I will not try to talk his Bill out.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I thank my hon. Friend for that assurance. I just hope that other hon. Members will do the same.

The Bill is important and I thank the supporters who have turned up today. It is a Bill—and a campaign—that matters. I would like to thank in particular the major trade unions and the smaller trade unions that have backed the Bill and worked tirelessly with their members to raise the profile of the issue and to rally support among MPs. I would also like to thank our people in the party who made the issue a manifesto pledge. We all stood on that manifesto, and it is one that I am proud to stand by, but it seems that some people wish to drop that pledge along the way. I find that very strange.

I would like also to thank the 178 colleagues from all parties who signed early-day motion 699 on the issue and the 11 colleagues, also from all parties, who have sponsored the Bill. There is cross-party support for the Bill, so it seems strange that the Government oppose it, but there we are. I thank the Secretary of State for Business, Enterprise and Regulatory Reform and the Minister for Employment Relations and Postal Affairs for meeting me to discuss the matter. In fact, we were still discussing it on Wednesday evening, because we had not reached agreement. We tried to change the Bill. We wanted to be amiable and remove any ambiguity from it, so for somebody to decide to try to scupper it while discussions were taking place is quite unacceptable.

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Photo of Paul Farrelly Paul Farrelly Labour, Newcastle-under-Lyme

I congratulate my hon. Friend on introducing the Bill. My hon. Friend Andrew Miller and I have been in the same position, with regard to temporary and agency workers. Does my hon. Friend agree that it would be a great shame if any hon. Member voted against a closure motion or against Second Reading, particularly any hon. Member on the Labour Benches? They do not have to vote against the Bill.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

My hon. Friend is absolutely correct. The Temporary and Agency Workers (Equal Treatment) Bill ended up being opposed and it caused delay for another 12 months: that did not help the people we are meant to represent. I hope that others who want to oppose this Bill will take note of my hon. Friend's words.

The Bill calls on the Government to link the value of statutory redundancy pay limits to the level of average earnings, which will ensure that future increases in statutory redundancy pay are linked to average earnings. Before discussing the Bill in detail, however, I would like to inform Members about how statutory redundancy pay is currently calculated so that they can understand why I am introducing the Bill.

The amount of statutory redundancy pay to which an employee is entitled depends on his or her age and length of service and pay. An employee who has been employed continuously for more than two years is entitled to half a week's pay for each complete year of service between the ages of 18 to 21, one week's pay for each complete year of service between the ages of 22 and 40 and one and a half week's pay for each complete year of service after reaching the age of 41. There is, however, a statutory cap on the amount of an employee's weekly pay that can count towards the entitlement to statutory redundancy pay. Since February, the limit has been set at £350.

When statutory redundancy pay was introduced back in 1965 through the Redundancy Payments Act 1965, the limit was set at £40, even though average weekly earnings for that year stood at £19.95, which meant that it was twice the average weekly wage when people first had the vision back in 1965 to introduce the SRP.

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Photo of Jim McGovern Jim McGovern Labour, Dundee West

I congratulate my hon. Friend on introducing his Bill. He may be aware that yesterday in my Dundee constituency, a major employer, NCR, announced 250 redundancies, and while I am sure that the local Unite trade union official, Fiona Farmer, will attempt to negotiate some sort of enhanced package, does my hon. Friend agree that if there is no such package, it is precisely that sort of people whom his Bill will help?

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I could not agree more with my hon. Friend. He is right that it is all about ensuring that we look after people who do not get an enhanced package. I had a conversation earlier today with my hon. Friend Mr. Flello, who made exactly the same point—negotiations had taken place with Wedgwood to give a good package and enhanced payout, but tragically it went into receivership, so those employees lost tens of thousands of pounds and unfortunately ended up with the bare minimum. That just shows why this Bill is needed—to represent those people and others, because I can honestly say that there is not a constituency in the United Kingdom that has not been affected by the issue of statutory redundancy pay. We all have to do the best for the people we represent, and it is usually those people at the bottom of the employment league that we must look after most.

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M

If it is good enough for a failed chief executive in RBS, surely you must be able to get through a Bill in Parliament to help the most poorest paid in the country? Assuming the majority of MPs really care about such people.

Submitted by Mr Smith

Photo of David Hamilton David Hamilton Labour, Midlothian

May I draw my hon. Friend's attention to another problem that people face? Now that we are in a downturn, multinational companies are taking the decision to lay people off, and on account of the poor terms and conditions on offer in the UK compared to Germany, for example, it is much more likely that a British worker is going to be laid off than a European one—and it is the European worker who is more likely to get an enhanced pay-off.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I could not disagree with that. In fact, the Business and Enterprise Select Committee took evidence on that, and I recall that three Opposition Members were sitting on that Committee when we took evidence relating to Peugeot and Vauxhall. One of the key issues that came out in that evidence was that it was cheaper and easier to get rid of someone in the UK, ensuring that people were more protected in Europe. It was people in the UK who suffered the most and who were the easiest to sack, so I agree with my hon. Friend.

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Photo of Mark Hendrick Mark Hendrick Labour, Preston

I congratulate my hon. Friend on introducing the Bill. Given the economic downturn, the financial crisis and the vulnerability of many people in our society today, is it not important that the Government do not get into the same sort of position as the banks? The banks would only give people money when they did not need it and when the economy was doing well; now that the economy is doing badly, they will not give people the money they need. We do not want a Government who provide an umbrella only when the sun shines.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Very good! My hon. Friend is absolutely spot on. It is all about helping and there has never been a more appropriate time than now to offer help, because we are a Government who care, who are meant to look after everyone, so I could not have put it better myself.

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Photo of Joan Walley Joan Walley Labour, Stoke-on-Trent North

My hon. Friend has mentioned the urgency of the Bill in respect of Stoke-on-Trent and north Staffordshire. Will he say a little about the importance of his Bill for women? Clearly, there are industries in the area that employ a greater proportion of women workers, who would stand to gain from the Bill.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

My hon. Friend is absolutely correct about that—some will benefit more than others from the Bill, and women, workers in the hotel and catering trade and others in other sectors will be beneficiaries. My hon. Friend is spot on to say that the Bill is about helping women and others working on low pay and in poor conditions.

As I said, in 1965, the limit for SRP was set at £40, which was around twice the weekly wage, at £19.95, and it is interesting to note that that covered 96 per cent. of the working population. Since then, the relative value of the link to earnings has declined, and in 2008, just 40 per cent. of the working population were covered. That shows how much it has been eroded since 1965. It is only right, then, that we try to address this issue now, particularly given the economic circumstances that people face today.

I am aware of the limitations of attempting to achieve my aims through a private Member's Bill. Much to my frustration, we cannot propose a Bill that would significantly change expenditure. That is a feature of any private Member's Bill and it helps to explain some of our frustration, but we are working within the terms of such Bills.

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Photo of John Bercow John Bercow Conservative, Buckingham

I am pleased to support the hon. Gentleman's private Member's Bill, as he knows. Although I do not wish to intrude on private Labour party grief, may I put it to him that Ministers should not seek to prevent the Bill from going into Committee because of any concern about costs? Precisely because the hon. Gentleman is simply suggesting that a link should be made, without being overly prescriptive about it, the Government still have the matter in their own hands. To prevent the Bill from making progress, when an important principle is being established, seems to me perverse.

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Photo of Dennis Skinner Dennis Skinner Member, Labour Party National Executive Committee

The hon. Gentleman should chair the Committee for the Bill.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I thank my hon. Friend for that suggestion, and hope that John Bercow will chair the Committee considering the Bill or at least serve on it. I am sure that he would like to see fair wind given to the Bill, which is why I was so surprised and shocked to find out what was going on. I thought that we were negotiating a genuine agreement. Okay, I may not have persuaded the Government to go all the way, but I thought that they would be prepared to see how the Bill went and not to stand in its way. That has not been case, so I hope that there are some red faces in the Chamber, particularly of those responsible for sending out that letter asking Members to speak against the Bill. I think it is shameful and silly. I believe that even at this late stage, whispers are going round with the intention of preventing this Bill from making progress. I hope that people will rethink their attitude and that the Minister will have a word to call off what is happening as we speak. I look forward to hearing the Minister taking a more sympathetic line, because I take him at his word; I believe what he tells me. I think that he will be shocked and embarrassed by what we have found out.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Yes, I would always give way to the Minister. I do think he is an innocent abroad; I am not too sure how far abroad he is at the moment, but there we are.

As I was saying, the relative value of the payments has declined, so a significant proportion of the working population now earn significantly more than what is offered, so it is only right to address the issue, particularly given the economic times. There is no better time than now. Some people say that now is the wrong time, but that is absolutely not the case. When people need us, it is the right time.

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Photo of Dennis Skinner Dennis Skinner Member, Labour Party National Executive Committee

It is the right time. The Government have, quite properly, said that now is the time to put money into people's pockets to give them a greater propensity to spend. They have done that for pensioners by bringing forward to January the biggest increase for about 30 years; they have brought forward increases in child benefit, tax allowances and all the rest of it. The idea behind what the Government are doing is encouraging the propensity to spend. My hon. Friend's Bill is seeking to do exactly the same, so let me say this to the Minister: do he and the Cabinet understand that my hon. Friend Mr. Hoyle and the rest of us are engaged in a practice here today of helping the Chancellor to put more money into the economy to help it recover?

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P

I would just like to point out that British Pensioners are still well behind the Old Age Pensions of people in the original EU Countries.
The Government appears to 'Cherry Pick' from the EU basket of rules and regulations picking out the ones that add to our misery and expenditure.

Submitted by Paul Rutherford

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I thank my hon. Friend, who always has good advice, not just for me but for the Minister and the Government generally.

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Photo of Andrew Dismore Andrew Dismore Labour, Hendon

My hon. Friend is right that this debate is somewhat redolent of times past. He will have read, as I have, the unfair dismissal legislation, and will know that one of the building blocks of unfair dismissal compensation is the basic award, which is equivalent to the redundancy pay calculation. Will he confirm that the Bill would translate into unfair dismissal law, so that people who are unfairly dismissed, for redundancy reasons or otherwise, will still get the basic award, calculated on the basis of the redundancy pay assessment under the Bill?

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Absolutely. I would expect that link to be kept in place, and we need to ensure that that happens.

We ask the Government to adopt new legislation, which would link the value of statutory redundancy pay limits to average earnings and ensure that future increases, if determined necessary by the Secretary of State, are also linked to average earnings. The level at which the SRP is linked to earnings is obviously for the Government to determine, and is not part of the Bill. The Bill is not about putting the Secretary of State in handcuffs, but allowing the Government to set the level. I want to ensure that we get that message across. If successful, however, the Bill will change statutory redundancy pay for the better—that is the key.

Until 2000, the statutory limit was reviewed annually by the Secretary of State, who made the decision whether to increase the limit, and if so by how much. That was very good. In 2000, however, the Government decided to replace the system with a new scheme under which the statutory limit is increased annually by the Secretary of State in line with the retail prices index. The danger with that at the moment is that the RPI could go below zero, which means that, in theory; statutory redundancy pay could be reduced, not increased. That would be absolutely absurd at this time when people will need help, and that is why the Bill is important. We need to reconsider and reword the legislation.

Although the earlier development in terms of the new scheme has been welcomed, and has resulted in an annual increase, statutory redundancy pay entitlement has not been reinstated to its original value in real terms. Therefore, by introducing the link to earnings, as opposed to the RPI, my Bill aims to change the formula that the Secretary of State uses, and would protect the value of statutory redundancy pay in the future. That is what is important.

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Photo of Dai Havard Dai Havard Labour, Merthyr Tydfil and Rhymney

As my hon. Friend will know, Hoover, an iconic employer in my constituency, is making redundancies in Merthyr. Workers there have had a fight about redundancy pay in the same way as a lot of others. I am old enough to remember the arguments for the introduction of redundancy payments back in the 1960s. It was not about someone winning the lottery, having a windfall, or the incidental benefit of them spending the money. It was about giving them a cushion, and the ability to reorder their lives and engage in the training that they needed to move on, the very training that the Government say that they are so interested in—and I welcome their efforts to try to make that possible. The Bill is about more than people having money to spend when they are initially made redundant; it is about reordering their lives.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Absolutely. All these case studies are being cited not by me, but by Members who are appealing to the Government to take notice and listen. There is no better case than the one put forward by my hon. Friend. Indeed, there is not a Member in the House who has not had constituents affected by the credit crunch or by statutory redundancy.

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Photo of Judy Mallaber Judy Mallaber Labour, Amber Valley

Will my hon. Friend comment on another example? I note that in the pre-Budget report a large amount of money was allocated precisely to give effective support to the unemployed to find new jobs. The Train to Gain programme and rapid response service were refocused to assist in that. Like others, I have a constituent who lost his job last week, at Denby pottery, and who assumed that he would get extra money, which he had planned to use for a specific training course that would help him get a new job. He has found that he also will probably get only statutory redundancy pay, which is unlikely to give him a sufficient cushion to undertake that training.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I agree with my hon. Friend, who has cited yet another case study. The Bill would help people by giving them a little more as they finish work; otherwise, they would have to try to claim benefits. The measure would give people a cushion and a little more dignity. It would help them to pay bills—perhaps for a credit card or a mortgage—because there is a gap between them losing their job and getting help with their mortgage. The Bill is one way to help to close that gap. As my hon. Friend has outlined, there are many reasons why we should give such support.

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Photo of Rob Flello Rob Flello Labour, Stoke-on-Trent South

I thank my hon. Friend for his kind words earlier about our conversation about Wedgwood. He mentioned mortgages. Does he agree that when obscene amounts of money are going to people who have got us into this mess, and those people do not have a problem with statutory redundancy limits, we should ask why on earth our hard-working people should have such problems?

