Motion to Approve
My Lords, this order amends the rules on collective redundancies. It makes three changes. First, it reduces the current 90-day minimum period for 100 or more redundancies to 45 days. Secondly, it makes an equivalent change to the requirement to notify the Secretary of State in advance of the first dismissal taking effect. This period will also be reduced from 90 to 45 days. Thirdly, the order removes fixed-term contracts that have reached their agreed termination point from the obligation to consult the individuals affected. These changes will be complemented by guidance on how to consult, which is being developed by ACAS.
I shall set out the changes in context by explaining the current rules. The rules are set out in the Trade Union and Labour Relations (Consolidation) Act 1992 and implement a European directive on collective redundancies. The directive aims to protect employees in large-scale redundancies but not to prevent employers from taking necessary steps to restructure. However, UK legislation builds on the provisions in the directive by introducing minimum periods before the first dismissals can take effect. Where the employer is proposing 20 or more redundancies at a single establishment within a period of 90 days or less, no redundancy can occur until at least 30 days after the start of consultation where between 20 and 99 redundancies are proposed, and no redundancy can occur until at least 90 days after the start of the consultation where 100 or more redundancies are proposed. This does not affect individual notice periods. These do not begin until redundancy notices have been issued, which cannot happen until consultation is genuinely complete.
The 90-day minimum period looks long by comparison with other countries. There is no minimum period in the US, Japan, Australia or New Zealand. In addition, the European directive governing collective redundancy law does not mandate a minimum period. As a consequence, the picture across Europe is varied. For example, there is no minimum period in France or Germany. It is 30 days in Spain, Belgium and Ireland, one month in the Netherlands, and 45 days in Italy and Poland.
Collective redundancy obligations have been in place for 40 years and there have been no changes to the 90-day minimum period in that time. However, I doubt that anyone who retired 40 years ago would recognise today’s working environment. Modern communications technology has made consultation easier and faster to carry out. People have easier access to details about employment opportunities, and CVs can be created and sent out in a matter of hours. Although it was once common for people to spend their career in a single firm, nowadays careers are made up of jobs in a variety of organisations.
In 2011, the Government carried out a call for evidence on the collective redundancy regime as part of a wider review of employment law. We then consulted from July to September 2012. The evidence from both exercises identified a number of issues. Employers were concerned that the rules delayed their ability to respond to challenges and opportunities. A business may need to restructure because it is involved in a merger or acquisition, or it may gain a new contract that requires a change of product or process. Of course, a business may also fail. Whatever the reason, the ability to adapt can create a stronger business from which it might expand in future, and that may include the creation of new jobs. Alternatively, restructuring might simply be about assuring survival and salvaging some jobs rather than losing them all.
For employees, a particular issue was the impact on morale and productivity caused by uncertainty about their future. This affected everyone, not just those being consulted. The evidence suggested that concerns about protecting the rights of those who are ultimately made redundant can crowd out the interests of those who are not.
Trade unions were opposed to any change because they believed that it would reduce job protection and make employers more likely to make employees redundant. However, they also wanted to see an improvement in the quality of consultation so that employees were genuinely engaged in the outcome.
As a result, we identified three objectives for reform: first, improving engagement and therefore the quality of consultation; secondly, ensuring that employers can restructure effectively to respond to changing conditions; and, thirdly, balancing the interests of the employees made redundant with those who remain.
On the minimum period and the treatment of fixed-term employees in the order, as I have said our consultation identified a number of problems with the current 90-day period. Employers considered that the 90 days prolonged consultation beyond the point at which it was constructive. Most told us that meaningful consultation usually lasts only 30 to 45 days. Genuinely viable alternatives to employer proposals were either hard to find or quickly identified.
A second major concern was the effect on staff. This was described by one leading trade association as leaving employees in a “state of paralysis” and,
“unmotivated on a day-to-day basis”.
In addition, the prolonged uncertainty hampered the retention of skilled staff. Investors, suppliers, customers and lenders were also affected.
We considered these responses carefully and decided that, 40 years after it was first introduced, it was appropriate to reduce the 90-day minimum to 45 days. This is a statutory minimum, which means that companies are entirely able to extend the period.
I remind the House why employers need to consult. Consultation improves communication and engagement. It ensures that employees feel included in what is happening. It allows them to get used to the idea of change. It allows employees to identify alternative options that the employer might have overlooked. It allows them to ask questions and consider their own personal options. For all these reasons, good employers take employee consultation seriously.
We are not changing the requirement that employers consult on ways of avoiding, reducing or mitigating proposed redundancies, nor are we changing the need to demonstrate that the consultation has been meaningful. The consultation might have to last longer than the minimum period if the employer is to do this, or the employer might decide that a longer period is necessary because it makes sense for them and their workforce. We have also retained the level of punitive penalty that can be made to employees who have not been consulted appropriately. This can be up to 90 days’ pay per affected employee.
