Orders of the Day — Employment Bill

House of Commons, 12 February 2002.

New Clause 6 — Complaints about grievances

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

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

Michael Martin (Speaker, Glasgow Springburn)

With this it will be convenient to discuss the following: Amendment (a) to the proposed new clause, in line 43, leave out subsections (8) to (10).

Government amendments Nos. 47, 48 and 52.

Government new schedule 1—Tribunal jurisdictions to which section [Complaints about grievances] applies.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

Clause 33 contains general powers for the Secretary of State to introduce regulations preventing complaints from being presented to tribunals before all or part of the relevant statutory procedures have been followed. It is an important clause that is designed to ensure that complaints are first raised internally before being taken to a tribunal. It also has implications for access to the tribunal system.

In Committee, I explained in detail how we planned to use these powers. I explained how we intended to set several simple criteria that tribunals would apply when deciding whether to admit a complaint. Given the issue's importance, I consider, on reflection, that there are advantages to providing more detail about the policy in primary legislation, which should narrow the role for secondary legislation. I am sure that hon. Members will appreciate the benefits of including more detail in the Bill.

Let me proceed by describing how the new clause works. As I said, its main purpose is to set new admissibility criteria that tribunals will apply to certain categories of complaints brought by employees. The criteria are set out in subsections (2), (3) and (4) of the new clause. I should mention first that the criteria would apply only in relation to tribunal complaints arising out of grievances. They would have no application to complaints arising out of disciplinary action.

There are three criteria. First, the employee must have completed step one of the statutory grievance procedure. That means that the employee must have set out the grievance in writing and sent a copy to the employer. Secondly, 28 days or more must have passed since step one had been completed. That minimum 28-day period gives time for the parties to discuss the grievance and try to resolve the problem. The third criterion deals with the special case in which an employee may have failed to meet the other criteria with an initial application. For example, the employee may have failed to send the step one letter to the employer. We do not want to deny the employee access to the tribunals in such circumstances. Instead, the employee would be given another chance to submit a valid application. That would often involve extending the normal period for making applications to tribunals, using the powers under clause 32.

We want to ensure, however, that the grievance is quickly brought to the employer's attention during any extended period. That should ensure that recollection of the events surrounding the grievance remains fresh. We therefore stipulate in subsection (4) that the step one action must have been completed within a period of no more than a month after the normal period for making applications to tribunals has ended. For most jurisdictions, the normal period for bringing complaints is three months. For those jurisdictions, the third criterion means that the step one action needs to be taken within four months of the event that gave rise to the grievance.

New schedule 1 to the new clause lists the jurisdictions to which the admissibility regime was intended to apply. However, the criteria will not apply to unfair dismissal, other than to cases involving constructive dismissal, because dismissal is a disciplinary matter. We also think that with the exception of constructive dismissal, the criteria should not apply to ex-employees. That exclusion will be covered by regulations under subsection (7) of the new clause. The regulations will also define those particular cases—extreme bullying and the threat of violence—in which an employee should not be obliged to complete even step one of the grievance procedure.

Philip Hammond (Conservative, Runnymede and Weybridge)

Why is it unreasonable for an employee to complete step one even in such extreme cases? After all, it only involves writing a letter, which is hardly intimidating in any circumstances.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

It depends on the circumstances. It would be wrong to insist that an employee write to an employer in cases involving, for instance, serious violence against an employee by an employer or racial or sexual harassment. We should not force the employee in those circumstances to open up a dialogue with the employer. However, that will be dealt with in regulations and those are subject to consultation.

The criteria are simple to understand and it should be relatively easy for tribunals and the parties to ascertain whether they have been met. There is limited scope for parties to dispute whether a case should be admitted. In most cases, there will be no need for tribunals to hold preliminary hearings to assess compliance.

Subsection (8) of the new clause gives the Secretary of State an order-making power to change the admissibility criteria if necessary. It is prudent to take that power in case experience shows that the criteria need to be amended. Subsection (9) requires the Secretary of State to consult the Advisory, Conciliation and Arbitration Service before exercising the power. The power also allows us to extend the regime to non-employees if necessary.

Amendments Nos. 47 and 48 deal with consequential matters. Amendment No. 47 ensures that clause 32, which is on time limits, includes a necessary reference to the new schedule. Amendment No. 48 deletes clause 33 and amendment No. 52 makes a consequential change to clause 51.

The group of amendments greatly improves the Bill and makes our intentions plain. It constructs a workable and sensible admissibility regime to ensure that most grievances are aired before they are taken to tribunals. The regulations will build in safeguards to ensure access to justice.

Philip Hammond (Conservative, Runnymede and Weybridge)

I declare an interest as an employer. I hope that we will hear very full declarations of interest from hon. Members on both sides of the House either as employers or as recipients of the largesse of trade unions, in the form of sponsorship of their constituency parties.

As the Minister said, the purpose of the new clause is to include in the Bill—

Tony Lloyd (Labour, Manchester Central)

On a point of order, Mr. Speaker. The hon. Gentleman invites hon. Members to declare an interest. That is a reasonable request and I am a member of a trade union. However, as there is no such thing as sponsorship, will you clarify whether it is necessary for members of trade unions to declare an interest?

Michael Martin (Speaker, Glasgow Springburn)

If a matter is recorded in the register, it should be declared. If it is not, it is up to hon. Members to decide what to do. I hope that that helps the hon. Gentleman.

Philip Hammond (Conservative, Runnymede and Weybridge)

Thank you for that ruling, Mr. Speaker. As I understand it, following recent clarifications of the rules, it is not necessary for hon. Members to list sponsorship of their constituency parties in the register. However, as we will discuss amendments and new clauses that are a clear and well established part of the Trades Union Congress agenda, it will help people who are interested in the debate to know whether the hon. Members who propose them—

Michael Martin (Speaker, Glasgow Springburn)

Order. When those matters are before the House, hon. Members will decide what to do. At the moment, we are debating new clause 6 and the associated amendments, and the hon. Gentleman should stick to that subject.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am grateful to you, as ever, Mr. Speaker, for your guidance.

As the Minister advised the House, new clause 6 includes in the Bill measures that would otherwise have been provided in regulations under clause 33, which is now deleted. It is interesting that the Government have chosen to include in the Bill detailed procedures that would otherwise have been introduced by regulation. Many clauses leave matters to be disposed of by regulation, and the Government have chosen this one clause for special treatment—removing the regulation- making power and adding a fairly lengthy new clause that spells out in detail the procedure to be followed.

Interestingly, in its briefing to members of the Standing Committee the TUC suggested that it expected the Government to table amendments to clause 33. Conservative Members were somewhat surprised that no such amendments were forthcoming in Committee, but it seems that the TUC was ahead of Parliament in knowing the Government's intentions, and their agenda—or perhaps I should say the TUC's agenda—has now been revealed. In Committee, Conservative and Liberal Democrat Members urged the Government to reveal the details of the regulations that would arise from many clauses; so will the Minister explain why the provisions in clause 33 need to be spelled out while others do not?

Grouped with the new clause is new schedule 1, which is an interesting device because, subject to a minor amendment that the Government will move later, it is identical to schedule 3. The only plausible explanation is that the Government intend, at some point in the future, to amend one or other of the schedules through regulation so that different jurisdictions apply to two different parts of the Bill. That is an unsatisfactory way for a Government to proceed.

The original decision—that it would not be necessary for an employee to have gone through the entire statutory grievance procedure before being able to bring a case before a tribunal—was a concession to lobbying from the trade union movement. That is clear from the briefing that the TUC put out for Second Reading and to the Committee. Now, an employee will have had only to write a letter to his employer outlining his grievance and then to wait 28 days before instigating proceedings in a tribunal. It is not clear to Conservative Members that that will have the effect claimed by the Government of significantly reducing the number of cases that come before tribunals.

I should like to probe the Minister a little further on the provision in the new clause for the Secretary of State, by regulation, to exclude certain classes of case from the requirement to have taken the first step. As I told the House in my intervention on the Minister, the first step consists only of writing a letter. I find it difficult to imagine a case in which the obligation to write a letter to one's employer outlining the grievance was so traumatic that it would be better to provide that the employee shall go straight to an employment tribunal.

I can understand how the provision got into the Bill. The original thinking was that the complete statutory procedure would have to be gone through before recourse to an employment tribunal, so there would of course be cases in which a face-to-face confrontation between employer and employee would be inappropriate—for example, in cases involving violence or allegations of sexual harassment. However, I am unable to think of a single substantial class of case in which it would be inappropriate to impose on the employee a requirement only to write a letter. I shall be grateful if the Minister, using the considerable resources of ingenuity available to him, comes up with at least one convincing example, so that the House can understand the need for the power to exclude.

The matter is causing employers' organisations some degree of concern. That concern flows from a fact that will be a recurring theme this afternoon: that the Government are under obvious pressure from trade unions to concede yet more. Every time the Secretary of State is given a power by regulation to concede the agenda of the TUC, there is a danger that further concessions will be made in the wider horse trading that apparently goes on between the Government and the TUC.

The Opposition are concerned that a loophole is built into new clause 6 and that the Bill including new clause 6 will not have the impact that the Government desire, in terms of reducing the number of tribunal cases. We are aware of the need to monitor the effectiveness of the provisions to ensure that they deliver the benefit for which the Government, employers and responsible trade unions hope—of reducing the number of cases that go to employment tribunals without those involved even embarking on existing in-work procedures for dispute resolution.

I wish to draw the House's attention to new clause 6(6). The procedure outlined therein departs from, or goes beyond, what the Minister described to the Committee. Subsection (6)(a) is unlikely to apply: it is unlikely that an employee will bring to a tribunal a case in which the information that he lays is such as to disqualify him from bringing it on the face of the facts. Subsection (6)(b), if I understand the provision correctly, places on the employer the responsibility for drawing the employment tribunal's attention to the fact that the employee has failed to go through the correct procedures under the statutory procedure laid down in schedule 2.

Will the Minister clarify whether an employer's failure to draw the tribunal's attention at the appropriate point to the failure of the employee to exhaust, or at least embark on, the statutory procedure will preclude that matter being dealt with at a later stage? In other words, if the employer—perhaps through ignorance: he may be a small business man who is unfamiliar with the now increasingly complex body of law—fails to draw the tribunal's attention at the appropriate point during consideration of procedural matters to the fact that the employee has not written the requisite letter and waited the requisite 28 days, or whatever period regulations specify, will it be impossible for a subsequent finding against the employer to be set aside on the grounds that the employee did not follow the correct procedure? I hope that the Minister will clarify that. It would be a further burden on employers if at that stage they had to identify the problem, so as to avoid being subjected to a decision of wrongfulness in the light of the facts.

Amendment No. 47 sets out a power to vary new schedule 1 from time to time. Perhaps the Minister will tell us what he has in mind in varying the schedule. He must have something in mind; otherwise there would be no point in introducing a new schedule that is identical to a schedule that is already in the Bill. It is clear that the Minister intends to introduce changes at some stage.

Amendment (a) seeks to delete subsections (8) to (10). The subsections give the Secretary of State a power to amend the grounds for exclusions of a claim. The Government appear to be seeking to have their cake and eat it. On the one hand, they want to put the detailed provision of the regulations in the Bill. Presumably they have been told to do so by the TUC. On the other hand, they want to retain a power fundamentally to amend, by changing the grounds on which claims to a tribunal would be excluded by regulation. Surely that is not the appropriate way in which to proceed. Having decided not to use regulation and to set out provisions in the Bill, the Government should get things right the first time. They should stick to their guns and exclude subsection (8).

Subsections (9) and (10) would be excluded by the amendment, because they depend on subsection (8). I look forward with interest to the Minister's response.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I, too, should like to refer to a reference in the Register of Members' Interests. I am the managing director of a company, an interest to which I have referred before. I naturally have an interest in these matters.

I am pleased that the Government have decided to remove the controversial clause 33 and to replace it with a clause that seems far more sensible and will add greater clarity, which is what we were looking for. The Liberal Democrats tabled an amendment to clause 33 before we embarked on Report. We were concerned that the clause, as it stood, could act as a barrier to justice for tribunal applicants with valid cases.

We are concerned that it would be inappropriate to rule out claims altogether where they concern sexual harassment or racial abuse, for example. The hon. Member for Runnymede and Weybridge (Mr. Hammond) referred to the issue and wanted clarification, which I expect the Minister will give.

There may be cases where a woman is being exposed to sexual harassment or intimidation of some sort. She might feel so nervous and concerned that even sending a letter could pose a problem. If violence could be involved, for example, she might fear some form of retribution. She might be concerned about stirring things up. I am sure that the Minister will have some general thoughts about that.

The Minister has said that applicants will be required to send only written notice of the grievance to the employer and wait 28 days for a response before an application to a tribunal can be made. That is fair enough. I acknowledge that it would be reasonable to expect most employees to take the first step, but I still have concerns. That is why we tabled an amendment.

In Committee, the Minister seemed to agree with me when he said:

"We recognise, however, that there will be rare cases in which the threat of violence or serious personal harassment may make it dangerous or intimidating for applicants to take step one action before making an application."—[Official Report, Standing Committee F, 18 December 2001; c. 196.]

I am sure that the Minister will explain what he meant by that and perhaps provide clarification. In addition, as the Law Society pointed out, the national minimum wage enforcement agency does not require workers who are not receiving the minimum wage to take up matters with their employer first, which might serve to increase their vulnerability. Yet

"detriment in relation to national minimum wage"

is apparently still covered by the new clause; section 24 of the National Minimum Wage Act 1998 is cited in the new schedule.