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Absolutely correct. I am pleased that that point has been made. We all know about the obscene pensions and pay-offs, and hard-working people always seem to be the ones who suffer. Those with the easy life at the top seem to be doing very well, and seem to benefit more from a pay-off than by working. That spells out the difference.

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Photo of Jim Sheridan Jim Sheridan Labour, Paisley and Renfrewshire North

Does my hon. Friend also accept that people will have difficulty understanding politicians who seek to deny decent redundancy payments to workers while themselves receive generous redundancy payments when they lose their jobs?

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Absolutely right. The majority of people get enhanced redundancy pay, especially those at the top of the tree—we never see them doing badly. We want to help those at the bottom of the tree. That is what we are here for, and that is why I was elected.

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Photo of David Crausby David Crausby Chair, North West Regional Select Committee

My hon. Friend is absolutely right. This is not a Bill for those who are in well organised trade union shops. The strong trade unions are perfectly capable of looking after themselves. This is a Bill for those who work for small employers and do not have the strength of the large trade unions. Those people deserve the protection of this Government.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Absolutely right. Those who do not have the protection of trade unions or whatever, rely on this House, and the measures that we can bring forward to protect them. The point cannot be better made than it has been by my hon. Friend.

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Photo of Paul Farrelly Paul Farrelly Labour, Newcastle-under-Lyme

Does my hon. Friend agree that we should expect the Minister to go further than the Bill, and to prevail upon his Secretary of State in the other place to ensure that, in situations such as that at Wedgwood—where people are being done out of their enhanced severance agreements and banks have brought in receivers—where the banks have been state supported, they should, before repayment of their loans, respect those severance agreements?

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

My hon. Friend is absolutely right. The Government can go as far as they wish, but at the moment they do not wish to do anything. That is the shame. It is Friday 13th, but let us hope that it is not a bad day for all those whom we are meant to represent. Let us make it a Friday 13th that will be remembered for the good that we can do.

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Photo of Julie Kirkbride Julie Kirkbride Conservative, Bromsgrove

I thank my Select Committee colleague for giving way. May I make a point that has not been made so far? Mr. Crausby rightly pointed out that we are talking about people in the most vulnerable forms of employment, but does not Mr. Hoyle worry about the timing of his Bill? We have all been told by employers that they are undecided about whether to lay people off. If employers thought that coming down the tracks was a heavier redundancy payment for their most marginal employees, might that not hasten their action in making redundant people who might otherwise have remained in employment?

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

A case can always be put for not doing something, but I would never have expected that from my colleague on the Committee. I know that she is aware of the importance of keeping people in employment, and that she is very good at putting a strong case. We stood shoulder to shoulder at the time of the Longridge redundancies, thinking of ways in which we could help people. Well, the Bill aims to offer help in exactly the same way, and I hope that the hon. Lady will accept that it is being introduced at the right and the appropriate time. I know that she is very open-minded, and I look forward to her support in the Lobby.

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Photo of David Hamilton David Hamilton Labour, Midlothian

The expression "joined-up writing" is used in my area. Sending the Bill to Committee would allow us to do some joined-up writing. People must currently wait for training packages to kick in six months after they become unemployed, but we could provide for a "free flow" redundancy package enabling them to embark on training immediately, so that they could return to employment sooner.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I entirely agree with that. We need joined-up writing and joined-up thinking. We need everyone to work on the same side.

Of course the Government's objective is to help business and families throughout the country, in some cases by bailing out our major banks, as we did last autumn and are continuing to do. We cut VAT to help people by allowing money to circulate in the system. The Bill provides another way of allowing money to circulate, but it also targets that money on the people who need it when they lose their jobs. It is important for us to convey that message not just to the Department for Business, Enterprise and Regulatory Reform but to the Treasury.

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Photo of Bob Laxton Bob Laxton Labour, Derby North

Let me take up that theme of getting the message over. The vast majority of the population, who have seen so-called ex-masters of the universe such as Goodwin—I prefer not to use the cuddly name "Sir Fred"— walk away with huge sums, would be rightly aggrieved and enraged if the Bill was not given a smooth passage. We are talking about only a small proportion of the sort of money that Goodwin and his ilk have received, and they have received it as a result of personal failure.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

No one could disagree with that. My hon. Friend is spot on. There is real anger in the country when bankers receive those huge payoffs—I said bankers, with a "b"—and there will be real anger in the country if we do not stand by the people at the bottom of the tree.

As I have said, the Government have done a great deal to try to get money circulating. They have propped up the banks, made money available to small businesses and cut VAT. That was the right thing to do, but we also have a responsibility to respond to the problems of hard-working people. Job losses and redundancies are spread across the country, and no part of it is immune from the threat of further redundancies in the future.

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Photo of David Drew David Drew Labour, Stroud

The number of redundancies will be greater in this country because many firms on the continent already pay wage-related redundancy compensation. It is because of their higher redundancy costs that they will not lose their work forces. The Bill is an important measure which will keep people in jobs, as well as dealing with the circumstances that would arise were they to lose their jobs.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I agree. We should have a scheme that keeps people in work, rather than making it so much easier for them to be made redundant. We should be giving people extra financial help at the time when they need it most. I keep repeating this: the Bill is about helping people in their hour of need.

Members have rightly cited case studies. Let me now give an example. A Woolworths distribution fork lift truck driver working full time on the night shift earned a basic rate of £10.61 per hour, or £401.11 per week. Because of the SRP limits, that 55-year-old driver, who had worked for Woolworths for 20 years, received £8,580 in statutory redundancy pay. If the SRP upper weekly limit had been increased to above £401.11, he would have received £10,428, an increase of £1,848.95. I cannot understand why anyone would see a problem with giving that sort of help.

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Photo of Jim Dobbin Jim Dobbin Labour, Heywood and Middleton

A Woolworths distribution centre in my constituency has just closed. More than 440 of my constituents lost their jobs overnight. Had my hon. Friend's Bill been in operation, they would have benefited.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

My hon. Friend is absolutely spot on. He has seen the effects of the closure of that centre, and his constituents have come to him to put their cases, give their views and express their hope that the Bill will help—not them, because they have already suffered, but those who have not yet suffered.

The Woolworths case, and the Rochdale case that I mentioned earlier, highlight the need to ensure that the value of statutory redundancy pay does not continue to decline. Linking the value of SRP to earnings would secure real benefits for people throughout the country. It is not surprising that 178 MPs signed my early-day motion, and that similar motions have been tabled in the Scottish Parliament and the Welsh Assembly. Members of Parliament in all parties realise that during these difficult times we should be doing as much as possible to help people who lose their jobs through no fault of their own. It is strange that it should be those at the top of the tree—the management—who generally receive the pay-offs and, in most cases, affect the business one way or the other, while those at the bottom, who work very hard and do all that they can for the business, are given the rawest of deals. I want to ensure that those raw deals do not continue.

We need only consider the Woolworths employees. Those 30,000 people, many of whom had been poorly paid, were left to survive on the basic statutory redundancy pay. There was a branch of Woolworths in nearly every Member's constituency. Because we have already witnessed what happened when an employer like Woolworths goes under, surely it is right for us to stand up for people like those 30,000.

Many of the poorest paid employees are women and young people. There are still huge pay differentials in the workplace. I am sure that those women and young people would welcome any measure that would help to maintain the level of statutory redundancy pay. I have met people who have lost their jobs. Other Members have as well, and they will know the real difficulty that is caused by job losses. There is only one thing that we should be doing: supporting the Bill today.

As I said at the beginning of my speech, the Bill has received the support of the trade union movement. It is supported by, for instance, ASLEF, Community, the TUC, the GMB, TSSA, UCATT, Unison, Unite and USDAW.

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Photo of Jim Devine Jim Devine Labour, Livingston

My hon. Friend has mentioned the support of Members of Parliament, trade unions and other bodies for the Bill, but he has not told us the reasons for the Government's opposition to it.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I am not here to apologise for the Government. I will let the Government do that for themselves. No doubt they will come up with some reasons, but, to be honest, there can be no reasons. All of us—the Minister, the Whips and me—stood for election on the basis of the same manifesto. Some of us respect and adhere to what we stood for then, while others, it seems, do not consider it appropriate to stand by their manifesto pledge. I find that very strange, and it worries people in this country, because they believe we mean what we say in our manifestos, so it is no wonder that they question the honesty of politicians. They should never do that, however, because I believe that we are all here for the right reason: to help our constituents. That is why we should stand together. I know my right hon. Friend the Minister is a genuine politician and is very understanding, and I still hope that, even at this late stage, he can help to ensure that this Bill passes its Second Reading and is sent into Committee.

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Photo of Andrew Dismore Andrew Dismore Labour, Hendon

My hon. Friend emphasises how modest his Bill is. His red line is to do with weekly pay, but he has not sought to redefine the multiplier—the fact that people only get one week's pay for one year's service. Therefore, the fact remains that under the system of "last in, first out," the people who are suffering often have very short service, and even under his Bill they would end up with very modest sums.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

There are many anomalies that we need to put right. This Bill is a start, and it represents the progress we are trying to make. We are not trying to put anybody into handcuffs, and especially not the Government. In fact, I have tried very hard to work with the Government to try to ensure the Bill can proceed.

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Photo of John Bercow John Bercow Conservative, Buckingham

Mr. Dismore has just referred to the modesty of the Bill. If I understand clause 1(2) correctly, that modesty is underlined in triplicate there, because the responsibility will be to put together regulations within 12 months of the Bill becoming an Act, so there is no question of excessive haste. Instead, there is plenty of time for due consideration of what those regulations should contain, and therefore also of their cost. That is perfectly reasonable.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I thank the hon. Gentleman for that clarification. As ever, he is absolutely spot on and he explains his point most eloquently. I am sure that there are no closed ears on our Labour Front Bench—I am sure that everybody is listening to what the hon. Gentleman has said, and I hope they take that good advice on board.

I would like to place on record my thanks to all the bodies that have worked tirelessly both in terms of proposing a Bill on statutory redundancy, and in working with me to ensure that we mobilise an effective campaign to persuade our Government to support their own manifesto pledge and accept this proposal. I would also like to thank everybody who has worked so very hard, including in my office. Tireless workers have, in a very short space of time, brought this Bill together, and have brought us together today to try to ensure we get the numbers we need for this Bill to progress.

Members of the public from across the whole United Kingdom have contacted me to support this Bill, and we have learned that other Members are also being contacted and asked to support it. The Warwick agreement includes references to improving statutory redundancy pay, and we stood on an election manifesto to implement Warwick—so I say to those who do not think it is in the manifesto, that it is in it. In the light of this, I urge Members and the Minister to back the Bill, which will take one step towards helping people who are unfortunate enough to lose their jobs. In their hour of need, we should be giving them that support. I commend the Bill to the House.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General 10:23 am, 13th March 2009

I have listened to the debate and the internal Labour bust-up, including a review of the party's manifesto pledges, with some degree of amusement. However, I need to remind hon. Members that Britain is currently facing extremely serious and difficult economic circumstances. Unemployment continues to rise and company insolvencies are increasing rapidly during this prolonged and deep recession. Figures show that the number of companies collapsing increased by more than 250 per cent. in the last quarter of last year, and the knock-on effect of that increase, and of the recession generally, are startling. The amount of people out of work hit almost 2 million at the end of last year, which is the highest level since Labour came to power.

I am sure that Mr. Hoyle honestly believes that his Bill will help employees, but from the Opposition's point of view it is, at best, an inappropriate reaction to the crisis that we are facing. Moreover, we are extremely concerned about the damaging effect that it could have on workers in the longer term. In diverting money away from the running of businesses, which could lead to more insolvencies, the Bill could undermine and damage the very workers whom it seeks to protect. Whether or not it is a panicked reaction to the financial crisis, I state now that we do not support this Bill.

What measures are in place for those who face redundancy? The first relevant source for many employees will be their contract of employment. A contract of employment will often stipulate an employee's entitlement on being made redundant. Such a contract must at least be in line with the minimum requirements for all employees, which are contained in the Employment Rights Act 1996. That legislation provides that employers must pay employees a minimum amount, depending on their age and number of years of service. Currently, the Act stipulates that employers are required to pay laid-off employees a minimum redundancy payment calculated by multiplying the length of service by a specified sum. That specified sum is calculated by multiplying the redundant employee's salary—up to a capped level—by a figure from 0.5 to 1.5, depending on the employee's age and length of service.

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Photo of Mark Hendrick Mark Hendrick Labour, Preston

Is not the hon. Gentleman hiding behind a piece of legislation that his party opposed in the 1960s?

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

The hon. Gentleman can go back to the 1960s if he wants, but I will return to the matter of the current recession.

For example, for each year's service when the employee was aged between 41 and 64, 1.5 weeks' pay are factored in. There is a maximum of 20 years' service which counts towards the calculation. There is also a maximum limit on the amount that constitutes a week's pay under the Act. It is currently set at £350. That means that the maximum redundancy payment is £10,500. Importantly for our debate, however, it should be noted that pursuant to section 34 of the Employment Relations Act 1999, under existing law these sums already increase in line with inflation on an annual basis. I am not entirely sure whether the hon. Member for Chorley made that claim in his opening remarks.

The Bill would serve to increase the statutory maximum limit on the sum applied for a week's wage. It is currently capped at £350, but the Bill, in linking the cap to average weekly earnings, could increase it to as much as £500 on a one-off basis, and then maintain the link to average weekly earnings on an ongoing basis.

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Photo of Nia Griffith Nia Griffith Labour, Llanelli

Can the hon. Gentleman explain the logic of not linking redundancy pay to average earnings?

