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Moved by Baroness Prosser
97A: After Clause 14, insert the following new Clause—
“Codes of practice: employee engagement
In section 203 of the 1992 Act (issue of Codes of Practice by the Secretary of State), after subsection (1) insert—
“The Codes of Practice issued by the Secretary of State for the purpose of promoting the improvement of industrial relations must encourage all employers, in both the private and public sectors, to establish mechanisms via trade unions that encourage and enable effective employee engagement in industrial relations.””
My Lords, I am pleased to speak to the amendment because it is about the only part of the Bill that strikes a truly positive note. The Bill itself is entirely negative, and the other amendments—those we have heard already and those yet to come—are designed as a damage-limitation exercise to stop the Government making a complete hash of industrial relations and complete fools of themselves.
As a trade union organiser over many years, I met many ordinary workers who had great ideas about ways to improve work processes or systems. Even the humble road sweeper—in the days when we had them—could make suggestions about bettering route arrangements, for example. I will not, however, rely simply on anecdotal points; there is ample evidence regarding the link between employee engagement and morale, and employee engagement and productivity.
The Involvement and Participation Association, in which I declare an interest as a board director, has recently produced a report entitled Involvement and Productivity—the Missing Piece of the Puzzle?, in which it looks at the influence on productivity in workplaces that have good levels of employee engagement. This is not small beer. We in this country have a very poor record on productivity. We are 17% less productive than the rest of the G7, while the average worker in France and Germany produces more in four days than does the average worker in the UK in five. The report examines evidence from large surveys, behavioural experiments, academic studies and employers themselves, and shows that when employees have a voice in the decision-making process over their jobs and the wider organisation, productivity is higher.
The report also looks at how employees feel about involvement in their workplaces. Just one in three workers felt that managers allowed them to influence, or have a say in, decisions, and employers in the UK are less likely than global competitors to encourage workplace involvement. In many EU countries, for example, solid trade union agreements run alongside works councils. Matters are not helped in the UK by the decline in collective bargaining and the fact that mechanisms for employee voices to be heard are few and far between.
A concrete example of a successful exercise may help to persuade Ministers of the sense of this case. For many years, Royal Mail was renowned for its poor industrial relations. From my six years of experience as a non-executive director of the Royal Mail holdings board, I can say categorically that the problem lay with both management and the union, neither of which for a very long time had any knowledge or experience of workplaces outside Royal Mail. However, a programme was introduced under the then chairmanship of Allan Leighton entitled Great Place to Work. This involved various strands, such as First Line Fix, which enabled local managers to take decisions about local issues, rather than having to send everything to national level for a decision.
For example, when a local clothes dryer broke down and was not repaired for months—meaning that posties had no means of drying their soaked uniforms—it made everyone very fed up and resentful of the company. What was the matter with it? First Line Fix got the dryer mended within a week.
A Great Place to Work also involved work-time listening and learning sessions, discussing ideas from all in a section about ways in which things could work better—ordinary employees advising managers on improving workplace systems. Listening and learning has continued and was felt to be extremely important during the difficult period of privatisation of the company. Engagement scores have improved significantly even through the privatisation process.
Employee engagement is about not only productivity but morale. How do any of us feel if we have no control over what goes on in our lives? Does what we think have no value? Can we be engaged in a process or a subject matter over years and years and still have nothing to say about it? It does not make sense, for either the morale of the worker or the future of the employment, be that big or small.
The world of work is made up of workers and employers—managers. But there is no mention of managers in the Bill. How are we to develop and grow and compete in the wider world when we pay so little attention to the role of the manager? Quite often, even senior managers pay no attention to the behaviour, training, ability—or whatever—of their junior managers. According to the Chartered Management Institute, only 13% of managers in this country have any management training. That is shocking. Here we are, spending our time arguing about problems with trade unions that mostly do not even exist.
Finally, I ask the Minister not to cite the Government’s view of red tape and their dislike of it. Please do not say that the Government cannot be doing with the nanny state, because everything about the Bill is about unwanted red tape by the mile and the Government poking into areas about which they are shamefully ignorant and where neither workers nor employers want them to.
My Lords, I congratulate my noble friend Lady Prosser on her amendment. I can pay her no higher compliment than I wish I had thought of it myself. I was a junior Minister in the previous Labour Government, who supported the concept of employee engagement. As I understand it, the present Government continue to support that concept. The amendment gives the Government an opportunity to put something positive into the Bill that is direly needed.
As it stands, the Bill is really a lost opportunity. It does not address the real problems facing British industry: low productivity, which has already been referred to by my noble friend; skill shortages; and a lack of management training, which she also referred to. There are so many examples of the value of constructive engagement between employers and employees involving trade unions. Unionlearn was referred to in a previous debate. Health and safety was given a thorough airing on a previous day in Committee. There are examples of where industries have been in serious trouble, as the automotive industry was, where the trade union movement has shown itself more than capable of being involved in very constructive engagement. My noble friend referred to Royal Mail. I could give your Lordships numerous examples from British Telecom, where I was involved. I declare my interest as a lifelong trade unionist. Unions can make a really positive contribution to government policy.
I will quote a couple of examples that do not involve trade unions because we know that there are plenty of workplaces where they are not involved. There was an article in the Evening Standard on
“Sacha Romanovitch is a breath of fresh air. It’s not only that she’s the first female boss of a major City accountancy firm”, it is the things that she has introduced. It continues:
“The new chief executive of Grant Thornton, in effect their senior partner … has already announced a John Lewis-style profit sharing scheme and a cap on her own salary. Her pay will be limited to 20 times the firm’s average salary—compared with the average FTSE 100 chief executive on 149 times”— whether they are all worth it is a moot point. The article goes on to say that,
“profits will be shared among all 4500 staff instead of the most senior, and the profit share will come from boosted profits generated by more collaborative working”.
I stress that last phrase because that shows the benefit of it.
Another example, which I saw in the Times in April last year, is a company called Gripple, which makes agricultural wire joiners in Sheffield. It is an interesting company. According to the article,
“it employs 500 people and has a turnover of more than £50 million. Hugh Facey, the entrepreneur behind the business, is as original as his invention. He doesn’t run the business to make money for himself, he claims”—
I have not had a chance to check that out but I will give him the benefit of the doubt for the rest of the things he does—
“but to provide jobs to local workers”.
Goodness knows we need that in British industry. The article continues:
“Rewards are shared throughout the company, because every employee has to own shares in the business, giving them a collective stake of 36 per cent—and a say in how it is run”.
It is that last point that I want to emphasise: another good example of employee engagement.
Some of the Government’s policies are right. I am with them on their approach to apprenticeships. We might argue about the detail but their drive to increase the number of apprenticeships is a very worthy objective. It would be much easier if, instead of discussing this Bill, we had a Bill that talked about involving trade unions in that campaign to increase the number of apprenticeships, which is why I talk about a lost opportunity.
I cannot help reflecting on my experience of negotiating with senior management in BT—and this applies to many companies throughout the UK—and their love of employing external consultants. They would think nothing of employing McKinsey for a few million pounds. I said to them on many occasions, “I am not going to tell you that you should not do it—I know you won’t take any notice—but while you are doing that it just might occur to you that you have about 140,000 consultants, and you are paying them anyway. If anybody can tell you what’s wrong with various parts of the company and how to improve productivity and profits, it is your employees. You ought to start listening to them far more than you do at the moment”, and I gave them many practical examples. My noble friend Lady Prosser pointed out a significant fact in British industry: the level of management training is really abysmal. We still have a long way to go on that. The need for employee engagement is paramount.
I am sure that we will have some comments from the Minister about the wording of the amendment. I do not think that my noble friend Lady Prosser or I say that everything is perfect. The amendment has been pitched at the fact that this is a Trade Union Bill and we know that there are significant areas of interest where trade unions are not involved. The core principle of the amendment is valid. It says:
I stress “encourage”—
“in both the private and public sectors, to establish mechanisms via trade unions that encourage and enable effective employee engagement in industrial relations”.
There is a real opportunity for the Minister to prove that the Government are in fact in listening mode and to inject something positive into the Bill.
I will end on a quote. I cannot match the intellectual capacity of my noble friend who quoted Chekhov—or at least I could not find a quote that was apposite—but I thought this one would do. It comes from a song written by a couple of my favourites, Harold Arlen and Johnny Mercer:
“You’ve got to accentuate the positive
Eliminate the negative”.
That is my advice to the Minister and I look forward to her response.
My Lords, I thank my noble friend Lady Prosser for moving this amendment. After the rest of the Bill, which was like trudging through a freezing Arctic wilderness, this is like relaxing in a warm bath and savouring the moment. The subject of Royal Mail was raised earlier. When I first got to ACAS and tried to book the best rooms in the building for a meeting I was told, “No, you can’t have those rooms. They are set aside for six weeks”. I said, “Why on earth are you setting aside those three best rooms for six weeks?”. I was told, “Well, that’ll be the Royal Mail dispute”. So the job, as I saw it, was to eliminate the recidivists and accentuate good employment relations. I know that ACAS saw that as its job. I should say that I am in receipt of a small pension from ACAS before I go on to praise it.
This amendment sums up what ACAS is about. Without going into detail, because I am going to take only two minutes, it produces high-quality reports on employment relations and how to improve productivity and employee engagement. It has a helpline which took 1 million calls a year when I was the chair—it is probably more now—assisting both employers and employees, while its website was consistently praised by HR managers in every industry. ACAS knows the value of good employment relations and about the important work of trade unions.
My noble friend Lady Prosser mentioned the Involvement and Participation Association, of which I am very proud to be a vice-president. It encourages partnership working and employee/trade union engagement, produces reports and promulgates examples of good practice to encourage others. Finally, as a fellow of the CIPD, which also promotes good employment relations as a route to improving productivity, attendance and staff morale, I say that this amendment acts as a welcome contrast to the rest of the Bill, which is such a lost opportunity, as my noble friend Lord Young said. We could have been discussing how to improve our productivity and provide a skilled workforce. Every study from the organisations that I have mentioned, including the workplace employment relations study that ACAS always supported and helped to finance, proves time and again the importance of positive employment relations. I very much hope that the Minister will take this amendment on board in the spirit in which it is intended.
My Lords, I too am grateful to my noble friends Lady Prosser, Lord Young of Norwood Green and Lord Mendelsohn, who have put their names to this amendment. I spoke at some length at Second Reading and I will not repeat that today, as much of what I wish to say has already been said. However, at Second Reading I talked about not just trade unions but the millions of workers who are as yet not members of a union. A series of analyses indicate that many of them lead unhappy lives at work. They do not make the contribution at work that they would like to, while the benefit of what they could add to companies’ quality and output is not taken into account. I said that we needed to think in a more positive frame of mind about how we can engage people in unions, and those who are as yet not in unions, to better our economic performance and well-being in this country.
At the end of that speech, I pleaded with the Minister to go back and look at the information and consultative council regulations introduced back in 2005 by Tony Blair’s Government. At the end of Second Reading, she had a lot of people to respond to and she did not address that issue—in fairness to her, it was probably because she saw that she needed to speak on other topics. When she responded to me she spoke on something else—check-off, which we were dealing with earlier in the day. But like my colleagues I hope that I can urge her or her Whip, who may be looking at the subject with a fresh pair of eyes, to take this part of the debate away and look carefully at what we have had to say. It is about progress and making a better life for employers and employees.
Following my noble friend Lady Donaghy, I have had a look at some recent documents issued by ACAS. It says:
“Information and consultation are the basic building blocks of every effective organisation. These concepts are as crucial to the relationship between the individual workers and their line manager as they are to”, any other parties. It continues:
“Whatever the size or type of your organisation people need to talk to each other. They need to … exchange views and ideas … issue and receive instructions … discuss problems … consider developments”.
ACAS goes on to list a range of topics that are worthy of joint consultation between employees and their managers, including organisational performance, management performance and decision-making, employees’ performance and commitment, levels of trust, job satisfaction and work/life balance. The list goes on and on.
In many workplaces, unions are there but such discussions are not taking place in the way that they should. There are even more workplaces around the country where the voiceless have no means whereby they can engage properly with their managers to the overall improvement of the operation of those businesses and companies. That is to the detriment of not only the individuals in and owners of businesses but the company at large. My noble friend Lady Prosser has been extraordinarily agile in finding a way to bring an amendment to a Bill whose primary focus is on what I would see as negatives relating to trade unions. However, this amendment gives the Government a chance to put a positive there, as my colleagues have been pleading, and this time around I hope that we will get a positive response to our points
My Lords, I too hope that this session provides a little light relief for the Minister, who has had quite a hard time through various sessions of the Bill. It has been a bit like a series of one-sided OK Corrals. Over lunch, I thought I might ask the Minister whether she has any genes from Stonewall Jackson, that great Confederate general. The other metaphorical point I would make is that he ended up being shot by his own side—accidentally. I hope the Government at least allow the Minister to make the concessions in the Bill which will be her salvation.
Amendment 97A is welcome in providing a wider debate on where we are going and I would like to make a number of points. Employment engagement is very important to improving the country’s competitive position, and to improving services in the public sector. As someone who has been in industry, I certainly feel that we have far too much dependence on adversarial systems and processes—I sense this in our politics as well—when engagement and working together on problems normally provides much better solutions.
I am certainly one of those who welcomes unions and sees their important role in society and industry but, sadly, the reality is that although the unions remain strong in the public sector they have become weak in the private sector. However we may regret that, we have to make the point that although unions are important there has also to be a diversity of systems that can work well. We see that in companies such as Marks & Spencer and John Lewis, and many foreign-owned companies where processes have been developed not necessarily strictly through recognised trade unions. This is very important in the public sector, where we in this country will no longer have a great and dominant manufacturing sector—although we might like to aspire to that—but will be much more dependent on services. That requires the motivation of employees and will be especially important in the public sector; it is certainly important in the private sector. That is why an adversarial system is no longer totally relevant to improving industrial relations.
I welcome the spirit of this amendment, the thinking behind it and the opportunity to have a general debate, however briefly, on this important subject.
I congratulate and thank my noble friend Lady Prosser for introducing this amendment and will set out why it is particularly important. It was a sheer pleasure in the previous debate to listen to the contribution of the noble Lord, Lord Balfe, and to the good sense that came from all parts of the Chamber. I hope that the Government are very much in listening mode and can perhaps hear a case for change. I will set out why the Bill merits some sort of change.
An interesting feature of the coalition Government was that every year, we would read in the papers and in blogs that Conservative Ministers would present this very Bill to Liberal Democrat Ministers. Each year, they would say, “Together, we could do in the Labour Party, which would undoubtedly be to our benefit”. Each year, to their considerable credit, the Liberal Democrats would block the Bill. I am sure that some noble Lords present today were witnesses to this annual event. It was no surprise that the Government, given the opportunity, chose to use a huge legislative sledgehammer to target—and in some ways to torture and weaken—their perceived enemies or to make life a little difficult.