The 45-day period, though, will introduce increased flexibility for the employer, who can carry out meaningful consultation quickly. It will also have benefits for the employee. Individuals who have found a new job quickly will be able to accept a job offer and leave with a redundancy payment. Employees who are part of the consultation but who end up being retained get reassurance sooner, and individuals who lose their job can begin to plan for and get help with their future.
On the change relating to fixed-term employees, our consultation identified confusion over whether the ending of a fixed-term contract at the agreed point of expiry triggered an obligation to consult. For example, if an employer had more than 20 fixed-term contracts coming to an end within a 90-day period, employers were not clear whether they needed to consult. This has proved particularly difficult for the higher education sector, where the cycles of academic funding mean the routine use of fixed-term appointments related to the academic year. Universities can end up carrying out multiple consultations about appointments where no one is any doubt that they are limited.
As a result, we have decided to take advantage of the provision in the directive that allows member states to exclude fixed-term contracts that have reached their agreed point of expiry. This would mean that in my earlier example there would be no obligation to consult. Where, however, the employer seeks to terminate the contract early and on grounds of redundancy, consultation is still required if the thresholds are met.
Finally, we have asked the Advisory, Conciliation and Arbitration Service—ACAS—to produce guidance, and ACAS is working with employers and employee representatives to develop its content. When it is complete, it will represent the agreed approach between employers and unions.
I anticipate that noble Lords might want to be apprised of the guidance document. With this in mind, I have already prepared a letter to send out to all your Lordships. This guidance is an important part of the overall package of change. Consultation showed us that statutory solutions were neither desirable nor achievable for all the difficulties arising with the collective redundancy rules. The guidance emphasises the importance of looking after employees. What employers do and how they treat employees in difficult circumstances is crucial to the future success of their businesses. Good practice suggests: first, maintaining a constructive ongoing relationship with employee representatives; secondly, having a plan for restructuring; and, finally, having recognised procedures for handling redundancies.
In the last 40 years we have seen a revolution in the working environment, and as a result our labour market has changed significantly. Modern communications mean that things happen faster and more easily. Individuals move more regularly from one job to another and, to remain competitive in global markets, businesses must respond effectively to commercial pressures.
The changes this order will make—
My Lords, I think the Minister said that this is his final point and that he is about to sit down. Is he really going to sit down before telling us what is clearly in the impact assessment: that policy option 2—the 45 days—means a reduction in output, and costs for employers, through making employees redundant more quickly, of £230 million per annum? For employees, there is,
“the reduction in the amount of time paid by their current employer, and therefore in the pay received. We expect this reduction in pay to total £252m per annum across all affected employees”.
Are the Government trying to get this measure through while hiding that information, or does the Minister think that I have somehow misunderstood that information? Does he not think that that loss of pay of £252 million is mere chicken feed?
I thank the noble Lord for his intervention. I was just about to finish my opening speech, and there would have been the opportunity for replies. I am, however, very happy indeed to address that concern. The figure that we have is actually higher. It is £300 million, which is the saving that would be made in the reduction to 45 days. Let me try to address and explain where we get that figure from. It is based upon the number of people being made redundant as a result of collective redundancies involving 100 or more people. It is based on UK-specific European Restructuring Monitor data, and 96,000 people were involved. I will not go into the specific details. I am delighted to furnish the noble Lord with the specifics, but if we take the median weekly pay and multiply it up it comes, if I can reassure him, to £300 million. It is purely based upon the amount that is not paid out to employees because of the reduction to 45 days.
The clarification is not complete. The Minister is using the figure of £290 million or £300 million. That is classed as a benefit, if you wish. I gave the figures under the section of costs. Under benefits, the benefit to employers is the,
“reduction in wage costs by allowing large scale redundancies to take place more quickly. We currently estimate this to be in the region of £290m per annum”.
I repeat my question: if this is a benefit and the only benefit to employees is a reduction in periods of uncertainty and a possible reduction in stress, is that not rather like saying that if you are on death row for capital punishment it is more motivating to make it quick?
I would not take that track at all. I was merely making the point that if the consultation period is reduced from 90 to 45 days, there is obviously a reduction in costs in terms of the salaries that are paid out to employees who are made redundant more quickly if that is the case. Equally, another figure could be included, because employees might move on more quickly anyway. The answer is that I am more than happy to give the noble Lord, who clearly understands this exercise by this issue, a full answer in writing and to give the figure in more depth, but the £300 million figure is the one that we have.
Further to the point raised by my noble friend Lord Lea, the impact assessment says about benefits, particularly at this stage, that the current estimate of the reduction in wage costs would be £290 million at what is termed Option 2(a)—a reduction to 30 days. It says that a reduction to 45 days would make the impact lower,
“but it is not possible to quantify the difference”.
I ask the Minister why not. If it is possible to calculate a ceiling of £290 million from roughly reducing the period from 90 days to 30, which is two-thirds, why is not possible to say what the effect is of reducing that period from 90 days to 45, which of course is a 50% reduction? It seems to me that if you can do one, you must be able to do the other.