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

As I have said—and as the hon. Member for Chorley failed to say, I believe—the current legislation provides for increases in relation to inflation. I have the figures to hand: in 1998, the sum was £220; in 2004, it went up to £270; in 2007, it was raised to £310; and in 2009, it became £350. I am not here to make the Government's case for them, but the fact of the matter is that measures that the Government brought in have been increasing the amount, and I do not think that came out in the hon. Gentleman's comments.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Of course I am going to try to do so. I made the point that there had been increases. In fact, I made the point that we are in the very dangerous situation of having inflation falling and every other economic indicator dropping, and statutory redundancy pay could drop, too, because it is linked in this manner. That is why we want to broaden the link. I am sure that the hon. Gentleman would not want to support a cut in statutory redundancy pay, but that could happen under the current terms.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

The economic situation changes, but I assume that the hon. Gentleman is hoping that we do not move into a deflationary economic situation. We will leave that to those on his Front Bench, who are at present doing a pretty good job of taking us towards such a situation. That is something we may have to deal with, although I hope we do not.

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Photo of John Bercow John Bercow Conservative, Buckingham

I understand, although I do not agree with, my hon. Friend's argument that statutory redundancy pay should not be increased in line with earnings because we are in economic bad times. As a demonstration of good faith on the issues, can he identify an occasion of economic good times in which he did support such an increase?

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

One does not have to support such an increase, because it is in legislation that it happens. My hon. Friend just mentioned good faith. He has also discussed how clause 1(2) provides for the Government, in good faith, to bring in regulations over 12 months, and I must say to him that it is the looseness of the Bill's wording that causes me great concern. Rather the opposite of what he maintains is the case, he should realise that the looseness of the Bill's drafting will mean that business does not really know what is going to happen, and that problem causes much concern.

The hon. Member for Chorley made the point that because money is involved, the format of the private Member's Bill makes it difficult for him to draft the measure precisely and he is therefore drafting on principle. He must appreciate that the Bill's implications for business are significant, and that when loosely worded Bills are presented to Parliament, people will have concern.

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Photo of David Hamilton David Hamilton Labour, Midlothian

May I draw hon. Members' attention to the current situation? Every hon. Member will have worries about their high streets. We face the possibility of an amalgamation of banks, and the tellers—the lowest-paid people—will be pushed into taking redundancy packages. How will the hon. Gentleman and other Front Benchers explain that although those at the top of the tree—the people who created the problem—are walking away with millions, we will make other people suffer, such as the young and the loyal workers who will walk away with the minimum redundancy arrangements?

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

The hon. Gentleman makes two important points. The first concerned the general state of the economy. I totally agree with him that this country, and its economy, is in an utter mess. We place the blame for that on this Government; their missed opportunities for reform over the past 10 years have led us to where we are now. His second point was that the poorest are having to bear the brunt of the situation. Of course it is very sad that working people are losing their jobs because of the failed policies of this Government, but it is also important to realise that the more wealthy one is, the more one suffers under these redundancy provisions.

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Several hon. Members:

rose —

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Let me finish my point, because it is an interesting one. When I discussed the Bill with several employment law experts who do not act for unions, they told me that the main shocks that they see involve wealthier people who think that the law will provide them with some form of fair redundancy—it does not. [Interruption.] But the law is right. Labour Members are maintaining that it works only against poorer people, but that is not the case, for the more wealthy someone is, the more the existing law is prejudiced against them. Someone earning a vast amount who asks their solicitor whether they are going to get a few months' pay because they are being made redundant will get the answer, "No, because it is capped." In our view, given the economic circumstances, that is right, but it is wrong for Mr. Hamilton to say that this is a problem simply for poorer people—it is not.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

The hon. Gentleman has slightly missed the point, which is that the arrangement used to represent and help 90 per cent. of the working population, but it now helps only 40 per cent. That, in itself, tells him that the measures have been eroded over the years and that they have not helped in the way they should. Perhaps he would therefore like to reconsider what he has said. I respect his views and I know that he is more liberal than most on the Conservative Benches. I would have thought that there had never been a more appropriate time for this Bill than now, when people are struggling. Surely it is when people are struggling that one should give them help. He knows, as I do, that money is being found for family allowance increases and so on. This is a case where we ought to help those people now, just as we did with the minimum wage. There is no difference here. We should annually review these arrangements in the way that we stated. Why can he not support us?

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Providing help to working people in this country means making sure that we have an economy that will create and sustain jobs, and that includes getting credit moving in a way that this Government are consistently failing to do. We simply believe that this proposal would be damaging to our economy, to our companies and to the workers who drive our economy.

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Photo of Judy Mallaber Judy Mallaber Labour, Amber Valley

The hon. Gentleman has said that part of his opposition to the Bill relates to its vagueness and the fact that he does not know what would happen as a result of its introduction. Will he re-read it and note that it provides that the Secretary of State is required to make further regulations "within twelve months" and that those would be in the form of "statutory instrument" that would come back to this House and could be considered by it? Does he accept that that means that the Bill is not vague and that it contains procedures that would enable him and all other hon. Members to consider fully any proposals that come forward under it?

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I am afraid that I cannot agree with the hon. Lady. As she points out, clause 1(2) states:

"The Secretary of State must, within twelve months of the day", and so on. Subsection (3) states:

"Before making regulations under subsection (2) the Secretary of State must—

(a) have regard to the desirability of including in the mechanism an annual comparison", and so on. That is pretty vague stuff; it is one set of possibilities backing up another set of possibilities, and she must realise that as far as business or indeed anyone else is concerned, it effectively means nothing—it means what the hon. Member for Chorley said in his speech and what might transpire; it does not mean what is in the Bill.

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Photo of Judy Mallaber Judy Mallaber Labour, Amber Valley

What about subsection (4)? It states:

"Regulations under this section shall be made by statutory instrument."

That means that there will be every opportunity for the hon. Gentleman, if he wishes to do so, to oppose the regulations when they come back before the House.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

That introduces a third level of what might happen; using statutory instruments means that things are basically decided by Ministers. I had thought that the idea of a private Member's Bill was to have the House decide things on the Floor of the House.

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Photo of Andrew Dismore Andrew Dismore Labour, Hendon

I see red when I hear Conservative Members advance this argument that somehow the wealthy people—the Sir Freds of this world, whom we hear the hon. Gentleman standing up for now—are the ones who are going to suffer as a consequence of such a proposal. The fact remains that this measure is primarily aimed at helping the less wealthy. The numbers that the hon. Gentleman read out earlier are not significant sums to the wealthy, but they are significant to the less well-off people, who are less likely to have skills, more likely to be made redundant and more likely to be out of work for a lot longer than the wealthy people for whom he is making special pleading. The wealthy may well have resources to fall back on, unlike poor people who live from hand to mouth, and they are more likely to be able to be re-employed more quickly. His special pleading is a bit out of place.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I totally disagree with the hon. Gentleman's assertion that someone who earns more is more likely to walk into a job more easily in this current climate. It is possible that the opposite is true. In his earlier remarks he made an interesting point which I shall analyse later in my speech.

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Photo of Jim Dowd Jim Dowd Labour, Lewisham West

On that point, I would assert that the person whom the hon. Gentleman has described would be the least likely to rely solely on statutory redundancy payments, and it is those at the lower end of the earnings scale who will be most likely to be entitled only to statutory redundancy arrangements if and when they lose their jobs. The higher up the pay bands one goes, the less likely it becomes that someone will rely solely on statutory redundancy payments.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Unfortunately, given the current economic situation, that is often proving not to be the case.

I maintain that the increase from £350 to £500 is considerable, and its impact on thousands of vulnerable employers and businesses could be substantial, with a possibly devastating knock-on effect on workers. The measures in the Bill would further burden employers, who will often have no choice but to make more redundancies as a result, in an attempt to consolidate their position and stimulate a revival. The British Chambers of Commerce has calculated that this one-off increase would cost businesses nearly £200 million this year. Revenue needs to be injected into businesses to encourage their long-term prospects rather than diverted by Labour in a short-term bid to appease the unions. If cash is clawed away from where it is most necessary, even more businesses may collapse, leading to even more redundancies and unemployment.

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Photo of Nia Griffith Nia Griffith Labour, Llanelli

Like my hon. Friends, I am horrified that the hon. Gentleman spends so much time worrying about the better-off, who will clearly have other resources on which to rely and far more opportunities to find further employment. He must surely agree that the trade unions have often improved conditions for their people, and the concern under this Bill is for those people who have not had the benefit of good trade union agreements, perhaps because they are in temporary employment or areas of under-representation by trade unions. The point of the Bill is to look after the very people who miss out most because they are not part of good, strong collective agreements.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

If the hon. Lady thinks that I and the Conservative party are not concerned about the 2 million unemployed, she has seriously misunderstood what I have said. We accept that the unions have a part to play in the life of this country and in negotiating employment conditions. The question is whether legislation should be drafted purely on the basis of the unions' interests. I shall maintain that the interests of the country go beyond the narrow union interests that are on display today.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I am interested by the hon. Gentleman's line of argument. I accept completely that if the House is interested in helping people who face losing their job as a result of the recession, the redundancy pay package is only one part of the picture. But it is also the case that the Conservatives have opposed the extra Government spending in other areas, such the rapid response service—funds for which have doubled—and training places. If he opposes the redundancy pay increases in the Bill, is he also opposed to the extra expenditure elsewhere in the system for those who lose their jobs?

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

We cannot group every single Government measure—I should say "proposed" measure, because most of them have not actually been implemented—together and say that we support them. As the Minister knows, we have supported some, but not others. More importantly, we have made our own proposals, not least on loan guarantees, to which the Government came rather late in the day. They said that they would put similar proposals in place, but they have not yet delivered on that. It is not fair to say that we have been doing nothing or that we have failed to address the Government's proposals.

We are hugely concerned that, in this economic downturn and with unemployment already predicted to rise to 3.5 million, this diversion of cash will only add fuel to the fire. Essentially, the Bill could damage those whom it seeks to protect. Although some redundant staff will enjoy a short-term monetary gain, it could also have negative effects. First, the additional financial strain on companies could lead to more businesses becoming insolvent, so there could be fewer businesses to offer jobs once the economy begins to recover and, perversely, there could be more workers to compete for those limited job opportunities.

Secondly, the Bill may lead to employers ceasing to offer more generous contractual provisions in case of redundancy. As we have heard, some 50 per cent. of organisations offer workers more than the statutory minimum. In an attempt to improve conditions for those who enjoy only statutory protection, the Bill might indirectly harm a host of other workers. Thousands could potentially be put under pressure to renegotiate their contracts, and many new workers would simply be left with the statutory minimum.

Thirdly, the Bill might lead to employers looking to avoid its provisions. For example, they might seek to avoid potential payments by increasing staff turnover so that workers do not qualify for statutory redundancy, or through complex contractual means. More worryingly for workers, employers may simply be unable to pay the enhanced sum. Fourthly, the Bill might also lead employers to make workers redundant pre-emptively, for fear of incurring far higher costs by delaying the process in the hope of recovery. Young and newer workers, who are comparatively cheap to make redundant, would likely be sacrificed. Rather than softening the blow of redundancy, the Bill might actually make it more frequent and more financially painful, particularly for newer employees.

Finally, we need to appreciate that this measure is not designed to help the poorest employees. That is because increasing the maximum week's pay would provide no increase in statutory redundancy pay for the lowest paid employees—those earning less than £350 a week. To that extent, this Bill seems to be out of line with the Government's policy of "protecting vulnerable workers" and "supporting good employers". Indeed, it is quite feasible that the poorer workers who receive nothing under this Bill could have less job security because of the benefits given to higher earning employees.

So why would the hon. Member for Chorley introduce a Bill that supports only the better-paid employees? Let us put the potential negative impact of the Bill on workers to one side for the moment and consider the motivation for the Bill—the trade unions. It is clear that they are the driving force behind this Bill. The Warwick agreement made between the Labour party and the trade unions contained a promise to increase the maximum statutory redundancy payment, and the Bill is a belated attempt to fulfil that commitment.

The Bill has scant regard for the economic crisis facing Britain, and comes despite disastrous figures for businesses and the economy generally. It is nothing more than a thinly veiled attempt to save Labour's blushes in failing to honour the foolish promises made during the peak period of Labour's boom and bust era. Since coming to power in 1997, the Labour party has made concession after concession to the trade unions that fund it. During the boom years, the public—and, to some extent, business—paid little attention to that fact, while all appeared to be rosy with the economy. So despite the Government's obedience to union demands, businesses were willing to turn a blind eye while the economy remained stable. We need only look at legislation forced through by the Labour Government to see this. Among other measures, the working time directive and the Employment Relations Act 1999 are examples of legislation that is extremely favourable to the unions. For example, the 1999 Act introduced protection from dismissal during the first eight weeks of an official strike for workers taking part in industrial action.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

The hon. Gentleman is pursuing a dangerous argument. His party has spent the past two to three years trying to change its image and to say that it is no longer the "nasty party", to quote one of his colleagues, yet he seems to be embarking on an attack on a series of measures that were all designed to improve the lot of working people. That raises an interesting question. Is he saying that at the next election, whenever it should come, his party will say that it wants to reduce the rights to paid leave granted under the working time directive, for example? Will it reduce the rights to trade union recognition contained in some of the legislation that he cites? I do not know what was coming next in his speech, but I am sure that he will take my point. Is his party going to stand on a platform of taking those improvements away?