How will new clause 6 operate in conjunction with other statutory rights, such as the right to paid leave? Will the Minister repeat the assurance that he gave on Second Reading on the original clause 33 and clarify the application of new clause 6 to other measures? Can he explain who will be in a position to decide whether or not the exception is applicable, and whether applicants have a legitimate reason for taking action? Will that be for the tribunal to determine at a preliminary hearing and would it not cause further complications in tribunal proceedings? In such cases, will the second chance, which will allow the applicant to go back and complete the grievance procedure—referred to by the Minister on 18 December in Committee—apply to new clause 6? If so, does the Minister share the Law Society's concerns that such an action may sour relations between employees and employers?

Finally, can the Minister provide an assurance that applicants who do not give the correct legal label to a grievance in their written statement will not be prevented from pursuing their claim in an employment tribunal? How will that influence what is brought up in the original written statement, and how much influence will the written statement have on proceedings at the later tribunal? I look forward to the Minister's reply, but generally we welcome the fact that the problem raised in Committee has been addressed.

Mark Prisk (Conservative, Hertford and Stortford)

Radical reform of employment tribunals is long overdue. Talking to the Federation of Small Businesses, the Institute of Directors and the CBI, I have learned that there has been an extraordinary increase in the number of cases taken to employment tribunals. In just 10 years, the figure has risen by 300 per cent., which cannot be good for industrial relations or the economy as a whole.

Rob Marris (Labour, Wolverhampton South West)

Would the hon. Gentleman care to tell the House about the decline in the number of days lost through strikes in the same 10-year period?

Mark Prisk (Conservative, Hertford and Stortford)

I am not in a position to deal with that claim. I am concerned with the way in which industrial relations will work from now on. As an MP with a legal background, I am sure that the hon. Gentleman may like to add to his point later.

Mark Simmonds (Conservative, Boston and Skegness)

Perhaps I can help my hon. Friend and, through him, the hon. Member for Wolverhampton, South-West (Rob Marris). In the financial year 1997–98, 254,000 days were lost as a result of strike action. In the first 10 months of last year, 325,000 days were lost, which is a significant increase since the Labour party came to power.

Mark Prisk (Conservative, Hertford and Stortford)

I am grateful to my hon. Friend, not least in helping me to channel that information to the House. The fact that 130,000 cases were taken to employment tribunals in 2000 clearly needs to be addressed; that is the principle on which I welcome the Bill's aspirations. It is clear from the CBI and the Institute of Directors that the cost to business of those cases is now about £633 million. Beyond the cost alone, it cannot be right that cases are immediately brought to court; they should be dealt with in the workplace.

New clause 6 tries to rebalance the responsibilities in the workplace, and for that reason it is welcome, in principle. The Bill sets out clear and, in some cases, quite prescriptive requirements on employers for dealing with complaints, grievances and so on, as the Minister described at length on Second Reading and in Committee. It seems only right, therefore, that we should require employees equally to accept responsibility to begin a complaint or a grievance in the workplace, and not immediately to run to the courts.

I welcome the requirement that the employee should first write a letter—that seems common sense—and that there should be 28-day waiting period, which also makes sense. Before the Minister thinks that I am going too soft, however, I shall raise one or two concerns. My first relates to new clause 6 because the Secretary of State still has reserved powers to exclude certain individuals. I reiterate the concern expressed by the Federation of Small Businesses and the Institute of Directors that that power should not be overused. I hope that the Minister will reassure me and those employers representatives that the power will not be overexercised.

My second concern is that although responsibilities are being introduced for employees in an attempt to balance the responsibilities already sought for employers, those seem a little inadequate. There is merely a requirement that the employee should write a letter, as my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) rightly pointed out. It is not a requirement to meet, to sit down and to have an intelligent and reasonable dialogue to sort out the differences. The Bill is prescriptive in the requirements that it places on employers to act, yet the Government seem reluctant to introduce similarly prescriptive measures for employees. It is that slight imbalance which worries me.

If it is right to set out three steps for employers, surely it is right to set out at least two steps—to write and to meet—for employees. Although I understand the argument of the hon. Member for Weston-super-Mare (Brian Cotter) that in extreme cases individual members of an organisation might not want a face-to-face meeting, that is a rare example. Wherever possible, we should encourage employees to write, to meet and to have a dialogue.

Kevan Jones (Labour, North Durham)

As a full-time trade union official until last June, it is clear to me that the hon. Gentleman does not understand the process. If the employee wrote a letter and was then invited to a disciplinary hearing, and did not attend, and if the case reached an industrial tribunal, it would be deemed unfair anyway, so I do not understand where the hon. Gentleman is coming from.

Mark Prisk (Conservative, Hertford and Stortford)

The purpose of the new clause is to encourage employees to take responsibility. I do not claim to be a lawyer, but I do claim to have worked in small businesses.

Philip Hammond (Conservative, Runnymede and Weybridge)

Perhaps my hon. Friend should point out that it is the hon. Member for North Durham (Mr. Jones) who does not understand what we are talking about. We are dealing with grievances, not discipline.

Mark Prisk (Conservative, Hertford and Stortford)

I was too polite to do that, and I shall try to maintain that air of civility. My hon. Friend is right. Perhaps the hon. Member for North Durham will bear my hon. Friend's comments in mind.

There seems to be a strange omission from the Bill. It is fine to introduce a clearly defined and prescriptive set of proposals for employers, but there is a hesitancy to do the same with regard to employees. It would be helpful if the Minister could explain to the House why that omission exists. In conclusion, I welcome the purpose behind the new clause. What concerns me is that it seems, unusually for the Minister, to lack the confidence to see that through.

Mark Simmonds (Conservative, Boston and Skegness)

I, too, begin by declaring an interest: I am an employer in and outside the House.

I hope that the Government share my view that the main purpose of new clause 6 is to reduce the number of cases that go to a tribunal. I welcome more detailed provision for that in the Bill rather than through regulations. I should like the Minister to offer a cast-iron guarantee or to express belief that the new clause will reduce the number of applications that go to tribunals.

Many employer organisations share my deep concern that the new clause will not have the impact that I described, and that an increasing number of cases will continue to go to appeals tribunals. The figures are staggering. In 1988–89, just over 29,000 tribunal applications were submitted; in 1997–98, the figure exceeded 80,000; in 2000–01, it was comfortably over 130,000. Clearly, the number of applications to tribunals has increased dramatically. I believe that that is a direct result of many policies that the Government have introduced since they came to power in 1997.

Norman Lamb (Liberal Democrat, North Norfolk)

Does the hon. Gentleman agree that the number of new rights for employees expanded considerably when the Conservative Government were in power? That led to increases in the number of claims that were taken to tribunals.

Mark Simmonds (Conservative, Boston and Skegness)

I am not arguing against employees' rights. There is a balance to be struck between employees' rights and employers' responsibilities. However, since 1997, matters have accelerated and employment relations have been damaged. Personnel Today stated that

"the raft of legislative changes brought in under the Employment Relations Act 1999 is the chief factor behind the big rise in tribunal claims reported by ACAS".

Nothing in the new clause will stop that acceleration.

I generally support the clause, but I share the concerns of my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) about the open-ended list of exceptions. I should like the Minister to show us that our anxieties are not well founded.

I would go slightly further than my hon. Friend on subsection (6)(a). I cannot foresee any circumstances in connection with bringing proceedings in which an employee would inform a tribunal that he or she had not complied with the procedure, thereby barring themselves from obtaining a tribunal application. The provision is therefore superfluous.

The Minister did not enjoy receiving the letter from Judge Prophet; indeed, he provided a robust and speedy response, which he copied to us all for which I am grateful. He made a pertinent point about an employee who is dismissed and therefore entitled to redundancy payment. If the employer refuses to pay, how does the internal grievance procedure apply to someone who is no longer an employee? Is such a case one of the exceptions that the Minister proposes to make through regulations under the new clause, or will the employee have to write to the employer to express his grievance after he has been made redundant?

Joan Walley (Labour, Stoke-on-Trent North)

I shall speak briefly. I declare that I am a member of Unison and declare my constituency arrangements: my constituency Labour party has an agreement with the Union of Construction Allied Trades and Technicians.

I want to give credit to the Minister for having taken account of the representations made to him not only in Committee but on behalf of people in constituencies such as mine, who had a great fear that, if clause 33 as originally drafted had stood part of the legislation, people would not have been able to take their case straight to a tribunal, and would have been excluded. I wanted a great deal of consultation about the regulations that would have come into force if the original clause 33 had remained part of the Bill.

I pay tribute to my hon. Friend for the attention that he has paid to those of us who had concerns about this aspect of admissibility in respect of clause 33. He has been kind enough to listen to me, and said that this provision will now mean that people will not be excluded. I have listened to some of the comments made by Conservative Members, particularly in relation to people who have lost their jobs. The new clause, assuming that it will stand part of the Bill without being altered to a significant extent elsewhere—

Philip Hammond (Conservative, Runnymede and Weybridge)

Several hon. Members have attempted to draw the Minister on which classes of people are to be excluded from this provision, so enabling them to apply to a tribunal without going through the procedures. If the hon. Lady has any inside information on that as a result of her correspondence with the Minister and her Labour party channels, would she be good enough to share it with us?

Joan Walley (Labour, Stoke-on-Trent North)

I would be very happy to place in the Library a copy of the Minister's response to me. If, however, the hon. Gentleman thinks that I have any prior knowledge of this matter, he is mistaken. I am simply one of 659 Members who take a keen interest in the Bill.

My main concern about the original clause 33 related to cases of bullying, for example, in which people might feel that they could not raise the matter with their employer before taking it to an employment tribunal for fear of harassment. I was worried that such people might genuinely be prevented from taking their case forward, and the new clause takes considerable account of the representations that have been made on that issue.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am genuinely puzzled. The hon. Lady is outlining a scenario in which someone would be afraid to write a letter to their employer in case they suffered harassment for doing so, yet not be afraid of suffering harassment for applying to an employment tribunal. Surely the two are entirely comparable in terms of the risk to which the employee is exposed. Why is writing a letter more risky than applying to an employment tribunal?

Joan Walley (Labour, Stoke-on-Trent North)

We are talking about a question of balance. The Government are absolutely right to concentrate on ensuring that the resolution of disputes can take place first and foremost in the workplace, and that the process should not have to go all the way to an employment tribunal. I accept that that is the Government's intention, and that is what I want to happen. I can, however, envisage certain scenarios in which people who had suffered sexual harassment or intimidation, for example, or who had been bullied, could have been prevented from taking their case forward under the original clause 33. I therefore want to record my praise for the Minister's having taken account of those concerns.

I have one further point, to which I hope my hon. Friend will reply. A slightly more complex set of arrangements is now being proposed, and people who cannot reach an employment tribunal in the first instance might be able to come back and make a second application. Perhaps organisations such as the citizens advice bureaux could find out how they might be able to advise and represent such people, because I would not want them to be excluded from access to the kind of representation that they might now need to reach an employment tribunal.

George Osborne (Conservative, Tatton)

I shall speak briefly to new clause 6 and, particularly, to the amendment tabled by my hon. Friends. I want to begin by saying how much I enjoyed serving on the Standing Committee. It was a pleasure to watch two great professionals, the Minister for Employment and the Regions, the hon. Member for Hull, West and Hessle (Alan Johnson), and my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) proceed with the business. It was noticeable that, when junior Ministers took the place of the Minister of State, the standard of debate dropped considerably. I have probably done for the Minister's career, but there we go.

Like other Opposition Members, in general I welcome the fact that the Government are including in legislation what would otherwise be dealt with through statutory instruments and regulations. That is a good idea in principle, and I also welcome the attempt to require employees to go through a basic minimum procedure before heading straight for the employment tribunal. However, like other Opposition Members, I am extremely concerned to know the categories of people that might be excluded from that procedure.

Even those who have suffered the grossest sexual or racial abuse in the workplace should at least be able to record the incident on a piece of paper. Indeed, in Committee we discussed the benefit of conducting more of the procedure in writing, and I remember with fondness that the hon. Member for Wolverhampton, South-West (Rob Marris) supported us on that point. His support was welcome and it certainly cheered up a rather dull day.

I reinforce the point made by my hon. Friend the Member for Boston and Skegness (Mr. Simmonds). I assume that the purpose of new clause 6 and other such provisions is to reduce the number of cases going to employment tribunals. Indeed, the Government's regulatory impact assessment suggests that the Bill could reduce them by between 30,000 and 40,000. That would be greatly welcomed by Members on both sides of the House if it proves true, but, like many other people and outside organisations, I have my doubts.

The Bill will introduce a load of new employment rights, including paternity rights and rights for adoptive parents, which I welcome, but it will also introduce new rights for union learning representatives and a complicated new power relating to flexible working, which I do not welcome. I would not be at all surprised if the legislation increased the numbers going to employment tribunals, and it would be interesting to have on record the Minister's assessment of its likely impact on those numbers.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

The hon. Member for Runnymede and Weybridge (Mr. Hammond) made the usual pantomime points about Trades Union Congress briefings, and so on. One minute, we in the Department of Trade and Industry are accused of being the provisional wing of the Confederation of British Industry, and the next he redresses the balance by saying that we take all our instructions from the TUC. Of course, we do neither. We listen carefully to both sides, and unlike the previous Conservative Government, who seemed to have an aversion to free and independent trade unions, we think that the trade union voice is important. We have listened to it carefully, but no more so than to other voices.