As I say, I will address this question in much more depth later, but let me give a slightly extended answer to the question on pay. The committee argues that employees are unlikely to be predisposed to viewing the new regime favourably because the impact assessment assesses that the changes would mean a reduction in pay across affected employees of £250 million per annum. This does not mean that the individuals lose out on this money. This is the amount of money that the current employer will not pay to affected employees. In practice, employees will almost certainly move to other employment, which is the point that I made earlier.
The Government acknowledge that the proposed changes could result in a small increase in the number of employees seeking jobseeker’s allowance, but we do not see a direct link between the length of the consultation period and the amount of time an individual will take to find a new job. Each case is different. There are many other factors here, including the point at which an individual starts job hunting. The Government can see a considerable advantage for the employee in the new regime, because it proffers certainty sooner, which is the point that I made earlier, not only for those who end up losing their jobs but for those who remain. It is important to remember that the individuals remaining are typically more significant in number than those who depart.
In conclusion, the changes that this order will make are needed to ensure that the statutory framework remains up to date, so I ask noble Lords to consider this instrument.
Amendment to the Motion
To move, as an amendment to the above motion, at end to insert “but that this House regrets that the draft Order will have an adverse impact on employees in a situation which will fundamentally affect their livelihood and future career opportunities”.
My Lords, we regard this as yet another ill-founded government proposal to attack workers’ rights. The Government’s own figures, over which we have had a little exchange, estimate that this change represents a net loss of £252 million—or, on the same page, £290 million; I am a bit baffled by the two different sets of figures on page 2 of the impact assessment. Similarly, page 3 of the impact assessment does not quite seem to grasp the nature of what is happening. It says, first, that there will be a,
“possible short-term increase in employment tribunal claims relating to consultation in redundancy situations”.
I can go along with that. It then says that there will be a,
“possible very small increase in job seeker’s allowance claims”.
Well, I do not know quite how that can be justified. That to me almost seems an anecdotal assessment rather than anything based on evidence. When I listen to the Minister say that in practice employees move to other jobs, I only wish that that were the case in 2013. Of course some will, but for many this is going to be a very challenging and difficult situation, with no guarantee that the employee will move to another job, given the current levels of unemployment, which are running at very high rates in various parts of the country. So I do not believe that that is a fair statement of the situation.
The stated purpose, as we heard the Minister say, is to bring this up to date and create a simple, understandable process that promotes quality consultation and will allow the parties to engage in consultation that is best suited to their circumstances, improve business flexibility to restructure effectively and reduce business burdens. “Flexibility” is the term used by the Government to justify the steady erosion of employee rights. From our perspective, it is part of a “hire and fire at will” philosophy and goes along with the myth that the UK’s employment laws are somehow ossified. However, according to the OECD, which I notice was quoted in the report of the Secondary Legislation Scrutiny Committee, the UK already has one of the most flexible labour markets in the world.
The Government’s aim, they say, is to simplify the system for employers. The Minister told us that the EU minimum requirement is 30 days, so I am unclear how a reduction to 45 days will necessarily simplify the situation or provide greater clarity. My question to the Minister is simple. It is the age-old question of, “What about the workers?”. Many of them have given their working lives to the company. They have served and worked loyally. They surely deserve maximum consideration and consultation. The Minister said that it was about survival of the companies. I take his mind back to the situation in 2008 when we had a lot of companies going on short time. There was a huge amount of co-operation, with workers accepting in that situation that they could move to a three-day week. They made sure that there was training involved and so on. The logic that less consultation will somehow be better eludes me. Workers fully understand the importance of the survival of companies, but they want a fair deal. This change does not give them that.
If there is a high degree of confusion about the current rules, the call for evidence highlighted that the lack of certainty and agreed understanding about the consultation process has driven negative behaviour by both employers and employee representatives. I would say that, given a fair opportunity, employee representatives will respond positively. This implies that there is a need for greater guidance for employers from BIS on the consultation process, not a change in the rules. I was interested to read on page 10 of the impact assessment:
“Some UK employers have argued that the current regime for collective redundancy consultation is harming their competitiveness on a global level. They state that it is much quicker to restructure in other, competitor, nations, both within the EU and beyond. However, further discussion in focus groups with employers suggests this is not a universal view, and that in fact many view the process as easier in the UK than the rest of the EU. Table 2 shows that, compared to the main competitor nations across Europe and globally, the UK has a much higher requirement for minimum periods before large-scale redundancies can take effect. However, the table does not tell the whole story. Some of the competitor nations listed (including France and Germany) rely on strict enforcement and monitoring regimes to ensure minimum standards of consultation where the UK relies on minimum periods before redundancies can take effect”.
That is an interesting and important qualification.