This is unfortunate, not just for the well-being of those who are perceived to be the enemies but because it highlights that the Bill has yet to pass a strong public interest test. During our debates, we looked at the “will the sky fall in?” test. It probably will not, but we have certainly not met the “unattractive consequences” test. We have had a good debate about the impact on the regions and on devolution, and whether or not this will weaken the union; I do not think it has met the test that it will not. We also had a debate about what the point of this is, and looked at whether it passes the test of minimising the harm it might cause.
However, the Bill does need to pass the “making a positive difference” test—not just to trade union members but to the public and the national interest. This is what this amendment is about: the role and work of trade unions in a modern society. As a businessman, I would say that this is also about the massive opportunity we have to use workforces and trade unions for better purposes. The Bill has a stunning lack of meaningful objectives, such as targets, goals or definable and provable outcomes. We have seen repeatedly that there is no evidence to establish that there is a problem to justify the solutions. There is no cost-benefit analysis and no meaningful consideration of the consequences of its measures. It lays regulation on obligation on cost on restriction on complication on Whitehall centralisation. It really is time for a bit of light.
The amendment also passes a very important legislative test, which is that it tempers the Bill with proportionality, purpose, principle and practicality. I strongly believe that Government Front Benchers in this House have clean fingerprints on the design of this Bill. They are respected in this House and do credit to a tradition in their political party and to our country’s political culture and traditions—the debate we had earlier attests to that. I have been very encouraged by the debates during Committee and the strong consensus for changes to the Bill in so many areas, but I fear that the dull hand of the other House will compress the capacity of our House to ameliorate the Bill and that the power of the arguments made so ably by so many will not receive the proper response. I hope Members there are listening not just to what we say about the measures they have introduced, but to this very welcome addition.
In that capacity, I am very pleased to see the noble Baroness, Lady Finn, in her place. She of course plays a very important role as a special adviser with a particular responsibility, supporting the Minister of State for Skills in the Department for Business, Innovation and Skills on trade union reform—a kind of facility time for the Conservative Party. It is very important for the message to be conveyed to the Minister and to those who have held the debates in the other House that there is an opportunity here to do something which restores a bit of balance and addresses the great tragedy of the Bill, which is that it is not about reform for a great purpose.
I hope the Government will take a moment to reflect, through this amendment, on the shape of the
Bill and will consider it a very useful addition. The Bill has been designed to address the issues of the past. As someone who has been a long-standing advocate and sponsor of reform of the Civil Service and public sector performance, I think we will miss a great opportunity to define a forward-looking approach in keeping with our current condition and with what we know will work well for today and the years ahead—where maximising the performance of the workforce is our central purpose and where we can successfully address the challenges ahead with the sensible involvement of employees.
Ministers may not trust trade unions, but employees have trust and confidence issues with employers. In the most recent Edelman Trust Barometer, just over half of UK employees say they trust their own employer. This is the crucial area we have to deal with. Employees are a company’s greatest asset, and effective organisations are able to maximise performance by optimising employees’ performance. But this needs great managers and great leaders, which is a crucial part of the Bill that is missing. Especially in the public sector, employees are the greatest route to the solutions that Ministers want, as opposed to delivering diktats from Whitehall.
I draw the attention of all noble Lords to my noble friend Lord Carter’s magnificent report on achieving efficiencies and the benefits of economies of scale in the NHS. It is a masterly report, which makes this argument completely. In it, he states that the NHS has,
“arguably the greatest concentration of intellect and talent of any UK business, but there is little evidence it has been fully engaged to solve the efficiency and productivity issues”.
Commenting on his report, the Financial Timessaid that “the key” is what management does to recognise what employees,
“already know, or can find”, in terms of,
“the answers to poor performance and high costs, if only managers will let them”.
A modern approach is to build engagement, maximise skills and adaptability, create purpose and direction and make people feel part of something that properly lives up to the values it claims to espouse.
I congratulate my noble friend Lady Prosser on another element of her elegant amendment. Its drafting should be commended for two reasons: it is workable and it is within scope. Regrettably, the attempts that I and other members of the Front Bench made to provide the House with a workable amendment fell foul of the clerks, who felt that anything that addressed management was outside the scope of the Bill. What more perfect a metaphor could there be for the Bill’s flaws? Getting engagement right is in the private sector a source of competitive advantage and should in the public sector be a source of collaborative advantage.
I congratulate ACAS on its work in developing and pioneering ways for manager and industrial relations to develop; I regret that some of its role was weakened and taken away. The Bill does little to move us forward or even to encourage and incentivise trade unions towards what our modern economy needs. Our long-standing poor productivity owes more to the performance and tasking of management than any other single indicator. Getting that right unleashes huge potential gains in individual productive capacity: we have the evidence in industries across the UK. There is so much potential for a forward-looking approach to provide considerable benefits in the public sector, in which our acute problems of productivity, sickness, absence and disputes take two, three or even five times longer to resolve than they do in the private sector.
The Government always want to get more for less. Engagement, not coercion, is the only way. I urge them to restore some balance to the Bill, to embrace the future and to support the only thing that has been debated that is proven to improve workplace relations and has economic and productive benefits. I hope that they take this opportunity to do so.
My Lords, I thank the noble Baroness, Lady Prosser, as well as my noble friend, for giving me the opportunity to respond to this debate, a fascinating debate covering many different aspects of the great relationship.
The Government recognise the positive role that trade unions can play in the workplace. In a debate last November brought by the noble Lord, Lord Foulkes, the House debated that positive role. During that debate, the noble Baroness, Lady Prosser, highlighted from her personal experience some of the important contributions that trade unions can make. Having read the debate and looked carefully at what she said, in the last paragraph of her speech, she mentioned the partnership between workforce and management and how important it was that that worked efficiently for all concerned. I could not agree more.
My experience in this field, apart from a brief period in the 1970s when I was working on the shop floor in an engineering firm in the West Midlands—which was an interesting experience for someone from my background—was up until 2010, when I was a contract manager in the construction industry. I worked for an SME, the backbone of the British economy. We employed 25 to 30 people. I was involved in sending people out to work, finding them work and such like. It was so important that those relationships worked and that there was the engagement mentioned by many noble Lords. It was a non-unionised workforce, but it still worked very well, whether on health and safety or training, but then we were a committed organisation. We worked well with the workforce and it was mutually beneficial.
The noble Lords, Lord Stoneham and Lord Brooke, talked about the importance of employee engagement. I recognise that, and we know that businesses understand it too. The CBI 2015 employment trends survey highlighted that the top priorities for businesses in the coming year are better leadership and employee engagement to foster productive workforces. The noble Lord, Lord Brooke, also referred to information and consultation regulations and said that employees are voiceless in some organisations. Under the information and consultation regulations, employees have a right to request a formal workplace agreement for engagement. That does not apply to workplaces of less than 50 employees—the sort of organisation I was involved with—but employees have greater influences in those workplaces anyway. Also, as we have heard, many employers involve employees in decision-making processes because it makes good business sense.
We have acknowledged that unions can play an important role in the workplace and have heard many examples in many debates in your Lordships’ House. However, productivity, which was mentioned by the noble Baronesses, Lady Prosser and Lady Donaghy, is not influenced solely by the presence of unions, but by capital investment, innovation, and dynamism of markets—they all have potential to increase productivity, given current record high employment levels. Data from the OECD do not directly indicate a link between trade union density and productivity, but I realise that there are different figures from a wide range of sources. We are very conscious that productivity has to rise, and we are doing a great deal in this area, which I will not go into at present. We also understand the importance of a well-motivated workforce.
The noble Lord, Lord Young of Norwood Green, mentioned apprenticeships, as I suspected he might. The Government accept that apprenticeships and training are key to improving productivity; that is why we are committed to the 3 million apprenticeship starts in England over this Parliament, and making sure that they are of the highest quality possible. We know that the trade union movement will play its part in helping us to deliver this commitment. For example, last year the TUC and the CBI signed a joint commitment to support and promote apprenticeships and traineeships for young people.
It is not right that we restrict how employee engagement can happen. The current approach is flexible and means that businesses have a variety of ways in which to engage with and involve their employers in their businesses. Currently, employers and employees can decide the best mechanisms for engagement and tailor this to address individual workplace needs. This may or may not involve representation through a trade union. The choice for individuals to join or not join a trade union is important. Many workplaces and sectors are not as heavily unionised, and alternative or additional methods have been created for engaging with employers effectively. Therefore, we do not believe that we should restrict the type of engagement that we promote. I do not believe that this amendment will improve industrial relations or employee engagement. But we will take careful note of what has been said.
I thank the Minister for giving way. I am not sure that I made it clear in my speech that employee engagement is conducted in workplaces that are unionised and in those that are not unionised. It is not something that sits separately from trade unionism or can only sit alongside trade unionism; it works in companies where there are good union relations but insufficient attention is paid to ways in which employees can participate and contribute to a debate and in places where there are no mechanisms for engagement. So it is not one or t’other; it goes across both kinds of workplaces.
I made the point in my contribution that we did not think that the wording was initially absolutely perfect, but there were constraints on the wording, as we have already heard, given the nature of the Bill. It would be useful to hear from the Minister that they would be willing to meet us to discuss the potential of improving employee engagement.
My Lords, I cannot resist making one point on employee engagement. As we move on to the Certification Officer, the measures that we are about to debate would certainly have hugely benefited from some form of employee engagement. I noted in the evidence of the Certification Officer of
“No, I was not consulted”.
He was asked a broader question on whether he was consulted at all and he said, “Not before the Bill”. These measures have the hallmark of something that would have greatly benefited from being examined carefully, and if advice, experience and evidence had been sought from the Certification Officer.
The Trade Union and Labour Relations (Consolidation) Act 1992 clearly intended that the Certification Officer should be accountable primarily to trade union members and that he was to codify reports on compliance, have powers of investigation and intervention and deal with complaints. With the breaches of any rules, remedies were underpinned by law. Indeed, the noble Lord, Lord Forsyth, in the previous debate, gave us a very good understanding of how this was to deal with the issue of a significant foundation about how members felt about the unions and where the unions were. We can certainly agree with that. But we now move on to something where we are substantially and almost completely changing the role and function of the Certification Officer and muddying the waters tremendously.
In his evidence, the Certification Officer was asked about whether the problems about complaints were consistent with his understanding. He said:
“All rules can be improved. No one has complained to me at any time that they have been impaired in making a complaint or pursuing what they want to do. Of course, that does not mean that they do not feel that way—it is just that it has not been reported to me. The answer to the first part of your question is that I am not sure; there is no evidence of that”.
He went on to say:
“The Bill approaches it from a totally different perspective. They are not trying to tinker with what exists; they want a new model. I do not think it is fair to say that it is successful or not successful in perfecting the existing model”.
I find it strange to be debating the expansion of a role like this with the Minister after our discussions on the Small Business Commissioner in a previous Bill, where there was such an apparent case for the extension of the role, which was so narrow as just to be about collating data. There has to be a significant case for why this Bill widens the current role of the Certification Officer. The Bill seeks to extend his role, accountability, reporting and data collection duties and turn him into an inquisitor. Trade unions are being exposed to a vastly different and colossal burden of regulation, which breaks new ground constitutionally and legally and is out of all proportion to any conceivable mischief the Government have conspicuously failed to identify.
Indeed, there is a rationale for the intervention suggested, as outlined in the impact assessment. There are three legs to it. The first is a market-failure argument that suggests that the regulator needs significant change not because members have a detriment but because,
“The actions of unions can have wider impacts beyond their membership and their operations may not always be transparent to the wider public”.
This completely transforms the nature of what we are talking about and puts in a burden which is impossible to meet for almost any institution or organisation. In fact, in regulatory principles, this is by far the largest extension that we have had, even if we consider what happens in other industries that are heavily regulated.
Secondly, the impact assessment suggests:
“The regulator must have available sufficiently robust enforcement powers and sanctions to deter breaches”.
We have evidence of what the potential breaches are in the role, work and reports of the Certification Officer, and I will come to that later. However, there is no current sense of where there is an identifiable market failure to suggest these measures. The impact assessment also states:
“The Trade Union Bill is modernising and reforming trade union law. Therefore, we will need a regulator that has the right tools to deter breaches with this updated framework, and in a proportionate manner. It is only fair that trade union members, employers and the public can rely on robust regulation of trade unions.”
Again, there is no evidence about why any of these things suggest that there are any particular failures in the regulation of trade unions in relation to their members or other activities. The case is just not made.
Finally, the impact assessment makes the point that:
“The Bill provides for recovery of the costs of running the regulator”.
It establishes the principle that the trade unions should pay in regard to protecting their members. Whether or not that is the case—I am not hugely sympathetic to that view, given the Charity Commission and others—I think the Government could make a case, but if they were to make such a case, there has to be proportionality in the costs, but the costs have no proportionality whatever.
What was also interesting in the evidence of the Certification Officer was the huge difference in his prediction of the costs and consequences of these activities on the Certification Officer and on trade unions. He made the point that, from calculating what he estimates to be the changes required to the Certifications Officer’s costs, there would be significantly greater costs on trade unions. The impact assessment, without any basis, notion, thought, breakdown or anything covering the Certification Officer’s report, suggests that there may be 50 more declarations over five years. This does not bear serious consideration, given the report of the Certification Officer and the data that have already been published.
I suggest that all Members spend time reading the annual report of the Certification Officer, which is significant and comprehensive, covering all sorts of requirements and obligations on trade unions, including superannuation schemes, membership information, data and all sorts of other things. There is a considerable section on where there have been complaints and breaches of trade union rules. It talks about the number of people who made complaints and says that in the year from
I stress that 11 applications for consideration remained to be determined. The report goes through the series of complaints and issues and how they were dealt with. I have to say that the Certification Officer deals with them very well in the report. Given the number of issues that were raised, I have not calculated the percentage but I think that the unions are broadly running at an average of 80-20 in their favour on how they have dealt with them.
I just cannot see an evidential base for this provision. It is yet another measure with no problem to solve, no justification in the impact assessment and no arguments that bear scrutiny, with no balance of fairness and with the intention of, at best, making life difficult and, at worst, allowing the most malevolent in our society a licence to cause mischief. At heart, this is a detriment to members, not least because of the massive costs involved. We are opening up the examination of trade unions to anyone, even if they harbour ill will with no grounds or justification. The measure creates the ability to frustrate any dispute by means of egregious complaints to the Certification Officer, and allows the Certification Officer to start being involved in any sort of issues that he feels there are grounds for. The costs of this falls on the members. Without a sensible estimate or principle for how the proper costs of this could be established, this is an open-ended burden on members of trade unions.
Our amendments seek to probe, and propose some mitigating factors. The first amendment in the group seeks to prevent the insertion into the 1992 Act of Schedule 1 to the Bill, which provides for the Certification Officer’s extended investigatory powers. The extent of those proposed new powers is wide-ranging; they sweep far beyond what is wholly necessary. This proposed remit should be of concern to all, but of particular concern is the potential impact on the privacy of individual trade union members. As it stands, the Certification Officer or other persons can request detailed information from all trade unions on the personal data of their members, including the names and addresses. The BMA has said that these,
“New powers for the Certification Officer threaten to intrude into union activities and affairs and presents a potential invasion of trade union members’ rights to privacy”.