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Again, the right hon. Gentleman generalises. If he thinks that we are happy with the Government's £10 million bung to the trade unions—the so-called modernisation fund—he should realise that we are not happy with it, and we might well consider those issues following a general election. In the run-up to the 2005 general election, the trade unions won more than 60 commitments from the Government on employment legislation. Since 1997, about 20 Acts and more than 280 statutory instruments have been passed that directly deal with employment law. In other cases, such as that of the Legal Services Act 2007, the unions have been exempt from regulations to which other entities have been subject. The Conservative party supports the interests of businesses, which include companies and their employees, and so we will act in their wider best interests and not in the narrow interests of the unions.

It is of little surprise that the unions also represent a considerable source of donations to the Labour party. Since 2001, trade unions have donated more than £76 million to Labour, equating to some 61 per cent. of all the donations that Labour has received. In 2006, Labour received a total of £11.8 million of donations, of which £8.6 million came from the trade unions— 73 per cent. of the total. As we move deeper into the recession, Labour has become more and more reliant on the unions for funding. It is against that backdrop and that of the more specific obligations in the Warwick agreement that we view this Bill with a degree of suspicion.

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Photo of Andrew Dismore Andrew Dismore Labour, Hendon

Effectively, the hon. Gentleman is saying that he is going to take his red pen out and redact great swathes of people's employment rights. This shows the real distinction between his party and ours. We believe in standing up for working people and protecting their rights, and he believes in taking them away.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I hasten to add that it is the hon. Gentleman's party that has been having an internal row today in front of the nation about whether it has been keeping its manifesto pledges. I have not come here today to give manifesto pledges for my party. I have come here to debate this private Member's Bill, and we believe that what has happened is indicative of Labour's increasing isolation from economic and business realities. Red tape is already choking businesses that are struggling to keep afloat, yet Labour MPs and MEPs are seeking to place further hurdles along the path to recovery. Labour MEPs have even been speaking and voting against the Government's position. They recently voted to remove British workers' ability to opt out of the 48-hour week. At a time when thousands are hoping to work as much as they can rather than face redundancy or poverty, Labour politicians are voting to reduce people's ability to work. Neither are we the only force of dissent. Business organisations and even the unions that the Bill seeks to placate have recently criticised the Government for failing to advance a unified, consistent strategy for tackling the recession. The Bill is another example of the Labour party's having lost its way.

The mass of new employment regulations over recent years has meant that the UK labour market has become increasingly inflexible, which will impact on our ability to come out of the recession. So we urge the Government to make the right decision and to be considerate of wider non-party political concerns. The narrow political interests of the trade unions and the outdated Warwick agreement should be irrelevant in the current economic climate. Will the Minister also confirm that the Government have no intention of getting around today's situation by invoking the time-bomb provisions of section 14 of the Work and Families Act 2006?

In looking to move out of the recession as soon as possible, we should be focusing on resolving the issues and challenges ahead rather than exacerbating the unfortunate consequences of past Government failures. The Bill is reactive, retrogressive and entirely inappropriate for the desperate economy that we have in this country today.

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Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Chair of the Liberal Democrat Parliamentary Party 10:55 am, 13th March 2009

I congratulate Mr. Hoyle on sponsoring the Bill. As he said, it is Friday the 13th, and on a Friday I and the vast majority of my colleagues are normally working in our constituencies, so why are we here today? We are here because the Government have failed to deliver to the unions the promise that was made out before the general election and specifically in Warwick I. The promise to link statutory redundancy pay to average earnings was also enshrined in the 2005 Labour general election manifesto, so it is no wonder that we are here today. Labour failed to fulfil its promise to its paymasters and, specifically, to the direct sponsors of many Members who were on the Government Benches earlier and who now seem to have gone—perhaps to the Tea Room. Business also donates large amounts to the Labour party, so the Government are between a rock and a hard place: if they please one paymaster, they will upset another.

The Conservatives, on the other hand, are not in thrall to two masters. They have only one: big business. Big business, as we have heard, does not like these proposals one bit, and nor should it.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Before the hon. Lady goes too far into how we are in thrall to big business, I want to point out that more than 50 per cent. of companies currently pay more than the statutory limit. She will find that those companies tend to be from big business.

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Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Chair of the Liberal Democrat Parliamentary Party

I am grateful to the hon. Gentleman for that intervention, and I take his point. He said that big business should not like these proposals and I can understand that because they will increase the cost to business just when times are the hardest they have been for business in living memory.

My party and I are not in thrall to the unions or big business and we seek to steer a path that achieves fairness and prosperity for all. That is not easy, and in times such as these it is probably not even possible, but I am going to try.

It is worth considering the decision that we are being asked to make today in the context of the history. When the Redundancy Payments Act 1965 was introduced, average earnings were £19.60 and the cap was £40 a week, which was just over twice average earnings. That cap remained unchanged until 1974, when it was doubled to £80. However, there was no automatic mechanism to operate the cap until 1999. In 1999, the retail prices index was introduced as that mechanism. As wages regularly surge ahead of the RPI by an average of 1 to 2 per cent. in most years, the cap has fallen behind average earnings. At £350, it is now worth only 57 per cent. of what it was in 1999. A person who has worked all their life for a company can be made redundant with a maximum of £10,500 in redundancy pay. I personally feel that that is hardly fair compensation for a lifetime of work and dedication to one company.

To put the system into context, it is interesting to compare how generous we are in calculating redundancy with how generous our European neighbours are. Indeed, the hon. Member for Chorley kindly provided examples showing that countries such as Italy, Spain and France are much more generous than the UK. That is interesting but not necessarily relevant, because to make sense those statistics would need to be related to the relatively large burden of social insurance paid by employers and employees alike in those countries. High taxes are not the only cost; inflexible employment rules also make it harder to fire and less attractive to hire employees in those countries.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

The allegation is frequently made that it is easier to fire workers in the UK compared with other countries and that it leads to higher unemployment in the UK than elsewhere. If that were true, would unemployment in the UK not be higher than in Germany and France? In fact it is lower, so it seems to me that the frequently made allegation that it is easier to fire people in the UK is not reflected in the unemployment figures for the various countries usually cited as examples.

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Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Chair of the Liberal Democrat Parliamentary Party

I am grateful to the Minister for that intervention, although I wonder whether the degree of unemployment in other European countries is also related to other factors that are not necessarily linked to how easy it is to hire and fire. However, I take his point.

In the UK we have a relatively low-tax, more flexible economy, and that flexibility has gone against us in that the UK has sunk into recession faster than many of our European neighbours. My hope is that our flexible labour force and low set-up costs will enable us to be one of the first to climb out of the recession.

Let us consider the case against the Bill. For an employer it is the worst possible time to increase minimum rates of statutory redundancy pay. For the employee it is the best time; with more people being made redundant, they will need the money. In an intervention, Miss Kirkbride suggested that higher redundancy payments would make employers accelerate redundancies, but surely the opposite is the case. The more it costs to make someone redundant, the more likely it is that the employer will think twice.

The CBI says that the increased costs would reduce the savings made for each redundancy, so employers would have to make more people redundant. There is certainly a lot of wisdom in that statement. The CBI also says that the annual increase is intended to reflect living costs, so the retail prices index is a more appropriate tool for uprating the cap.

However, we have seen what happens when RPI is used as a measure: the amount becomes out of touch with the general standard of living for those who are working. The current maximum is 56 per cent. of average earnings—it was 200 per cent. when the measure was introduced. The rate paid to pensioners is now only 52 per cent. of what it would have been if Mrs. Thatcher had not withdrawn the earnings link during her reign. The Government have slowly but finally agreed slowly to restore the earnings link for pensioners. Surely the same principle should apply to redundancy pay.

The CBI cites the Government's "Success at Work" policy paper of 2006, and makes a point similar to that made by Mr. Djanogly: given that the Bill will take two years to come in and that it addresses only the upper limit, not the lower, it is not in keeping with the Government's policy of

"protecting vulnerable workers, supporting good employers".

The Engineering Employers Federation takes things a step further. It would be minded to support a minimum rate for redundancy rather than a new maximum, and suggests that the minimum rate should be £200. However, would that not disproportionately affect employers at the other end of the scale? Would not even more of the lowest paid workers lose their jobs as a result? I should be interested to hear what the Minister thinks about the EEF's suggestion.

The EEF commented that the proposals would disproportionately affect manufacturers because they pay relatively higher wages. Surely the real factor is the percentage of total wage costs compared to overall costs. I suggest that the impact would be lower overall.

I turn now to the benefits of the Bill. I do not accept the argument put forward by Mr. Skinner that giving people more redundancy pay would stimulate the economy—as in Keynesian economics. When someone has just lost their job and does not know when they will find another, the last thing they will do is splash out on a new freezer, carpet or conservatory. They will squirrel their money away. The rainy day has come and people need the comfort of knowing they have something to fall back on when the economic winter becomes even harsher.

Giving people some means of surviving economically until they can get back on their feet is right and fair. The Bill does two things. It promotes a method of calculating statutory redundancy pay that links it

"in such a manner as the Secretary of State considers appropriate, to average weekly earnings" within 12 months. It occurs to me that there is a fair amount of wriggle room for the Minister or the Secretary of State to take fair and proportionate action. It would be above my pay grade to suggest exactly what that fair and proportionate action should be, but I am sure that the Minister has excellent advisers who could come up with some good suggestions.

Secondly, the Bill links the figure in subsequent years in

"an annual comparison...with average weekly earnings."

We thus know that if we are to have a cap it must be linked to something that protects the relative prosperity of our society and not to the price of a loaf of bread.

In conclusion, something needs to be done in the interests of fairness. I should like the Bill to make its way to Committee where the Government can propose amendments to make it a fair and realistic proposition that employers can cope with, or I should like the Minister to offer enough comfort to the hon. Member for Chorley so that, in the knowledge that the Government will introduce their own Bill, he does not push for a vote. The Minister is a man of great talent, and I am sure that with his advisers he can come up with a solution that is proportionate and fair for all.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee 11:08 am, 13th March 2009

I congratulate my hon. Friend Mr. Hoyle on his success in the private Members' ballot. The issue he raises in his Bill is important, both in itself and in terms of our response to very difficult economic times.

I begin with a note of caution: in our attitude to the Bill, we should be careful not to make a judgment about the whole recession and the set of economic circumstances we face. It would be a mistake, particularly for my colleagues on the Labour Benches, to judge purely in terms of our response to the measure whether we were acting in the interests of the working people we care about. They are at the heart of everything we do in response to the recession. I will have more to say about that in relation to the help offered to people who are in difficult circumstances, having lost their job.

As my hon. Friend said, people expect the Government's response to the recession to be focused on the concerns of ordinary families. They expect it to be about real help for those at the sharp end. That has been the central concern in everything that we have done in recent months. He suggested that on the Government's side, there had been some attempt to encourage people to speak against his Bill. I was puzzled by that suggestion. I have tried to find out whether that was the case, and I am told that it was not; it is certainly not something of which I have any knowledge.

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Photo of Andrew Dismore Andrew Dismore Labour, Hendon

It was not very successful, if there was such an attempt.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

As my hon. Friend remarks, the evidence shows that that was not the case. When we intervene in response to the recession, it is very much because the interests of ordinary, hard-working men and women who do their jobs faithfully, day in and day out, are at the heart of our concerns. There is sometimes confusion about that: when people see us intervening in the banking system, or see us acting as an insurer or a guarantor of lending risk, they may feel that we are doing that purely because we feel concern for the banks, or indeed the investment bankers who took some of the decisions that led to the problems that we face, but that is not the case.

We intervene because a properly functioning banking system is an essential prerequisite of a modern economy. It is a basic necessity for companies that employ millions of people. Of course, banks are the home of the savings of the hard-working men and women who are at the heart of our concerns, and the home of the savings that those who have retired have built up over the course of their life. Although the intervention is in the banks, the concern is not for the bankers but for those who have invested their trust and their savings in the banks.

The same is true of the other measures that we have taken in response to the recession. We have taken a dual approach to the downturn, which involves both tackling its causes—the international banking crisis and the lack of adequate lending—and dealing fairly with the consequences. That means providing the right support for people and businesses. The Bill is concerned with support for people who are at the sharp end of what is happening in the downturn. For example, with regard to the credit crunch, we believe it is important to try to maintain lending to businesses, so that they can keep employing the people with whom the Bill is concerned, as well as lending to households, which is vital for growth and jobs.

The health of the economy also matters to banks, as growth and jobs determine whether borrowers can repay their loans, and whether the banks can make new loans. That is why the Government took decisive action in October and since then to ensure that the banking system does not collapse, and to ensure the certainty and confidence needed to get credit flowing again.

This is not just a British response. After the steps taken in October in the United Kingdom, similar action was taken by countries around the world. The detail of the response may differ from state to state, but across the world there is a common approach, which is to try to stabilise the banking system and engage in fiscal stimulus in order to restore confidence, get credit moving and ensure that the recession is shallower and less long-lasting than it might otherwise be. Our response is not just national; it is also about calling on other Governments to join us in taking action to get credit flowing again, because that is central to getting the world economy moving. Here in the UK, we have announced a number of measures to help businesses and employment. That is about delivering real help to businesses that are in urgent need of credit, which is important if we are to stop the job losses to which the Bill is designed to respond.

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Photo of Andrew Dismore Andrew Dismore Labour, Hendon

My right hon. Friend is setting out a cogent case on the macro-economic position and the Government's overall policy, but will he nose his speech into the Bill? The Bill is not a red flag-waving measure; there is not a great deal of red meat in it. It is a modest measure. Will he please get on to the Bill, and say what he objects to in it, rather than giving a great macro-economic description of what is going on in the wider world?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I will of course come to the specifics of the Bill, but the macro-economic context is important. I began my remarks by cautioning Members, and my hon. Friends in particular, not to judge the Government's response, or think that the public should judge the Government's response, to the recession purely in terms of our response to the Bill. That is why the wider context is of importance. I have great sympathy for the concerns that my hon. Friend the Member for Chorley outlined in his opening speech. It is absolutely right that working people should be at the heart of our response to the credit crunch. However, the issue has to be seen in a wider economic context.