On admissibility, our response to "Routes to Resolution", which was published almost three months ago, made perfectly clear our belief that the provision should apply to grievances only. I shall deal with some questions that were asked on that point, particularly by the hon. Member for Hertford and Stortford (Mr. Prisk), but I should point out that, as the response to "Routes to Resolution" made clear, there was no debate about whether we would apply admissibility simply to step one of the grievance procedure.

In Committee, the debate concerned whether the provision should be included in the Bill or in regulations and whether clause 33 was drawn too widely in terms of its operation. Our view was that, on balance, it would help the House if we amended the Bill to clarify the admissibility clause, thereby preventing any hares from running in respect of its use and application.

The hon. Member for Runnymede and Weybridge asked why we proposed to include two identical schedules. It was a prudent move. New schedule 1 is indeed identical to schedule 3, but there may be occasions in the future—although we do not envisage them now—when we want different jurisdictions to apply to the very new admissibility clause and to the measures in schedule 3. The two schedules are identical, but they may not always be, although we have no plans to change anything at this stage.

Philip Hammond (Conservative, Runnymede and Weybridge)

Is the Minister seriously saying that he is including two identical schedules in case he wants to change one of them at some time in the future, but that he has absolutely no intention of doing so? That has staggering implications. Why not include two of every clause and every schedule in every Bill, just in case the Government want to change one of them by regulation at some future stage?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

We will consider that suggestion carefully. All I know at this stage is that we are moving into uncharted territory in respect of admissibility, and I think it prudent to ensure that the jurisdictions are separated.

The hon. Gentleman referred to subsection (6)(b), and the employer's challenge to the making of admissibility criteria at an early stage. We consider that reasonable. We do not want the questions to hang around until there is a full hearing at an employment tribunal; that would mean devoting extra time and resources to cases that would otherwise be inadmissible. Our approach is workable, and we think that it will ensure that preliminary issues are handled expeditiously.

The hon. Gentleman made a point about the step one letter that was made consistently by Opposition Members. They omitted one important consideration. Step one involves not just writing to the employer, but allowing a period of 28 days. Although there is no requirement for a hearing in new clause 6, we think that the 28-day period would enable employee and employer to discuss the grievance at the heart of the problem.

We intend the exceptions to be genuine exceptions. We want as few as possible, but we think it advisable for them to be made in some rare circumstances. It must be beyond doubt that the time will be used productively, and the letter must concern a case of serious sexual harassment, violence or intimidation. It must be clear that there is no possibility of the issue being resolved in 28 days, because the trust and the relationship have broken down completely—although the employee is still in the workplace. We will regulate for such exceptions, and consult on them.

Michael Weir (Scottish National Party, Angus)

How would this statutory procedure sit with companies' internal grievance procedures? I know from my long experience as a lawyer that when cases reach tribunals there is often a lot of discussion about the fairness of the internal procedure that was carried out initially. Would the statutory procedure override existing grievance procedures?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

We seem to have moved on to disciplinary procedures. Given that an employee was allowed to be informed of the so-called offence that had been committed, to discuss it with the employer—unless it was an offence of gross misconduct—and was granted the right of appeal, internal disciplinary and grievance procedures would not breach the basic three and two-step criteria.

That brings me to a point raised by several hon. Members, including the hon. Members for Hertford and Stortford and for Boston and Skegness (Mr. Simmonds). They ask what effect the new clause will have and say that it does not go far enough. At present, 6 million workers have no recourse to any grievance or disciplinary procedures in the workplace. Some 600,000 workplaces have no procedures, and a further 340,000 have substandard procedures.

Mark Simmonds (Conservative, Boston and Skegness)

Does the Minister accept that a large proportion of those workplaces have voluntary systems that work very successfully?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I do not know what the hon. Gentleman means by voluntary systems. If they are voluntary, they are not recorded, and the employee does not know that he or she has recourse to them. I am referring to workplaces where there is no procedure whatever. There are reports in today's newspapers of an horrific case of someone who was dismissed and had no right of appeal because there was no internal procedure to allow that.

I fully accept that people are more aware of their rights. Thanks to this Government, they have more rights to be aware of—we do not apologise for that. Given article 13, which outlaws discrimination on grounds of sexual orientation and age, it is almost inconceivable that the number of tribunal cases will not rise. However, we estimate that between 30,000 and 40,000 cases that go to employment tribunals could be resolved in the workplace if the procedure existed to deal with complaints or grievances there.

Mark Field (Conservative, Cities of London and Westminster)

I appreciate what the Minister says. However, the acid test of the Bill in terms of improving employees' rights will be if more cases go before employment tribunals. My concern is that that will be seen as a mark of success. I ran a small business before coming to this place, and I am not sure what our procedures were. They were certainly not written down in a massive booklet—not that there was any problem in that regard, I hasten to add. I may well have qualified as one of the 600,000 employers mentioned. There has been increasing awareness of employee rights, with more people rushing to use employment tribunals as a first rather than a last resort. That has to be the underlying concern, given all the waste that would result for business.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I do not know about people rushing to use employment tribunals as a first recourse. However, people who have no other outlet to resolve their problem will go to an employment tribunal and slap in their IT 1.

Business organisations, including the Confederation of British Industry and the Federation of Small Businesses, support this simple fact: having a basic procedure in the workplace must be preferable to airing problems at a full-blown employment tribunal.

Philip Hammond (Conservative, Runnymede and Weybridge)

Let me go back five minutes. If someone submits his grievance in writing within 28 days—I am not talking about an exception case in which harassment or something similar has taken place—and the employer suggests meeting to sort it out, the employee is entitled to ignore that and go ploughing off to the tribunal anyway. Will the Minister confirm that the Government's original intention was that the entire statutory procedure should be exhausted before there was access to a tribunal? Will he confirm that he has backed down, watering down the proposals during the Bill's consideration to the point where an employee can ignore the employer offering a grievance meeting and go straight to a tribunal?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

No. The hon. Gentleman is entirely wrong. It was never our intention that every case must exhaust the discipline and grievance procedure prior to being allowed into the employment tribunal procedure. The hon. Gentleman should read our response to the "Routes to Resolution" document published last November, in which we talked about grievances.

The other point being missed is mitigation. Elsewhere in the Bill there is the right for an employment tribunal to take action if it believes that either the employee or the employer has not followed the procedures. First, if the employer has not carried out the basic three-step procedure and there has been a dismissal, that dismissal is automatically deemed unfair. Secondly, if the employee or the employer, without good reason—one of the exceptions such as racial harassment or bullying, for example—did not go through the full procedure but came to the tribunal before completing stage two or three, the award can be mitigated by between 10 and 50 per cent. That is a salutary and sobering prospect for people who may be tempted to think, "The procedure's there, but I'll simply ignore it."

This is a crucial point, fundamental to human rights. As things stand, someone can simply sling in an IT 1 and there are no procedures in the workplace. Should we move from that to a procedure in which people are locked out of the system altogether and prevented from seeking justice at an employment tribunal?

We took that question extremely seriously, and business supports us here. For example, there is the CBI document—although perhaps some Conservative Members now consider the CBI to be the provisional wing of the DTI. The CBI said that it warmly welcomed proposals that would require employees to raise a problem with their employer. Most business people said that for them, the important thing was not to hear about a grievance in a courtroom but, that if someone still in their employment was worried, perhaps after having been passed over for promotion, they would talk to them first and air the grievance. That view has been reflected in new clause 6.

The hon. Member for Weston-super-Mare (Brian Cotter), whose general support I appreciate—

Philip Hammond (Conservative, Runnymede and Weybridge)

The big tent.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

For a moment I thought that the hon. Gentleman was insulting me; I think that my suit fits rather well.

The hon. Member for Weston-super-Mare asked how relevant the step one letter was to the tribunal's decision on the substance of the case. The letter will be relevant to the tribunal's decision on whether the complaint is covered by the grievance that the employee raised, but not to the decision on the substance of the complaint.

The hon. Gentleman also asked who would decide whether an exemption should apply. The tribunal will decide. I agree that that might require it to hold preliminary hearings, but we think that if we get the regulations right and the exceptions are clear, there will be less need for that to happen.

The hon. Member for Hertford and Stortford asked why the new clause did not require the employee to follow the three-step procedure. He made some curious points about why the employee gets three steps but the employer does not—

Mark Prisk (Conservative, Hertford and Stortford)

The other way round.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

Sorry, that is what I meant.

Both sides have to follow those steps or any award will be liable to serious mitigation of between 10 and 50 per cent.

This is not about one side or the other; it is about having a facility in the workplace to air grievances. Insisting that an employee had to follow the three steps before reaching a tribunal would cause a simple problem: we can imagine all the barriers that an unscrupulous employer would put up to stop the case going to a tribunal. He could ensure that, even with the extra three months that we have provided under clause 32, it was time-expired.

There is also a series of exemptions. The hon. Gentleman and I agree that certain situations need to be exempted, certainly from the full three-step procedure. We would have to have more exemptions, and there would be more preliminary hearings. The representatives of all sides of business whom we consulted shared the view that stage one of the grievance procedure was the important part.

Mark Prisk (Conservative, Hertford and Stortford)

The Minister said earlier that the Government were sympathetic to the idea that during the 28-day period following the provision of a letter, more employers and employees should have hearings and discussions—that they should, in his phrase, use that period. Will he give businesses guidance on that?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

By the time we have finished, businesses will have guidance on all aspects of the Bill coming out of their ears. The proposals are very important, especially for small businesses. There are 600,000 workplaces with no discipline or grievance procedures. Those employers are under no obligation to put such procedures in the written statement that goes to every employee because they employ fewer than 20 people. We have changed that requirement also, but the matter will need careful guidance, which I certainly undertake to supply.

The hon. Member for Boston and Skegness asked how the admissibility regime would apply to a complaint by a redundant former employee. As I said when I moved the new clause, we do not envisage that the procedure will apply to former employees. For them, the relationship between employer and employee has been broken, so why should they write to a person who is no longer their employer? However, we believe that, with careful guidance, the step one procedure would help clarify and resolve constructive dismissal cases, without recourse to a full-blown tribunal.

My hon. Friend the Member for Stoke-on-Trent, North (Ms Walley) also contributed to the debate. She was absolutely right to say that we must recognise that there could be circumstances in which it would be difficult for an employee to go even as far as writing a letter and waiting for the 28-day period.

The hon. Member for Tatton (Mr. Osborne) supplied some very welcome flattery, and that is always appreciated. However, I do not agree with him, for the reasons that I set out earlier.

I shall spend a second on amendment (a), in the name of the hon. Member for Runnymede and Weybridge. It deals with the necessary powers contained in new clause 6 that would allow the Bill to be amended by secondary legislation. New clause 6(8) provides the power to extend the scope of the clause to non-employees. We will debate that matter again in connection with new clause 2, so I shall not spend much time on it now, other than to suggest that Opposition Members are making a considerable mountain out of a molehill.

Proposed new subsection (8) provides the power to amend the admissibility criteria by order. We consider that to be prudent and sensible. We think that we have set sound and reasonable criteria that will encourage dialogue without delaying access to tribunals, but experience may show that the admissibility criteria could helpfully be recast.

For instance, it is conceivable that the 28-day period might be too short for proper dialogue to take place. We need to learn from experience about that, which is why we have given ourselves the power to deal with the matter in secondary legislation. In proposed new subsection (9), we have committed ourselves to consult the Advisory, Conciliation and Arbitration Service before making any changes in this area. Likewise, I would expect that we would consult widely before proposing any changes.

I therefore hope that the hon. Member for Runnymede and Weybridge will not press amendment (a), and that the House will endorse new clause 6 and the associated amendments.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 1 — Report on impact of Act

Philip Hammond (Conservative, Runnymede and Weybridge)

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

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to discuss the following: New clause 3—Assessment of costs to businesses—

'(1) The Secretary of State shall, within one year of the coming into effect of this Act, prepare and publish an assessment of the average administrative costs per employee to businesses of complying with each of the requirements of this Act

(2) The Secretary of State shall, by Regulations, provide for the average administrative cost per employee as determined by the assessment under (1) above to be reimbursed to employers from public funds.'.

New clause 4—Assessment of resources of the Advisory, Conciliation and Arbitration Service—

'( ) Before making any order under section 55(2) of this Act relating to Parts 2 and 3, the Secretary of State shall prepare and publish an assessment of the additional resources likely to be required by the Advisory, Conciliation and Arbitration Service as a consequence of the coming into force of Parts 2 and 3.'.

Philip Hammond (Conservative, Runnymede and Weybridge)

New clause 1 would require the Secretary of State to make regular assessments of the Act's ongoing impact on employers and public funds. It also focuses attention on the distribution of costs and benefits between different groups, including between different groups of employees.

We believe that many of the Bill's provisions are positive, and we welcome them. However, it is disingenuous to pretend—or imply—that the measures do not have costs. Businesses will face costs in terms of potential job creation, given that the Bill will reduce flexibility in the labour force. In addition, the Bill will benefit some members of a work force, inevitably at the expense of others. It is therefore right and appropriate to require the Secretary of State to focus attention on such matters by preparing and publishing regular reports on the effect and outcome of the Bill in real life.