The sentiment shown by the BMA has been echoed by many other trade unions and human rights groups. It should lead us to question why this level of data is required at all by the Certification Officer. Many workers and trade union members quite legitimately do not wish their employers to know that they belong to a union, and it should remain their right to keep such personal information private. The Bill removes any guarantee that details of trade union membership and names and addresses of individuals will remain private. Given the sensitive history around blacklisting—I am not even sure we can call it “history”, since it still happens today—how can the Government assure trade union members that these new investigatory powers will guarantee individual privacy and the safety of personal information in relation to trade union membership and current or future employers? It is for that reason and many others that the Equality and Human Rights Commission concluded that the proposed new investigatory enforcement powers do not comply with the European Convention on Human Rights.
In addition to the type of personal data which could be collected by the Certification Officer, the question remains as to what purpose this data on individual trade union members will serve to the aim of the Bill or the work of the Certification Officer itself. The answer is: very little. At best this is overkill and at worst it could seriously infringe the privacy rights of 6.5 million trade union members. However, I do not ask noble Lords to take my word for it. The Certification Officer himself in giving evidence to the Select Committee was asked by my noble friend Lord Whitty whether he believed that there were any administrative reasons for the Government’s proposals and whether there was any obvious need for improvement in current legislation or requirements of union rules, and said very clearly that no one has made such a complaint.
At the very heart of our amendment to remove these new investigatory powers is the notion that there are no grounds for change. No one—neither trade union members, employers or businesses nor even the Certification Officer himself—is calling for more powers of investigation. With seemingly no call from any involved parties to change the investigatory powers of the Certification Officer, how and why have the Government identified the need to do so?
The second set of amendments deal with changes to the Certification Officer’s powers, which would allow him to instigate an investigation without the need for a complaint, as well as complaints no longer having to be made by a member of the trade union they are complaining about. These amendments state the need for a complainant or applicant to be a member of the union which is the subject of the complaint or application. This is just common sense. There is a real need to protect unions, their members, employers and the Certification Officer from wasted time on malicious complaints. As it currently stands, the Bill allows any third party to instigate a complaint. Anyone from aggrieved employers or employees, any campaign group or even a rival trade union from within the same workplace could become complainants without having ever been in direct contact or personally affected by the actions of the union which is the subject of the complaint. It is just an unnecessary series of complications.
Putting aside the very real threat of leaving the Certification Officer open to malicious complaints, the post may also be subject to an increase in workload due to non-malicious complaints which are still not valid. Complainants could unwittingly instigate unfounded complaints because they are so far removed from the trade union that is the subject of a complaint that they lack the adequate knowledge about a situation or practices of a trade union that they are not a member of.
As it stands, the Bill leaves the investigations of the Certification Office vulnerable to misuse, adding to the time and costs of the Certification Officer’s investigations. Amendments 100 and 108 simply seek to offer the protection that is needed to both trade unions and the Certification Officer against any unnecessary additional investigations and a further strain on resources. The Bill proposes an extension of power which places the Certification Officer in the almost unprecedented position of becoming the investigator, the prosecutor and the adjudicator.
During the Select Committee evidence session, the Certification Officer confirmed that he had raised concerns about this drastic change in role and responsibilities with the Government. He said:
“We have explained the difficulties of the investigator/prosecutor/adjudicator role. I have tried to find, and have asked for, an example of a body, such as the Financial Conduct Authority, that investigates and adjudicates, as you read in the press, to see how it does that. There is nearly always an independent body. The FCA has an independent body that makes recommendations, and the decision is made by the board. The only example we have been given is that of the groceries adjudicator, who apparently does the same thing”.
Bodies such as the Financial Conduct Authority ensure that there is a clear division, and that independence is maintained, between any decision to investigate, the investigation itself, the decision whether disciplinary action may be merited and the decision whether there has been a breach. Why, then, has no such guarantee been provided for trade unions and the Certification Officer within the Bill?
On the last amendment in this group, Amendment 117A seeks to address this very problem by probing the Government’s attitude to the case for establishing an independent adjudication panel to adjudicate cases where the Certification Officer considers exercising his new powers in the Bill. Very much like the FCA panels, the panel would publish an annual report and might comment on the work of the CO, which the CO would respond to within six months of the publishing of the report. This important probing amendment tries to understand deeply what the Government’s objections are to any other form which separates those roles and makes it more sensible.
I must say in this regard that it is very important to place on record the serious concerns presented by the Equality and Human Rights Commission. It has provided a very clear statement on this measure, which is worth addressing at length because it makes the point better than anyone else could. Its analysis says:
“Article 6(1) of the ECHR provides that, in the determining of their civil rights and obligations, everyone is entitled to a fair hearing by an independent and impartial tribunal. In our assessment, the new proactive character of the CO’s functions (i.e. the power to instigate, investigate and then adjudicate the same complaint) compromises the impartiality of the CO. In particular, the new power to instigate a complaint implies that the CO may have already decided that there is something worth looking into further and taken a view of its merits. This is inconsistent with the Article 6 requirement that a complaint should be impartially determined by an independent body. The Government has argued that the right of appeal to the Employment Appeal Tribunal … would remedy any such breach of Article 6. However, in our assessment this would not be a sufficient answer where the CO makes findings of fact and an appeal to the EAT lies only on a point of law, as is the case with current appeals against CO decisions under,” the 1992 Act. It continues:
“The provisions of Clause 15 and related Schedules are also relevant to the UK’s other international legal obligations, in particular, under the ILO Convention 87 on Freedom of Association and Protection of the Right to Organise. Although they cannot be directly enforced through our domestic courts, international human rights treaties (conventions and charters) are legally binding in international law and have mechanisms to hold States to account. The Commission notes that the ILO Committee of Experts, a body which provides advice to the bodies which are responsible for enforcing ILO Conventions, has asked the UK Government to review a number of the provisions in the Bill and to provide comments on the proposals to extend the powers of the CO”.
That is a particularly dramatic and significant statement. It is very important that the Government try to meet the test of answering those questions. I do not think that they can, but I look forward to hearing from the Minister.
In looking at this part of the Bill, I have asked: for whom and to what benefit are the Government extending the powers of the Certification Officer? Throughout the evidence sessions with the trade unions and the Certification Officer, no one expressed an explicit need for the extended powers within the Bill. I keep on reinforcing the point that these are the words of the Certification Officer himself:
“No one has complained to me at any time that they have been impaired in making a complaint or pursuing what they want to do”— no one except this Government.
In my view, these extensions of the Certification Officer’s investigatory powers reveal the real intention behind the Bill. What this Government are pursuing is motivated more by the want to suppress trade unions and their members than by the need to improve openness and transparency. I beg to move.
My Lords, I have a great deal of sympathy with long-standing trade union members on the other side of the Committee. First, who really likes change, and, secondly, who really wants more regulation? Our whole economy is tied up in string with regulation. It was a delight to hear Labour shadow Ministers arguing against more regulation and complaining about regulators being investigators, prosecutors and adjudicators, which I assure him they are in practice across most areas of regulation, whatever little committees might exist to alleviate it.
We are in a world where institutions that serve the public and with which the public has dealings are regulated, and increasingly so. I am afraid that I do not really see any logic as to why the trade union movement should have special exemption from regulation. Trade unions have the scope to break the law, they have the scope to do things that they should not do and they have the scope to cause inconvenience to the public. Therefore, to argue that they are a world unto themselves is not valid. Some regulation may be needed to protect members from being overlorded by their trade union leaders.
Under the provisions of the Bill, the enhanced powers of the Certification Officer are meek and mild. They are extraordinarily modest in comparison with the powers of regulators in other sectors. The noble Lord should just try working in the financial services sector if he has not done so already. Everyone spends their whole time looking over their shoulder for fear that they are going to break a regulation. There are so many regulations, comprising something like 4 million words and I have forgotten how many tomes.
I am glad to hear that; the noble Lord will know all about it then. But he is probably about to enter the new senior managers’ regime where he will find that the extent of his regulation will increase substantially.
If really heavy-handed regulation was being imposed on trade unions, there would be a fair argument. However, what is in the Bill is very meek.
Is not the real case that there was a massive problem in the financial and banking sector? There was a huge crash that led to lots of people having very serious troubles, and we are still not fully recovered from that to this day. The number of abuses is enormous. In the small world of trade unions, however, there are hardly any abuses, and those that do happen are dealt with by the Certification Officer on behalf of any member who wishes to apply. Opening the door to say that they can take a complaint from anybody and demand this and demand that, and to charge the union for the privilege, involve employer consultants and so on, is no equivalent at all. What the banks did rocked this society to its roots. The unions have not done that.
I would dearly love to embark on a long debate with the noble Lord on the banking crash, but it was essentially caused in America and not in this country. I do not think that the regulations that have come in since have done very much to prevent another financial crisis arising in the future. They always arise and there is nothing new about them—just look at economic history. But I am glad to have livened the Committee up a little, perhaps.
The other issue that is constantly reported on the radio is that of mis-selling, which created a huge crisis across the financial sector. I do not understand how that equates to breaches of trade union rules.
I will dig myself in deeper and say that, to my mind, a great deal of the mis-selling issue is unjustified. First, if you go out and buy a new or second-hand car, you buy what you see. Individuals have some personal responsibility for determining what they buy. Secondly, and more specific to the whole area of mortgages, it was largely about inflation reducing dramatically and returns differing substantially. The simple point is that financial services are at one end of the spectrum and, arguably, trade unions are at the other. It is unreasonable not to accept that the behaviour of trade unions can be extremely inconvenient, if not damaging, to the public at large. Therefore, there is a public interest here.
This group of amendments is about cancelling or dumbing down some parts of the Certification Officer’s modest new powers. It seems to me that the powers in question are really not of the substantial importance that the noble Lord suggested. Specifically, the amendments are to remove the new investigatory powers in the Bill and remove the power to investigate in the absence of a complaint by a member. Surely the public have some right to complain if they feel that they have a complaint, and surely a regulator—even a modest regulator—ought to be there to investigate. To say that the trade union itself can investigate does not comply with the government standards of our times, which require some degree of individual investigation.
As we are all aware, the Bill provides the Certification Officer with additional powers he can use proactively to investigate breaches of trade union statutory requirements in relation to political funds, union mergers, internal leadership elections and appointing to, or failing to remove from, a union a person convicted of certain financial offences. It does not seem unreasonable that a very modest regulator should have the power to look at those territories. The Certification Officer ought to be able to investigate formal complaints, not just when lodged by a member but in response to information raised by third parties. Again, his powers beyond investigating are not that great. I do not see why the trade union sector should not be as transparent as any other.
There is a key addition in principle behind what is in the Bill, which is regulation on behalf of the public. The wider public has an interest in trade union conduct where, as I said, unions can by industrial action and in other ways inconvenience the public and damage the economy. Likewise, the investigatory powers cover areas relating to statutory requirements that are of relevance to the public as well as to trade union members.
I note that the Electoral Commission, which is somewhat, if not entirely, analogous to the trade union movement, can impose larger financial penalties. While the Certification Officer has only the discipline of civil penalties, the Electoral Commission can escalate an issue to a criminal offence. I do not propose that that should be the case in trade union regulation, but it illustrates that these measures are pretty modest. On the issue of bearing the costs, again, the industries affected invariably bear the cost of regulation, but I cannot see that what is envisaged here will cost very much at all. I repeat the key point: at present, what exists is purely to protect the interests of members and what is proposed is to protect the interests of the public. That is not an unreasonable change.
I close by saying that I cannot see that there is much in these provisions that is at all inherently damaging to trade unions if they are conducting their affairs in a proper manner. I would have thought, therefore, that it would be a wise strategy to accept the measures, comply with them and make them as unonerous as possible.
I declare an interest as chair of the Equality and Human Rights Commission. I return to a point that I made at Second Reading, which is that we are talking here about restrictions on Article 11 rights—the right to freedom of assembly. That is a right that I believe all parties are committed to.
The European Convention on Human Rights sets out the permissible purposes for which a restriction may be placed on the right. It is only those permissible purposes that count. They include, for example, the protection of public health, the protection of other liberty rights and the protection of privacy. But the idea that they include general protection of the public and consumer rights, as the noble Lord, Lord Flight, has suggested—not merely today but on earlier occasions—is mistaken. Consumer rights are extremely important, but they are the creature of statute; they are not fundamental rights. I do not believe—and from letters that the Minister has written, that she believes— that those would constitute a sufficient reason for restricting freedom of assembly.
Freedom of assembly is very precious not just for trade unions but for many other groups, including, as I suggested at Second Reading, churches and other faith groups. We must be extremely careful that, when we start thinking about what is proportionate, we remember that it has to be necessary and proportionate for a permitted purpose and not for any old purpose. As the Minister has already said, administrative convenience would not be a sufficient purpose. I suggest that consumer protection and some generic idea about the public are also not sufficient purposes.
My Lords, I want to make some general points about the Government’s proposal on the Certification Officer in addition to the amendments, but first I thank my noble friend Lord Mendelsohn for such a comprehensive coverage of this subject. In my view the TUC summed it up: this is a disproportionate response to an unidentified problem, and I fully agree. The Minister will be pleased to know that although I am going to take slightly longer on this amendment, I will be as brief as possible on my technical and probing amendments later, which may give her an opportunity to think about the exit door and her throat; certainly before 7 pm and I hope a lot sooner.
My first point is one that I am sure everyone understands, but it needs to be put on the record. The Certification Officer is a public servant who carries out his work with diligence and integrity, and I am sure that all future postholders will do the same. We are not and should not be discussing the role of the individual CO. The officeholder will carry out whatever function the Government of the day give them, and I have no doubt that they will do that to the best of their ability. Secondly, I do not question the right of any Government to promote policies that change the nature of a post or a role, no matter how unnecessary and churlish those policies might be. Thirdly, I do not challenge the right of a Government to increase expenditure without providing the direct means to fund it. One could challenge the wisdom, but not the right.
However, I do challenge on the following matters: unfairness, lack of evidence, the one-sided nature of the proposals, the politicisation of the role of the Certification Officer, the necessity for any substantial change and, finally, the Kafkaesque proposal to make trade unions pay for unnecessary government-imposed red tape. On the issue of unfairness, I am grateful to the Equality and Human Rights Commission for supporting these amendments. Others will no doubt deal in more detail with the EHRC’s evidence, and indeed have already done so, but I shall just repeat the quotation given by my noble friend Lord Mendelsohn because it bears repeating. It states that,
“the new proactive character of the CO’s functions (i.e. the power to instigate, investigate and then adjudicate the same complaint) compromises the impartiality of the CO”.
The commission has dealt comprehensively with the problems caused by Clause 15 and I thank it for doing so.