We have set out an enterprise finance guarantee scheme—a £1 billion loan guarantee scheme, delivered through the banks, which will enable additional lending to businesses up until the end of March next year. The scheme provides a 75 per cent. Government guarantee on individual loans to viable businesses with less than £25 million of turnover through approved lenders. Some 26 businesses have taken up the scheme so far, with more in the approvals process. That is important in getting new credit to businesses, so that they can continue to operate and avoid the redundancies that the Bill seeks to address. That scheme is already operating. Loans are being made, and more than 80 per cent. of all applications registered by the banks are eligible for support.

The scheme is subject to sectoral restrictions, but my Department has succeeded in lifting restrictions from certain sectors, including the automotive, medical, health services and shipbuilding sectors. It is backed by the working capital guarantee scheme, which is on a larger scale. That scheme is not one to which individual applications are made; it allows banks to share more risk of lending with the Government, and thereby increase funds for lending. It involves businesses with a turnover of up to £500 million a year.

The guarantee is available to participating banks, and we are currently in discussion with Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland. They can use the guarantee to cover portfolios of lending to sound, creditworthy businesses with an annual turnover of up to £500 million. By guaranteeing portfolios of working capital, the package will release capital held by banks against those portfolios—capital that those banks have, in turn, agreed to lend to businesses with turnovers of less than £500 million. That will help to ensure that banks do not reduce or withdraw working capital lines on renewal; as those lines are short-term, they can be easy to cut. It will also ensure that banks have new capacity to lend to UK businesses, which are suffering from the withdrawal of certain lenders from the market. Those credit schemes are particularly important to restoring confidence and trying to avoid redundancies.

That is an important part of our response to the recession, but I come now to the specific response for people affected by job losses and what we are doing for them. A number of people are affected by job losses and short-time working. In essence, there are two elements to the context of the Bill: the economic circumstances that we face, and what we said we would do about the issue before the last election. I assure my hon. Friend and the supporters of the Bill that the issues raised by it are under consideration, although he will understand that I cannot set out the conclusions of Government discussions on these issues.

I share my hon. Friend's belief that people should have a fair deal at work, and next month we will see further improvements to people's employment rights through, for example, the extension of paid leave and the introduction of extended rights to request flexible working, to help people to balance the responsibilities of work and family life. I hope he does not mind me saying that, during the past week or so, we have discussed the fact that when pressing for a new or additional measure it is important not to ignore what the Government are doing for working people, which includes some significant changes that will come into force next month.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I am more than happy to put it on the record that I have been in discussions with my right hon. Friend, and with the Secretary of State. Quite rightly, we have been through this, and certain objections have arisen. I think the Minister will agree that we have to go a long way to meet those, which is why the Bill has changed. We were still in discussion as late as Wednesday night.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

We share a common aim, which is to ensure that people at work get a fair deal in our response to the recession. The context should be wider than the measures my hon. Friend proposes in the Bill.

This Government have introduced a number of measures that were attacked by Mr. Djanogly, but which I stand by. They include the extension of paid leave, the extension of flexible working, measures to help people to balance the responsibilities of work and family life, and measures to get lending flowing in the economy so that we can minimise the number of people who lose their jobs as a result of the recession. It is important to set discussion of the Bill in that context because, whatever happens to it—whether it proceeds or not—concern for working people will still be right at the heart of the Government's response to the recession.

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Photo of David Clelland David Clelland Labour, Tyne Bridge

I am listening carefully to my right hon. Friend, but what is it about this Bill that would prevent the Government from pursuing those laudable measures in any case?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

The Bill would not block those measures, and I do not suggest that it would. I say to my hon. Friend, my hon. Friend the Member for Chorley and others that it is important that we remember those measures, talk about them and ensure that the public understand that the Government have a response to the recession that has their interests at heart.

I shall deal now with redundancies because they are at the heart of what we are talking about. There is no doubt that redundancies are growing in number at the moment. Sadly, that is a feature of the recession not only in this country but right around the world. In the fourth quarter of 2008, there were 263,000 redundancies—significantly up on figures from recent years, although well below the levels of the early 1990s. Whether the numbers are higher than those of the recent past, or lower, each redundancy is still the story of a career cut short, not out of choice but because of economic circumstances, with all the worry and uncertainty that that causes for the people involved and their families. It is important that the Government do everything they can to help those individuals and the businesses that they depend on for employment.

Redundancy can occur for a number of reasons and it is usually implemented only after alternatives have been considered. No business wants to lose people that it does not need to. We have heard stories in recent weeks, for example, of companies reducing their employment through voluntary schemes, by restricting or suspending external recruitment, by reducing or eliminating overtime, or by seeking applications for early retirement. Employers can also try to avoid redundancy by maximising redeployment and training opportunities for those likely to be affected in the organisation. Sometimes, however, all those avenues are exhausted and, in such cases, employers turn to compulsory redundancy programmes, which is where people's statutory entitlements come to the fore.

There are two statutory definitions of redundancy, which are to establish the entitlement to a redundancy payment and to establish the right to be consulted collectively. Those are important because they are used to identify who is entitled to a redundancy payment and the amount that they will receive. If the employer is intending to make 20 or more employees redundant at one establishment during a 90-day period, the law requires the employer to consult employees. If the dismissal is wholly or mainly because of closure of the business, or a declining need for employees to do the work, the employee may be entitled to a redundancy payment.

Collective redundancies, as I said, occur where the employer needs to make 20 or more employees redundant at one establishment within a 90-day period. Under part 4 of the Trade Union and Labour Relations (Consolidation) Act 1992, there is a specific requirement in such circumstances for employers to consult appropriate representatives of the employees who may be affected. That means that where employees are represented by an independent trade union, the employer must consult a trade union official. Where employees are not represented by a trade union, the employer must inform and consult other appropriate or elected representatives. Issues that should be included in the consultation are the reasons for the proposals, the number of employees it is proposed to make redundant, the proposed method of selecting the employees who may be dismissed and the proposed method of calculating any redundancy payments that the employer proposes to make.

If an employer fails to meet the requirements of the legislation governing collective redundancies, an employee or the employee's representative may lodge an application for a protective award with an employment tribunal. That award focuses on the employer's failure to comply with the consultation requirements under the legislation. Employers should undertake meaningful consultation with a view to reaching agreement with employees' representatives. It is not enough simply to go through the motions of a consultation. The consultation should be fair and transparent, and be a two-way process. It should begin when proposals are at a formative stage and encourage an ongoing dialogue between employers and employees. The employer is also required to notify my Department of the projected redundancies.

Where it is proposed to make fewer than 20 employees redundant, employers are not under a specific legal obligation to consult employee representatives or to notify my Department. However, employers must warn and consult individual employees who are to be dismissed, adopt a fair basis for selection and take reasonable steps to redeploy affected employees.

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Photo of Andrew Dismore Andrew Dismore Labour, Hendon

I am sorry to stick my nose into a fascinating speech, but the process for deciding who is made redundant and how it should be administered has nothing to do with the Bill and the calculation of the weekly pay element of the multiplicand. What does my right hon. Friend object to about that?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I will certainly come to how redundancy pay is calculated and how it has changed over the years, but I believe that it is fair first to set out the context of the redundancy scheme and how it works.

Once the employer has identified how many employees are at risk from redundancy, the next step will be to identify the pool from which to select those to be made redundant and develop the selection criteria. We believe that, as far as possible, employers should use objective selection criteria that are precisely defined and can be applied independently.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

My right hon. Friend might not be aware that Sky News is carrying a story that the Prime Minister is more than happy with the Bill. Will he reflect on that, and does he now believe that he can support the Bill? Instead of skirting around the outside of the Bill, will he now go into the depth of it?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

Sadly, Sky News is not available in the Chamber, and the Prime Minister has not communicated that to me.

Employers should, as far as possible, use objective selection criteria that are precisely defined and can be applied independently. Objective criteria should also help a business to maintain a balanced work force after the redundancies have been carried out. Some examples of selection criteria could be attendance, disciplinary records, experience, capability, relevant skills, competence and so on. It is important, as I have said, that those criteria are applied in an objective and even-handed manner, as that will help to avoid any complaints of unfair dismissal or discrimination on prohibited grounds.

None of that decreases the pain of individuals and their families when a redundancy takes place, but there is a process in place to make the system as fair as it can be in what are always very difficult circumstances. The system is also designed to ensure that employees are not selected for redundancy because of their sex, marital status, race, disability, religion, belief and so on. Selection for redundancy on the basis of trade union or health and safety activities, or because the employee was pregnant or on maternity leave, is also unlawful. Part-time employees and fixed-term workers are also protected from being discriminated against during the selection process. Selecting employees for redundancy for such reasons, if challenged, would result in an unfair dismissal case. The employer would have to show that the selection was conducted fairly and that there had been an objective analysis of the gathered information about the pool of employees.

It is also important that, when possible, an employer proposing to make an employee redundant should attempt to offer suitable alternative employment within the organisation. An employee made redundant could be found to have been unfairly dismissed if a suitable alternative position existed and was not offered to them.

Once the employer has selected the employees to be made redundant, he must give them notice of dismissal by reason of redundancy. The length of the notice period will depend on the employees' contracts of employment, subject to the statutory minimum periods. Those are at least one week's notice if they have been employed for between one month and two years, one week's notice for each year if employed for between two and 12 years and 12 weeks' notice if employed for 12 years or more. Once an employee is given notice of dismissal because of redundancy, they are entitled to reasonable time off during working hours to look for another job or to make arrangements for training or future employment. The time off must be allowed during the notice period, although employees are entitled to time off in that way only if they have two years' continuous employment with the employer.

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Photo of David Clelland David Clelland Labour, Tyne Bridge

I cannot help noticing that my right hon. Friend has a considerable sheaf of papers in front him. If the Prime Minister does support the Bill, will that in any way alter the content of the Minister's speech? Should he be sending out a runner to find out what the latest news is?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I think that my hon. Friend will find that I am always happy to be guided by the Prime Minister, as are all Ministers of the Crown.

I was talking about how the redundancy scheme works. Upon making any redundancy payment, the employer must give the employee a written statement indicating how the payment has been calculated. If the employer fails to provide that statement without reasonable excuse, they could be guilty of an offence and fined up to £200. The Business Link website, which is an important source of information for all employers and the general public, particularly during the recession, hosts information that will help employers to calculate statutory redundancy payments due to their employees and produce written statements for each employee showing the amount of redundancy pay and how it was calculated.

It is automatically unfair and sex discrimination to select an employee for redundancy for a reason connected with maternity leave, birth or pregnancy. If the reason for redundancy is connected with other family leave—paternity leave, parental leave and so on—that is automatically unfair and may be sex discrimination.

I have outlined an individual's rights when faced with redundancy. As I said, redundancies have sadly risen in recent months. I told the House a few moments ago that, in the last quarter of 2008, there were more than 260,000 redundancies reported in the labour force survey, which is the highest level for some years. The quarterly redundancy figures in the recession in the early 1990s reached about 350,000—significantly more than we are now experiencing—but I do not seek to deny the urgency of the redundancy situation facing many people or the good motivation of my hon. Friend the Member for Chorley in bringing the matter before the House and asking what can be done.

Past recessions were sometimes felt in different ways around the country. At the moment, the highest proportions of redundancies are occurring in the south-east and the west midlands. As an MP who represents a constituency in the west midlands, I am sad to say that the largest increase in redundancies since the fourth quarter of 2007 has been in that region. The regional redundancy rates show that the north-east now has a rate of 15.8 per cent., up from 6 per cent. in the fourth quarter of 2007. That is followed by the west midlands, Wales, the north-west and Yorkshire and the Humber. The west midlands has seen the largest increase in recent times.

I am afraid that redundancies are increasing among all age groups. They are all experiencing more job losses compared with the same period a year ago. However, it appears that those in mid-career are often the worst hit. Men are experiencing more redundancies than women. Almost 70 per cent. of all redundancies are among the male work force. That figure, too, is increasing, and relatively young men are experiencing significant numbers of redundancies. The situation is affecting various regions and groups of people.

Sadly, people with lower levels of academic qualification are also being badly affected by redundancy. There has been an increase in redundancy across all qualification levels, but the biggest increase in the fourth quarter figures that I have quoted was among those with no qualifications. This reaffirms our view that one of the significant challenges in the labour market is to reskill and re-equip workers and to offer them one-to-one help in training. That is a significant part of our response to the recession, which is why I asked the hon. Member for Huntingdon whether he supported such measures in that regard and about his stance in opposing the Bill.

People with higher qualifications—those with NVQ level 4 or above—accounted for 27 per cent. of all redundancies before the recession really began to bite, but the proportion is 19 per cent. in the most recent figures. There has been a major increase in the number of job losses for those with qualifications that are not at degree or higher education level. Job losses for people in those groups increased from 9,000 in the fourth quarter of 2007 to 28,000 in the fourth quarter of 2008.

Probably the greatest concentration of job losses is in the construction industry, which saw an increase of just over 38,000 over the period—from 9,500 job losses in the fourth quarter of 2007 to 48,000 in the fourth quarter of 2008. The industry now accounts for 18 per cent. of all recent redundancies, up from 9 per cent. a year before. We also have large proportions of redundancies in manufacturing, and almost a fifth of all redundancies are in part-time positions. Some 49,000 part-time employees lost their job in the fourth quarter of 2008, up from 17,000 a year before.