According to the Government, a significant number of respondents to the consultation called for a statutory code of practice in order to clarify the rules, but the Government rejected this out of hand. Why? Because it did not fit with their agenda. Can the Minister answer that question when he responds?
I heard what the Minister said about fixed-term contracts. I have less to quarrel with on that front because there is some genuine need for clarification there.
A further reason for the change given in the impact assessment is to,
“increase the likelihood of agreement between employers and employees’ representatives”,
“increase employee buy-in to the decision-making process”.
Again, however, the Secondary Legislation Scrutiny Committee is highly sceptical of this argument, stating in its report:
“It is not obvious from the evidence presented by BIS that the changes are likely either to promote agreement between employers and employees’ representatives, or to gain greater employee support for the process”.
It concludes that the change requires special attention from Parliament on the grounds that:
“The evidence provided by BIS does little to inspire confidence that these other objectives will be achieved”.
Large-scale redundancies have a big impact on local communities, as I have said. Halving the amount of time required before an employer can make employees redundant halves the amount of time that those employees have to find a new job. It also possibly reduces the amount of time in which they can explore redeployment and retraining opportunities. It also reduces the time and ability of a labour market in a local authority to absorb those job losses, and it has significant implications for local authorities, which will need to provide for a sudden increase in those out of work in their area.
This legislation will not make any positive contribution to employment. The Government ought to be stimulating the economy so that we get more growth and, hopefully, diminish redundancies. The Government ought to be seeking ways to encourage consultation, retraining and redeployment. If they really wanted to help the situation further, they could also go some way towards redressing the deficiencies in management training to which I have drawn attention in previous debates. The Chartered Institute of Personnel and Development points out that, still, only one in five managers receives any training at all. On those grounds, I beg to move.
My Lords, I rise to support my noble friend, who has expressed regret. I, too, regret this decision. I am not surprised that there is trade union opposition to it; I would be surprised if there were not. It seems to me that this decision affects not just individual workers but families as well. If this takes place where 100 employees are involved, this means that we are talking about larger companies. This may very well be in places where there has been substantial unemployment because of the decline of manufacturing industry in many areas—a decline for which we should of course thank previous Conservative Administrations, in particular the Thatcher Administration. There are many places where manufacturing industry provided the local population with jobs over a long period, but this is no longer the case, and individuals who face redundancy in such circumstances need a longer period to adjust to that redundancy and to find alternative work.
The Government say that we have a flexible workforce, as though this is something to be very proud of. I am rather suspicious of that view because it indicates that some of the employment rights that we have worked for over the years are in danger. The Government support the disappearance of some of these rights on the grounds that it makes for a more flexible workforce. I do not support that view at all. It is regrettable that the Government are moving down this path. We shall have to look very carefully at the way it operates, and the Government have said that they will watch to see how it pans out. It is not likely to be welcomed by the workforces when they discover that they suddenly do not have the period to adjust to redundancy that they once had. That is entirely regrettable.
Moreover, we could well be entering a situation in some of these areas where more workers enter into benefits, to the discomfort of the Government, who wanted to get people off benefits but who then of course talk about the taxpayer having to bear the brunt of benefit claimants. What else do they expect if they are making it easier for workers to be dismissed? I regret this decision by the Government, and I hope that my colleagues will also regret it.
My Lords, I, too, rise to support the regret Motion that has been moved by my noble friend Lord Young. The present rules on the period necessary for consultation are designed, in part at least, to provide an opportunity for employers and unions to explore alternatives to redundancy. These alternatives could be short-time working or transfers to growing parts of the business. They could be used to help those workers who are to be made redundant to find alternative work with another employer.
If the minimum period is to be cut in half, these opportunities are inevitably reduced. Staff will be laid off more quickly. The wages bill of an employer will be cut correspondingly. However, the cost, as has been demonstrated by my noble friend Lord Lea, will be met by those who are being made redundant. The impact assessment makes it absolutely crystal clear that this is a straight transfer from employees to their employer and, as my noble friend Lady Turner has just reminded us, to the state, too, if people go into unemployment more quickly than would otherwise be the case.
This is the latest salami slice of employment rights. I remember that in the 1980s Jim Prior used to refer to a step-by-step approach when he was legislating against trade unions. Now, with Vincent Cable and the coalition Government, we have a slice-by-slice approach going on. The measure before us is justified mainly by anecdotal evidence, and by the cries of some—but by no means all—employers that redundancies in the UK are too expensive. I see that there are also some allegations that the UK has gold-plated the EU directive which underpins this law. In fact, by easing the obligations of employers, one makes UK employees more vulnerable to being fired when multinational companies are cutting their staff. We in the trade union world already feel that British workers are uniquely vulnerable because of our so-called flexible labour market, which, as my noble friend Lord Young has claimed, reminds us that we are the third least regulated labour market in the OECD.