The clause is one-sided because it will have very little impact on employers’ associations. According to the impact assessment, the familiarisation costs will be £2,400 to be met by 93 employer organisations. That represents 26p per employer organisation, although no doubt that will vary depending on the size of the employers’ association. So we are talking of an average of 26p per employer organisation. The estimated cost of familiarisation to the trade unions is £525,000. The actual levy of £1.9 million per year will be covered in secondary legislation, and there may be variations depending on the size of the trade union, any exemptions or other issues about which we have absolutely no knowledge. We will not be able to change it, and yet it will be of considerable importance to at least 7 million people. But if we look at the division of the cost of the levy between the trade unions and the employers’ associations based on the same division as the familiarisation costs, it comes out as 0.5% of the £1.9 million levy for employers’ associations and 99.5% of it to be met by the trade unions. That is why it is one-sided. I accept that the impact assessment may be completely wrong in its calculations, and I know that there is to be some consultation with employers and trade unions about the levy in the future. I ask that Cabinet guidelines be adhered to and that this will not be yet just another appearance at the August-fest.
The trade unions will have less money because of the ban on deduction from salaries and will be now levied for the bulk of expenditure that, up to now, has been paid from public funds. That is unfair. It will politicise the role of the CO because any third party will be able to ask for an investigation. The purpose of my amendments, and the probing amendments in the following groups, is to ensure that it is trade union members who can complain, not a daily newspaper or Conservative Central Office.
While I am on the subject, I ask the Minister whether there is a typing error on page 77 paragraph 280 of the impact assessment. Under “Rationale for Intervention”—it is “rationale” used in its loosest sense—it says:
“The main market failure arguments which underpin the existence of a regulator are externalities which occur because of union behaviour and imperfect information between employers and trade unions”.
That has to be a typo. If it is not, it reveals a worrying ignorance of the role of the CO. Surely it should read “employees and trade unions”. I hope that I can be reassured on this.
The impact assessment also comes out with the admirable understatement:
“It is likely that the Certification Officer may receive more representations from 3rd parties”.
There is an attempt to reassure us that the representations would need to meet the two tests that,
“the Certification Officer can only require documents if there is good cause to do so and can only investigate where there are circumstances to suggest that a union could be in breach of a duty”.
The impact assessment calculates that the increase in investigations as a result of these changes is likely to be limited. That may well be true of formal investigations, but that does not take into account the actual work involved processing any representations short of a formal investigation. This creates an unnecessary industry. There is no evidence whatever that anybody wants it, and, to add insult to injury, the trade unions will be picking up the tab for something that nobody wants.
My Lords, I shall speak to the amendments in this group, in particular Amendments 98 and 99, and to the question that the clause stand part of the Bill. If I ever wondered why I joined a liberal party, almost every day that we have discussed the Bill I have been given a clear and stark reminder. Today is no different. Clause 15 goes to the heart of the role of free trade unions in a free and liberal society. State interference in the organisation of freely associated people should be contemplated only where there is compelling and overwhelming evidence that it is required.
The comparison between what is proposed here and the financial services industry, which the noble Lord, Lord Flight, made, is entirely specious. The banks beggared our economy and it was millions of trade unionists and other workers who paid the price. What was the first action of the Tory party in government freed from coalition? It was to let the bankers off the hook by reversing the change we had made in the coalition of reversing the burden of proof, and it was to go after the trade unions with this Bill. It says everything we need to know about the Tory party.
Returning to the amendments, a regulator exists in the form of the Certification Officer with a modest and proportional role. The powers and obligations on the regulator will be massively increased if the Government have their way and the grubby and grasping hand of state interference and control will have been further extended. A sensible, modest and proportionate regulator will have been turned into a monster capable—if not intent on—suffocating democratic trade unions in red tape. There will be a vast expansion of the powers and obligations of the Certification Officer. As noble Lords have said, he or she will now be investigator, prosecutor and adjudicator, compelled to investigate the complaints not of trade union members but of any third-party complainant. An array of right-wing organisations and individuals are doubtless preparing their vexatious complaints, led—I have no doubt—by the TaxPayers’ Alliance. Why is this happening? What evidence has been brought forward to justify this unwarranted new interference in the operation of free trade unions? The Government proffer none. The current Certification Officer says that there is none.
In the Select Committee, my noble friend Lord Wrigglesworth asked the Certification Officer where he thought the pressure had come from. He replied that he had no evidence of pressure for change—although, to be fair to the Government, they would have had no way of knowing that prior to the Bill being published. Why would they not have known? Because, as the noble Lord, Lord Mendelsohn, noted, at the same Select Committee hearing the noble Lord, Lord Richard, asked the Certification Officer whether he had been consulted, and he replied that he had not been consulted. The transcript shows that the noble Lord, Lord Richard, then asked him again—one assumes incredulously—“You were not consulted at all?”. The answer was no. The Certification Officer—the person you assume would have been the first port of call to whom any Government actually interested in the evidence before them would have gone before even considering legislation—had not been consulted at all. That is astonishing—or at least it would be if we had the slightest thought that the Government’s intentions in this Bill were to address a genuine problem. Those are not their intentions. Every clause after those relating to the thresholds—the merits of which you could argue one way or the other; personally, I think they are unnecessary—is a nakedly partisan attack on free trade unions and the main opposition party. Although those trade unions and the main opposition party have often done no favours to the Liberal Democrats, there is something more important at stake here—the nature of our democracy.
Clause 15 will significantly increase the burdens on the regulator and on trade unions. The Certification Officer made clear in the evidence he gave that, in his opinion, as far as he could judge, the costs of the regulator would rise at least fourfold. Can the Minister explain to us how that can be justified? And can she explain on what basis she thinks it right that such a stark increase in the costs should be passed on to the trade unions instead of the Exchequer? For example, does she think that the Conservative Party should pay the costs of the Electoral Commission, or MPs pay the costs of IPSA? These are the relevant comparators. It might be reasonable to charge a levy on trade unions when the regulator was simply looking at members’ complaints, but it is most certainly not in the circumstances we are discussing.
The impact assessment is very weak on justification. It can claim only this justification:
“The actions of unions can have wider impacts beyond their membership and their operations may not always be transparent to the wider public”.
I could as easily substitute the word “unions” for the words “Conservative Party”. Given the number of times we have heard the Government justify their position on this Bill by the claim that they have a mandate provided by the Conservative manifesto, might the public not have a legitimate interest in knowing how the content of that manifesto is decided? Should it, for example, be determined by an all-postal ballot of its members? Should there be a 50% threshold, and perhaps an additional threshold requirement that at least 40% of eligible members vote on any section determined to be nakedly partisan?
Given that less than 25% of eligible voters supported the Conservative manifesto at the last election, should the public not at least know that it was properly considered and voted on by Conservative members? Perhaps we should introduce amendments to that effect. But no, of course not. The state should not interfere in the operations of a voluntary association of citizens, unless there is a compelling and overwhelming need to do so. The Conservative Party used to believe that. Indeed, many on the Conservative Benches still do, as evidenced by their contributions in our previous discussion, but Ministers seem to have forgotten it. I appeal to my friends in the Government—if I still have any left after the Bill—to recall that traditional Conservative belief and to drop this obnoxious clause.
My Lords, I am reluctant to detain the Committee longer than is necessary, but I would like to complement the remarks of my colleague, my noble friend Lord Oates, and will therefore contain my remarks on subsequent amendments.
We need to get to the root of the issue about why this reform, particularly this clause, is necessary. In evidence, as we have heard, the Certification Officer said that there was no evidence of pressure for change. The impact assessment contains some clever drafting. It says:
“At present there is scope to broaden the powers and sanctions available to the Certification Officer”.
But there is no real mention of what the need is and why it is so essential. It says that there is a need to do this to “ensure greater union compliance” and that the Certification Officer should have “more powerful sanctions” and extended powers to investigate. Why is that necessary?
I have also read the Certification Officer’s report. It was 10 years since I read the last one, so I read it twice: once to understand it, and then again to analyse the complaints made to the Certification Officer. And what I found was quite remarkable—this is where it differs from the financial sector. The sector has a turnover of £1 billion and 7 million members, which is not unsubstantial, yet what did we see in the Certification Officer’s report last year? We saw 57 complaints, 47 of which were on union rules and were made by 19 applicants. This is a mere handful of complaints.
I also analysed the costs. I am surprised that a Conservative Government do not respect an organisation that, since 2007-08, has reduced its expenditure—now at £560,000—by 16.5%. Of that expenditure, only £150,000 was spent on complaints. So where is this great build-up of complaints that makes necessary these additions to legislation to further control and examine and provide for extra sanctions?
On the rule of law, I think we can take issue with what has been said about the financial sector. Are trade unions a part of our society that does not believe in the rule of law in terms of the Certification Officer? Great detail is required in the submission of returns, in dealing with inquiries and, when dealing with complaints, in providing extra information. According to the analysis, 98.8% of all returns to this body come in on time. These are not organisations that are disregarding the rule of law in the current situation. So you have to ask why these extra powers are now required.
It is not easy for people who have been in the trade union movement to argue against third-party complainants but in any political organisation, there are cranks. The Conservative Party will have them as much as every other political party, and the trade unions have a number of cranks as well. If you open up complaints to third parties you open up to the world of cranks, and you have to ask: is there any sign of a build-up of complaints from third parties that needs to be answered? According to the Certification Officer, he had only 500 inquiries in the year of his last report, and 200 of those were probably just asking to see the accounts. They were not complaints, they were just general inquiries. There is absolutely no reason for this increased bureaucracy to be imposed on the trade unions. Frankly, in pretty much every other business sector the Conservative Government would totally reject this incursion.
The 1992 Trade Union and Labour Relations (Consolidation) Bill had 303 clauses. Since then we have heard from the Certification Officer, and I have given the level of complaints and issues. It is actually working very well. Reading the evidence of the Certification Officer to the Select Committee, he seems a very honourable public servant of long standing and we should listen to his experience. As I say, this Bill has only 25 clauses yet the Government seem to think that it is required to further add to powers to investigate, enforce and so on with regard to the trade unions. There is no justification for this and we need an explanation of why the Government think it is necessary.
My Lords, I want to make a very short contribution. The noble Lord, Lord Mendelsohn, has said virtually everything I was going to say, far better than I would be able to, and I am pleased about that. However, it is important to stress that Clause 15 represents an affront to fairness, justice and proportionality.
The Certification Officer’s independence, impartiality and integrity will be compromised by Clause 15. The new expansive investigatory powers and sanctions being vested in the Certification Officer, from the position of reasonableness, as we have heard, would in effect be likely to result in uncontrolled, unaccountable and non-independent interventions in trade unions’ reasonable and legitimate activities. There is no evidential basis to suggest that the expansion of powers is justified.
I will not repeat the assessment by the Equality and Human Rights Commission, which has been alluded to already, with regard to contraventions of the European Convention on Human Rights. I would like to reiterate one point raised by the noble Lord, Lord Mendelsohn, about Clause 15 and related schedules being relevant to the UK’s other legal obligations, particularly the International Labour Organization’s Convention 87 on the Freedom of Association and Protection of the Right to Organise. Will the Minister please indicate how the Government intend to respond to the ILO committee of experts’ request that the Government review a number of provisions in the Bill and provide comments on the proposals to extend the powers of the Certification Officer?
My Lords, the sore throat that I have been keeping at bay all week overwhelmed me earlier so I apologise to the House. I thank the noble Baroness, Lady Donaghy, for what I think I should call solidarity because she presented me with some Fisherman’s Friends so that I can get through the rest of today. I also congratulate my noble friend Lord Courtown on his interesting contribution to the Committee’s proceedings, and all noble Lords who have spoken in this important debate.
In our manifesto, we said that we would reform the role of the Certification Officer and we are doing just that with, it is fair to say, a great deal of scrutiny in this House. The Certification Officer has responsibility to consider complaints relating to important union processes. It is vital that we have confidence that those processes are conducted properly. For example, the Certification Officer can consider complaints in relation to union leadership elections, union mergers or the accuracy of trade union membership registers—which matter a lot if there is a ballot—or to ensuring the removal from a union office of a person who has been convicted of certain financial offences.
I would argue that there is a legitimate public interest in trade unions running their affairs according to what is required of them. It is not always the case that union members will know their union’s regulatory duties. That is why a responsive and diligent regulator is necessary. I hope that is agreed.
If I may interrupt, it is a shame that the noble Lord, Lord Forsyth, is not here because it is important to remember that the reforms of the 1980s, if I am to believe him, were about ensuring that trade unions were representative of and controlled by their members. That is what those reforms were about. I am happy to place it on record that I do not want to see us ever go back on some of those laws. It is a real shame that the Minister is confusing those obligations of a free association, which are to be guaranteed, and then saying that there are other interests which need to be regulated. Can we not go back to what Margaret Thatcher said and ensure that we have free and fair trade unions, controlled by their members?
My Lords, I do not think that I have a great deal to add on that point now but I have some observations which, with the noble Lord’s agreement, I will move on to. Before doing so, I will comment on the question which the noble Baroness, Lady Donaghy, rightly asked about whether we got the impact assessment wrong. My understanding is that it was not a mistake. The point is that the public in general have an interest in good regulation—in employers, in employees, in families and in the wider public. That is perhaps what we should have said. We are scrutinising this but I am not seeking to change the impact assessment, which has obviously been looked at carefully in the usual way.
Of course the provisions in the Bill have to be proportionate and give effective regulation. As I see it, we are bringing the current powers of the Certification Officer up to date with the accepted normal situation in other sectors. I shall leave the financial services sector on one side, because I want to get through the debate this evening, but perhaps I could give some other examples. There is the Information Commissioner’s Office and the Groceries Code Adjudicator, which has been mentioned. The Charity Commission, the Electoral Commission, the Gambling Commission, Ofcom, the Food Standards Agency, the Environment Agency, Natural England, and Ofwat—it is a long list—can all consider representations from third parties and undertake investigations if appropriate.
I am not sure whether I agree with the noble Lords, Lord Mendelsohn and Lord Oates, on the subject of the costs. The Certification Officer has given views on the potential costs necessary to undertake the new regulatory function and I understand that his comments were consistent with the estimates we have set out in the Bill’s impact assessment. I think he said, rightly in my view, “I do not want to employ rafts of people only for them to be underused. I want to see what happens and increase numbers as appropriate”. My understanding is that we agree that the annual cost will be around £2 million. However, to respond to the point made by the noble Lord, Lord Oates, although I can confirm that the Certification Officer was not consulted before the Bill entered Parliament, we have engaged with him and will continue to do so as we move towards implementing the reform. As the noble Lord, Lord Stoneham, suggested, we want to continue a tradition of good compliance.
Amendments 98, 99, 100, 106, 107 and 108 relate to the new investigatory powers which would prevent the Certification Officer acting in the absence of a complaint from a member. As I have said, the Certification Officer’s powers to investigate or take action to ensure compliance are limited unless he receives an application from a member, and I see no reason to treat unions differently from other organisations in other sectors. Furthermore, the powers we are giving the Certification Officer to request documents and information are not new. He has had these powers to investigate the financial affairs of trade unions for many years. Similar powers of investigation are also available to a range of regulators and bodies.