The Bill is wide ranging. The first part deals with paternity pay and leave and with adoption pay and leave, and extensions to rights of maternity leave. The second and third parts deal with tribunal reform and improving disciplinary and grievance procedures. The fourth part is a hotch-potch, dealing with everything else. I want to focus on the first part and clause 47, the new clause introduced by the Government in Committee that deals with the right to ask for flexible working terms for employees who have children below school age or, in certain specified circumstances, older children where a disability is involved. There is also a question in terms of cost impact relating to fixed-term work, but as we will debate that matter later, I shall avoid talking about it now.

We generally support the family friendly approach of the first part of the Bill, but, in most cases, we should see the benefits delivered not as benefits to employers—although when labour markets are tight, they may help employers recruit and retain staff—or as benefits to individual employees, but primarily as benefits to society as a whole.

It is unquestionable that anything we can do to strengthen families and support parents in the raising of children will have a significant benefit to society as a whole. We will have a better-educated and motivated work force, as well as a more stable social fabric. This is a social good from which we hope all of us will benefit in terms of less delinquency, better education, better- behaved children, less crime and less call on social services and social security to support damaged or collapsed families.

We support that, but it is important to recognise that this is a benefit to society, and that society should be prepared to pay for it. In some cases, the Bill appears to impose the costs of this benefit to society on one sector of society, namely businesses. Businesses have a finite capacity to absorb additional burdens. If they are damaged by the imposition of too great a burden, that will have a significant effect on society as a whole, as business becomes uncompetitive, the economy is unable to grow, jobs are not created and wealth does not expand.

In terms of the first part of the Bill, the direct costs will be met by society as a whole through the reimbursement by the Treasury of the costs of the direct payments for paternity and adoption leave and additional maternity leave, but the indirect costs on business will fall first on employers. Time off, sometimes for prolonged periods, will create problems, especially for small businesses. On Second Reading, we rehearsed the impact on a firm employing three or four employees which finds that perhaps one or two of those employees at a time may be absent on statutory leave. Perhaps one of those employees will have a key skill that is essential to keeping the business going. The consequences could be significant if that employee were absent.

In practice, I have always believed that, in a small firm, a deal will be done with such an employee. Effectively, the employer will end up bribing the employee not to exercise his statutory rights. That is probably a sub-optimal outcome, but one can envisage situations in which it will not be practical for a small business with three or four employees to continue operating for a prolonged period in the absence of a critical employee with a real skill.

The real cost to a small business of losing a key employee is not, as the regulatory impact assessment suggests, the administrative costs of replacing him with someone else, or sharing out his work to others; it is the opportunities forgone.

In the real world of small business, the order not pursued or the customer not served will represent the costs involved in lost output, lost profitability and, perhaps at the extreme margin, lost viability for that small business, so part 1 will involve intangible costs. Flexible working imposes further burdens, and the compliance requirements for smaller employers involved in ensuring that they do not infringe all the obligations placed on them under the Bill will impose yet more burdens on small business.

Labour Members are fed up with hearing about burdens on business, but burdens on business have a real impact on all of us. The burdens that will be imposed under the Bill cannot be seen in isolation; they have to be seen in the context of a stream of regulations coming from the Government. Last year alone, the Government imposed more new regulations than in any previous year on record. Since 1997, business has had to come to grips with a raft of legislation that stems from the Government's signing up to the social chapter. Business has had to deal with the minimum wage and the working time directive, as well as the Government's determination to treat business as an extension of the welfare state apparatus and the working families tax credit, and there are more administrative burdens to come as business delivers more and more of the Government's in-work welfare programme.

Business is reeling under that onslaught. The manufacturing sector in particular is under huge pressure, struggling with very tight economic conditions and facing an over-valued exchange rate, or perhaps one should say an under-valued euro, and swingeing tax increases, some of which—for example, the climate change levy—are targeted precisely at the sector, manufacturing industry, least able to cope with them. However, many of our competitors appear to have finally got the message; they are edging away from inflexibility in labour markets and moving back to embrace the benefits of more flexible labour markets. We are moving in the opposite direction, increasing the inflexibility in our labour markets in a way that threatens the competitiveness of British business. That needs to concern us all, not merely those who run and operate businesses.

Rob Marris (Labour, Wolverhampton South West)

I apologise to the House for the fact that, when I intervened earlier, I failed to say that I am member of the Transport and General Workers Union, that I employ two people in my office and that my constituency Labour party received money from the TGWU before the election, as is recorded in the Register of Members' Interests.

Will the hon. Gentleman give the House three examples of regulations that he would get rid of? I am sure that he will be able to do so, because I asked that very question on Second Reading, approximately two months ago, so he has had plenty of time to prepare an answer. Which three regulations introduced by the Labour Government that he thinks are burdensome on business and not socially necessary should be got rid of?

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman's declaration of interest, which I did not quite catch, ranks as the verbal equivalent of small print, but I am sure that it will make interesting reading in Hansard tomorrow. I do not intend to get involved in going through all 4,600 regulations that the Government introduced last year, looking at their merits and demerits. The hon. Gentleman may be right to imply that I cannot recall all 4,600 of them off the top of my head.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I hope that the hon. Gentleman will not attempt to stretch his memory. Under new clause 1, we are discussing the Bill's impact, and he need not stray outside it.

Philip Hammond (Conservative, Runnymede and Weybridge)

Thank you, Mr. Deputy Speaker. The point that I am trying to make is that the burdens that will be imposed under the Bill are, of course, incremental. I do not suggest that this Bill alone will be the downfall of British industry. That would be absurd, but the Bill has to be seen in the context of business—in particular, the manufacturing sector—facing extraordinary difficulties because a raft of new burdens, new taxes, new regulations and new legislation has been imposed on it since 1997. We are staring down a pipeline that contains a further vast array of legislation and regulations—which largely originate in Brussels—and that will descend on British business in the not-too-distant future. That is the last thing that business needs at this point in time.

Judy Mallaber (Labour, Amber Valley)

If the hon. Gentleman is able to talk only about the burdens imposed by this Bill, would he care to tell us which parts of the Bill, other than the provisions for union learning representatives, a proposal with which we know he disagrees, he would get rid of? Would he get rid of the paternity provisions and the adoption provisions? Will he let us know exactly which parts of the Bill he wishes to dispose of?

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Lady has perhaps missed the point of new clause 1. We must be honest with ourselves in recognising that all the good things in part 1 will impose costs on business. The next thing I was going to say was that I do not know exactly how damaging those costs will be to business. However, anybody who cares about our economy, growth, jobs and prosperity will want to ensure that we monitor carefully the impact of the legislation passed by the House. Regulatory impact assessments are prepared for Bills considered by the House. However, once we have passed them, off they go.

New clause 1 suggests that the Secretary of State should attempt to measure annually what the cost impact of the measures in this Bill has been, and continues to be, on business. That would enable us to have an informed debate about the costs and benefits, and also about the incidence of those costs and benefits. It is not a question only of the costs imposed on businesses, but of the costs imposed on other employees in the workplace.

The Bill has a particular focus on dealing with employees who have young children. However, if we accept the premise that business has a limited capacity to absorb additional burdens and remain competitive, we are selecting one group of employees for favourable treatment against other groups of employees who believe that they have claims for similarly favourable treatment. Of course, parents of young children can make a strong argument for a right to ask for flexible working, and strong arguments can be made for granting paternity leave to help strengthen families at the time of a birth. However, other employees look after elderly relatives, and in many cases they spare the state a very expensive burden. We should also consider employees who look after adults with disabilities.

Many employers attempt to be even-handed and flexible in dealing with their employees and their requests for flexible working or periods for time off. The fear must be that if one group of employees is given an absolute statutory right to ask for flexible working and to have that application considered by an employer who has to provide reasoned arguments if he will not grant the request, the natural reaction of employers will be to resist granting such extra statutory rights to other employees who are not entitled to them under the law. Therefore, a cost will be imposed on other employees in the workplace because of the real benefits being extended to a particular group of employees.

Kevan Jones (Labour, North Durham)

Does the hon. Gentleman agree that there is also a benefit to business and industry if parents do not have to worry about having to get time off to look after young children? Productivity may increase. Companies that have invested in training and other matters and that allow women, in particular, to work flexibly could therefore retain them in the work force.

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman is absolutely right. In many cases, particularly in areas where the labour market is tight, employers will take the kind of measures that we are discussing entirely for reasons of self-interest. I do not disagree with that for a moment. I do, however, take issue with the suggestion that we should get into the business of Governments using legislation to force employers to do things because they are good for them. In general, the Government's record in second-guessing the best way to run a business is not top quartile. If courses of action are available to a business which a rational manager might take for himself, that should be left to education rather than legislation to determine. Frankly, I would not trust the Government to impose the best management course of action in legislation.

Mark Tami (Labour, Alyn and Deeside)

The hon. Gentleman talks about forcing employers to act. How does he square the re-authorisation of trade union membership with that?

Philip Hammond (Conservative, Runnymede and Weybridge)

I am not sure that I follow the hon. Gentleman.

Mark Tami (Labour, Alyn and Deeside)

I refer to check-off, which the previous Government forced employers to carry out every three years.

Philip Hammond (Conservative, Runnymede and Weybridge)

rose—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I sense that the hon. Member for Runnymede and Weybridge (Mr. Hammond) is being led out of the confines of the new clause. It might be best if he does not pursue that argument.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am grateful for that ruling, Mr. Deputy Speaker. I shall plead ignorance in line with a sedentary comment from my hon. Friend the Member for Tatton (Mr. Osborne) who also thinks that Chekhov is a playwright.

It is not clear that the proposed measures will help UK business in the struggle to maintain productivity in the face of competition from overseas and the black economy, which we discussed in Committee. That touches on what the hon. Gentleman said. It is also worth remembering that every time we impose more legislative burdens on business, we widen the competitive advantage enjoyed by those who operate in the black economy and increase their ability to undercut responsible firms that abide by legislation, good or bad, that we introduce.

Costs that are borne by business will have to be absorbed in their total labour cost. The cost to a business of treating one employee will inevitably reduce what should be available to other employees as wages. Those employees who do not benefit from the costs that are imposed on business will be cross-subsidising their colleagues in the workplace. I am not suggesting that it is necessarily wrong to introduce such measures, many of which we welcome, but it is wrong to pretend that they do not have a cost to business, the economy and fellow employees. We have introduced new clause 1 to focus on that cost and to find a mechanism for regularly reviewing and assessing its level.

New clause 3 is supplementary to the purpose of new clause 1. It requires the Secretary of State to focus on the administrative cost to business of implementing the measures and to provide for reimbursement from public funds for that. Businesses are increasingly being asked to perform a role that was previously carried out by the state, especially in relation to administering the welfare state. The burdens are being imposed not just for the benefit of business itself but for the wider benefit of society, and they should be paid for by the public through taxation.

The Minister and the Secretary of State were keen to emphasise on Second Reading that small businesses at least will be reimbursed for 100 per cent. of their direct costs in dealing with maternity pay, paternity pay, adoption pay and so on. That is right, although it does not extend to all businesses. However, there is also a significant indirect cost to businesses. We do not know the size of the cost, but the best guide that we have is in the regulatory impact assessment. New clause 3 would provide a mechanism for regularly assessing that cost and arranging for it to be picked up by the public purse.

I understand that the Carter review of the cost to business of payroll compliance is under way. Perhaps the Minister will tell the House about the progress of that review, or perhaps it is a state secret that will be revealed by the Chancellor on Budget day. Many small businesses place a great deal of hope on the outcome of the review. They hope it will lead to a recognition by the Government that as businesses are being asked to do more and more of the state's administrative work in relation to employees, their costs must be reimbursed. Businesses may well be an efficient means of delivering services because they are geared up to administering the work of the welfare state and delivering benefits to employees, but they must be reimbursed.

New clause 4 deals with the resourcing of the Advisory, Conciliation and Arbitration Service. The original scheme for tribunal reform considered by the Government was intended to generate revenue through a system of fees. Under pressure, the Government scrapped that system. Until this evening, I had thought that parts 2 and 3 were intended to reduce the work load of tribunals, so I was a little surprised to hear the Minister say he thought it likely—indeed, I think he said inevitable—that the work load would increase. That makes new clause 4 doubly important because it deals with the adequate resourcing of ACAS in fulfilling its responsibilities under the Bill.

It is apparent to everyone that if the Bill is successful in reducing the burden on tribunals by diverting cases away, an additional burden may fall on ACAS. We probed the Minister on this matter but did not get a satisfactory answer. The new clause would require the Secretary of State to undertake a formal assessment of the resourcing requirements of ACAS before implementing parts 2 and 3. One of the many matters on which Members on both sides of the House have agreed during the proceedings on the Bill is that ACAS has a vital role, and it is essential that it is properly resourced to perform that role.

In Committee, we merrily talked about conciliation officers being available for this, that and the other, but ACAS is already under great pressure. Whether the work load of tribunals increases or, with a greater number of cases being handled outside the tribunal system, substantially decreases, there is likely to be a significant increase in the demand for ACAS services. I hope that the Minister will enlighten us as to what his Department envisages for the future adequate resourcing of ACAS. How can we ensure that this will not be a half-baked measure and that parts 2 and 3 will not come into force without ACAS having been given sufficient resources to cope with the responsibility placed on it by the Bill?