The inconvenient truth is that the consultation arrangements in other European countries as a whole are more extensive than ours. In the Netherlands, for example, the authorities can extend the period of consultation to find alternatives to redundancy above the minimum figures to which the Minister referred. Could we perhaps add that provision to what the Government propose? I note that in Germany, where no agreement is reached in the works council, the issue can be referred to arbitration. Is that something which the Government have actively considered?
I can only come to the conclusion that the Government are intent on weakening the worker hand in difficult situations. This is not the road to building up high productivity and high-quality partnerships at work. It is not the right road to building successful economies—as successful, perhaps, as some of these other economies on the other side of the North Sea to which I have referred and to which the noble Lord, Lord Heseltine, keeps trying to drag the attention of that side of the House when he talks about the need for Britain to emulate some of the practices that apply in those countries that are coming though the recession, and coming along more strongly than we are.
Perhaps I may ask a specific question about the minimum threshold of 20 employees per establishment. This, as the Minister probably knows, led to some anomalies which were exposed in the recent closure of Woolworths stores. Most of the stores did not employ 20 people and, because it was looked at as an establishment issue, rather than the undertaking of Woolworths as a whole, there was no proper opportunity for consultation. That anomaly is crying out to be tackled, and a move should be made from establishment to undertaking.
In conclusion, the Government should stop this slicing away of employee rights. They should start promoting better relations and high productivity, and you do not do that by making firing easier.
My Lords, I, too, support the amendment of my noble friend Lord Young of Norwood Green. I would like to ask the Minister how he justifies this change against the background of a repeated government assertion that we are all in this austerity period together. Even in a straightforward redundancy situation, this carves out the salaried or hourly-paid workforce that generally runs the company—we are talking about over 100 employees here. Yet in that same redundancy situation you will probably have managers who have contracts of employment that give them a notice period of six months up to as long as 12 months, which would give them a cushion against unemployment. Here there will also be workers who have nothing like that, and have a far shorter period to become accustomed to what is happening to them.
The Minister has heard that good employers will probably, if they need to, take more than 45 days. However, as in everything else, we need to legislate for the bad employers, because the good employers will usually follow their conscience. The bad employers will take advantage of this. Anyone who has witnessed over 100 workers losing their jobs in one go will know that it takes time and consideration. Certainly this change has nothing at all to do with helping the growth measures that we need in this country. It is about taking away the rights of workers at a time in their working lives when they are the most vulnerable. Their jobs are going and they need support at that time. This measure will do nothing but harm to the workforce and do absolutely nothing at all to help the growth in this country that this Government should be concentrating on at the moment. This measure will do nothing at all to assist that.
My Lords, I, too, speak in support of the amendment. I believe that it was Rahm Emanuel, the chief of staff in President Obama’s first term, who said:
“You never want a serious crisis to go to waste. … it’s an opportunity to do things that you think you could not do before”.
I suggest that this is the latest example of this Government not letting a serious crisis go to waste. Purely in employment terms we have already had a reduction in the period for claiming unfair dismissal. Now we are faced with this. In some cases you could describe this as a sledgehammer to crack a nut. I see that there were a total of 160 responses to the Government’s consultation. That hardly suggests that this is a serious problem that needs to be legislated on. Of the 160 who responded—who could be bothered to respond because they thought that it was worth their while to do so—only 100 commented on the need, as they saw it, to reduce the consultation period. The impact assessment tells us that approximately 96,000 people a year come into the category of large-scale redundancies. That is out of a working population of 29 million. Therefore it is not a problem that employers are clamouring for there to be legislation on, and it is not an issue that involves a relatively large number of people, so why do the Government feel the need to move?
We also have figures for other European Union countries. We appear to be better at this stage than any of the countries listed there, so why try to race down to their level? As my noble friend Lord Young said, the OECD says that the UK’s economy is already one of the most flexible in the world, yet it is apparently not flexible enough. Despite the fact that we are ahead of many of our rivals, in an area where there is some protection we seem to be trying to have it whittled away.
I have one or two specific questions. A term that always bugs me is this question of “business burdens”, which basically means it is harder for employers to sack people. Unemployment is quite a burden and there are many people in this country today that would welcome that burden being lifted from their shoulders. Yet the Government seem to be concentrating on burdens perceived by at least 160 employers, or perhaps only 100 if we believe the figures that we have been given. I was a trade union official for 12 years and negotiated in redundancy situations under the current legislation and every attempt was made to try to assuage the redundancies. Sometimes they were turned back and sometimes, as my noble friend Lord Monks said, it was possible to introduce short-term working. In situations where employees feel vulnerable, they are not going to be more productive at work. I fail to see how it will improve productivity if you reduce employees’ protection. If somebody feels they have an axe circling above them that could fall at any time and that they will have less time to find alternative employment, I cannot see any way in which that is helpful. People need to feel as secure as they can in employment for the benefit of the economy.