In response to a point made by the noble Lord, Lord Mendelsohn, as with other regulators, deterrence is an important aspect. As the impact assessment says, we expect only a modest increase in complaints. The current system relies on union members being aware of the union’s obligation, which is not what most other sectors rely on as the sole source of a regulator’s activity.
I am very reluctant to test the Minister’s voice, as I understand it is wavering a little, but she is proposing to increase the regulator’s costs by four times, and yet we are only going to see a modest increase in complaints. Is that a good use of money?
I think so. It is important that we have an up-to-date regulator. The £2 million that I mentioned is the upper end of the range in the impact assessment. Obviously, we do not know the figure for certain, and as we have said, we are going to continue to consult the Certification Office. Under a later amendment, we will come on to discuss the levy that will meet the cost.
Amendment 117A seeks to establish a separate independent adjudication panel whose decision will be required before the Certification Officer is able to exercise his powers under Clauses 15, 16 and 17 of this Bill. As I have already explained, it is common for regulators to make proactive investigations or to have the power to initiate investigations and then decide to take enforcement action where a breach of rules or statutory requirements is found—the point that was made about judge and jury. There are various regulatory models in the UK: many regulators—for example, the Information Commissioner, the Charities Commission and the Groceries Code Adjudicator—have internal processes for ensuring fair decision-making. They do not, however, have their decisions made by an entirely separate body that oversees their work.
In view of the Certification Officer’s independence—I emphasise to the noble Baroness, Lady Donaghy, that this will be an independent regulator, not a political appointment—it is only right and proper that procedures for investigations and decisions will be up to the
Certification Officer. The Certification Officer has in fact recently referred to his early thinking on how best to manage his functions in the light of the requirements in the Bill. A range of different models is used by regulators, and we will have further discussions about the implementation processes with his office. The union will also of course have the opportunity to make representations to the Certification Officer before any decision is made. There will continue to be a right of appeal to the Employment Appeal Tribunal.
The noble Lords, Lord Mendelsohn and Lord Ouseley, asked whether the reforms were in breach of international obligations under the ECHR or ILO. It is important to be clear what the powers will be. The Certification Officer will be able to investigate and to determine whether there has been a breach, and then take enforcement. The decisions are then appealable, as I have said, to an independent tribunal. This is standard for regulators, and it has been established that this framework is compatible with Article 6 of the ECHR.
I am very grateful for the work of the noble Baroness, Lady O’Neill, on human rights, both in this House and more generally in the country. She asked whether Article 11, the freedom of association provision, might be breached. The Government do not think that effective and proportionate regulation infringes Article 11 rights, and our reforms do not interfere with the right to join trade unions. Having said that, I have listened carefully to the points about the oversight of the Certification Officer’s decisions, and I would like to reflect on them in the light of discussion.
The noble Lord, Lord Mendelsohn, asked about access to sensitive data. He was concerned that the Certification Officer would have quite a bit of sensitive data—a concern close to my heart. As I have said, the CO is independent from Ministers; the Government will not be able to see any sensitive data that he or she may hold. When handling data, the CO and his or her inspectors will need to comply with the provisions of the Data Protection Act. Any inspector whom the Certification Officer appoints will have a duty of confidentiality. The CO is also under a statutory duty to act consistently with rights conferred by the ECHR, as I have already said. Those are important provisions.
I come finally to the question that a number of noble Lords, including the noble Lord, Lord Oates, have raised about the risk of vexatious complaints using the new power. We are extending the potential to make complaints for members only to third parties. Concerns have also been raised that the Certification Officer might feel duty bound to examine all complaints, which could be very costly. I do not see it like that. Let me first reassure noble Lords that the obligations on concerns from third parties are different from those relating to union members. So while currently the Certification Officer must make inquiries following a complaint from a trade union member, he or she will be under no such obligation with concerns from third parties. He or she will be able to exercise judgment based on the evidence presented as to whether there are sufficient grounds for further investigation. The Certification Officer will remain independent, with responsibility for delivering against the statutory objectives. As I said, his or her enforcement decisions will remain subject to appeal.
As I have said, we are planning ongoing discussions with the Certification Officer, and it will be sensible to revisit that point. But this is the way that we see it in the light of practice in other regulatory areas. I add, if I have not said it already, that enforcement decisions will remain subject to appeal. I suppose that that was the point the noble Lord was making—we have to be careful with systems of appeal.
The Certification Officer reports on the complaints he or she considers in an annual report, which is submitted to Parliament. His or her activity and decisions can therefore be the subject of public scrutiny.
The setting up of a separate body to oversee the Certification Officer’s work would, I believe, create additional costs and increase legislative complexity. It could slow down action, allow genuine complaints to go on for longer without being addressed, which is the last thing we want, and go too far in the regulatory direction—noble Lords will be glad to hear me say that.
We will be discussing the levy on a later amendment, but—to respond briefly to the noble Baroness, Lady Donaghy—there is no intention to penalise anyone. The system simply has to recover the costs of its constituent expenses. The Bill provides scope for regulations to provide for different amounts to be charged. This will be deployed if the proportion of functions provided by the Certification Officer to certain organisations is different. That is proportionate and fair, and in line with Treasury guidance. Whether the regulations will specify that different amounts are to be charged in these circumstances will be subject to the outcome of consultation, which seems the right approach. I believe that setting up an entirely separate body to oversee the Certification Officer’s work would be unnecessary.
I have managed to get through my speech without another Fisherman’s Friend, and I ask the noble Lord to withdraw the amendment.
My Lords, let me deal first with the two chinks of light. The first was that the Minister said that the Government will look at the arrangements where the Certification Officer absorbs all the investigatory and adjudication roles. Secondly, her case against having someone to look independently at adjudications as a means of oversight—the case against the enforcement of human rights—was that it was too regulatory. That breaches the principle that she is espousing in the first place. I do not think that the case has been made for regulation, and I do not really understand the architecture for the regulator. I do not understand the model or where we are going on this. I do not think the Minister has made a case for where there are comparable institutions or why, just because this impacts on the public realm, this is a proportionate role and one with any appropriate objectives.
The noble Lord, Lord Flight, tried to make a case for regulation—bizarre as I felt it was. We believe in better regulation—sometimes less, sometimes more— but there has to be a case for it, and there is not for this measure. The point about why this is different from general consumer or other rights matters was extremely well made by the noble Baroness, Lady O’Neill, who has made it before. We are dealing with fundamental rights, which are vastly different to the other sorts of rights that the noble Lord was addressing. I do not think that the Government have taken that point on board at all.
I am very concerned about this extension, because it cuts to the heart of our debate. It is not really about members who are not getting the right service and ensuring that unions are operating properly within the rules. We just have to read the impact assessment, which, it is now apparent, was written long after the Bill was published, without consulting any expert and with no real evidence. It identifies, as does the Bill, the particular areas that it covers as: political fund rules, political fund ballots and expenditure on political objectives. Then there are the areas that the Minister was prepared to address: union mergers, internal elections and other such things. It is absolutely clear that this is targeted at political matters.
The Minister has not addressed the warnings that came from the Certification Officer. In his same evidence to the Select Committee—we could almost recite his entire evidence and ask the Minister to respond to it—he talked about the growing uncertainty caused by the legislation:
“In my experience, uncertainty gives way to litigation, and there are a number of issues that could give rise to uncertainty. It is not only members who can complain to me about these things; anyone can raise them with me. Given the political nature of the subject matter, which is likely to be highly contentious, and the fact that what is reported to me is likely to be forensically examined, I can see many more issues being brought to me about what is reported”.
The nature of trying to open up all political matters provides a completely different sense of what the Government want the Certification Officer to do. It is about the regulation of people’s free right and ability to join together and have political views, and they want third parties to be able to intervene on them. That is wrong.
The noble Lord, Lord Stoneham, made exactly the right point about the cases raised in the Certification Officer’s report. There were 19 complaints, and four declarations were made that a union had breached or threatened to breach its rules. What were those issues? The cases of note that the Certification Officer addresses are: case 1, union disciplinary procedures; case 2, internal disciplinary procedures; case 3, the elections for general secretary and issues relating to members in long-term arrears; case 4, internal disciplinary procedures; case 5, internal disciplinary procedures; and case 6, a removal from office of an official. All of a sudden, every third party is now going to have a chance to raise issues on every political matter. That is just not credible.
My Lords, I have dealt with the issue of vexatious claims. Whenever you try to modernise a regulator—and this is a regulator, albeit not the Financial Conduct Authority—the people who are regulated obviously have concerns. We are debating those concerns, but that does not mean to say that the extra regulation we are bringing in, which does not seem nearly as wide-ranging as everybody is suggesting, is unnecessary. Noble Lords should remember that the accuracy of trade union membership registers affects the results of ballots and other very important things. These matter to the economy.
I accept the last point, but the report itself demonstrates that there are no problems with that. What is the case for any additional intervention? Can the Minister present me with evidence of any particular case or circumstance—anything, a report or a press cutting? I shall go on for a bit longer to give her the chance to respond on that point.
May I assist the noble Lord by pointing out that one area in which we will have more disputes is ballots, because of the Government’s determination to get rid of check-off?
The truth is that at the moment the only people who can complain are the members. We are not hiding the fact that there is a change here, so you might have extra complaints, but I think that that is right if we are going to get this regulatory area correct, because of the wider point I was making. I have to say, I do not think we are going to agree on this issue. I look forward to hearing the noble Lord’s final comments, as we have a number of other amendments to move on to.
I thank the Minister for asking me to hurry up, but I am going to take my time in addressing this, because this is our main opportunity to deal with the major points of principle—although, as I said, we will get on to some more technical matters. She has not made a case or provided evidence, and it is worth continuing to probe these issues. The evidence is there in the Certification Officer’s comments that at this stage, in their obligations to collate that material and in the penalties and breaches available, unions are not transgressing and there is no such case. That is a very important principle. She raised a series of issues, and I am very happy to receive a letter establishing that they warrant the grounds on which the regulation of penalties on such measures can be extended, and include political matters. The key point is that it is not just about the regulation of those matters; she is trying to regulate the ability to have a political view together, and to associate. That is the fundamental difference. It is not about regulating other things or about the ability of a board of directors to have a particular view; it is just about trade unions. That is fundamental and really important.
Turning finally to the important issue of costs, the Minister is not on the same page as the Certification Officer, but I will be happy to receive a letter about that, as I am sure other noble Lords will be. The impact assessment refers to the great benefits—including the fine revenue and the levy revenue, although it does not give a figure for the investigation cost levied on trade unions—and identifies extra costs that are much lower than those identified by the Certification Officer: much lower even than if you established the nature of the cases and the type of evidence she is now expecting unions to pay to assemble, to their detriment. It is very important that she understands that my fundamental problem with how the cost-benefit analysis is presented is that at the very end it says, under benefits, that members of the public will benefit from a strongly regulated regime. Members of the unions will not—they will be burdened by the shackles of cost and by a greater interference from vexatious claims, and probably ministerial interference or direction from the Certification Officer. It is not clear that there is a public benefit at all. We will certainly come back to this issue on Report, and I ask her to think again very carefully about it. I beg leave to withdraw the amendment.
Amendment 98 withdrawn.
Amendments 99 and 100 not moved.
Clause 15 agreed.
Schedule 1: Certification Officer: investigatory powers: Schedule to be inserted into the 1992 Act
Moved by Baroness Donaghy
101: Schedule 1, page 18, line 7, leave out “or any other person”
My Lords, I have one point about the impact assessment that relates to the previous issue, but I think it better if I write to the Minister rather than take up a lot of time. I am quite concerned that a market failure argument is used. I understand about union behaviour and imperfect information between employees and trade unions, but I do not understand the point about imperfect information between employers and trade unions. That is not the role of the Certification Officer. If it is intended that it will be in future, it puts the whole industrial relations scene on a very different level, but I will drop the Minister a line about my concern.
I look forward to receiving the noble Baroness’s letter.
I shall speak also to Amendments 102, 103 and 105. Amendment 101 goes over some of the ground that we have already covered. It would restrict the power to require the production of documents to the Certification Officer and his or her staff. Amendment 102 would require a complaint to be made by a union member and for the Certification Officer reasonably to believe there was evidence of a breach of an obligation before he or she initiated an investigation. Amendment 103 would require a person investigating a breach of an obligation by a union to be a member of the staff of the Certification Officer and not “other persons” as vaguely written in the Bill. Amendment 105 would require the interim report of the person investigating a breach of an obligation by a union to be sent to the union concerned, which is a new point and, if anything, represents the one improvement in the whole area of the schedule.
The concern is that the Certification Officer and inspectors will have wide-ranging powers to demand the production of union documents and access to membership records, members’ names and addresses and correspondence between a member and their union, even though no union member has raised a complaint about the union’s practices. I am also seriously concerned that the evidence threshold that needs to be met before these wide-ranging powers are triggered is very low. The CO will be able to demand access to documents if he or she thinks there is good reason to do so. The CO would not need to have substantial evidence demonstrating that the union has breached any statutory obligations. Requests for union documentation would not be limited to union head offices, and the CO and any appointed inspectors would also be able to approach branch offices and regional offices to request documents.
These powers represent a serious violation of union members’ rights to privacy, as protected by Article 6 of the European Convention on Human Rights, as has already been said. Many individuals do not want their employer or, indeed, the state to know that they are a member of a union for fear of victimisation or blacklisting which, as my noble friend Lord Mendelsohn said, unfortunately still exists today. The Bill may therefore deter individuals joining unions and benefiting from effective representation at work. This will undermine the right to freedom of association. I know that the Minister has said that this information will be confidential to the Certification Officer, but that is not necessarily the perception that will be held by individual union members, who will fear that the information may get out to the public, particularly if they find out that the complaint or investigation has been initiated by a national newspaper or a political party. Perceptions are extremely important on that. It is not surprising that, as the noble Lord, Lord Ouseley, has already referred to, the ILO committee of experts has called on the Government to account for their proposal to increase the powers of the Certification Officer.
I hope the Minister will understand that it is quite important from the point of view of the standing of the Certification Officer that any complaints are confined to union members. I do not think there is a case for any external inquiries. If anyone in the public thinks that there is some illegality going on in the unions, there are different ways of investigating that which have nothing to do with employment relations. I beg to move.
My Lords, I shall speak particularly to Amendment 104 in the names of my noble friends Lord Stoneham of Droxford and Lady Burt of Solihull. We have discussed the serious concerns about the nature of the changed powers of the regulator. A particular concern has been expressed about the power to appoint a person or persons who are not members of the Certification Officer’s staff, and about the severe financial burdens that could be placed on trade unions as a result if organisations such as big accountants’ firms, lawyers or others were to be used.
The amendment tabled by my noble friends simply sets out a sensible way—which the Government could accept if they insist on going forward with this clause and these schedules—of ensuring that proper consideration is given to the proportionality of making the appointment, the cost of appointing the person or persons, and their impartiality. This would be very important in reassuring trade unionists. I hope the Minister will feel able to consider the amendment very seriously and adopt it.