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

The hon. Member for Runnymede and Weybridge (Mr. Hammond) may be surprised to find that the tent to which he referred is bigger than he thought because the Liberal Democrats support new clause 1. We agree that there should be an annual assessment of the impact of the Bill, which makes several changes to employment law. Although employees will benefit from new employment rights such as flexible working provision, we must recognise that those new rights will have an impact on businesses, which will have to comply with new regulations.

Small businesses in particular will be affected. Before Second Reading, I met representatives of the Federation of Small Businesses who expressed the hope—perhaps it is a forlorn one, but we must take it on board—that small businesses would not be forced to take on the burden of too many more regulations and that any new regulations that were introduced would be examined extremely carefully. That is why we Liberal Democrats strongly support the concept of examining regularly all sorts of regulations that affect business. In fact, we would support an annual horizontal impact assessment of all regulations. I cannot talk about that now as it would not be in order to do so in this debate, but it is something that should be done regularly.

Mark Prisk (Conservative, Hertford and Stortford)

For my benefit, will the hon. Gentleman clarify what an annual horizontal assessment is?

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

It covers everything that confronts businesses—all sorts of regulations. However, I am not supposed to drift on to subjects that we are not debating; I chipped this one in quickly, but I had better move back to the clause. That regulations should be examined has long been a Liberal Democrat view—in fact, I think that my party was the first to make such a proposal.

Tony Lloyd (Labour, Manchester Central)

Given that the purpose of the new clauses is to examine the costs arising from the Bill, will the hon. Gentleman estimate the cost to Government and other sources of the exercise he describes?

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

If the hon. Gentleman means the costs of the exercise of examining, I cannot estimate them. However, it is not unreasonable to suppose that they need not be excessive. We have regulatory impact assessments in respect of Bills, and even if the proposal in the new clause were to carry a cost, it would surely be repaid in terms of enabling us to see the legislation's impact and to address certain matters.

Dave Watts (Labour, St Helens North)

My hon. Friend the Member for Manchester, Central (Mr. Lloyd) was trying to identify the rationale prevailing among the Conservatives and Liberal Democrats. You seem to be arguing against an increase in bureaucracy, but at the same time you—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I am arguing against nothing.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

Indeed, Mr. Deputy Speaker. That was well out of order. We are saying simply that we have long argued in favour of an annual assessment of the impact on the business community of all regulations and Bills.

I do not support the logic of the arguments of the hon. Member for Runnymede and Weybridge in respect of costs. Will he explain what sort of costs he believes should be removed once the assessment is complete? There are many reasons to carry out an assessment—for example, to see how regulations are implemented, how much red tape is added and how many requirements fall on small businesses.

We accept that costs will be associated with good regulations such as those covering maternity and paternity leave, which we strongly support. I do not decry those regulations, which are acceptable. Indeed, they are necessary to improve the workplace. However, when the Government implemented European regulations on part-time working, provisions that were two or three pages long in some countries ended up being 40 or 50 pages long in this country.

Helen Jones (Labour, Warrington North)

I question the feasibility of what the hon. Gentleman is supporting. New clause 1 would require an assessment of the impact of the legislation on employees of different descriptions. How will we collect that information? How will that be done, unless every employee completes a form stating whether he or she has children or a disabled relative, for example?

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I support the argument that there must be assessment. Would the hon. Lady say that we should not assess the cost to business? Certainly not. Should we not assess how much red tape is unnecessary? I give credit to hon. Members on both sides of the House, because we are all considering how to examine Bills to determine what can be done away with and how we might say, "In practice, we do not need this rule, or that piece of paper." I am concerned that that process should be regularly undertaken.

Whether we accept costs depends on the Bill. I accept costs that relate to social requirements, including maternity and paternity leave, but there is laxity in the way in which Bills are introduced. Many regulations can be introduced after a Bill is enacted, for example.

Judy Mallaber (Labour, Amber Valley)

Taking up the intervention of my hon. Friend the Member for Warrington, North (Helen Jones) on the distribution of costs and benefits between employees of different descriptions, can the hon. Gentleman think of any way in which such assessments could be made without asking employers to be involved in collecting that information? Such involvement would clearly place another burden on them.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I have always supported the principle of examining Bills. Sampling procedures can be carried out to assess impacts. There are different ways of assessing different things. Specific details will turn on particular Bills and particular regulations. Are we calling into question impact assessments altogether? They must be carried out before a Bill is in place. One of my long-standing criticisms, along with my Liberal Democrat colleagues, is that such assessments have not been carried out adequately. We are arguing that the assessments should be undertaken adequately, regularly and on a continuing basis.

Philip Hammond (Conservative, Runnymede and Weybridge)

Does the hon. Gentleman agree that it is alarming that Labour Members appear to be reluctant to accept an assessment of costs? It is a matter not of ruling out things because of costs, but of wanting to know what the costs are, so that we can behave rationally and understand what we are doing. It is appalling to think that we should work while blind.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I agree, although having said that there is a broad tent, I do not incorporate into that everything for which the hon. Gentleman stands, such as reluctance to introduce a minimum wage. However, I am not supposed to refer to that, so I had better press on.

I think that I have sufficiently addressed the issue. I ask the hon. Member for Runnymede and Weybridge to be more specific about the costs that concern him. What are the costs that he thinks could be cut? I accept the principle of assessing costs but I would like more detail, either now or later.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am grateful for the opportunity to intervene again. Contrary to what the hon. Gentleman said earlier, we want to assess the costs not only of the things that we think are bad, but of those that we think are good. We want to assess all costs and benefits and their incidence so that we can make informed decisions. I cannot tell him whether the Bill contains proposals involving costs that are too great for the benefits that they will deliver unless and until there is assessment, which will allow proper and rational decisions to be made.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I think that I shall leave it at that for fear of being drawn into any suggestion that Liberal Democrats do not support maternity and paternity leave and other welcome and worthwhile proposals. We must regularly examine the impact of regulations and Bills on business. I am sure that the Minister will find it difficult to argue against that. I look forward to what he and other colleagues have to say.

Rob Marris (Labour, Wolverhampton South West)

I shall principally address new clause 3. The hon. Member for Runnymede and Weybridge (Mr. Hammond) talked about flexibility in the labour market which, of course, we need. He also mentioned manufacturing, which is particularly important to me as a Member representing a west midlands constituency. He talked about benefits to society being imposed on business by some of the Bill's provisions. New clause 3, which he tabled, deals with working out average costs and reimbursing them to employers; that is contrary to my view of the way in which small business operates and, I suspect, to his views. The cost for small businesses of complying with administrative requirements is often higher than it is for bigger businesses yet, in the new clause, the hon. Gentleman simply wants an average cost to be reimbursed.

The hon. Gentleman assumes—I do not—that there is a cost; many of the Bill's provisions will benefit business. Thanks to the Labour Government, employment has gone up a great deal, and there are scarcities in the labour market. That can benefit business, as it means that it will not lose part of its trained work force. Is the hon. Gentleman seriously suggesting that, as a consequence of the new clause, we go into negative accounting? If there is a demonstrable benefit from the Bill's provisions—my hon. Friend the Member for North Durham (Mr. Jones) adverted to it—should business reimburse the state for having introduced them? I suspect that the hon. Member for Runnymede and Weybridge does not believe that it should.

Training is increasingly offered by the state, which is not to say that many businesses do not do a lot of training. In most cases, the Government do not seek to charge business directly for undergoing that training. In such things, there are trade-offs in any society; the new clause is therefore misconceived.

Philip Hammond (Conservative, Runnymede and Weybridge)

Is the hon. Gentleman aware of the Carter review to which I referred earlier? Does he anticipate a gesture in response to that review, as proposed by the new clause? The state should recognise that in some cases significant costs previously borne by the state are transferred to business through business administration, particularly of in-work welfare schemes.

Rob Marris (Labour, Wolverhampton South West)

I am not about to prejudge the outcome of the Carter review. We must consider the practicalities of the way in which legislation operates, as I know the hon. Gentleman wishes to do. He talked about benefits being imposed on business; however, the flavour of his remarks was that, for example, he and his colleagues might wish to get rid of a swathe of health and safety legislation, which is massively beneficial to business and those who work in business. I hope that he will give an assurance that he and his party do not intend to do so. No doubt he will address that issue when he sums up.

The hon. Gentleman also mentioned favourable treatment for parents when he discussed flexible working. I am delighted that there is favourable treatment for parents; I say so as someone who, sadly, is not a parent, despite my best endeavours and those of my partner. Although I am not a parent, the next generation will look after me in my old age, assuming that I have the privilege of reaching an old age. I hope that my nephews and nieces are prepared to look after me as carers, if it comes to that. I salute the hon. Gentleman for suggesting that carers should be included in flexible working. I only wish that he had tabled an amendment to that effect; we could have debated it and heard the Minister's views.

Finally, on new clause 4, I hope that the Minister will give us an assurance that sufficient resources will be available to the Advisory, Conciliation and Arbitration Service to do any extra work that may be required under the Bill. I am not saying that the Bill will require extra work, but if it does, I hope that the Minister can give us that assurance.

Mark Field (Conservative, Cities of London and Westminster)

It is a pleasure to follow the hon. Members for Wolverhampton, South-West (Rob Marris) and for Weston-super-Mare (Brian Cotter). I suspect that the tent will not be big enough to keep us all happy, but I hope that our debate will continue in an easy-going manner.

I want to address in particular new clause 1, to which my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) gave such a skilful introduction.

I well understand what was said in relation to part 1. Although I did not serve on the Standing Committee, I have paid close attention to the Bill, which is clearly important. Behind it is a practical analysis of the modern world of work, and I fully appreciate that the family needs and responsibilities, especially of young employees, must be catered for. I should like to think, though, that many sensible and responsible employers have catered for them on a voluntary basis, without the need for legislative constraint. I recognise that the Minister will no doubt point out that some employers do not play the game and make life difficult for employees who find themselves in dire straits, for whatever reason.

My hon. Friend the Member for Runnymede and Weybridge hit the nail on the head. There is a great cost not just to businesses, but to fellow employees arising from many of the new rights that have been put in place. It is highly unfair, particularly in a tight employment market and in a small business context, that people who by choice are not parents, for example, find an increasing burden placed on their shoulders.

Helen Jones (Labour, Warrington North)

Can the hon. Gentleman enlighten me? In new clause 1(c)(iii), who are the "others", who are neither employers nor employees? How would he carry out an assessment of the costs and benefits of the Bill to them?

Mark Field (Conservative, Cities of London and Westminster)

There are external costs that will not be borne directly by either employers or employees, but which may be borne by a range of bodies. For example, to promote the Act it is likely that there will be a large amount of advertising via various Government Departments, which have been known to extol the virtues of their own legislation. That expense would be covered by sub-paragraph (iii).

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Member for Warrington, North (Helen Jones) does not seem satisfied with my hon. Friend's answer. The most obvious "others", neither employees nor employers, are surely the Government—the public purse.

Mark Field (Conservative, Cities of London and Westminster)

I hoped that that was the point that I was making. I thank my hon. Friend.

Earlier, the Minister proudly announced the support of the CBI. Central to the proposal set out in the new clause is the protection of small businesses. The CBI has supported in principle a number of pieces of legislation that have been introduced in the past five years. I hasten to add that the CBI was also supportive of much legislation passed over the previous 18 years. One of the reasons for that support is that larger businesses are well catered for. They have the infrastructure in place. They have large human resources or personnel departments.

That luxury is not available to many small and medium-sized enterprises. With 10 or 15 employees, they will often not have a dedicated HR department or a payroll department. That goes to the heart of the issue that my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) has made his own—the Carter report and the incumbent expenses on the payroll that have been brought into play by recent legislation, rules and regulations. That is a great concern to many small businesses. If the Bill is enacted, there should be an early opportunity for a full assessment of the cost to small business resulting from the new rules and regulations.

My chief concern is that many of the proposals will provide a strong disincentive for smaller employers to increase their work force. That is especially true of small, vibrant organisations which, by the nature of their business, employ a lot of young employees. With 10 employees, say, all of whom are in their 20s or early 30s, there is a risk that two or three will be on paternity or maternity leave at any one time. The prospect of having to keep those jobs open for any length of time, especially when the economy may start to go through a more difficult phase, may result in such businesses deciding that they should not grow any larger. If rules and regulations provide a disincentive to businesses to employ more than, say, 12, 15 or 20 employees, those businesses may have to set up small subsidiaries that operated under a different umbrella in order to get round the rules. That would be an unhealthy state of affairs, but the provisions in the new clauses could alert us to this at an early stage.

In many of our constituencies, whether they be the heart of the City of London, which I represent, or some of those represented by Labour Members, the days of large-scale employers being able to offer many thousands of jobs are gone. The small and medium-sized enterprise sector is the real vehicle for employment growth in the years ahead.

George Osborne (Conservative, Tatton)

It is welcome to have a chance to debate the important new clauses moved by my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond). They go to the heart of the Bill as regards the costs and benefits that it will impose on our society and our economy.

As hon. Members who served on the Committee will know, many parts of the Bill are uncontroversial. Widespread support was given to the extension of maternity rights, the creation of new paternity rights and, especially, the creation of new rights for adoptive parents. Conservative Members found themselves in the refreshing position of arguing for more rights for adoptive parents, which is a good sign. However, the Government must accept that those rights are not introduced without costs to society and to business. Indeed, the Government's regulatory impact assessment makes it clear that substantial costs are involved. Maternity leave will cost taxpayers £305 million and paternity leave and paternity pay will cost employers £64 million and taxpayers £63 million.