I raised a question about the £290 million reduction in wage costs, which was suggested in the impact assessment. I will not repeat that. The Minister has said he will respond. If he wants to do so in writing, I will happily accept that. However, there are one or two other points I wish to raise. It seems to me that when the Government undertake a consultation such as this there must be some driving factor behind it. I am not sure that the Minister has outlined that as clearly as he ought to have done. Currently, unemployment is high and is rising and every effort should be made to keep people in work. The Minister was being a bit disingenuous when he said that there are many opportunities for people facing redundancy to find other employment within that period. We know that when new jobs are created the trend is for many of them to be part-time. It is not like-for-like. Somebody working in the manufacturing industry will find it extremely difficult to find another manufacturing job if he or she is made redundant. They may find a part-time job or a job on a casual basis, but that does not make the same contribution to their family income compared with the job they have lost.
People feel vulnerable. They should be able to look to the Government to help them at a time of economic crisis. We are teetering on the brink of a triple-dip recession. Obviously I hope that does not happen but it might. People are feeling very vulnerable and the Government are saying “We want to make it easier for employers to sack you and give you less time to respond to employers who seek to do so”. That is a worrying trend, although it is perhaps not surprising, and one that I hope the Government will think about again.
My Lords, there is one very good thing I can thank the Minister for: making a party political broadcast on behalf of the Labour Party. There will be many hundreds of thousands of workers who, when this is explained to them, will be determined to make sure that in two years’ time this will be reversed by a Labour Government.
The Minister’s speech raised my blood pressure, probably noticeably so, by hiding, sweeping under the carpet, the huge costs to workers in this change. There is a basic fallacy in saying that we stand in good stead in comparison with Germany and France on this front. Germany and France, and, indeed, Scandinavia, have one thing in common. They all have permanent machinery for consultation with workers through information and consultation bodies, bodies called works councils. We created the whole philosophy and structure of the modern industrial economy in Germany in the British High Commission zone, under Ernest Bevin, in the scheme signed by Field Marshal Montgomery and Marshall Rokossovsky, one of the most interesting footnotes to that period of history. That means that there is no doubt that there is access to the top decision-makers in the company.
Where does the Minister think that those decisions are made? I will try to answer my own question and see whether he has any logical disagreement with it. They are made at top level by the board, or at least by the CEO. As the research done for ACAS by the Warwick Business School demonstrated, the local managers generally know as little about what is going on as do the shop floor. To say that the shop floor representatives can talk to the local managers is a waste of space. Indeed, our system is so second-order to those in the countries I mentioned that redundancy is almost always a fait accompli by the time that it gets announced, whether it is over 90 days or 45. Why is it always a fait accompli? Because there has been no history of knowledge about what are the company's problems.
I have made this point once before. If you have a structure of involvement of the workforce, it cuts out this “us versus them”—much derided in the 1970s. Instead of having the machinery to say, “We are all in this together”, we simply mouth the words and drive the two sides further apart. The workers’ representatives are put together literally overnight with no background knowledge about these matters. Is that a sensible way to run a railroad in the year 2013? Of course not.
This is such a dialogue of the deaf. There is no one on the Conservative Benches, so I could speak all night and it would not make any difference. There are no brains there, there is nothing there. I think that I had better conclude by saying that the development of our alternative thinking on this has been given a big boost tonight. It has given us absolute clarity of the target area where we need to create machinery at board level, workers’ representatives on remuneration committees and throughout the enterprise.
I strongly take the point made by my noble friend Lord Monks that we cannot be the victims of deliberate gerrymandering of constituencies in the company, whereby company X says, “This is the decision-maker”, when we know that the structure of the capitalist company—obviously I am teaching everybody to suck eggs, but please tell me where I am wrong—means that it is at the level of the enterprise as a whole where strategic decisions are taken. It is at that level that we need machinery, as well as, side-by-side with that, a substructure. You do not need to be Einstein to understand, and we are certainly not advocating, that there should be machinery only at the top level with nothing underneath or machinery at local level with nothing on top. There has to be a strategic change in the British economy so that we can look at the real problems why our world export market share is diminishing. As my noble friend Lady Turner pointed out, if you are talking at least about 100 employees, you are not talking generally about SMEs, where I think the cut-off point is 250 in the BIS rules. We are talking about companies here that all need permanent machinery. As has already been stated, that is supposed to be consultation with a view to reaching agreement. That is a joke. We know that that is the way that the world is working at the moment. I strongly support my noble friend. We will get a majority on this because there is no one there to vote against it.
My Lords, this has been an interesting debate and I thank noble Lords for their contributions. I will start on a point of definition. The noble Lord, Lord Monks, raised the issue of whether “an undertaking” should be exchanged for “establishment”. The test of establishment is used in the European directive, which this legislation stems from. The test of undertaking is not used. Also, the case law dealing with the definition of establishment is still being developed and it would be very difficult and risky to try to define the term in legislation.