My Lords, I thank my noble friend Lady Donaghy and congratulate her on some excellent amendments, which naturally I strongly support. I also support the amendment in the names of the noble Lord, Lord Stoneham, and the noble Baroness, Lady Burt.
This group of amendments focuses on the practicalities of the proposed changes to the Certification Officer and their staff. They would further secure the impartiality of the Certification Officer in maintaining an approach by staff to investigations that is free from bias and undue influence. In order to give trade union members assurances over the security of any personal information supplied, it is vital that the power to require the production of documents remains solely that of the Certification Officer and his or her staff. That is what Amendment 101 seeks to achieve. Contracting out investigatory powers and the handling of sensitive information may not only jeopardise the independent standing of the Certification Officer but leave trade unions vulnerable to the misuse of their data.
That potential problem relates directly to the issues raised in the following amendments. There must be a requirement for a person investigating a breach of an obligation by a union to be a member of the staff of the Certification Officer, not simply “other persons” as the Bill currently states. Amendments 103 and 104 would add yet further safety measures for occasions when the Certification Officer appointed as an inspector someone who was not a member of his or her staff. The Certification Officer must have proper regard to the proportionality of making such an appointment, the cost of the appointment and, importantly, the impartiality of the person, which is naturally a matter of deep concern given the political nature of all the issues involved in the appointment.
There is nothing in the Bill to stop the Certification Officer hiring what is vaguely described as “other persons” to take part in an investigation. That leaves us without any safeguards against the hiring of a person who may have a particular political leaning or history of working against trade unions. Without appointees being directly employed by and accountable to the Certification Officer, how can the Government ensure that the investigations will be consistently impartial? This point is critical to the accountability and independence of the Certification Officer.
Reflecting the threat of malicious complaints, as mentioned in discussion on the previous group, standards must also be set to gauge the validity of any complaints. Not only should complaints be made by a union member but the Certification Officer must have reason to believe that there is adequate evidence of a breach of an obligation before they initiate an investigation. Again, this would protect everyone involved from wasting time on deliberately unfounded complaints.
In an effort genuinely to increase openness and transparency, the Certification Officer or the person investigating any breach of an obligation by a union should be required to produce an interim report, which would be sent to the union concerned. This allows for a truly open process and for communication from the Certification Officer to the union concerned, which ultimately would pave the way for a quicker and smoother resolution.
Due to the sensitivity of the Certification Officer’s work, maintaining their independence and impartiality is crucial. Their investigations should be of the highest quality, able to withstand the most rigorous scrutiny. We must ensure that the Certification Officer’s staff are able to maintain their independence and continue to be free from inappropriate influences. This is what these amendments seek to achieve. We have a duty not just to protect the millions of trade union members who will be subjected to these new investigatory powers but to protect the very people being handed the responsibility to carry out these new powers.
My Lords, I thank noble Lords for these amendments. In considering them it is important to reflect first on the approach and safeguards that already operate with regard to the Certification Officer’s current power to investigate a union’s financial affairs and how they will continue to operate after these reforms are adopted. In response to the final point that was made, I agree that impartiality is critical. As with all regulators, that is an absolutely essential point and it is possible to get into a terrible mess, so I assure the House that the Certification Officer’s impartiality will continue.
As I have already said, the Certification Officer will continue to be under no obligation to undertake an investigation. They will remain independent, subject to delivering against the statutory objectives. His or her judgments will remain subject to appeal, where he can be challenged through an independent process for the conclusions he or she reaches. In exercising the current powers to appoint an inspector, the Certification Officer needs to be satisfied that there were circumstances suggesting a breach. That will continue after the reforms.
When we reflect on how the current system works we see that the Certification Officer has acted proportionately and only when satisfied that the relevant tests have been met. There is no reason to believe that they or their successors would act any differently in future, and there is certainly no evidence to suggest that a more onerous test for these powers is necessary.
It is also important to reflect on the nature of the investigatory powers which, as I have said, are very similar to the Certification Officer’s long-standing powers to investigate financial affairs. That includes the power to appoint an inspector who is not a member of the officer’s staff. That approach has been in place for a long time, so we are continuing with that long-standing approach.
Before I comment on one or two of the other amendments I will just respond to the point made by the noble Baroness, Lady Donaghy, on the potential breach of Article 8. The investigatory powers will give the Certification Officer access to members’ information. Access to such information may be needed to determine whether there has been a breach of relevant obligations—I am sure the noble Baroness would agree with that. I made two key points in response to the question on data and data confidentiality, which she picked up in her comments about the need for confidentiality and to obey the Data Protection Act—although I note her comment about how people might feel, which is always a fair point. However, the key issue is that the Certification Officer will be under a statutory duty to act consistently with rights conferred by the European Convention on Human Rights, including Article 8, so we have to set it up in a way that does that.
Amendments 101 and 103 aim to restrict inspection activities and Amendments 102 and 104 place controls on the appointment of inspectors, which the noble Lord, Lord Oates, was concerned about. We envisage that most inspections will be carried out by the Certification Officer or their staff. However, the reforms allow the Certification Officer to bring in additional resources, as the noble Lord said, or, perhaps more importantly, specialist knowledge should an investigation prove very technical or complex. This approach is not new. This flexibility has been used rarely, specifically to supplement auditing skills in relation to investigations into a union’s financial affairs, and it seems appropriate to bring in such skills. It will give the Certification Officer flexibility in choosing an appropriate inspector to deal with investigations swiftly and effectively. This is common among other regulators, including smaller ones. For example, the Office of the Regulator of Community Interest Companies and the Charity Commission can appoint outside people to conduct or help with an inquiry if that makes sense.
Finally, Amendment 105 allows unions the opportunity to see an inspector’s interim or other reports before a final report is compiled. I am not sure that there has been much debate about this. I believe that this would be unhelpful for unions. Any investigation is likely to give a union several chances to state its case to the inspector before a report is finalised. Furthermore, requiring the inspector to provide interim or other copies of his or her report will serve only to slow down the inspection process.
I assure the Committee that the law will continue to require that a union must always have an opportunity to make representations to the Certification Officer before any enforcement decision is made following an investigation. That seems to me very important. As we have discussed, a union also has a right of appeal against any decision to issue an enforcement order.
I hope that some of that explanation is helpful and that the noble Baroness will feel able to withdraw the amendment.
I could make a number of points. I think the Minister has underestimated the issue of the perception of the individual member who finds himself or herself in the middle of all this. I think that just having an assurance that there will be confidentiality and that the objectivity of the Certification Officer will remain the same will be a bit more difficult to accept in the context that 99.5% of the cost of the levy will be met by the trade unions.
Incidentally, I may well have got that figure wrong. Apparently I was wrong in referring earlier to 26p.
I should have referred to a cost of £26 per employer organisation, so I put that on the record and apologise. However, I am certain that 99.5% of the levy cost will go to the trade unions. That does not look like a fair allocation and, in the context of that unfairness, it will be difficult for people to think that they will be treated fairly.
In the light of the time of day and the fact that we have given this matter a good airing, I beg leave to withdraw my amendment.
Amendment 101 withdrawn.
Amendments 102 to 105 not moved.
Schedule 1 agreed.
Schedule 2: Certification Officer: exercise of powers without application etc
Moved by Lord Stoneham of Droxford
106: Schedule 2, page 21, line 37, leave out sub-paragraph (2)
I shall speak also to Amendment 107. Both amendments stand in my name and in the names of my noble friends Lady Burt and Lord Mendelsohn. I do not want to detain the Committee for long on these amendments because, in many respects, we have already dealt with the issues in principle. This is obviously a further initiative to try to restrict the amount of intervention—in this case, by the Certification Officer.
I just want to remind the Committee that the original trade union Certification Officer was appointed in 1975. From memory—I was brought up on the Donovan report, so I think I am right in this—the intention was to try to eliminate disputes, particularly about union membership, within and between unions. Therefore, it was thought that there was a need for better records and the recording of membership and finances to reduce the scope for disputes.
I re-emphasise that the Certification Officer is there primarily to protect the members of individual unions, particularly when they are in some form of dispute or disagreement with their own union. Their complaints are absolutely key. I accept that an investigation initiated by the Certification Officer, particularly if it is a public servant with the experience of the current Certification Officer, is the least-worst incursion that we are seeing in this Bill. Certainly, it is much better than the third-party initiative, which I think is a charter for cranks and would lead to all sorts of muddle and unnecessary bureaucracy. I have already said that there is no evidence that there is pressure or a burden of complaints that need to be answered, particularly from third parties, let alone from union members themselves.
Given that the Government have now started to consult the Certification Officer, can we ask him whether he wants these powers to investigate himself? Does he think these powers are needed? Those are two questions the Minister has to ask in relation to these amendments.
It is clear from the oral evidence the Certification Officer gave to the Select Committee that he sees problems with the complications that have now been caused. There are those who say that this is common for regulators, but there are now four distinct areas of requirement for the Certification Officer. He is going to be an initiator of inquiries, if he wants to be, in the form of a policeman; he is going to be an investigator; he is going to be an adjudicator; he is going to be an enforcer. There are quite a lot of complications there, given that this is a semi-legal process. I wonder whether the Government have really consulted the Certification Officer on what he thinks those problems are.
Finally, let us remind ourselves that the great tradition set by the Donovan report—and we have accepted that, as experience has gone on, that was ameliorated by further Acts—was that, wherever possible, where there are disputes within unions, whether a member organisation or voluntary organisation, the emphasis should be on voluntarily resolving them. Trying to set up a semi-legal process that becomes increasingly complicated and does not emphasise the voluntary nature of what you are seeking to do will make it more difficult and more expensive to resolve. That is precisely why, amazingly, a Conservative Government are causing the expenditure on this regulator to go up from £500,000 to £2 million—what an indictment.
My Lords, I will speak very briefly as we have spoken to the principle of the amendment and the noble Lord, Lord Stoneham, made a very powerful case and asked some very important questions. I just want to address a couple of points on which I would be grateful if the Minister could give us more detail. If she is not in a position to do so tonight, perhaps she will write to me.
My questions are on the financial components of this. In the Certification Officer’s evidence, he said:
“Our provisional thinking on all this is to recruit some new members of staff and then to play it by ear and recruit as we go along”.
The increase that he talked about is his,
“provisional view, but we are warning our funders, ACAS, that we may ask for more money”.
Within the context of the impact assessment, additional inspectors will cost between £250,000 and £500,000 and will look at an increased number of investigations. The impact assessment also talks about a likely 10 additional enforcement decisions being issued against trade unions every five years. There is very little behind the assumption of how you get to the first cost or the second cost and how the two relate to each other. What are the anticipated number of inquiries and how many of those will go to determination or other sorts of things if we open this up to third parties? I would be very grateful if the Minister could provide more detail on that. As I said, if she is not able to do that now, I am more than happy to receive a letter.
My final point is to clarify the position and probe whether there is a way of ameliorating this. There are of course fears and concerns that the Certification Officer could be pressured into carrying out investigations in response to a request from employers, campaign groups or a variety of people. Will the Minister confirm that the failure to act on submissions from third parties could expose the Certification Officer to risks of judicial review? Are there any safeguards in the Bill to prevent the Certification Officer being pressured by malicious motives?
I am a great believer that legislation rarely changes the heart and is there to restrain the heartless. In the circumstances that there are heartless people who have ill intent against the trade unions—and I believe there are—how can the Certification Officer be protected from these sorts of vexatious complaints, the racking-up of costs and the problems associated with allowing judicial review to be a mechanism available to third parties on spurious claims? I would be grateful if the Minister could give us some sense of how that could be dealt with.
I start by responding to the noble Lord’s questions. On cost, I thought that that aspect of the impact assessment was quite helpful and clear, but I will look through it myself in the light of the questions that the noble Lord has asked and drop him a line. I will copy it to others who are interested, in all the nooks and crannies of this House, which I think is what we agreed on our previous day in Committee.
I also think that I went into some detail on the last amendment about how I saw judicial review and how the Certification Officer would need to act when looking at external, third-party complaints. But again, I will look at what I said, see if there is anything useful that I can add and cover that in the same letter.
The amendments seek to retain the current position by preventing the Certification Officer from making inquiries or taking enforcement action unless a complaint is received from a member in relation to two specific obligations—the duty to secure positions not held by certain offenders and a failure to comply with political ballot rules. As I have explained, the current system is reliant purely on complaints from union members. This relies on union members being aware of all the obligations on their union and of any failures to comply with them. Enabling the Certification Officer to consider potential failures without having to wait for a complaint from a member will enable him or her to take action should information on serious matters come to light, regardless of the source. That is consistent with our reform towards a more responsive and diligent regulator.
The noble Lord, Lord Stoneham, asked what the Certification Officer had said about these reforms. The Certification Officer set out how he might deal with the reforms and how they could be implemented when speaking to the committee.
I am not clear whether there is yet a Hansard record of what he said.
I thought that the Minister said that, although the Government did not initially consult the Certification Officer, they had now done so. He has, it is perfectly true, appeared before the Select Committee and made certain views known, but I would have thought that it would be helpful for the Government to ask him his views, why he thinks reform is necessary and what powers he wants.
As far as I know, he has not given a view on that either in the committee or elsewhere. We consulted him on the implementation of proposals which obviously the Government have set out and believe to be necessary.
Like other noble Lords, I hope that the powers we are discussing under this amendment rarely need to be used because that would indicate compliance, which must be the goal of any good regulatory system. However, in the circumstances of failure coming to light, the Government strongly believe that the Certification Officer should be able to respond. It is important that we have a consistent and credible approach for all the reasons that we discussed earlier. I hope that these comments have been helpful and that the noble Lord will feel able to withdraw his amendment.
I thank the Minister for her reply. We have had a long debate on various aspects of the role of the Certification Officer. I shall withdraw the amendment, but I am sure that we will return to this on Report.
Amendment 106 withdrawn.
Amendment 107 not moved.
Schedule 2 agreed.
Clause 16: Enforcement by Certification Officer of new annual return requirements
Amendment 108 not moved.
Moved by Baroness Donaghy
109: Clause 16, page 13, leave out lines 24 to 27
I thought you were going to say that you have lost the will to live.
I have also lost the will to live. However, Amendment 109 intends to delete the following:
“Where an enforcement order has been made, a person who is a member of the union and was a member at the time it was made is entitled to enforce obedience to the order as if the order had been made on an application by that person”.
Amendments 110 to 117 are technical in nature and again are consistent with my theory that the role of the Certification Officer should remain simple and that the investigatory powers should be confined to that officer, not spread far and wide. The amendments are all entirely consistent with my view that the Government are going down the wrong track in trying to change this position, which the noble Lord, Lord Stoneham—I might call him my noble friend in view of our common trade union background—has commented on.