New clause 3 gives us the opportunity to debate where those costs should fall. Should they fall on employers, on employees or on society as a whole? If we as a society want stronger families and believe that it is right for parents to take time off to help to bring up their children, it is important that we give them a chance to do so. We should provide financial support, if necessary, or the chance to take a career break before returning to work. It is welcome that in recent years hon. Members of all parties have come to accept that.

Other parts of the Bill received less general support in Committee. Hon. Members have mentioned union learning representatives and the requirement on employers to give them paid leave. The Government predict a massive increase in the number of union learning representatives, from 3,000 at present to 22,387 in eight years' time—I am not sure how they managed to be so precise in predicting that figure. Many of those will be in the public sector. An illuminating fact that was mentioned in Committee was that the Department for Education and Skills has no union learning representatives.

The cost of the union learning representatives clauses will be considerable. The cost to employers of the clauses on fixed-term work could amount to £136 million. The Government estimate in the regulatory impact assessment that the huge new right—the duty to consider flexible working—will cost employers £286 million, possibly more. As I think that the Minister would freely admit, we are not sure whether that figure is remotely accurate, because the provision opens up a whole new area.

Judy Mallaber (Labour, Amber Valley)

The hon. Gentleman may be interested in my previous experience as an employer in a small organisation. By helping to rearrange someone's working hours, I saved the money that would have been spent on advertising to recruit a highly skilled employee and on training that person. Employers can cut costs in that way.

George Osborne (Conservative, Tatton)

I am happy to accept that flexible and part-time working, and helping employees to spend time with their families, often help a company by improving relationships in the work force, and often ensure that someone who would otherwise leave a company for good comes back to work. We are flying blind, however, so far as the Bill is concerned. We do not know what impact it will have on society and on businesses. New clause 1 will at least give us a route map.

Mark Simmonds (Conservative, Boston and Skegness)

rose—

Philip Hammond (Conservative, Runnymede and Weybridge)

rose—

George Osborne (Conservative, Tatton)

I shall give way first to my Back-Bench colleague.

Mark Simmonds (Conservative, Boston and Skegness)

Does my hon. Friend accept that we must consider not just the direct impact of the Bill but the administration that will ensue, particularly in small businesses that do not have personnel departments? That will be the real impact on the running of the business.

George Osborne (Conservative, Tatton)

My hon. Friend is right; real indirect costs arise from places being left vacant that are difficult to fill. Does my hon. Friend the Member for Runnymede and Weybridge wish to pursue his intervention?

Philip Hammond (Conservative, Runnymede and Weybridge)

Is my hon. Friend surprised that, notwithstanding the lessons of history, hon. Members on the other side still apparently believe in the power of the statute to tell businesses what they should do in their own best interests? Does he not find that quite startling?

George Osborne (Conservative, Tatton)

My hon. Friend is right: that is indeed striking. One of the things that I would have expected the Labour party to learn from the supply-side reforms of the 1980s is that we cannot continue piling costs and legislation on businesses without having an effect on their competitiveness. When economists and historians look back on this period of history, they will judge those supply-side reforms to have laid the foundation for the strong economic growth that we have enjoyed for the last 10 years.

There is no real evidence of what impact the Bill will have on businesses and on society. Anyone who has read the regulatory impact assessment will know that it uses fantasy figures to try to calculate the possible costs and benefits to employers, which are almost impossible to calculate in advance. It would surely be much more sensible to ask businesses what the costs were likely to be. It has been suggested that that would represent an extra cost to businesses, but in my experience, small employers are only too happy to tell me what the costs of Government regulations have been for them. They have always been very happy to volunteer that information.

It clearly makes sense that we should have some idea of the cost of the employment legislation that we introduce.

Rob Marris (Labour, Wolverhampton South West)

rose—

Betty Williams (Labour, Conwy)

rose—

George Osborne (Conservative, Tatton)

I shall give way to my good friend, the hon. Member for Wolverhampton, South-West (Rob Marris).

Rob Marris (Labour, Wolverhampton South West)

I am obliged. I think that I understood the hon. Gentleman to concede that, in certain circumstances, businesses could save money through the measures in the Bill. My hon. Friend the Member for Amber Valley (Judy Mallaber) gave an example earlier in relation to advertisements and so on. Will the hon. Gentleman also concede that, if the new clause were added to the Bill and the ensuing investigations showed that a business was, overall, saving money through the measures, that money should be reimbursed to the Government? That seems to be the logic of what he is proposing.

George Osborne (Conservative, Tatton)

I thank the hon. Gentleman for making that point. Businesses are already paying through the nose to the Government because of the huge increases in business taxation that have been piled on over the last four years. Frankly, we cannot ask them to pay any more.

Mark Prisk (Conservative, Hertford and Stortford)

I would like to review new clauses 1, 3 and 4 in the style of the Miss World contest, by taking them in reverse order.

I want to begin by looking at new clause 4. At the beginning of Second Reading and in subsequent claims and comments by the Secretary of State and the Minister, we heard proud—and, I think, genuine—claims about the potential for the Bill to improve the situation in the workplace. In a letter to all colleagues in the House, the Minister stated:

"The Bill will improve the way disputes are managed in the workplace."

He went on to say that

"the Bill introduces a simple internal procedure and encourages both parties to use it."

He also said:

"The Government is committed to . . . a modern and user-friendly public service, and well-informed users."

Those are all good and noble intentions that underpin the purpose of the Bill. The difficulty is that, no matter how hard I looked through the Bill, the explanatory notes and the subsequent regulatory impact assessment, I found nothing that specifically identified the resources required to achieve the aims set out in the Bill's preamble and by the Minister during his promotion of it.

New clause 4 would enable an accurate assessment of the costs to ACAS, and thereby allow it to plan. That is particularly important in the light of the Minister's interesting comment that he foresees that the number of cases coming before employment tribunals will probably rise in years to come, despite many earlier statements to the contrary by him and his colleagues. It is right to bring that principle of assessment to the heart of a vital part of the Bill.

Although I do not want to overdo the cross-party consensus, I strongly support the request from the hon. Member for Wolverhampton, South-West (Rob Marris) that the Minister make it clear that resources will be forthcoming. New clause 4 would allow him to ensure that those resources are accurately identified and brought forward appropriately.

If I may, I shall discuss new clauses 1 and 3. On publication, the Bill was accompanied by an initial estimate of costs and benefits. I have in front of me the explanatory notes—all Members will doubtless have read them from cover to cover—which set out how the costs and benefits will affect employers, the individuals concerned and taxpayers. I wish to focus on the costs to employers. In keeping with the initial regulatory impact assessment, the explanatory notes refer to a one-off cost to employers of £97 million, and an annual run-on cost of a further £272 million. On the basis of the initial estimates, we can therefore envisage a cost of £369 million in the first year and £272 million in the years following.

There is a flaw, however. Although I do not intend to be prejudicial about its content, this is not a complete Bill. It is an enabling Bill that is merely a framework. Throughout our deliberations in Committee, the Minister and his hon. Friends told us that the Bill will lead to many regulations, so the danger is that to rely on the initial regulatory impact assessment is to consider an incomplete Bill. To do so is like paying merely for the first and main courses in a restaurant without taking into account the pudding and the wine bill.

The difficulty is that regulations have not been tabled, so they cannot be costed. The £272 million is the beginning—the minimum. The danger is that, when those regulations are enacted, the House will be unable to consider and itemise the costs. As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) rightly said, those costs could well be substantial. That is my concern.

On the right to request flexible working, the Government produced in Committee, rather belatedly, a subsequent regulatory impact assessment, albeit that the Minister was open enough to point out that it is a partial assessment. I realise that members of the Standing Committee are probably worried that my enthusiasm for reading regulatory impact assessments might not be good for my long-term health, but I pursued the matter and went through the assessment in great detail.

It became apparent that the new clause on flexible working, which was introduced at the end of the Committee's deliberations, adds £38 million in the first year and a further £286 million every year thereafter. As the mathematicians present will understand, that is not merely a small increase in the original bill of £272 million. The increase resulting from introducing one extra clause more than doubles the original cost. The annual cost of this Bill was initially £272 million. It has now risen to £558 million—and, as I say, I fear that that is only the price of the dessert. Perhaps we have not yet considered the price of the wine and the petits fours.

My first reason for supporting new clause 1 is the need for a comprehensive assessment of all the costs. My second is that it rightly seeks to distinguish between different employers, and between different burdens borne by employers. Because the Secretary of State has reserved a number of powers, we do not yet know how they will impact on the various players. We therefore need an assessment that is comprehensive, and also distinguishes between different types of employer.

The creation of new rights, and the cost of administering them, will always pose fewer difficulties for larger employers. As my hon. Friends have pointed out, a large company with a human resources or personnel department will be able to deal with such matters. However, the Bill will impose a huge new set of burdens on small employers—not least the increased time that will have to be spent on ensuring that the business, perhaps a family firm, is sticking to the letter of the law.

To be fair, I must add that the Government have acknowledged in the explanatory notes and the regulatory impact assessment that the Bill will place a disproportionate burden on small employers. Notwithstanding Labour scepticism, I think that the burden will be experienced in two ways. First, there is the problem of time. The Bill contains 53 clauses and seven schedules, and heaven knows how many amendments will be made today. Small businesses will have to try to understand the rules—for instance, those governing the three-step process of dispute resolution. It will take time to understand, implement and verify each of those steps.

Many small firms are already struggling with the volume of paperwork with which they must deal. I am told by a number of small business organisations that the average small family firm must now spend up to 31 hours a month, the equivalent of four working days, simply complying with existing regulations. That is an appalling statistic, and I fear that the Bill will impose further burdens of time and pressure.

The second problem is this. While a company employing 100 or 200 people will be able to cover absences for statutory maternity or paternity leave if four or five people have rights to such leave, the burden will clearly be much greater for a small family business employing only four or five people when two people wish to exercise their rights. Although elements of the Bill acknowledge the existence of the problem in financial terms, I am not sure that it has been fully acknowledged.

The Bill tries to be family friendly; but—I think I made this point on Second Reading—what about the father or mother who must spend time in the evenings and at weekends dealing with paperwork for the family business, rather than spending it with the family itself? That is one of the potential conflicts at the heart of the Bill. It is friendly to some families, but not to all.

Rob Marris (Labour, Wolverhampton South West)

Of course running a small business is hard. I have helped to do so in my time, as the hon. Gentleman may have. Given that the burden he has just mentioned may fall disproportionately on small business, however, why does he apparently support new clause 3, which refers to an average reimbursement?

Mark Prisk (Conservative, Hertford and Stortford)

New clause 3 is intended to provide for a clear assessment of the costs and benefits for all concerned. Without that, as my hon. Friend the Member for Tatton (Mr. Osborne) pointed out, we shall be flying blind. New clause 3 seeks to ensure that we know the costs, and indeed the potential benefits, so that we can be fair to all parties. New clauses 1 and 3 attempt to identify a problem accurately; they also reinforce the spirit of National Audit Office guidance to Ministers on how regulatory impact assessments should be compiled. The Minister may wish to consider that important aspect.

All that the three new clauses aim to do is provide an informed assessment of the Bill's impact on those whom it will affect. Although I have grave reservations about the costs to family businesses and other small firms, I think that new clause 1 will allow us to have an informed and intelligent debate.

Mark Simmonds (Conservative, Boston and Skegness)

I too support the new clauses. The Bill contains much that is good, particularly the clauses allowing parents flexible working hours when that is appropriate and providing for paternity and extended maternity leave. Having run a small business, however, I believe that they will place additional burdens on such businesses.

I think we all accept that allowing more rights and greater flexibility in the workplace, where appropriate, is sensible and forward-looking. As my hon. Friends have said, however, the Government must understand that there is a cost to businesses. I am particularly concerned with the cost to small businesses. The provision of dispute resolution and grievance procedures are most likely to have an impact, mostly because they are less likely to have existing procedures from which to develop. According to the regulatory impact study, the total recurring cost—I am not talking about one-off costs—will be up to £610 million.

That extra money must come from somewhere. In the case of small businesses in particular, it can be found in only three ways. It may come from profits, which means that there is less money to reinvest in the business, thus enabling it to grow and making future jobs possible. It may come from a cut in employment. Some businesses living on the margin will not be able to cope with the additional regulatory burden, or with the extra administration and costs. Those businesses will disappear.

Mark Field (Conservative, Cities of London and Westminster)

My hon. Friend the Member for Hertford and Stortford (Mr. Prisk) made a good point. There will now be two sorts of employee, those who will benefit and those who are employers in small businesses. The latter will bear a double burden: they may have family commitments, while incurring large costs in terms of both money and time that will not even be included in the £610 million mentioned by my hon. Friend the Member for Boston and Skegness (Mr. Simmonds).

Mark Simmonds (Conservative, Boston and Skegness)

My hon. Friend makes a sound point. There is a paradox here in that one of the Bill's underlying themes is to create more family friendly policies so that more time can be spent with children. Yet there may be a direct impact, with those who own and run small businesses being able to spend less time with their families because of filling in forms and dealing with the administration and additional regulatory burdens imposed by the Bill.

It is my view that £610 million is an underestimate. The extension of union learning representatives will have a significant impact on small and large businesses. Furthermore, enormous additional costs could be imposed under the regulations. New clauses 1 and 3 should be considered carefully, otherwise we will have no idea of the costs for businesses.