The Government believe that the changes in this order are needed to ensure that the legislation remains fit for purpose in today’s commercial environment. I want to start by echoing the words of the noble Lord, Lord Young of Norwood Green, and the noble Baroness, Lady Dean. I, too, acknowledge that job loss is a very serious matter and that every individual who loses their job deserves our sympathy. However, we need to balance the important right of the individual to be consulted with the need for employers to implement change efficiently and quickly to meet market pressures. We need also to address the needs of those employees who do not, in the end, lose their job but have had to live with the possibility that they will. Ultimately, the right of the employee to be consulted is not intended to prevent the employer from making necessary changes. For businesses to remain competitive in the global economy they must be able to respond swiftly to commercial pressures. The 90-day minimum period has been in place for some 40 years and it is right that we now make some changes.
A number of specific points have been raised and I will attempt to answer as many as I can. The noble Lord, Lord Young of Norwood Green, asked, “What about the workers?”. He said that they need a fair deal. I certainly agree with the latter point. Collective redundancy consultation affects a wide pool of employees, many of whom may remain secure in their jobs at the end of the process. The government consultation on the collective redundancy rules showed that concerns about those employees who ended up being made redundant could crowd out the interests of the remaining workforce. The changes to the collective redundancy rules are therefore focused on providing better flexibility so that where consultation can be concluded within 45 days employees gain certainty sooner. I would like to remind the noble Lord, Lord Monks, that, as I mentioned earlier, research shows that the vast majority of decisions between the employee and the employer have been made at between 30 and 45 days. We are not proposing 30 days; we are actually proposing 45 days, which is at the other end of that scale.
Change is also focused on improving the quality of consultation so that during consultation both the employer and employee representatives will be free to concentrate on important issues. These are also issues that have been raised by many noble Lords today and they are valid points.
For employers concerned about losing skilled staff due to uncertainty a shorter minimum period is likely to mean that it will be easier for employees to wait and see if they are personally affected and if so, how. The Government do not believe that the changes will affect how long those made redundant are out of work, or that employers will make different decisions about how many employees to make redundant. Employers do not take lightly the decision to make employees redundant. It has an impact on the morale and productivity of the workforce and means a loss of skills and capability.
The noble Lord, Lord Young, asked why a statutory code had been rejected, given the support for it. The Secondary Legislation Scrutiny Committee points out that a significant number of respondents to the government consultation which was alluded to earlier believed that guidance would need to have a statutory footing. Those respondents were replying to a question that received only 43 responses out of a total of 160 to the consultation overall. That a significant number of those 43 thought that guidance would need to be statutory is not, in our view, a conclusive outcome. The EU directive which the legislation implements leaves a number of provisions open to interpretation. These include the definition of an “establishment” in deciding whether the number of proposed redundancies meets thresholds for consultation, where the majority of respondents considered that a statutory definition was undesirable.
The noble Lord, Lord Young of Norwood Green, also noted that the Secondary Legislation Scrutiny Committee is sceptical that the changes will deliver the aims identified in the impact assessment, particularly in relation to increasing the likelihood of agreement between employers and employee representatives and also in terms of increasing employee buy-in to the decision-making process. The Secondary Legislation Scrutiny Committee also queries whether culture change to deliver quality consultation on collective redundancies can be effected without a statutory code of practice. The Government do not believe that the quality of consultation between an individual employer and their employee representative relies primarily on statutory requirements.
The noble Lord, Lord Young, separately brought up the need for guidance. We believe that the current guidance, which has not been reviewed for some time, is out of date. The Government have found that it is no longer fit for purpose and is negatively impacting the quality of consultations, which is an important point I made about the consultation process. Consultations are delayed because parties are not sure what procedure they should follow—instead of discussing the issues at hand they are sidetracked by ambiguous distractions, which reduces the quality of consultation and therefore the quality of the ultimate decision itself. The new guidance is intended to help employers better understand their obligations and when the consultation is genuinely complete, as well as to provide advice on what should be discussed.
Finally, the guidance will address a number of issues identified by government consultation where legislation is not appropriate and would not provide the necessary flexibility; for example, in relation to the question of what is an establishment for the purposes of collective redundancy consultation. That will depend on the circumstances and how individual businesses are operating in practice, so further definition in the law is not helpful to employees or employers.
The noble Lord, Lord Monks, argued that there was a straight transfer of costs from the employer to the employee, but—for fear of repeating myself—as I explained, the reference to the £252 million per annum does not mean that the individuals lose this money. This is the amount of money that the current employer will not pay to affected employees. In practice, employees will almost certainly move to other employment.