It is important to remember that the post originated as a protection for the union member against the union structure, if you like. I know that add-ons have been made over the years, but the role remains essentially the same. Because of its limitations and the way the Certification Officer has carried out his role, it has become a trusted position. The Government have accepted that they are trying to change the nature of the role, saying that it is about modernisation. I think that we shall just have to agree to disagree. We need to take into consideration that any attempt to change the nature of the role by reference to “imperfect relationships” between unions and employers seems to add a meaning that I had not been aware of, which is why I was so worried about the impact assessment. These are probing and technical amendments, but they are consistent with all that we have been saying. I beg to move.
I want to raise a couple of quick questions which I hope that the Minister will be able to respond to. I am speaking in support of the amendments and to seek clarity on some of the questions which have been raised by my noble friend Lady Donaghy in her amendments. We have debated provisions that place in our view an unnecessary burden and level of regulation on trade unions. Clause 6 places an obligation on unions to report to the Certification Officer in their annual return the details of any industrial action taken, while Clause 11 places an even heftier duty on unions to include details of political expenditure exceeding £2,000 in their annual returns.
Clause 16 gives the Certification Officer quite a bite to ensure that unions abide by these obligations. The Certification Officer will now be able to declare an “enforcement order” against any union which does not follow these measures. Noble Lords will recall how earlier in Committee we debated the concerns expressed by smaller unions that would not have the resources to comply adequately with such regulation. Will the Minister consider any allowances or safeguards where small unions genuinely do not have the manpower to abide by these provisions?
This clause further enhances the role of the Certification Officer by giving the office the same consideration that a court would be given. New subsection (12) indicates that:
“An enforcement order made by the Certification Officer … may be enforced by the Officer in the same way as an order of the court”.
This seems a little extreme and I would be grateful for any examples the Minister could provide on similar bodies which have the powers of the court.
I should like to make a brief comment in relation to Amendment 109, which would remove new subsection (13). The central argument for doing so is because it just does not make sense. I would be grateful if the Minister could explain it to me.
My Lords, I thank the noble Baroness, Lady Donaghy, for her commendable honesty. I will seek to provide some reassurance on this, which is essentially a technical discussion. I think that there is a reasonable explanation; let us see how it goes.
In the current legislation a union member—so it is a member—can apply to the court to ensure that a union complies with an order of the Certification Officer. That is a long-standing provision of the current legislation, which we heard about. However, to reflect the Certification Officer’s investigation powers we thought it would be helpful when drafting the legislation to remove any doubt that his own orders may also be enforced, as an order of the court, by the Certification Officer. In doing so, the drafting of the Bill reiterates the existing rights of the applicant member and other members mentioned in relevant sections of the current legislation. The words in Clause 17 that the noble Baroness seeks to amend simply refer to those existing provisions. I do not have any examples, but I will see whether we can find one. The main example is that that is existing practice, but I will look at other regulators and add it to my letter.
I am sure that noble Lords would agree that, if the Certification Officer had found that a union was not compliant with its obligations and it did not rectify the situation, it must be right that a union member should continue to be able to take action to protect their interests.
I hope that that provides some reassurance and that the noble Baroness will feel able to withdraw the amendment.
I need clarity on this. Currently, where the Certification Officer publishes a decision and an enforcement order, the member can go to a court; having been before the CO on many occasions I am aware of the process. Is the noble Baroness saying that the CO will now be able to see enforcement through the courts on his own?
My Lords, my understanding is that the orders of Certification Officers are already enforceable as an order of the court under the 1992 Act, so we are just continuing that position.
I do not think that that is right, but perhaps I can write and clarify in the follow-up if I do not receive advice quickly.
On small unions, details of the application of financial penalties, including the maximum level of penalties available to the Certification Officer, will be set out in regulations. Of course, they will be subject to the affirmative resolution procedure, as we discussed. In setting maximum amounts in the regulations it will be possible to take into account the type of breach and the size of the union.
I will write to confirm that the answer to the noble Lord’s point is no and that it requires an application to the court.
I thank the noble Baroness for her reply—I think. The best thing for me to do at this stage is say that I will look at Hansard, because I am not entirely clear. The negatives have become so negative that I am not quite sure how many stages it has got through and what it actually means. At this stage, I will withdraw the amendment, but I may follow it up if I do not understand the reply.
As this is a technical point where there does not seem to be much difference between us, we can always have a discussion on what it means and involve the officials who drafted the provisions, who I think were trying to repeat an existing provision.
I beg leave to withdraw the amendment.
Amendment 109 withdrawn.
Amendments 110 to 117 not moved.
Clause 17 agreed.
Amendment 117A not moved.
Schedule 3: Certification Officer: power to impose financial penalties: Schedule to be inserted into the 1992 Act
Moved by Lord Mendelsohn
117B: Schedule 3, page 28, line 26, leave out “£20,000” and insert “£5,000”
My Lords, I think that we have gained a bit of momentum and I hope not to interrupt it.
We move on to a group of amendments which examines what happens to a union when it is unable to comply with the Certification Officer’s enforcement order. Clause 17 of the Bill provides the Certification Officer with a new power to impose substantial financial penalties on unions. Schedule 3 states that the maximum and minimum penalty amounts can be set in regulations but they cannot be less than £200 and cannot exceed £20,000.
The Secretary of State is given a power to issue regulations setting different amounts in relation to different enforcement orders and to reference penalties by whether the person in default is an individual or an organisation and by the number of members that a trade union has. We would be very grateful if the Minister could provide us with the Government’s thinking on those areas and how they are looking at setting those fines and how they are likely to operate. Given the momentum we have now achieved, it may be better if that information were provided in writing rather than from the Dispatch Box. However, if the Minister already has the relevant details, they would be gratefully received.
I return to an important issue. At present, the Certification Officer cannot impose financial penalties. I know that this is a repetitive line of questioning but I will ask the Minister again: what evidence has been provided as the basis for the Government to introduce these measures? From reading the Certification Officer’s evidence at the Select Committee and his annual reports, there was no sign of the need for a serious measure such as financial penalties for him to be able to exercise his powers effectively. The Government’s impact assessment predicts that if the Bill comes into effect, the Certification Officer will on average issue 50 declarations and enforcement notices during every five-year period. This is an increase of 10 declarations every five years. On each occasion, the Certification Officer is expected to impose a financial penalty, and a figure has been identified in relation to income from fines. As a result, it is anticipated that the Exchequer will benefit from fine revenue of £275,000 every five years. I would be very grateful to the Minister to be told how the Government have arrived at that figure. I am reminded that when you look at your credit card statement and it says that you have a credit card limit, it is a limit, not a target. An assumption that there is a £275,000 benefit to the Exchequer starts to create a target or underlines a series of assumptions which I think we should know more about.
There is no evidence of union non-compliance with the Certification Officer’s orders or any evidence of the Certification Officer raising concerns with government around the current enforcement regime. Therefore, the idea that there will be fines seems to underline a different series of assumptions or a different evidence base. I would be grateful if the Minister would indicate whether that is the case as regards either of those scenarios. I beg to move.
I will be brief because, frankly, discussing this issue will almost cost more—given all the noble Lords around the Chamber and all the people supporting us with the discussion going on until late at night—than this provision will raise in a year. The relevant figure is about £55,000. The impact assessment refers to five-year periods. I wonder why that is the case. The figures are so low. I could not find any evidence of enforcements in last year’s report, but, apparently, we have had eight enforcements per year on average. I am sure that the political advisers, the Minister, or whoever saw the impact assessment, thought that they had better talk in five-year periods because it makes the figure—40—sound bigger. If we put in these new powers, we will spend another £1.5 million and we will get two more enforcement orders a year. Goodness me, what is this? It is ridiculous. The Government are clearly contriving an issue out of nothing.
That goes back to my earlier point. The impact assessment says there is scope to increase the powers, but actually the Government have provided no evidence that it is necessary. The great sadness is that, as everyone knows, once you start having fines, interests become entrenched. Pride is at stake—nobody likes to be fined—so it becomes a legal process, it becomes drawn out and the poor old Certification Officer, who at the moment is doing a very good job trying to reach voluntary agreements, finds it more difficult because the parties become more intractable. And for what? For eight or 10 enforcement orders a year—goodness me!
I rise to intervene briefly, having listened carefully all afternoon to our exchanges. I thank the noble Lord, Lord Stoneham, for his remarks, and I fully support both this and the previous set of amendments. The more one thinks about this obnoxious, sad little Bill—well, it is a fairly big Bill, I suppose—the more one has deep misgivings about it.
I do not mean to embarrass the Minister, but I genuinely thank her for being a listening Minister on this occasion, and for listening very carefully. It is obvious that the Bill has been contrived, through the interstices of the central office apparatus of the party in power, to produce something that does not reflect the reality of modern trade union/employer relations. I cannot think of any examples, in respect of our exchanges on Clause 16 onwards, where employers have asked for anything in this field. That is fairly telling. Normally, Governments respond to legitimate lobbies, but that has not happened on this occasion.
I look back—it is a long way—to when I first entered the House of Commons in 1970 and the nightmare of the Heath Government, the National Industrial Relations Court, the Official Solicitor being called on to adjudicate, the dockers on strike, and all the rest of it. That all arose from anti-trade union legislation built on principles of prejudice, dislike and antagonism, rather than genuine constructive industrial relations—the kind of thing we see routinely in Germany and other civilised European countries where there is a much more balanced picture.
Given that the Minister has been a patient listener, and given that an expectation is building up that we will return on Report, which, if my memory serves me right, will be on
I am glad that the Liberal Democrats have been involved in objecting, and not just the Labour party, which is the main expert on industrial relations. It shows the authority of the genuine overall opposition—including on these Benches—to these really undesirable measures in a Bill that is widely unpopular among the people observing it. It is a pity that many are not bothering to observe it; they should be, because it is one of the worst examples of the Government’s illegitimate use of a so-called mandate based on 24% of the electorate. It is nowhere near a genuine majority of people in this country. People want proper, modern, civilised industrial relations that do not oppress trade union members.
I thank the Minister for her patience. She has the chance to indicate, either in her reply today or on another occasion, that, when the time comes, the Government will respond and make sure there is a definite change in the text of these clauses.
I thank Lord Mendelsohn for the amendment. This short debate has raised an important question about the proportionality of penalties for breaches in this area, and I want to emphasise the seriousness with which we should all view the requirements and obligations on unions. The impact assessment helps us to have a useful discussion in this House. It reflects conventions—I do not always agree with the conventions, as I am sure noble Lords opposite will remember, but penalty estimates are one bit of good practice that is rightly included when these assessments are prepared. I emphasise that it is not a target. It is about encouraging good compliance, including as a deterrent, and creating and maintaining public confidence by removing those unfit for union office and ensuring accurate trade union registers. Union leadership elections or political fund rules and ballots should all be carried out according to due process. Any irregularities, quite rightly, would raise concerns and damage confidence among not only union members but employers and the wider public.
We intend that the maximum penalty would vary according to the seriousness of the breach. This is a normal approach among regulators. Within this maximum, the Certification Officer may also set a lower penalty, depending on the circumstances of the case. In a number of areas that the Certification Officer regulates, he is currently limited to being able to make an order requiring the union to correct a breach. There is nothing to sanction a union that has failed to comply with a requirement, no matter how significant the failure. The additional option of a financial penalty being applied will ensure that appropriate sanctions are available as a remedy and a deterrent, as I have said.
The honest answer is: not this evening. Obviously, we are making the regulator more responsive. We are making some changes, and one of the things you look at when you review regulators is what the appropriate penalty regime is, and that is what I am proposing.
But normally when you reform a process, it is because something is not being enforced properly. I ask again: is there an example of where due process has not been followed?
I do not know the answer this evening. I am not sure I am going to give way on this point. We are setting up a modern regulator and a modern regulator needs appropriate penalties. We can argue about the exact detail of the penalties and I am going to come on to say something of a listening kind.
The range of the penalties that we propose mirrors that available to bodies that I see some parallel with, such as the Electoral Commission, which has a maximum of £20,000 in relation to the civil penalties that it can impose; I think it does criminal penalties as well. The national minimum wage regime also provides for penalties of up to £20,000 per worker. Our general approach is that a strong civil sanctions regime is an effective way of ensuring rapid compliance. That is why we do not think that the amendment, which seeks to reduce the fine to £5,000, would be sufficient.
We want to get this right. As the noble Lord, Lord Dykes, said, we are trying to listen during Committee. Obviously, we will consider and reflect on the debate in the House before bringing forward further details, particularly of the application of these penalties and how they would work. I ask the noble Lord to withdraw the amendment.
I thank the Minister for that reply. I think the noble Lord, Lord Stoneham, has really put his finger on it. The issue here, which we think is of considerable concern, is that there is no evidence that actions are not complied with or such orders are not dealt with adequately. It is certainly true to say that the Government are extending this significantly and placing potentially terrible burdens on smaller organisations, which may have tremendous problems with them.
As we move to Report, the Government have to make a better case than they have made thus far. They say that it is important to restore public confidence. I think this is setting people up for a fall and that is not how you instil public confidence. To me, it is more like the action of a bully and I regret it. I hope the Government come back with a much better justification.
I have already said in a previous discussion that we very much understand the point about small unions. I reiterate that. In the interests of brevity, I have not repeated it under this heading. We are looking to get the detail of this right and look forward to further discussions on the subject.
Amendment 117B withdrawn.
Schedule 3 agreed.
Clause 18: Power to impose levy
Moved by Baroness Donaghy
118: Clause 18, page 15, line 3, leave out “may” and insert “must”
My Lords, I think that I know where I am now. We are on to the proposal for a levy. Points have already been made about this proposed levy, which effectively means that trade unions and not the public purse will be paying for the Certification Office. Like others, I oppose that on principle, which is why I support the proposal that Clause 18 should not stand part of the Bill. I will not go into a great deal of detail about that. The points have already been made during general debate about why this levy is a new and very unwelcome development. Even now, I hope that the Government will reconsider.
The TUC is concerned that the Bill does not place a cap on the levy which can be charged to unions, other than providing that the total amount levied must not exceed the expenses incurred by the CO over a three-year period. Under the Bill’s current provisions, the Certification Office could expand well in excess of the Government’s current staffing estimates, with unions expected to cover the entire cost of the increased enforcement regime.
The TUC is also concerned that the Bill does not require either the Government or the CO to consult with stakeholders before determining the level of the levy. It believes that this is unreasonable, so I hope for an assurance from the Minister that there will be such consultation and that it will not take place, as I said, in the August-fest.
To speak specifically about Amendments 118 to 121, this is the old argument about “may” and “must”. If the Government have something in mind, it is really their responsibility to give some indication about their thinking rather than leaving the Certification Office to hang in the wind on this. The amendments would make it mandatory—not just a “may”—for future regulations introducing a levy to cover the costs of the Certification Office to specify what would be considered as recoverable expenses, including costs incurred by ACAS in providing staffing, accommodation and equipment, and to specify how the levy will be calculated for different organisations, taking into account the number of members and whether an organisation is a trade union, an employers’ association or a federated employers’ organisation, and the functions carried out by the CO in relation to different organisations.