It would be strange if the Department of Trade and Industry carried out no assessments and had no monitoring structures to ensure that these provisions did not have a detrimental impact on businesses, small and large. I hope that when he responds, the Minister will say that monitoring structures will be put in place. If not, how on earth will the Minister and his colleagues be able to judge whether the legislation has been a success? The only way in which the hon. Gentleman will be able to tell whether the Bill has been a success is if fewer cases go to employment tribunals, and he has already said that that will not be the case. He must consider the new clauses carefully, as they will ensure the Bill's success.

Many small businesses struggle to survive. It is only by the hard work and dedication of those who run them that they can thrive in a highly competitive economic situation. The new weight of red tape to be placed on employers needs to be assessed. It is my view, as I stated in Committee, that small businesses with fewer than a certain number of employees should primarily be exempt from certain aspects of the Bill. It is my belief that certain measures will be so detrimental to small businesses and their ability to create employment, grow and drive the economy forward that the voluntary arrangements that are in place and have been thriving in the past should be allowed to continue.

My view is supported by the Forum of Private Business, which says:

"The Bill establishes formal provision—whereas small businesses operate more effectively under informal conditions. Where regulatory compliance becomes mandatory and recourse is through legal process, then advocacy requires the production of formal evidence . . . or in a word, bureaucracy."

It is not unreasonable for new clauses 1 and 3 to require the Government to report back to the House with a detailed assessment of the Bill's impact. Further burdens are already borne by business, such as the processing of loans and administration of benefits. Those are matters for which the Government are responsible. Fulfilling those tasks takes up valuable management time and distracts from the focus of what management or owners are supposed to do in running small and medium-sized businesses. I hope that that work will be clarified in the Carter review and that it will give recognition to those who run small businesses.

The burden of regulation on business has greatly increased under this Government. The one theme that runs through the remarks of all the business men and women I meet is that we must reduce red tape. I plead with the Minister: if the Bill goes through, a line must be drawn in the sand. There must be no more additional regulations and burdens placed on businesses, particularly small businesses, which will lead to a further reduction in competitiveness.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

The new clauses would impose a regime of evaluation of the measures in the Bill that is both costly and unnecessary. New clause 1 requires an annual report of the impact of these measures. New clause 3 requires an assessment of the average cost to business per employee of administering each measure in the Bill and proposes that those costs be reimbursed from the public purse. New clause 4 seeks an assessment of the additional resources likely to be required by the Advisory, Conciliation and Arbitration Service before the measures in parts 2 and 3 of the Bill come into force.

Let me make it clear that I entirely agree about the importance of effective evaluation policy. We have already provided details of our proposals—they are included in the regulatory impact assessment—to evaluate the impact of the separate provisions in the Bill. That assessment, as hon. Members are aware, is available in the Library. It makes it clear that individual policies will be evaluated effectively. For example, we have accepted the recommendation of Professor Sir George Bain's work and the parents taskforce. That taskforce had representation from the CBI, and the splendid Simon Topham, a small business man, and other small business representatives contributed to the nine unanimous recommendations. One recommendation is about taking a baseline survey on current practice on flexible working later this year, with a repeat study, three years later, to measure the effect of the legislation.

We have taken account of the possible costs to ACAS arising from the implementation of parts 2 and 3 of the Bill and we have assessed the impact on employers of administering the maternity and paternity pay policies.

Philip Hammond (Conservative, Runnymede and Weybridge)

The Minister said that the proposals in the new clauses were costly and then went on to say that he intends to carry out precisely the evaluations that we propose. How are his evaluations not costly while the ones proposed in the new clauses would be?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I will be coming to that.

On flexible working, the specific recommendation from the Bain taskforce was that in such a brave new world, as Conservative Members have said, there was no precedent and that, as we had scant information, we should take measures now because the provisions to set a proper baseline against which to evaluate those procedures will not apply until 2003. Accepting a recommendation to conduct such surveys does not mean that we will accept every proposal to conduct surveys and reconsider costs, as proposed in the new clauses.

I shall say more about ACAS in a moment. Evaluation is important, but it cannot be produced out of a hat. Immediate impact assessment is often of limited value, as I admitted in Committee. It takes time for evidence to emerge, and it is not always possible to separate the effects of legislation from other changes taking place in individual businesses.

Conservative Members must decide which way they want to play this. On the one hand, there is a kind of "Letwinisation" that says that these measures are part of a good society and that people should have adoption and paternity leave. On the other hand, there is the old and rather tired view. I pay tribute, however, to the hon. Member for Runnymede and Weybridge (Mr. Hammond), who accepted that there were benefits to society but put the fascinating and quite new argument that society should pay for them. They cannot have it both ways.

The Bill introduces measures that are long overdue. It is ludicrous that adoptive parents have received no help in the past. It is ludicrous that, despite having for 20 years been part of a World Health Organisation drive to encourage mothers to breast feed their children up to six months, we have done nothing about it. It is ludicrous that so many workplaces and workers have no recourse to internal procedures for resolving disputes and grievances.

These matters must be tackled. Each new clause refers to the cost of a measure for employers and the public purse, but none of them refers to the benefits. I am pleased that some of my hon. Friends talked about the benefits. The family friendly policies, the improved dispute resolution, the modernisation of the tribunal system and the other policies in the Bill are designed to create modern productive workplaces that provide the partnership and flexibility that both employers and employees seek to strengthen business competitiveness.

Philip Hammond (Conservative, Runnymede and Weybridge)

The Minister said that none of the new clauses referred to the benefits, but that is not the case. New clause 1 specifically asks for an assessment of the distribution of both the costs and the benefits of the Bill.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I stand corrected on new clause 1, but the Conservatives' whole approach to the debate, including—with a few honourable exceptions—practically all their contributions, has concentrated on the costs rather than the benefits.

It is true that many of the substantial benefits that will arise for employers are difficult to quantify in financial terms. None the less, it would be wrong to discount them. We do not want to fall into the trap that Oscar Wilde once described, of knowing the cost of everything and the value of nothing.

Mark Prisk (Conservative, Hertford and Stortford)

One of the key points that we have tried to get across to the Minister is why we feel that there should be a continuing assessment. The reasons are that this is an enabling Bill, not a static item that can be costed instantly, and because things will change and the Secretary of State will have powers to add new elements. That argument lies behind our case, and I do not think that the Minister has tackled it.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

If the hon. Gentleman saw me smile just then, I should let him know that I was not smiling at what he was saying; it is just that I could have done without the pager message saying, "Vote on new clause expected soon". I shall deal with the hon. Gentleman's point in a moment; there is a special little bit of my speech dedicated to him.

There are benefits that can be quantified. Good employment relations lead to improved productivity, better retention of employees and reduced recruitment costs. The average cost of filling a vacancy in 2001 was nearly £4,000—up over 11 per cent. on the previous year—and it is often small firms that find it most damaging to lose valuable staff. If only 10 per cent. of the women who currently do not return to work after maternity leave decided to return as a result of the improvements in maternity rights, employers could save up to £39 million each year in recruitment costs alone.

We are also taking the pain out of administering the new benefits by enabling employers to claim back in advance the moneys that they are paying out. Small firms will get back more than 100 per cent. of their payments. We are almost doubling the number of small employers who qualify for that benefit, and that is an important step forward.

Like me, Mr. Deputy Speaker, you may remember that once, all employers received 100 per cent. reimbursement of statutory maternity pay, so you, like me, might have wondered where that went, and why they now get only 92 per cent. Lo and behold, it was the Conservative Government in 1994, who reduced the percentage.

Lindsay Hoyle (Labour, Chorley)

Never.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

Yes, that comes under the category of "Strange but True"—an item that I used to read every week in The Eagle. It was the party that is now telling us that we have to pay more attention to business, and not load burdens onto it, that cut the reimbursement of statutory maternity pay from 100 per cent. to 92 per cent. just eight years ago. To coin a phrase, this is a win, win, win scenario. Employers, working people and the economy all gain.

The new statutory procedures for dispute resolution recognise the needs of businesses, both small and large. Avoiding costly, stressful and time-consuming litigation will benefit employers, employees and the employment tribunal system. The benefits should become apparent in the second year after the introduction of the procedures, producing an annual saving for businesses of between £60 million and £80 million.

What I said earlier about the number of cases is an honest assessment of how things will look in four or five years' time. The number of cases may have tripled—incidentally, they doubled before any new rights were introduced. That must mean that we have a healthier society in which people are more aware of their rights and less afraid to use them. They are more assertive, and they have more rights to be aware of; I do not apologise for that. I think that there is a consensus, even among Conservative Members, that age discrimination and so on should be tackled, so it would be strange if we did not envisage that at some stage the number of cases would pick up. Current estimates are based on the current number of cases, and we are expecting to make savings. When the new jurisdictions are introduced, having a procedure in the workplace will help to resolve the issues without a tribunal.

Philip Hammond (Conservative, Runnymede and Weybridge)

The Minister is in danger of having his last remarks misinterpreted. He appeared to suggest that, as people become more aware of their rights, he welcomes the fact that they are taking more litigious action in support of them. Is he saying that a move towards a more litigious society is to be welcomed?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

Not at all. I am suggesting that as so many workers now have no opportunity to exercise those rights so that problems can be resolved in the workplace, it must be right for us to introduce the changes in the Bill.

I do not accept that employers should have the right to recover their average costs of complying with each of the requirements of the Bill from the public purse, any more than they should have the right to recover their costs in administering PAYE, national insurance, tax credits or VAT. The best employers already bear many of those costs, because they already recognise the value of providing their employees with those rights.

We understand the pressures that new regulation puts on business. We have, rightly, spent much time in Committee discussing the proposals, and we are committed to sympathetic implementation of the Bill and to ensuring that employers and employees have enough time to understand and plan for the changes. We will provide clear, accessible, user-friendly guidance to all, particularly small businesses. The Inland Revenue has also expanded the range of help available through business support teams, which now provide one-to-one on-site assistance to employers on every aspect of their obligations in respect of Inland Revenue business.

The hon. Member for Runnymede and Weybridge said that some employees would gain from the Bill and some would not. He mentioned flexible working, and I want to address that point again, because I agree with my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) on that. It is good of him to join us tonight. He is taking a break from his endeavours to become a father, so I hope that he can hang around until the end of the debate.

My hon. Friend was right to point out that we have a two-pronged approach. There is regulation; we are introducing the measures for parents of children under six because we do not want to miss out a generation. Best practice often emerges from small businesses, which have some cracking arrangements for flexible working, which help to recruit and retain staff. We are spreading that best practice for parents and small children.

As the hon. Member for Runnymede and Weybridge recognised, we all have a stake in helping to ensure that children are raised properly. We cannot wait a generation. There is also the work-life balance campaign. We have an enormous interest in spreading best practice for flexible working even when it is unrelated to parenthood. It might be that people have other caring responsibilities, or simply want to pursue a hobby. This is a two-pronged attack.

I have heard the backlash argument from several quarters, although the hon. Member for Runnymede and Weybridge did not put it so—[Interruption.] That is true; he did not put it at all—but that does not stop me from replying to the point, in case he does put it.

The backlash argument diminishes and insults working people, who in the wide consultation that we conducted in workplaces never once raised that idea. Of course, they understood the need for mothers and fathers to spend more time with their small children, and yes, many of them said that they would like the same kind of flexible arrangements for themselves, but they did not say it out of resentment.

Philip Hammond (Conservative, Runnymede and Weybridge)

I shall put that argument now, in response to the Minister. Just for the record, does he acknowledge that when it is ruled either by the courts or through new statutory provisions that, for example, a policewoman with a small child does not have to work a night shift, by definition her colleagues who are not mothers of small children will have to work more undesirable night shifts? Is that not a logical and inevitable consequence?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

That is a depressing approach to the clause. The answer to the question is no, not at all. In the vast majority of cases, such problems are resolved when one employee suggests that a change in shifts would be beneficial, and then finds a colleague willing to change out of a rigid shift system.

Philip Hammond (Conservative, Runnymede and Weybridge)

indicated dissent

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

The hon. Gentleman shakes his head, but it requires only a little thought and imagination to break away from the rigid systems that developed when women were largely absent from the workplace because only men had full-time jobs. I think that the hon. Gentleman is wrong in that regard.

I am conscious that I need to make some progress. My hon. Friend the Member for Wolverhampton, South-West also referred to ACAS, and the hon. Member for Runnymede and Weybridge was right in new clause 4, to draw attention to that body's importance in matters covered by parts 2 and 3 of the Bill. However, in seeking an assessment of additional resources likely to be required by ACAS when the measures in this Bill are implemented, the hon. Gentleman is once again concentrating on costs and ignoring benefits. It is clear from the responses received from all parties to the "Routes to Resolution" consultation paper that the services of ACAS are highly regarded. That body will play a key role in ensuring that businesses, especially small businesses, have the advice and guidance that they need.

We fully support that role. During the financial period 1998–99 to 2000–01, funding for ACAS has increased from £26.2 million to £32.4 million, a rise of 23 per cent. As I said earlier, the regulatory impact assessment of the Bill already refers to the possible costs to, and efficiency gains for, ACAS arising from the implementation of parts 2 and 3 of the Bill. However, the hon. Member for Runnymede and Weybridge will be aware that the employment tribunals system taskforce, set up by my Department and the Lord Chancellor's Department and headed by Janet Gaymer, is considering the resources of the employment tribunal system as a whole. The operational impact on both ACAS and the ETS of the policies included in parts 2 and 3 will be part of that consideration. The taskforce reports in spring this year, and we shall take account of all its recommendations when considering the funding needs of ACAS.