One of the silver linings in this picture is that the labour market is still dynamic. Most people who lose their jobs find another one within six months. Nevertheless, it is important to set out to the House that this problem affects significant numbers of people and important industries in our country. We are, of course, particularly concerned with the long-term unemployed; that is why we have concentrated much additional help on those who have been unemployed for six months or more. We know that the longer people are outside the labour market, the more difficult it will be for them to find a new job.

In the constituency of my hon. Friend the Member for Chorley, and certainly in my own, memories are still fresh about the devastation caused to communities in the 1980s and the 1990s, when whole industries were wiped out. It is important to say that we will not take the same approach to this recession as was taken by the previous Government to the recessions that happened before.

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Photo of Andrew Dismore Andrew Dismore Labour, Hendon

My right hon. Friend has now been speaking for well over half an hour. He has given us lectures on the economy, on the credit crunch and the Government's response, on redundancy law and procedure, on discrimination law, on redundancy statistics, and on help for the unemployed in the labour market, and he is now going back to where he started—the recession. Is he ever going to address the detail of this extremely modest Bill? None of these issues has anything to do with the Bill, which deals with a straightforward, narrow point on the weekly multiplicand.

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. May I remind the hon. Gentleman that the decision as to whether the content of Members' speeches is relevant is determined by the occupant of the Chair?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

Thank you, Madam Deputy Speaker. I am afraid that I do think that these matters are relevant to the Bill, because the whole premise of my speech is that it should be seen in the light of the wider response to the recession. That is why how the redundancy system operates is relevant, as are the other measures that we have taken with regard to support to employers. Of course, I will come to the specifics of the Bill.

I was saying that we will have a very different response to this recession from the one that the Conservative Government took to recessions in the past. We do not see our role as simply to pay a benefits cheque, which may keep body and soul together but does not in itself help someone to make a new start—to seek out retraining or to build a new career. We cannot always prevent people from losing their jobs; no Government can do that, and we do not claim to be able to do so.

I gave the redundancy statistics a few moments ago. I know how painful redundancy is for those involved and for the communities in which they live. However, we will help them to get a second chance and to try to seek new opportunities when faced with the very difficult circumstances of redundancy. That is why we are providing a £129 million package of support for individuals facing redundancy or who are already redundant, and why we are making available 75,000 further education training places for Jobcentre Plus referrals at six months' unemployment. The pre-Budget report in November also announced additional funding to ensure delivery of support for everyone who is made redundant, including a doubling of the rapid response service and an additional £1.3 billion to support Jobcentre Plus. Our package of support includes golden hellos of up to £2,500 for employers who take on and train long-term unemployed people, precisely because we recognise that those who have been out of work for six months or more will find the most difficulty in returning to the labour market.

Where redundancies take place, the Government's rapid response service provides valuable help in trying to find a new job. We have doubled funding for the service and will double it again this year.

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Photo of Denis MacShane Denis MacShane Labour, Rotherham

We appreciate many of the measures that the Government have set in train. However, one matter concerns many of us, especially those from steel industry communities. In the rest of Europe, efforts are made to keep workers at work, with part of what might be a future unemployment subsidy transferred to allow that to happen. The Government are resisting such action, and I received a most disappointing reply on the matter this morning from the Minister's master in another place. Will my right hon. Friend try to get officials to think a little bit out of the box—a little laterally—and perhaps even learn some German or Dutch? They speak quite good English over there. Good things are happening in Europe, so will my right hon. Friend consider applying them to our steel industry? If not, we will face much graver problems, which could be avoided with a little more flexibility and innovation from the Department.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

My right hon. Friend is a skilled linguist, fluent in several languages, and I am sure that that helps him learn what is happening in other countries. Employers and trade unions have raised his point with us, comparing the package that we are making available with that in other countries, which can include a wage subsidy scheme for several months to try to stave off redundancies. I cannot announce today that we will launch such a programme—there are several other issues to consider, for example, deadweight costs of supporting employment that may disappear in a few months—

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. I appreciate that the Minister is responding to an intervention, but I warn him against going too far down that road and getting too far from the Bill's contents.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I am happy to accept your guidance, Madam Deputy Speaker.

As I said, our package of support for people who face redundancy includes extra help with mortgage payments after three months. Most people who lose their jobs manage to find another in six months, so the support is important to help people keep their home. One of the worst things that can happen when someone is made redundant is losing one's home, too. We are keen to minimise that and to offer help so that it does not happen in any more cases than absolutely necessary through a long-term inability to keep up with the mortgage.

The Bill deals specifically with redundancy payments and a fair deal for those who face redundancy. How we ensure that those who are made redundant are properly and fairly rewarded for their service is a fair question to pose to the House and the Government. In that context, it is important to examine the history of statutory redundancy pay and how it developed.

As my hon. Friend the Member for Chorley said, the principles of the scheme that we are discussing were devised in 1965, when Harold Wilson introduced the first statutory redundancy payments. The principles were embodied in the Redundancy Payments Act 1965 and essentially formulated in the report of an interdepartmental committee on redundancy, which was appointed in January 1963 under the chairmanship of Sir James Dunnett. The committee's terms of reference were:

"To examine how far existing provisions by Government and industry for meeting the problems of redundancy are adequate to promote the mobility of labour necessary for economic efficiency and to provide security to workers."

The Dunnett committee based the theoretical justification for redundancy payments on two grounds, one economic and one social, of which the former was held to be overwhelmingly more important. The aim was to induce redeployment from overmanned to undermanned undertakings rather than, as we might naturally assume, purely to assist with financial hardship. In other words, it was a labour mobility rather than purely a social welfare measure.

In the early 1960s, before the scheme was introduced, industry operated voluntary redundancy systems. Only around 15 per cent. of employees in manufacturing industry were covered by redundancy schemes, although most nationalised undertakings and the public sector had them. It was felt at the time that it was important to plug the gap in the country's employment structure to encourage workers to be prepared to move from one industry or part of the economy to another.

Obviously, we understand that workers might have been reluctant to move from an industry, which offered redundancy protection to another, which did not. The Dunnett committee concluded that the purpose of further action on redundancy should be to encourage greater efficiency in industry and contribute to economic growth. What we now regard as the fundamental purpose of redundancy schemes—to help with hardship after workers become unemployed and reward them for length of service—was perceived as a secondary consideration at the time compared with labour mobility. The redundancy scheme was seen very much as an economic measure and a cornerstone of the Wilson Government's attempt to harness the infamous white heat of technology.

It is important to recognise the context of the statutory redundancy payment scheme. As we know, Prime Minister Harold Wilson wanted to modernise the country and modernise industry. He wanted a scheme that would allow people to move from industries that were in decline to industries that were growing. He saw a statutory scheme as an important way of underpinning that. That is the context of the scheme, and that aim made sense when some industries had protection and some did not.

At the heart of the statutory redundancy payment scheme lie two elements. First, the calculation begins by working out the number of weeks of service that are payable. Secondly, the amount of the redundancy payment is calculated after taking into account the worker's pay and the limit in the scheme. At the heart of the Bill before us is the issue of the statutory upper limit, so it is interesting to note how it has changed—or not changed—over the years.

As my hon. Friend the Member for Chorley said, when the scheme was first introduced, the limit was set at £40, where it remained for nine years. Only in 1974 was it raised, to £80, where it stayed for a further four years. That was at a time of significantly higher inflation than we have now. From 1979 to 1997—the 18-year period in which the Conservative party was in power—the overall payment went up from £110 to £210.

We have made far more significant increases in the statutory redundancy limit since we came into power. When we came in, the limit was £210. The current level is £350. I am sure that my hon. Friend would acknowledge that the progress made by the Labour Government in that regard has been significantly better than the Conservative party's record of increasing the limit by £100 during 18 years in government. Later I will say a little more about the formula by which the limit is increased.

At the heart of the structure lie two elements: the number of weeks of service and the worker's pay. Workers receive half a week's pay for every year of service up to the age of 21. They receive one week's pay for every year of service between the ages of 22 and 41 and one and a half weeks' pay for every year of service from the age of 42. A total of up to 20 years of service can be counted.

Perhaps the easiest way to understand how the system works is to take a practical example. Let us imagine a worker aged 50 who has just been made redundant and who has 20 years of service in the job. Let us say that the worker earns £500 a week—that figure has been quoted as the ceiling that we should raise the payment to, but I will leave that aside for the moment. Under the scheme that we currently operate, his statutory pay would be capped at the £350 limit that exists today. Our worker has eight years of service past the age of 42, which means he is entitled to one and a half weeks' pay for every year of service, so he would receive 12 weeks' pay at £350 a week. In addition, he has served for 12 years below the age of 41, for which he is entitled to a further 12 weeks' redundancy pay—again at £350 a week. This 50-year-old's redundancy payment, then, would reflect a total of 24 weeks' pay, which, multiplied by £350, comes to £8,400.

However, if the same worker earns below the £350 limit, he will have his redundancy pay calculated on his actual weekly earnings rather than according to the £350 limit. If our 50-year-old were to earn not £500 as in the earlier example, but £250 a week, we would take his 24-week entitlement and multiply it by £250, which comes to £6,000. That is the difference arising from the different forms of earnings and the operation of the statutory limit.

I have talked about the change in the statutory weekly limit over the years, and I believe that Governments of both colours have probably let the real value of the limit slip, but I think that this Government's record over the past 12 years stands in stark contrast with that of the Conservative Government who preceded us. In fact, over the six years from 1991 to 1997, the limit increased by only £5 a week, whereas in the past two years under this Government, it has increased by a total of £40 a week. Clearly, we have a very different approach to these issues. Although my hon. Friend is pushing us to do more through his Bill, I am sure he would agree that Labour's record in the past two years of a £40 a week increase is significantly better than that of the Conservatives—even if we take inflation into account—who, over six years, confined the increase to £5 a week.

In tandem with the decline in the real value of the statutory redundancy limit, there has also been a gradual reduction in the rebate, which we have not discussed today, although it was an important aspect of the system when it was first introduced. At that time, the Government covered 77 per cent. of the costs. This rebate then fell to 50 per cent. in 1969, then to 41 per cent. in 1977 and subsequently to 35 per cent. in 1985. At that point in the mid-80s, the rebate was paid only to firms with fewer than 10 employees. In 1990, the rebate was abolished altogether. This matters to our discussion. Apart from the increase in the overall limit and reduction in respect of average earnings, what has happened over time is that the costs of the statutory redundancy scheme have in many ways shifted from the state to employers themselves, with the exception—I shall say more about it in a few moments—of where there is an insolvency and the state ensures that people do not lose out on their statutory payments by making payments out of the national insurance fund. For redundancies that do not revolve around insolvency, however, most costs are today shouldered by the employer.

When we came into office in 1997, we were clear that the pattern whereby the upper limit had increased by only £5 a week over the previous six years, and by only £100 over the whole of the 18 years for which the Conservatives held office, could not continue. In times of trouble, employees were missing out on much-needed help. The Government were anxious to address that situation, but in a way that did not put substantial new costs on to either employer or taxpayer. We wanted to insert a greater degree of fairness into the system. Therefore, in 1999, we introduced an annual uprating formula. That increases the weekly limit each year, in line with the retail prices index.

However, the matter is not as simple as that, because an additional benefit is built into the system for employees, to which my hon. Friend the Member for Chorley did not refer, but which has an important effect on how the uprating works, and has been influential in increasing the weekly limit by £40 over the past two years. After the weekly limit is worked out, and inflation is included, the resulting number is rounded up to the nearest £10.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I acknowledge what my hon. Friend says from a sedentary position. I am sure that he agrees, however, that it is an important feature of the system. It might not sound significant, but it means that the weekly limit has almost tracked average earnings for the past 10 years. In fact, for the past three years, the limit has increased by 6 to 7 per cent., which is well above average earnings in the same period.

One of my concerns about the Bill is that had it been operation for the past few years, redundancy payments might be lower than they are. The Government's current formula to increase redundancy payments by the RPI, rounded up to the nearest £10, has produced increases greater than average earnings in recent years. Therefore, one caution about the formula that my hon. Friend puts forward is that it might have the effect of reducing redundancy pay. That is not his intention, and I do not accuse him of it for a moment. He will agree that we would not want to replace the current formula with one that would cut redundancy pay.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

In fairness, the Minister is being disingenuous. As I have said clearly, the formula is linked not only to average weekly earnings but to the RPI, so the position is covered two ways, not one as at present. He has it the wrong way round. The danger is that if inflation drops, statutory redundancy pay could drop rather than being increased. I am putting in the safeguard, and he ought to acknowledge that.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I hope that I am not being disingenuous. What I am trying to do is explain the possible unintended consequences of my hon. Friend's suggested formula. Even if it reflected both average earnings and the RPI, I do not think that it would include the uprating to the nearest £10 which has proved so beneficial in the last couple of years. In fact, I would be cautious about accepting either of the formulae that the Bill suggests. As I have said, had either been in operation in recent years there would be a lower weekly limit than exists at present, whereas the interplay of the link with the RPI and the uprating has produced increases of about 6 to 7 per cent.

Another part of the context of the Bill is what we said in our manifesto, to which both my hon. Friend and the hon. Member for Huntingdon referred. We do take that argument seriously. The hon. Member for Huntingdon suggested, erroneously—and even Lorely Burt made similar suggestions—that our action on redundancy pay was designed to please a sectional interest group. That is not true. Statutory redundancy pay is designed to protect workers who lose their jobs, whether or not they are trade union members, and to ensure—especially in cases of insolvency—that those with long years of service do not walk away with nothing. I do not believe that that constitutes acting in support of a sectional interest. It has nothing to do with the funding of the Labour party—that is an accusation that I would completely reject—but it does provide a measure of decency and fairness in the workplace.