I am looking, first, for some chink of light about the Government having second thoughts on the levy at all. Secondly, if there is to be consultation it should take place at a reasonable time and for a reasonable length of time. Thirdly, we need to be clearer about the Government’s thinking on this levy. It seems that it could be a bit like student loans: the minute you have it introduced, it could go really sky-high. As I said at Second Reading, it could look like the thin end of a very large wedge as the Certification Office is part of the ACAS family, which could include other functions of ACAS. I would be particularly concerned about that.
In the light of the time, I will confine myself to those remarks and hope that the Minister will give us some more positive response.
My Lords, I will make a couple of points about new Section 257A(4) in Clause 18, which covers the amount of the levy. They could have been made at various points, but they are probably as well made here as anywhere else. Before I start, can the Minister confirm that the various letters and information mentioned today will be sent to all noble Lords who have taken part in this debate?
The noble Lord will be aware that I have already said, in promising letters, that I will ensure that they go to the nooks and crannies of the Chamber, which I think would include those involved in the debate today. We will of course take a careful look at the list.
I will not admit to whether I am a nook or a cranny, but I thank the noble Baroness for that.
The impact assessment says that the Secretary of State is,
“to be given a power to make affirmative regulations … The regulations will include a requirement for the Secretary of State to consult trade unions and employer associations on how the fees should be calculated”.
Could the Minister give us any indication about what level of consultation of trade unions will take place?
The impact assessment then says in paragraph 287:
“They will also limit the fees to cost recovery, and provide that the membership size of trade unions … may be taken into account when the fees are calculated”.
This is obviously quite important, and I will come back to it in a minute. It then goes on to say, in paragraph 294:
“The change to the operations of the Certification Officer will not change the costs faced by compliant unions”.
I am not sure I understand that, because if the costs are going to go up, that must surely change the fees, because they will have to go up to meet them. In paragraph 295, the assessment repeats what it says in paragraph 287:
“The mechanism in which the levy will be calculated will be consulted on with trade unions and employer associations”.
Can the Minister give us some idea of how that will take place?
A little further on, paragraph 297 says that,
“secondary legislation will set out how the levy will operate in more detail … a further impact assessment will be needed for the secondary legislation”.
Could the Minister give us some idea as to where we are with that impact assessment? Is it in process and will it be produced after the legislation is adopted? What will happen?
Finally, paragraph 299 says:
“The design of the levy will consider the inclusion of specified criteria such as the number of members or amount of income an organisation has”.
I have raised this privately with the Minister, but make no secret of the fact that a number of these smaller unions are concerned at the impact this levy will have on them. Particular concern has been raised with me by a number of the smaller unions about the difference in costs that could be incurred because a large union with a political fund—for example, Unite—could end up costing the regulator a lot more to regulate than a smaller union without a political fund, such as the British Dental Association.
I am sure that the Minister cannot say anything tonight, but I would like her to agree, in working out how the levy is to be apportioned, to look, first, at giving due regard to these smaller unions—hopefully some sort of graded system will be introduced. Secondly, will consideration at least be given in the consultation to the fact that unions that have chosen to have a political fund, which is of course regulated separately, should pay an extra part of the levy so that, in other words, the levy for the supervision of the political fund will not be placed on unions that do not have a political fund?
I know that these are rather small and technical points, but they are quite vital to small trade unions. If you are looking at a fourfold increase in costs, and these costs being placed on the unions for the first time, coming on top of other costs that they have recently had placed on them, this is a serious financial burden for the smaller unions in the TUC. Many of those smaller unions, which represent important professional subgroups within the population, play an extremely important part. Some people will say that they can always be taken over by big unions but that, to my mind, is not the solution. The smaller unions of this country play an extraordinarily important part in safeguarding the pay and conditions and bringing the detailed knowledge to bear for important groups of largely, I confess, highly professional workers. They do a valuable job, and in constituting this levy and working out where it falls, I hope that the Minister can assure us that due regard will be given to the points I have raised.
I shall speak in particular to Clause 18 stand part in this group of amendments. We have considerable concerns about the shift of responsibility for the costs of the Certification Officer from the Exchequer to the trade unions. The Certification Officer estimated the cost of the levy to be £2 million to the department. But as he said in his evidence to the Select Committee, this is very much a provisional view. He said that,
“we are warning our funders, ACAS, that we may ask for more money … Apparently, you should do only a certain amount of forward planning while the legislation is at Bill stage, as you cannot move forward too quickly with public expenditure at that point”.
I do not know whether that reflects what he was told by the department. Of course there is a cost to the unions, not just of the Certification Officer but also of the additional resources that they will have to put in to answering complaints when third-party complaints are added.
The Minister has made references to and comparisons with other regulators whose members have to pay the fees. Perhaps she could answer a few questions. First is the question I raised earlier to which I do not think I have yet had a response. Why is it right for trade unions to pay a levy to be regulated but not political parties? I am not suggesting that political parties should pay for being regulated by the Electoral Commission, but they do not. It is not right to make comparisons with the Charity Commission or, indeed, any other area because the trade unions are involved in a political arena. It will be more so if third-party complaints are allowed, as a series of partisan and politically motivated complaints will be made.
If the Government insist on pushing this levy on to trade unions, will the Minister look again at the issues relating to third-party complaints? Will she, for example, look at excluding the costs of investigating those complaints from the levy that the trade unions have to pay? Will she look at restricting the scope of third-party complaints? For example, will the Government consider excluding complainants who are members of political parties unless they are also members of the relevant union? That would help exclude some of the partisan complaints that will inevitably be generated.
Will the Government also exclude organisations which refuse to publish their funding sources? I am thinking of the TaxPayers’ Alliance, which we know is very keen on this Bill—one of the few organisations that is. As I understand it, it will be eligible to make complaints against unions relating to details of union finances while refusing to divulge where its funding comes from—as it does at present. That cannot be right. Will the Minister look into that?
Finally, I comment on the irony, given that the partisan nature of the Bill was designed in the Exchequer—in the Chancellor’s office—that it is the trade unions who are having the cost shoved from the Exchequer on to them. That is simply not right.
My Lords, Clause 18 gives the Secretary of State power to make affirmative regulations to provide for trade unions and employers’ associations to pay a levy to the Certification Officer. The amendments in this group attempt to remove any ambiguity over how a levy would be imposed on the trade unions and limit vast increases in the cost of the Certification Officer. These are probing amendments to try to establish where we are. I must say that the powerful speech by the noble Lord, Lord Oates, was significant, and I share his sentiments.
The impact assessment on the levy states that membership size and income will be taken into account, without giving any detail of how it will be calculated and how the costs will be shared between unions. As matters stand, there is no indication as to how the levy might be applied in practice: whether larger unions would have to pay more than small unions, how it would work, what the impact would be on union finances or how the future of the Certification Officer’s resources is established. All those areas are far too ambiguous.
The Bill also fails to require either the Government or the Certification Officer to consult stakeholders before determining the level of the levy. By contrast, in an area of which I am aware, the Financial Conduct Authority’s board is under a statutory duty to consult key stakeholders on fees policy and rates. Indeed, it carries out two consultations: one on policy changes and one relating to fee rates. The amendments simply ask the Certification Officer to carry out the same level of consultation with trade unions and employers’ associations before determining any levy.
I raise this matter because there has to be some operating mechanism and some sense of how it will operate. There must be a view on what should be the limits in any year of the Certification Officer’s growth and how they will be applied. If circumstances require additional staff, does that have to conform to pre-agreed boundaries? How are we to ensure that this onerous system remains logical and can be applied in any manner that can be described as fair? The Bill must give adequate protection to trade unions that the costs will not continue to spiral in the same way as they tend to in a variety of other places.
The amendments are necessary to inform trade unions how any level will be calculated and at what cost. Without a guarantee that stakeholders will be consulted on the setting of the levy or limit to future costs, the trade unions will be very much in the dark over how much the Certification Officer will cost initially and in future. What is being presented to the trade unions is an endless bill and the potential for the Certification Officer to run up an expensive tab. This is not a deal which you or I would enter into willingly, and is one which all trade unions and employers’ associations should be protected against, not least because it is their members who bear the brunt of it.
I am trying to clarify the position. The Minister is held in very high regard in the House, and rightly so.
Frequently in this House, we have exchanges where we can disagree on a variety of matters either on the application—how something will work—or the foundation or principles behind it. I am not of a trade union background. I am a businessman, I have never been a member of a trade union, but I sit on the Opposition Benches, so it is entirely logical that someone might say: “You are likely to say that, are you not?”. During Second Reading and in Committee on the Bill, we have heard contributions which I hope have given the Government a sense that it is time to pause and reflect very carefully on what has been said.
The noble Lord, Lord Dykes, made a very interesting intervention. There is a certain mood attached to this Bill. The Bill is not worthy of where we are, and I am more than aware that the Minister on previous occasions has been very flexible and thoughtful in considering contributions from this House. I am also aware that there are difficulties in trying to convince those in another place that there is any reason, rationale or desire to make any changes, and that just as a bit of political yah boo sucks they continue in that fashion. I dearly hope that the Minister can use her good offices to convince others. Frankly, over the entirety of this period we have seen the flaws in this Bill and we know that it does nothing for trade unions, employers, our economy or our public services. It also does very little for our politics, and I hope that there is a chance that at the end of this Committee stage the Minister will give us some comfort that we might see some changes on Report, and that it will not be a continuation of an appalling form of politics that we should eschew.
My Lords, I thank all noble Lords who have been engaged in this very long debate today. On the final point that the noble Lord made, clearly, this Bill brings together a number of provisions that were promised in our manifesto, on which we were elected last year. There are important changes here but, as I said at Second Reading, and as I have reiterated over these four days in Committee, we are listening. We may be able to make some changes—this is very much a listening part of the process.
This clause provides a regulation-making power to enable the Certification Officer to charge a levy to recover the cost of his or her expenses. It is only fair that the cost of the regulatory functions provided by the Certification Officer fall on those who are regulated rather than on the taxpayer. We are, of course, applying this reform to employers’ associations as well as trade unions.
My Lords, government is not always logical, and while some regulators receive public funding many do not. In fact, increasingly few regulatory areas are paid for by government. We do not think it appropriate for the costs to fall on the taxpayer. We are going to set out our proposals. The clause requires consultation with relevant organisations, such as the TUC and ACAS, before making regulations. We will ensure that there is consultation, so we can achieve a levy that is proportionate and appropriate. I would envisage a consultation document, which can go to those concerned; that is always the sort of approach I favour in the areas where I have responsibility. An impact assessment will be published, as has been said, and the normal process is to publish that with the draft regulations, which of course will come before this House in due course, setting out the arrangements for the levy. We should also ensure that ACAS and the trade unions have a reasonable period of time in which to consider the detailed proposals, particularly in the light of the discussion taking place today.
This legislation is about trade union reform, and I do not think that the point about political parties, which I know is made with great vehemence by the noble Lord, Lord Oates, is a matter for this legislation.
It is important—and perhaps I can explain technically—that the Bill does not prescribe the amount. The Certification Officer needs to decide each year how much he or she needs to be charging to cover the cost of performing the functions for that year, adhering to the framework that is prescribed in regulations made under the Bill. It is common for legislation that introduces a levy or fees to require that the detail be set either in regulations or by the relevant regulator. This is standard practice and recognises that it is simply not possible to be too prescriptive in the primary legislation.
It is right that we do not attempt to limit the flexibility the Bill currently provides to apply one or more of these parameters until there has been proper statutory consultation. Let me give an example. We recognise that trade unions can vary greatly in size. Smaller unions and employer associations may require less of the Certification Officer’s time and resources, as my noble friend Lord Balfe said. We want the scope to be able to consider whether those who use more of the officer’s time should bear more of the cost, thereby reducing the amount of levy payable by smaller organisations. My noble friend Lord Balfe asked me to look at a point about political funds, and we can certainly consider that as part of the consultation. We will consider very carefully during the statutory consultation whether the amount of levy payable should be proportionate to the trade union or employer association’s income. It should take into account affordability for the smallest unions.
Amendments 118 to 121 seek to change that magic word, which the noble Lord, Lord Mendelsohn, knows so well, “may” to “must”, so that all the potential criteria in the Bill would have to be applied in setting the framework for the levy—I am afraid my sore throat is getting going again. That limits the flexibility to ensure that the power operates effectively, which is particularly important as we have a statutory duty first to consult.
On Amendment 121A, I appreciate noble Lords’ desire for there to be some control over the amount, but there are safeguards that act to control the amount of investigation that the Certification Officer could undertake. Most importantly, he will be able to investigate only where there is good reason to do so. Third parties have no statutory right to complain. The changes allow the Certification Officer to investigate in respect of information he receives that may be from a third party.
The officer has had the power to launch investigations into a union’s financial affairs for many years, and it has not been suggested that it has been used disproportionately. He or she will also be required to report annually on the amount levied and how it was determined. These reports are laid before both Houses. By way of further safeguards: the amount of the levy will be limited to cost recovery; unions and employer associations will be consulted before the framework for the levy is determined; and regulations to enable the Certification Officer to charge the levy will be subject to the affirmative procedure, allowing a full debate in Parliament, which I much look forward to. In these circumstances, I ask the noble Baroness to withdraw her amendment.
I am glad the Minister’s voice just about held out. I appreciate the points that she made. I will say only that this is creating a power to create a levy, with which I do not agree. It is increasing the costs of the whole exercise and then cynically passing them on to the trade unions. I say “the trade unions” advisedly because, although the Minister said that this will affect employers as well, I do not think I got my figures wrong when I said that they will be paying 0.5% and the unions will pay 99.5%—I am grateful to the Minister for nodding on that.
I do not see that my may/must amendments limit flexibility. I see the transparency which has been promoted by the Front Bench of the Government through all four days in Committee. It is important that people know where they stand. They will not know where they stand because the flesh will appear in the statutory instrument. Yet again we have important policy items waiting for a statutory instrument. It is not good enough just to say that there will be an impact assessment to accompany that statutory instrument; we all know that there are attempts to downgrade our powers to properly debate statutory instruments. Time will pass and everyone will look totally amazed when this side leaps up and down with indignation about the content of that statutory instrument. I give notice now that I probably will be leaping up and down.
I just hope, again, that the consultation will be adequate and that all relevant parties will be consulted, but I strongly believe that it is a very poor change for the role of the Certification Officer to become a tax collector as well as adjudicator, investigator and all the other things that he, or in future she, may have to do. It is a backward step and I very much regret it. In the circumstances, though, I beg leave to withdraw my amendment.
Amendment 118 withdrawn.
Amendments 119 to 121A not moved.
Clause 18 agreed.
Clause 19 agreed.
Schedule 4: Minor and consequential amendments
Amendment 122 not moved.
Schedule 4 agreed.
Clauses 20 and 21 agreed.
Clause 22: Commencement
Amendments 123 to 124A not moved.
Clause 22 agreed.
Clause 23 agreed.
Bill reported with amendments.