The noble Baroness, Lady Turner of Camden, was concerned that these changes would make it easier to dismiss employees. The proposed changes to the minimum period will not alter the requirement to consult or the emphasis on mitigating job losses. In addition, it is important to keep in mind that the 45 days will be a minimum period before any dismissals can take effect. This means that the process of consultation with staff may not take less time than it does currently, just that once consultation is concluded, employers do not face barriers, in terms of minimum time periods above 45 days, in going forward with their restructuring plans. The Government recognise concerns that less responsible employers may treat the time period as a maximum instead of a minimum. Neither the amount of compensation in a protective award nor the limitation period for bringing a claim in any employment tribunal for a protective award are being changed. The limitation period runs for up to three months after the last dismissal takes effect and can be longer if a tribunal decides that this is appropriate in the circumstances. The ACAS guidance will stress that consultation should continue beyond 45 days whenever necessary and would also highlight the importance of employers having good onward relations with employees’ representatives, such that no proposals should come as a surprise. I am sure that many noble Lords opposite would agree with that.
Time is running on and I should address the other points that have been raised by noble Lords by writing to them. Several other points were made but I would just like to conclude with some very specific points.
I thank the Minister for giving way; I will be brief. There was one point I raised in terms of the consultation as a whole, and the rationale behind what the Government are trying to do on this. I have seen what is stated in writing, but when only 160 people or organisations think it fit to respond to a consultation, and only 100 of these make any comment on reducing the period of 90 days, and of those only 19 suggest 45 days, is that not a rather shaky foundation for the Government to proceed on?
Consultation was just one part of the process, but this policy has been thought out—we believe, and we would say this, wouldn’t we? —extremely carefully. Having taken a lot of conversation wider than this particular consultation, we believe that this is the right way forward. I would remind your Lordships that we have also consulted businesses. In terms of the time, I repeat myself by saying that we have gone from the 90 down to the 45—it is not 90 to 30—because we have actually spoken to businesses and other organisations to get the information that we need.
I would like to conclude by saying that between 50% and 80% of employees subject to collective consultation are not actually made redundant. All are kept in suspense as they wait to find out who stays and who goes. If people do become unemployed, most leave unemployment quickly. Of those making a new jobseeker’s allowance claim, over 50% have left the jobseeker’s allowance within three months, and over 70% have left within six months.
Finally, union respondents did not provide any proof that reducing the minimum period would cause problems. Where anecdotal evidence was provided, it suggested that meaningful consultation can help reduce the number of redundancies, but these are rarely significant in number. I commend the order to the House.
My Lords, I thank the Minister for his response, even if I did not agree with the tenor of it, or the basis on which they have decided on this legislation. I thank all my noble friends and colleagues who have participated in this debate. They have raised a number of interesting points. As I think my noble friend Lord Monks made clear, this is not going to help industrial partnership or improve productivity. I do not think that the Minister has addressed the problem that the noble Lord, Lord Monks, drew to his attention about the question of establishments and where there is still large-scale redundancy taking place in the organisation as a whole.
My noble friend Lady Dean raised a couple of important points about the fact that the conditions, certainly for senior management, are often vastly different from those for the workforce as a whole. They have a significantly longer period to find alternative employment. As she rightly pointed out, this is taking rights away from workers, and although we heard a lot of talk from the Minister about employers and consultation, he did not really address the point about the bad employers who do not engage in any meaningful consultation.
My noble friend Lord Watson made a point that perhaps I did not stress enough when I pointed out—in response to the Minister, who said that workers would quickly find alternative employment—that we only wish that were the case. I think that he acknowledged in his reply that it would not necessarily be as easy as that. My noble friend Lord Watson pointed out that while they may move to alternative employment, it is often for significantly less pay and inferior conditions. It is not a particularly good climate at the moment to seek alternative employment.
My noble friend Lord Lea has pointed out that the cost of this falls on the workers. It means that their pay for those 45 weeks will be significantly reduced. His point about the importance of the machinery of consultation, which is much more evident in other countries in Europe, is an exceedingly valid one. The Minister talked about the importance of companies acting quickly. I would say to him that it is not about them acting quickly; it is about them having a strategic plan for their business that ensures that it survives. As we have seen so often in recent large-scale redundancies in the high street, they have not actually had a survival plan; HMV is the example that springs to mind. It is not the workers’ fault in these situations; it is not that they have not been prepared to contribute to the company in terms of ideas or loyal working—that is not the cause of the problem.
The Minister says that those made redundant will be a minority, and that crowds out the interests of the remaining workforce. Those who remain in employment are one thing; our sympathies are more with those who will have to look for alternative employment. We do not think it is a question of people being kept in suspense; it is a question of being able to have meaningful consultation and explore the alternatives that my noble friend Lord Monks referred to, whether it is retraining, redeployment or restructuring of the company. When it comes to certainty, there is one thing you gain in these situations: the certainty that significant numbers are going to be made redundant, and the only uncertainty is whether you will be able to get significant alternative employment.
As a number of my noble friends have said, this proposal by the Government is not going to improve the overall situation, in terms of either productivity in companies or stimulating growth of employment. Nevertheless, although I am not by any means satisfied by the Government’s response, and I hope that the Minister is going to reply in detail to some of the questions, I withdraw the amendment.
Amendment to the Motion withdrawn.