When we have introduced the upratings and other measures that I have mentioned, relating to paid leave, to flexible working or to other areas of the economy, we have done so because of a basic belief in fairness. Our statutory measures are not just favours to trade unions, as has been suggested; they arise from a belief in basic fairness in the workplace, which should apply in all cases.

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Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Chair of the Liberal Democrat Parliamentary Party

I entirely agree with what the Minister says about fairness, but given the Government's concession relating to pensions, which are now to be linked to average earnings, why can he not allow the same degree of fairness to operate in the area covered by the Bill?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I can answer that in two ways. Is the hon. Lady suggesting—as I think she did when she used the word "paymasters" in her speech—that our action on pensions was intended to please trade unions, or anyone who funds the Labour party? That would be completely untrue. We took action on pensions because after a number of years it was clear to us that we had lifted about a million pensioners out of poverty by concentrating help on those with the lowest incomes. The time was right to provide a general uplift.

One of my reservations about adopting the Bill's proposal is the one that I expressed a moment ago. The current formula increases redundancy payments in line with RPI, rounded up to the nearest £10, and, as I have said, has resulted in a higher increase than the formula in the Bill would produce. If the concern of the hon. Member for Solihull and the backers of the Bill is to increase statutory redundancy payments, I am simply pointing out that the current formula has done that with some effect in recent years.

Let me move on to what we said before the last election that we would do. I know that my hon. Friend the Member for Chorley is a right and fair man—most of the time—and he said we should increase statutory redundancy pay. In the light of that, earlier in this Parliament we introduced a provision in the Work and Families Act 2006 to make a one-off uprating to the limit through affirmative regulations. I think that that was attacked by the hon. Member for Huntingdon, who is not in his place at present.

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Photo of Bill Wiggin Bill Wiggin Opposition Whip (Commons)

The right hon. Gentleman has suggested that the Government are wholly motivated by altruism, but a rather helpful Library note makes it clear that there was a Warwick agreement in 2004, and the trade union Unite has categorised this particular legislation as "red" under its traffic light system, which means:

"Those policies and priorities where there is a disagreement between affiliates and the Government over interpretation or delivery."

Is the right hon. Gentleman in denial over the Warwick agreement?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I am not in denial over anything we said before the last election, and I have just referred to—and, indeed, quoted from—that, so I am hardly in denial over it. What I am saying is that when we act to improve the position of people at work, we do so not to please any sectional interest, but because the Government believe in fairness at work. Sadly, that is not a belief that is shared by the Conservative party, as has been made very clear today. I completely acknowledge our manifesto commitments, and it is because of this belief in fairness that the position of people in work in the UK today is significantly better than when the hon. Gentleman's party was in power. If he went back to those days, he would find no rights to paid leave, no minimum wage and no right to flexible working.

Lest the hon. Gentleman be tempted to attack these measures too much, I add that it has been a significant part of his party's repositioning over recent years somehow to pretend that they like these measures. That mask appears to be slipping today, however. The Opposition appear to be reverting to type, and I think that people at work who look at the record of this debate will see the signals, and will know that the Conservative party appears to be setting itself up to promise at the next election a reduction in the rights of people at work. I am therefore perfectly happy to talk about what we said and what our motives have been in recent years.

I was referring to the Work and Families Act 2006 and the one-off uprating to the limit through affirmative regulations. We have not yet made use of these powers, in part because the weekly limit has grown strongly in recent years. Although I understand the wishes of my hon. Friend the Member for Chorley and the other supporters of the Bill, it is fair to point out the degree to which redundancy payments have been increased in recent years.

The Government have done something else to improve the existing redundancy regime, as well as introducing the uprating formula. Under the original scheme, service below the age of 18 did not count towards the redundancy calculation. There was also a taper in the scheme that meant that redundancy payments were progressively reduced from the age of 64 and not payable at all from the age of 65. We removed both the lower and upper age limits in the Employment Equality (Age) Regulations 2006, benefiting both younger and older workers. That was an additional important measure of fairness; no doubt, we will be accused of implementing it for reasons other than our belief in benefiting older and younger workers, but such an accusation would be as spurious as the others levelled at us today.

We have also reviewed other elements of the existing scheme to ensure that it continues to be fair. I mentioned age bands. Under the scheme, the older someone is, the more pay they receive when they are made redundant for a given length of service. In 2005-06, we reviewed the bands as part of the age review, finding that both younger workers aged up to 24, and older workers aged 50 and above, were the most likely to be made redundant. We also found that young workers tend to find work more quickly and experience a smaller drop in their pay when switching jobs or when affected by redundancy, and that older workers are typically out of work between jobs for much longer and experience, on average, an 18 per cent. drop in pay when switching jobs. Those data suggest that older people have a greater need for higher compensation than younger people do. Consequently, after very careful consideration, we concluded that the current rules on age bands in the redundancy scheme were still relevant. After all, one of the recognitions built into the scheme since the beginning has been that it is in place to reward length of service. That seems to be reflected in how we operate the scheme.

The Government also looked again at the link between length of service and the final redundancy settlement. We believe that the burden of providing a safety net for those made redundant should fall, in part, on the employers whom they have served. That is the way that the scheme works, so it seems sensible that redundancy payments should reflect the level of commitment demonstrated by a worker to his or her employer throughout the length of their service. We carried out a consultation on this issue as part of the age review in 2005, and we found that our approach was recognised and supported by the vast majority of those who responded to that consultation; just under 90 per cent. of people agreed with the principle that length of service should be reflected in such a way, and we decided to retain that element of the scheme. That is how the redundancy scheme operates and has been uprated in recent years, and the £40 a week increase over the past two years is the benefit that people have seen from the current uprating formula. We share a concern with my hon. Friend the Member for Chorley for a fair deal for people who are made redundant, and I believe that most of us would agree that much progress has been made in recent years, particularly because of how the formula has operated.

Let us consider some of the specifics of my hon. Friend's Bill and whether such further changes would be appropriate, were we in a position to make them. As I said, I share much of the motivation of my hon. Friend and the many supporters of the Bill. The Bill says that the Government shall review the limit and come back within 12 months to introduce a mechanism that links the weekly limit to average earnings. It also provides that the Government will ensure that the limit is increased in line with average earnings in subsequent years. I hope that what I have said today has left no one in doubt about the Government's commitment to supporting those who have been made redundant through no fault of their own. The underlying intention of the Bill—to provide more help and to ensure that workers get a fair deal—is one that we share, but although I have much sympathy with its intentions, there are some specific reasons why I believe that the Bill, as drafted, is flawed and would not be the best solution.

The first of those reasons revolves around cost and affordability. My hon. Friend may argue differently, but the natural reading of the Bill is that the Government should set the weekly limit at average weekly earnings. Much of the supporting material and publicity has been clear on that point. The figure for average weekly earnings has varied, depending on the supporting material. Some people have talked of £500 a week, and there has also been talk of £585 a week. It is important that we examine the costs of setting redundancy pay at such a level.

Let us take at face value the claim that average weekly wages are £585 a week. If we raised the limit from the current £350 a week to £585, it would increase the cost of redundancy by approximately £500 million a year. Most of that cost would fall on business, and as I have said, one of the features of the redundancy system since its introduction has been the gradual transfer in the burden of payment from the state to employers, save in those cases in which insolvency is a factor, or when a business is threatened with insolvency and applies to the Insolvency Service for a loan to cover redundancy payments that might otherwise tip it into insolvency. Such a feature is an important part of the system, because we are trying to avoid businesses going into insolvency if they do not have to do so. If we keep employers in business, they can continue to employ people and keep redundancies to a minimum. The state's role in this is not restricted to the point after which insolvencies have happened; it can also play a role in lending money to businesses to pay for redundancies when not to do so might result in an otherwise avoidable insolvency situation.

Even taking both aspects of the state's role into account, most of the cost of raising the limit will fall on business. The effect of the Bill may in fact be greater, because it is not uncommon for contractual redundancy pay to be based on a multiple of the statutory rate. A fairly common feature of employment contracts is that the contractual redundancy pay will be set at one and a half or two times the statutory weekly limit, so any increase in the limit—as I say, we have increased it in recent years—will have an on-cost in terms of contractual redundancy pay, too.

Taking all those factors into account, we think that the cost will be about £500 million, without also taking into account the contractual redundancy pay. That will tend to apply more in the better organised workplaces and the union-organised workplaces. Unlike the Opposition, I can see the benefits of being in a union-organised workplace where a contract with such a provision might be negotiated. One would always hope to avoid redundancy, but if one could not and the company was not in an insolvency situation, the worker would benefit from such a contractual provision.

How the exact costs worked out would depend on how we defined average weekly earnings. I believe that £585 is the average for full-time weekly earnings. The figure does not include part-time workers and if we included them it would fall. I do not know whether my hon. Friend the Member for Chorley intends to include part-time workers in his calculation of average weekly earnings or whether he would just include full-time workers, but the figures are different. The average for purely full-time workers is £585, but if part-time workers were included the average would be £450 a week. The current weekly limit represents about 73 per cent. of average earnings as things stand, if we include part-time workers in the calculation. Even if we took that figure as our baseline, raising the weekly limit to £450 would increase the cost of redundancy by about £260 million a year. Again, we have to consider the impact on contractual redundancy pay to get a full insight into the costs. That is an important factor to consider.

I am not arguing that we can never impose costs on employers. We have done so when we thought that that was right, and it is not always wrong, but it is a legitimate factor to take into account, especially at a time of economic difficulty such as now. The cost is one factor that it is important to consider. If we raise the limit, about three quarters of the cost will be borne by employers.

There is clearly a case for providing additional help to employees, as I have said. I went through some of the measures that we are taking in response to the recession. I have talked about the measures that Jobcentre Plus and the rapid response service are taking when people are faced with redundancy. We also need to be conscious that businesses are struggling to keep their heads above water. We must consider the need to do everything we can to help keep people in work as well as the package that should be made available to them if they lose their jobs.

Of course, it could be argued—perhaps by my hon. Friend the Member for Chorley—that the Government could deal with the problem of costs to business by shouldering more of those costs and reintroducing the rebate. His Bill is silent on whether the state should carry more of the burden of the cost of redundancy payments but, even if we went down that road, it would not be an easy answer. Pressures on spending exist in that area too. At present there is sometimes confusion, because people hear about the big numbers involved in bank rescues, with the Government underwriting loans of many billions of pounds, and indeed sometimes underwriting loan books stretching to hundreds of billions of pounds; but that is not the same as spending hundreds of billions of pounds. Acting as an insurer is very different from one-off expenditure on a school or a hospital. It is certainly not the case that the Government are free to spend taxpayers' money without limit. There are implications for public spending, too.

Even in the first scenario, where we did not introduce the rebate and carried on with the present system, the Government would still have to bear a proportion of the costs. As I said, that is because the Government are obliged to meet the cost of redundancy payments when employers become insolvent. The average full-time earnings figure of £585 would leave the state carrying an annual burden of something more than £100 million.

Apart from costs, we have to consider another factor that arises from the Bill: the question of time. In an intervention on my hon. Friend Joan Walley raised the question of urgency. Timing is a legitimate factor. We have already raised the limit. In the Work and Families Act 2006, we took the power to make a one-off increase to the limit. The Bill offers an alternative road for doing that, but we have to consider the timing. I suspect that the motivation of my hon. Friend the Member for Chorley is not just to increase the statutory redundancy payment limit but to do so quite quickly—probably in the context of the current recession.

In two or three years' time, we hope that the country will have turned the corner and be pulling out of recession and on the road to recovery. I think my hon. Friend's aim is that his measure should be part of our response to the recession, but in terms of timing, how would the Bill work in practice? He says that within 12 months we should come forward with a proposal, and that in the meantime the Government should consult the CBI and the TUC. My Department regularly consults not only the CBI but other employers organisations, and not only the TUC but other trade unions. We are always happy to do that, and the quality of the responses to those consultations makes a valuable contribution to Government policy. However, if we did that for the Bill, the responses to such consultation would be fairly predictable.

The unions, for reasons I understand, would call for the limit to be increased substantially. Employers, for reasons I also understand, would argue that they could not afford such an increase. They would say that we were in the middle of a recession and the Government should understand that we should not impose new costs at such a time, and so on. In the end, the Government would have to square the circle and make a judgment. We could make such a change at any point, but if we took a further year to do so, there would be more redundancies during that year. There is a timing issue involved, if we want to increase redundancy payments.

My hon. Friend the Member for Chorley will understand that I am not in a position to make promises about public spending today. I cannot suddenly tell him what will happen in future. If we were to increase redundancy payments, it might be quicker to do so through the measure in the Work and Families Act 2006, which has already passed through the House. That way, we would not have to pilot a new Bill through the House—we can never predict quite how long that will take—and carry out a 12-month consultation after that. I suspect that my hon. Friend wants urgency and speed on the issue, but I am not sure that the Bill would give him urgency and speed. In fact, there is already a measure on the stocks that could be used, if the Government made a decision on the subject. I stress again that I am not making any announcement about an increase today. He knows that I am not able to do that. The issue of timing, and whether the Bill is the right vehicle, is perfectly legitimate, as is the issue of the uprating, which is at the heart of his Bill.

