Statutory Redundancy Pay (Amendment) Bill (Money)

European Affairs – in the House of Commons at 10:00 pm on 16th June 2009.

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Photo of Ian Lucas Ian Lucas Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Business and Regulatory Reform)

I beg to move,

That, for the purposes of any Act resulting from the Statutory Redundancy Pay (Amendment) Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money provided by Parliament.

This money resolution is required in respect of clause 1 of the Statutory Redundancy Pay (Amendment) Bill, promoted by my hon. Friend Mr. Hoyle. The Bill received its Second Reading on Friday 13 March and is likely to commence its Committee stage on Wednesday 24 June. In accordance with convention and as part of the parliamentary process, any Bill likely to incur additional public expenditure requires a money resolution.

This Bill proposes linking statutory redundancy pay limits to the level of average earnings. Uprating the current limit of £350 to £450—the level of average earnings at the time of Second Reading in March—would cost the Exchequer a significant sum of money.

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Photo of Ian Lucas Ian Lucas Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Business and Regulatory Reform)

I do not believe so, but I will happily check the record and get back to the hon. Gentleman on the matter; I am grateful to him for highlighting it.

We estimate the cost to the Exchequer as somewhere between £44 million and £86 million a year, so the Bill clearly requires a money resolution. I should make it very clear that the tabling of the motion does not indicate any change in the Government's position on the Bill. Those who participated in the Second Reading debate on Friday 13 March will know that the Government's objections to the Bill as it stands were set out at some length.

I am pleased to be able to announce that earlier today Parliament recommended for approval secondary legislation to implement the £30 increase in the upper limit from £350 to £380. In the meantime, despite our continued opposition to the Bill as it stands, I am moving this motion in accordance with convention and parliamentary process. For those reasons, I commend the resolution 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 10:02 pm, 16th June 2009

Let me make it plain that the reason why we oppose the Second Reading of this union-sponsored Bill, and the Government's haphazard attempt this afternoon to find a compromise, is that all those proposals, and the money resolution, will reduce access to employment opportunities at a time when the Government should be doing exactly the opposite—and, as I shall show, at a significant cost, not only to business but to the taxpayer.

Since 1999 the weekly limit for statutory redundancy and unfair dismissal payments has been increased in line with the retail prices index, rounded up to the nearest £10. In 1998 the sum was £220; in 2004 it went up to £270; in 2007 it was raised to £310; in 2008 it was increased to £330; and on 1 February this year it went up to £350. The limit has already increased by 6 per cent. this year, and earlier today we debated in Committee the Government's plans to increase the weekly limit immediately by more than 8 per cent. to £380, at a time when we are experiencing negative RPI inflation. The Government also wish to bring the increase forward by five months, even though we have already had an inflation-busting increase this year.

Tonight we are debating the implications for the public finances of an increase from £350 to something in the region of, let us say, £470. Sadly, we seem to be entering some kind of tragic bidding war between the soft left on the one hand and the hard union left on the other. Redundancies are, of course, a last resort for employers, including for the largest employer—the state. Employers do not want to lose the investment they have made in their employees, and will try to retain their staff as long as possible. They will make people redundant only when they are forced to reduce their labour costs.

The Minister will realise that increasing the weekly limit on statutory redundancy pay, especially to the extremely high level suggested by Mr. Hoyle—or rather, by the unions—would make redundancies far more expensive for employers, including the state. Employers, including the state, will now have to implement more redundancies to reduce their labour costs by the same amount as before. If the Bill is passed, the cost to employers could mean a rise in unemployment, resulting in a significant additional cost to the Exchequer in terms of payment of unemployment benefits and lost tax revenues.

The Department for Business, Innovation and Skills had its statutory instrument approved this afternoon. The impact assessment was based on an increase in the weekly limit on statutory redundancy pay from £350 to £380. The Government estimate that business would incur up to £121.2 million in extra costs. It is obvious that an increase from £350 to £470, as proposed by the Bill, would lead to significantly higher costs, and could have a devastating impact on many businesses across the country. Unemployment is increasing every week, and it is therefore likely that the cost to businesses would be greater than is suggested by any current estimates.

What is recognised in the motion, however, is that the Exchequer, too, will be faced with enormous costs if the Bill is passed. Again, all we have to refer to is the impact assessment based on an increase from £350 to £380. In the assessment, the Government estimate that that will cost the Exchequer up to £53.9 million. We have seen what an increase of 8 per cent. will cost the taxpayer. An increase of around 34 per cent., from £350 to £470, would cost the taxpayer considerably more. I calculate the amount to be in the region of £210 million, which strikes me as a conservative figure. I should be grateful if the Minister could explain the cost implications of the motion for the state.

Given the perilous position of the public finances, we know and the Minister knows—I think he more or less accepted it in his opening speech—that the country simply cannot afford this unnecessary measure. The Government—a Government on their last legs—are desperate to appease the trade unions that back them. That is what is so bizarre. I had thought that following this afternoon's concessions to the unions by the Government, the private Member's Bill would be withdrawn and there would be no need for the motion. That seems not to be the case, which shows just how feeble and unable to deliver the Government have become. They now need to focus on the reality of the situation, which is that they are imposing a large and unnecessary burden on both business and the taxpayer.

Conservative Members cannot support an arrangement that makes businesses, or the taxpayer, subject to such large and unnecessary additional burdens, especially during the almost unprecedented recession in which we find ourselves. I hope that the Minister will sort out this mess before the Bill returns to the House.

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Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Chair of the Liberal Democrat Parliamentary Party 10:08 pm, 16th June 2009

The Liberal Democrats consider this to be a not inappropriate increase in the maximum amount that a person could be allowed to claim in statutory redundancy pay. We understand that the future of the Bill is still in the balance. We shall wait to see what happens, but on the whole we think that the motion is worth supporting.

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Photo of Ian Lucas Ian Lucas Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Business and Regulatory Reform)

I have had an opportunity to check my notes from earlier today, and the correct figure is indeed £470. I am grateful to Mr. Djanogly for pointing that out, and I apologise to him and the House for inadvertently giving an incorrect figure. I am also grateful to Lorely Burt.

In his peroration, the hon. Member for Huntingdon rather misrepresented the Government's position. The Government do not accept the submissions from the trade unions, they do not accept the Bill presented by my hon. Friend Mr. Hoyle, and they do not accept the figures given by the hon. Member for Huntingdon. Today the Government have proposed a measured, balanced, considered figure of £30 as an increase.

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Photo of Ian Lucas Ian Lucas Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Business and Regulatory Reform)

Because I am in the middle of a speech, and I choose not to give way.

I think that we— [Interruption.] Yes indeed, and we had a very good debate earlier today. We had an accurate exposition of the Conservatives' policy, and of their disregard for individuals who are made redundant. We heard from them their resistance to giving help to people who have lost their jobs. They have not only indicated in the Chamber that they oppose that, but they have voted against it. I will certainly be conveying to my constituents—including those who are losing their jobs—the fact that the Conservative party opposes giving constituents real help now.

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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 we are talking about a money resolution, it is important for the Government to give some idea of the cost of the proposals to the Exchequer.

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Photo of Ian Lucas Ian Lucas Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Business and Regulatory Reform)

The Government are not supporting the Bill; we made our position very clear on Second Reading. The figures for the Government position were fully set out for the hon. Gentleman earlier this afternoon.

This is a measured, considered response from the Government and, unlike the position of the official Opposition, it offers a balanced approach. I therefore commend the money resolution to the House.

Question put and agreed to.

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