If the Bill was passed, it would in practice be 12 months before any changes could be introduced—and it would first have to complete all its parliamentary stages. My hon. Friend has quite fairly raised the issue of redundancy payments today. He knows that the issue is under discussion in Government. He has made his point; he has explored the issues and laid them before the House. He spoke with great skill and passion on behalf of the people about whom he is concerned. I simply ask him to think about whether, if we increased redundancy payments, the Bill would be the vehicle for doing so. He has perhaps underplayed the fact that the Government already have a power that they can use to make such an increase, if we judge that that is the right thing to do in the current circumstances. If we used that power, any increase would, in all likelihood, come into force more quickly than it would under the process set out in his Bill, which would be required to undergo the full, normal parliamentary procedure of a Committee stage and so on. That would be followed by the 12-month consultation mentioned in his Bill. So there are issues of content, effect and timing.

I now come to the third matter to which I wish to draw the House's attention. If we were increasing statutory redundancy pay, would the formula in my hon. Friend's Bill be the right way to do so? Under the statutory scheme, everyone earning above the weekly limit would receive a redundancy payment based on the limit. Someone earning £400, £500 or even £1,000 a week would receive, if they were dependent on the statutory scheme, a redundancy payment based on the figure of £350. However, anyone earning below the weekly limit receives a redundancy payment calculated using their actual pay. If we concentrate all our efforts on increasing the upper limit from £350 to whatever it may be—the average earnings of £450 a week including part-time workers or average full-time earnings set at £585 a week—only those earning £350 a week will benefit. Workers earning below that limit would not be affected by the changes proposed in the Bill.

Let us look at an example of how that might work. In the supporting papers for the Bill, my hon. Friend circulated tables of constituencies and employment rates, which showed how many people in each constituency earned above the £350 limit. If we take his constituency of Chorley, the figures showed that 47 per cent. of people earn above the weekly limit—roughly half. So half of his constituents are earning above the current weekly limit, and half earning below. If we had a limited amount of money and we concentrated it purely on increasing the upper limit, we would benefit the better-off half of the workers in his constituency. That is not an ignoble thing to do. I am not pretending that £350 a week is high earnings, but that would be the effect of concentrating purely on the weekly limit. The lower-paid half of workers in the constituency would not see a rise in their redundancy pay.

That issue should be considered when we take a sectoral view. My hon. Friend mentioned workers in the hotel and catering sector. In that sector, around 22 per cent. of workers earn above the weekly limit, which would mean that only the better paid 22 per cent. of people working in that sector would benefit from a measure that was focused on the upper weekly limit. The 78 per cent. who earned below the weekly limit would not benefit. I am not arguing that £350 a week is a huge amount of money because it is not, but as well as considering how the formula would have impacted in recent years and how long it would take for the Bill to come into effect, we have to consider content. If we had a limited amount of money and we wanted to do something about redundancy pay, would the Bill be the best way to do it? Would it concentrate help on those who needed it most? It has been a significant and justified part of our Government's approach to try to concentrate help on the lowest paid and we have done that. The hon. Member for Solihull referred to pensions, and we took such an approach to pensions during our early years in government. We took the same approach with the minimum wage, and that is a perfectly understandable and fair principle.

From a nationwide point of view, about 7.2 million workers in the UK earn below £250 per week. About 5 million of these are people working part time. Three quarters of them are women. A further 2 million people are earning between £200 and £250 a week—in other words, at or perhaps just above the national minimum wage level.

As I have said, I am not in a position today to announce extra help for redundancy pay. I know that my hon. Friend the Member for Chorley would like me to do that, but I pose this question: if we were in a position to identify extra Government resources and ask business to contribute more to redundancy pay, should we not also ask where it was best to direct that help? Should it be directed to lifting the upper limit or to concentrating help more on the low-paid? That is at least a legitimate question for debate. It is incumbent on us to consider that matter as well as the timing of the Bill. As I have said, I cannot promise that there is money available to do any of that, as the House will understand. However, whether we help those earning above £350 or below, it is a legitimate issue for debate, as are all the other matters that I have mentioned.

It is absolutely right and fair for us to consider redundancy payment, but it is important that we do not see it in isolation. Our response to the recession should also take into account the other things that we are doing to help people. When people are faced with redundancy, what matters is not just the redundancy payment, although that is very important. It is also what we can do to help them to find a new job and give them a second chance. We wish to do more than simply pay benefits as in the past. The Government must have an eye on the future and on ensuring that those affected by redundancy take their second chance by reskilling, upskilling and giving themselves a better opportunity to find a job in future.

The economy that emerges from this recession will not be based simply on pressing the rewind button to 2006 before the sub-prime crisis, the troubles at Northern Rock, the collapse of Lehman Brothers and the other traumatic events of the past couple of years. As we navigate the downturn, we must also ensure that those affected by redundancy can compete in the British economy in years to come. My Department has talked of industrial activism. That does not mean that we are going to try to pick winning companies, but it means that we see those affected by redundancy as needing to be equipped for industries in which we know this country will have to succeed in future.

For example, my noble Friend Lord Carter has published a strategy to help to ensure the provision of broadband throughout the country, knowing that the information and creative economy is critically dependent on a modern communication infrastructure. Similarly, we know that the way we heat our homes and offices, transport ourselves and manufacture our goods will change radically in future so that Britain is at the forefront of the skills and jobs needed in an ever-expanding green collar labour market.

That is why I believe that, in debating these issues, we should concentrate not solely on the financial payment available to people but on the real and practical help that they get from the Government in terms of retraining, new skills, and so on. Several years ago, we published the Leitch report, which identified the skills shortages in this country.

If we think back to Harold Wilson's motivation for introducing the statutory redundancy scheme in the first place, we see that it was about labour mobility. It was about giving people that second chance, not just about the perfectly legitimate concern to ensure that people were rewarded for their years of service. It is a mistake simply to view this issue in isolation without taking into account the doubling of the budget for the rapid response service or the £1.3 billion that has been made available to the Train to Gain scheme, which means that it is available for shorter-term courses and available to people who already have qualifications. They are not excluded from taking part in it because they have already had some training. The scheme is now much more flexible, and it is there precisely so that people who may be affected by redundancy or by short-time working are equipped for the jobs and industries of the future.

Our response to the recession and to the problems created by rising unemployment and rising redundancy is to ensure that a fair system of statutory redundancy payments is available. We have increased it by £40 per week in the past two years, compared with an overall increase of £5 per week in the last six years of the Conservative Government. We have introduced a new formula, with the provision that it not only increases by the level of RPI but is rounded up by £10 per week. That has resulted in an increase in payments at the weekly limit of beyond-average earnings in recent years. That is a completely legitimate thing to do, but it would be wrong to say that it is purely where we should concentrate our efforts.

In saying that, I do not mean that we should rule out further action, but I do mean that we should see it in a wider context of help for the unemployed, retraining and skills for the future. That is precisely the challenge that was put before us in the Leitch review several years ago. It highlighted the importance of investing in skills to maximise economic growth, productivity and social justice in a globalised economy. Hard skills matter, as do, in a world where services are more important economically, soft skills and people skills. In the economy of the future, we will find that many people facing redundancy have to find new jobs in new areas. That was the original motivation behind the statutory redundancy scheme, and it remains the motivation behind the scheme today.

Our response to all this is a major investment programme. More than £11 billion a year will be invested in education, employment and training. We have expanded apprenticeships, with more than £1 billion in Government funding to increase overall places by more than 400,000 by 2010-11. As colleagues know, we plan to lift the education and training leaving age to 18 by 2015.

Schools are also critical and we have made a historic commitment to raise the participation age to 17 by 2013 and to 18, as I said. That is an important part of our approach.

My hon. Friend the Member for Chorley is motivated by the impact of recession and job losses on his constituency and others. The Bill is well intentioned and we certainly need to do more to help those who need it most. However, I do not believe that the measure is the right way to achieve that goal and I have set out reasons for that.

Some of my reservations are about the formula and how it would work. We have a formula that has worked well in recent years and we also have a power to uprate, which would act considerably more quickly than the mechanism for which the Bill provides. If we intended to use any improvement to redundancy payments to help those affected by the recession, the existing power to uprate the formula would be a much quicker mechanism for doing that than the method that the measure sets out. I ask hon. Members to keep that point in mind, although, as I said earlier, I cannot make spending announcements today. There is also the question of whom we should help if money were made available or if we asked business to make a contribution in the way that the Bill sets out.

My hon. Friend claimed that there was no spending commitment and that the measure is merely a guide to the Government. There is a logical flaw in that argument. The Bill either commits us to increasing redundancy payment in line with average earnings, and to introducing a new formula to increase it in line with future average earnings after the one-off increase, or it does not. If it does not, what is the point? What is the point of legislation that is simply declaratory when we already have a power on the statute book to increase redundancy payment quicker than the Bill would? There is a logical flaw in arguing that the Bill would have no impact on spending because it would leave all power in the hands of Ministers. We have that power anyway under the Work and Families Act 2006, and we do not need the Bill.

My hon. Friend has made his point. He wants redundancy payment to be addressed—that is a fair point. As I have told him, discussions about the matter are going on in Government, but there is a logical flaw at the heart of the Bill. Either it has the implications for cost to business and to the Government that I outlined or it does not. We already have powers to increase redundancy payment. Of course, that would not be a decision for me, but for Government as a whole, and we would not announce such a decision today, as he knows. Those are the reasons for my reservations about the Bill and for being unable to support it.

I want to consider the notion of average earnings as our guiding light. Even if we wanted to do more about redundancy payment, why should average earnings be that guiding light? To begin with, we do not have an agreed definition of what average earnings are. We are not just talking about how much they increase by every year, as we would with the pensions system, which has been referred to; we are talking about setting the weekly limit at the level of average earnings. Is the figure £450, which includes part-time workers, or £585, which refers purely to full-time workers? It is not clear from the Bill which definition my hon. Friend is using.

Other elements of the redundancy package would include pay for the notice period to which the worker is entitled, pay for outstanding leave owed to the worker, unemployment benefit, tax and child credits, and retraining to help the worker gain new skills and find work as quickly as possible. There is not necessarily a magic level for redundancy pay within that overall package. However, we should not let the level atrophy, as it did in the past. I do not want us to return to the days when the Conservative party let it waste away, increasing it by only £5 over six years. We have increased the level from £210 to £350 while we have held office and by £40 a week in past two years. However, I question whether the level of average earnings is necessarily the right level for any future increase.

The Bill is flawed in its approach, although I share my hon. Friend's concern for people at work. I would not want anyone to go away from today's debate thinking that we were not concerned about people at work. We have made many changes to improve the lot of people at work. It would be a great mistake to ignore those changes, some of which come in next month. We should celebrate them and campaign on them. We should point out that those changes would never be granted by the Conservative party. If we find ourselves in the position of increasing redundancy payments, we have a quicker way to do so than we would under the Bill.

I hope that my hon. Friend will consider the points that I have made and understand that I cannot promise him an increase today. However, I assure him that we will do more to help people affected by the recession. I will remain in dialogue with him about the issues. The dialogue that we have had so far has been constructive and positive. However, I hope that he will understand why, for the reasons that I have set out, I cannot support his Bill today, even if I share his concern that people at work should get a fair deal and the best possible package of support. Crucially, that should apply not only when people are made redundant, but in respect of the whole package that they are offered: to help them find a new job and reskill for the future, to ensure that losing a job, while it is a setback and a crisis for every family, is not the end of that family's opportunity, and to ensure that we stand with people in those circumstances to give them a better second chance in the future.

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Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley 1:09 pm, 13th March 2009

I have to say that my right hon. Friend the Minister for Employment Relations and Postal Affairs has given a sterling performance with his longevity. His prostate must be much better than the rest of ours: he has taken on the water and managed not to go and relieve himself, but we now have the pleasure of allowing him to do so.

The Bill is very important. We have worked hard with my right hon. Friend's Department and the Secretary of State and we have had good, constructive meetings. There is a great opportunity here to help the Government. Indeed, through this Bill I have offered the Government time to carry on with the very good business of looking after this country and fighting the world recession. I recognise that that is at the top of the agenda and I want to give the Minister the time to carry on doing that.

We should give a fair wind to the Bill, as the majority of Back-Bench MPs support it. What is important is that we want to carry on sending out the message. People may well have different views, but that suggests the advantage of taking the Bill into Committee where differences can be overcome. The Bill should not be blocked now. I hope that the Opposition recognise that democracy is important and that any differences can be discussed in Committee. I am pleased to bring the Bill before the House today. It should go forward into Committee.

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

The House divided: Ayes 85, Noes 17.

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Division number 70 Prayers — Statutory Redundancy Pay (Amendment) Bill

Aye: 85 MPs

No: 17 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

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Question accordingly agreed to.

Bill read a Second time.

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Photo of Christopher Chope Christopher Chope Conservative, Christchurch

On a point of order, Mr. Deputy Speaker. During yesterday's debate on the possible use of the Chamber by the UK Youth Parliament, the Deputy Leader of the House said—it is at column 529 in Hansard—that he hoped there would be an opportunity for the issue to be put to the vote so that the will of the House could be established. Given the way in which matters are proceeding today, it is obvious that the item on the agenda to be dealt with at 2.30 pm, which concerns the Youth Parliament, will not be reached before that time, and if it is reached after that time, it will not be possible to put it to the vote. I wonder whether a Minister could indicate whether the Government intend to move the motion at 2.30 pm, or to withdraw it.

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Photo of Graham Allen Graham Allen Labour, Nottingham North

Further to that point of order, Mr. Deputy Speaker. Could you also—

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Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. I must say to the hon. Gentleman that it is not acceptable to address the House without being properly attired.

Let me deal with the point of order from Mr. Chope. The Chair cannot determine whether a statement will be made, or whether any indication will be given, from those on the Government Front Bench. We are faced with the Order Paper that we have today. The hon. Gentleman may draw a conclusion about the likelihood of any further progress on the matter, but that does not preclude progress on another occasion, at which point it is possible that the intention, or hope, of the Deputy Leader of the House will be fulfilled.

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