As I said earlier, however, there are benefits as well as costs to consider. The dispute-resolution measures in the Bill are designed to encourage parties to resolve their problems in the workplace. That should reduce the number of cases resorting to litigation and using ACAS services. Secondly, clause 24 introduces a fixed conciliation period. That will free up conciliators' time to deal with claims in which both parties are engaged in the conciliation process, and will allow ACAS to concentrate on the cases where its expertise is needed most.

Overall, the policies in the Bill strike a balance between rights and responsibilities in the workplace. I was shocked and surprised by what the hon. Member for Weston–super–Mare (Brian Cotter) said. People are rushing in and out of my tent at great speed, but the hon. Gentleman was guilty of trying to have it both ways. Liberal Democrat Members seem to lurch from one position to another, depending on whether they are trying to win seats in the north or the south-west. We well remember that they opposed the windfall levy that supported the new deal, and that they supported a regional minimum wage. Now, almost alone, they propose that the national rate for the minimum wage should be available for people aged 16. That is an incredible change from their original policy. I am therefore disappointed with the hon. Gentleman, who needs to rethink his approach to the Bill.

The hon. Member for Runnymede and Weybridge asked whether I could say anything about the Carter committee, or whether it was a state secret. The Small Business Service has conducted a series of focus groups to obtain views about the recommendations made by Patrick Carter in his payroll review. Small businesses and other interested parties participated fully.

The SBS subsequently submitted a report to the Inland Revenue that will feed into the consultation process. However, I am afraid that Conservative Members will have to wait for the Budget report for more details, as the Carter committee was set up by my right hon. Friend the Chancellor of the Exchequer. I have no news of any imminent report.

The hon. Member for Hertford and Stortford (Mr. Prisk) said that the regulatory impact assessment was incomplete and uncosted. He suggested too that the cost of following the regulations provided for in the Bill was not included in the assessment. The implication was that those costs would be the wine bill that would follow the bill for the main courses.

I can tell the hon. Member for Runnymede and Weybridge that the RIA will be updated and placed before the House with all secondary legislation fully costed. However, the RIA that is in both Libraries of the House contains the best estimates of the costs of meeting both primary and secondary legislation. It is therefore wrong to say that the existing RIA does not cover the costs of meeting requirements imposed by secondary legislation. I am aware that Opposition Members have tried to add to the costs imposed by the Bill, and a later amendment that would extend statutory paternity pay to the self-employed would carry with it a considerable cost.

I do not believe that we have to make a choice between helping business and helping the work force. I believe that we can do both. The evaluations that we conduct will look at costs but also at benefits for employers and public funds. They will take account of the time that it takes for the impacts to be felt. I hope that I have reassured the hon. Member for Runnymede and Weybridge that these amendments are unnecessary. An assessment of the kind proposed in new clause 1 would be too narrow, too soon, and conducted too often. The proposal in new clause 3 could well mean more bureaucracy and red tape for employers, and the proposal in new clause 4 would duplicate work already in hand.

I ask the hon. Member for Runnymede and Weybridge to withdraw the amendments. Failing that, I hope that the House will reject them.

Philip Hammond (Conservative, Runnymede and Weybridge)

To continue the culinary metaphor, I sense that the House is anxious to move on to other items on the menu, so I shall attempt to be brief. I am sure that the Minister will be relieved to hear that we will get rid of the big tent a little later on, and that we will resort to our customary small tents pitched on opposite sides of the parliamentary divide.

I am disappointed by the Minister's tone. I did not expect him to accept the new clause, but I hoped that he would make a more significant gesture in respect of the need for ongoing monitoring of the costs and benefits—and I emphasise the latter—arising from the Bill, and their distribution. In the absence of a provision in the Bill requiring that such assessments be made, we shall have to rely on what might be called unmandated assessments by the Department. It will be for Opposition Members to keep the Government on their toes by making sure that the matter remains in focus after the Bill has come into force. We will then be in a better position to evaluate its real impact.

I want to thank my hon. Friends the Member for Cities of London and Westminster (Mr. Field), for Tatton (Mr. Osborne), for Hertford and Stortford (Mr. Prisk) and for Boston and Skegness (Mr. Simmonds) for their valuable contributions to the debate. Many small businesses are worried about the Bill's implications for them, and the extent of the burdens that it will impose. It is important that we explore such matters with the Government properly and thoroughly. Finally, while we remain inside the big tent in this debate, I should like to thank the hon. Member for Weston-super-Mare (Brian Cotter) for his support.

The hon. Member for Wolverhampton, South-West (Rob Marris) a couple of times mentioned the proposal in new clause 1 for an assessment of average costs on business. I accept that there is no meaningful concept of an average cost of doing something: different businesses will have different costs. The proposal was an attempt to establish a crude and dirty form of reimbursement that at least would recognise the costs being imposed on business.

I am disappointed that, in the 21st century, Government Members and the Minister are still capable of believing that the Government should legislate to impose benefits on business. If something benefits business, all the Government have to do is to help and encourage it through education so that smaller businesses in particular can be aware of the evidence in support of the assertion that a practice will be beneficial. I can think of no case where there is credible evidence that the Government, using the blunt instrument of legislation, have been best positioned to impose on businesses the benefits that they believe will flow from these measures.

I readily and willingly recognise that, in many cases, there will be benefits from many of the courses of action resulting from the Bill. One of the pities of the Bill is that, in many cases, we are talking about things that good employers are doing and are willing to do, and about areas where the arrangements and relationships between employees and employers are appropriate. The Government are seeking to impose a one-size-fits-all solution by imposing, by statute, a requirement that their practices be followed in every workplace.

I am disappointed by the tone of what the Minister said, but I shall look forward to seeing the evaluations to which he referred. It will be our duty to keep a close watch on those evaluations and to probe their results as they become available. I am sorry to upset the Government Whips, who may have sent out a pager message, but in view of the fact that the debate is tightly timetabled and that there is exciting business further on, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn

New Clause 2 — Assessment of effects of widening definition of 'employee'

Philip Hammond (Conservative, Runnymede and Weybridge)

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

The new clause deals with issues that will be familiar to those who served on the Standing Committee. In Committee shorthand, it was known as the "employee versus worker" question. In parts of the Bill, a curious architecture is employed, which is repeated in new clause 6(8)(c). It says that the Secretary of State may by order

"make provision for this section to apply, with or without modifications, as if—

(i) any individual of a description specified in the order who would not otherwise be an employee for the purposes of this section were an employee for those purposes, and

(ii) a person of a description specified in the order were in the case of any such individual, the individual's employer for those purposes."

We have a counter-intuitive provision in the Bill that allows the Secretary of State to define somebody as an employee and somebody else as his employer, even where they are not in that relationship.

The reason for this provision is that our employment law is somewhat confused. In some places, it refers to employees and in others, it refers to workers—for example, in the minimum wage legislation and the working time directive. EU directives typically refer to workers, rather than employees, but the rules governing transposition of directives into national legislation seem to allow that definition to be narrowed when directives are transposed into domestic law. That seems to be the Government's legal advice. The TUC appears to have different legal advice, which goes to show that one can get as many opinions as one can afford barristers to give them.

There is a dispute in relation to the fixed-term work provision of the Bill. The TUC disputes the Government's interpretation, which is that the EU directive applies only to employees. I understand that the TUC is threatening legal action to clarify the situation in the future.

Who are these workers who are not employees? The Minister can correct me if I am wrong, but probably Members of Parliament, as office holders, are workers—at least some of them are—who are not employees. A more important category of workers who are not employees are agency workers working for a company but not employed by it.

It is important that I set out the Opposition's position. We believe that for the UK to maintain and enhance its competitiveness, it is essential that we maintain flexibility in our work force. We recognise the increasing need in the modern workplace for flexible working. I will argue against anything that reduces flexibility in the labour force.

Some, if not all, elements within the trade union movement appear to regard any form of non-conventional work as "Mickey Mouse" jobs. It is important that we change that attitude through education. We must make it clear that there is a role for flexible and unconventional work in our economy to maintain and enhance our productivity and efficiency and to defend Britain's role in the world.

Judy Mallaber (Labour, Amber Valley)

Does the hon. Gentleman accept that most parts of the trade union movement have been keen on allowing flexibility to assist people to have better working arrangements? However, the main aim is to ensure that that flexibility is operated within an environment in which there is still protection for people's rights. We do not want a system in which, for example, an employer can say at the beginning of the day that a worker has to work an extra three hours that night. The question is how we marry decent employment rights to the flexibility that can be of benefit to people in running their lives and to their employers.

Philip Hammond (Conservative, Runnymede and Weybridge)

It is interesting that the hon. Lady approaches the issue of flexibility purely in terms of flexible working hours. Flexible working arrangements and non-conventional working patterns go wider than that, encompassing fixed-term working and, in some cases, the outsourcing of work, in which someone moves from being an employee to being a self-employed contractor. That has happened in the Post Office in relation to Parcelforce delivery van drivers. The Minister may tell us something about that, as he is an expert on that subject.

There are a range of flexible approaches to work. My perception—I hope I am wrong—is that parts of the trade union movement are still relatively hostile to some of those non-conventional work patterns; for example, to the use of agency workers in business to provide flexibility at the margin to respond to demand.

That must change, but the Opposition are not in the business of defending abuse. If an elaborate ruse has been developed to pretend that somebody is not an employee, that is an abuse and it is right to deal with it. We heard some scary stories in Committee about fixed-term workers who were on their 40th fixed-term, six-month contract, having been in the same place of employment for 20 years. That is not what we are about. We do not want to deny employees proper protection by allowing artificial classifications of their work to continue.

The Secretary of State has instituted a review of the wider issue of the definition of "employee" and "worker" across the board of employment legislation. The Minister said repeatedly in Committee that the Secretary of State would not use the powers she had under the Bill to define a person as an employee and another person as his employer if they were not employee and employer, unless and until the review is completed. The new clause goes further, in that it looks for a proper assessment of the need for and the expected effects of any proposed exercise of these powers.

The new clause looks for the review to produce more than just a decision to do something; it looks for a proper and full appraisal of the arguments for doing something—in other words, the way in which the proposed change is expected to deal with the mischief that is expressed. It would require a full assessment of the expected costs and benefits and their incidence.

The Government come under pressure from the trade unions. I do not suggest that that is improper—they also come under pressure from some Labour Back Benchers. In Committee, some Labour Back Benchers put pressure on them rapidly to resolve the employee-worker issue. We are concerned that those powers are unnecessary because, if the Secretary of State waits until the review is completed and a comprehensive approach to that legal problem is formulated, consulted on and properly debated in the House, a broader Bill will be needed to deal with not only the issues raised by the Bill, but existing employment legislation.

We are forced to ask ourselves why such provisions have been included in the Bill. Our concern is that the Minister is perhaps offering a sop to the trade union agenda and the pressure that he is coming under. After all, the Labour party received £9 million from the trade unions at the last election, and it is not surprising if the Government are asked for something in exchange. The Minister is wincing. Was the figure not £9 million? If the figure was slightly different, he will no doubt correct me. Compared to the Formula 1 and Hinduja scandals, £9 million is a tremendously large sum and we might expect some pressure to be put on the Government.

Can we be sure that the review is not a cosmetic exercise? Can we be sure that the Government have not already decided to bow to that bit of the trade union agenda and cave in on the employee-worker issue? Under new clause 2, we seek to place at the end of the current review process a rigorous and proper assessment of the need for and the effects of the proposed exercise and its costs and benefits. The purpose is simply to ensure that there is a proper, fully informed debate.

Mark Prisk (Conservative, Hertford and Stortford)

Does my hon. Friend agree that, under new clause 2, we not only seek to stimulate that debate, but in a sense adhere to the spirit of the National Audit Office's view that any new proposal should be properly assessed and involve a regulatory impact assessment?

Philip Hammond (Conservative, Runnymede and Weybridge)

My hon. Friend is absolutely right. Although I have to tell him candidly and in confidence that I am not optimistic that the Minister will accept the new clause, I hope that, in response to it, he will take the opportunity on the Floor of the House to confirm that there will be no move to implement the powers under the Bill to change the definition of "worker" so that workers are covered by its scope until the review process is completed, the proper assessments have been carried out, a consultation exercise on the proposed legislative changes has been undertaken and general legislation is introduced to do at a stroke whatever needs to be done across all employment legislation.

In other words, I seek an assurance from the Minister that the inclusion of such provisions in the Bill does not imply that, on the basis of a quick and dirty analysis immediately after the review is completed and as a sop to the trade union agenda, he will present the prospect of including workers in the Bill's scope ahead of a more comprehensive solution if the review deems that necessary. I hope that good practice will require him to do what he would be asked to do under new clause 2, and that he will confirm what I have asked him to confirm so that Conservative Members can be comfortable in the knowledge that the changes will be made on the basis of properly assessed need, cost and benefit.

I hope that the changes will not be part of a wider political trade-off in the Labour party's smoke-filled tower, with Ministers desperately bidding to win trade union leaders' support for their privatisation of public services, while simultaneously keeping up the flow of cash into Labour party coffers. We hope that the Government will not be tempted to offer sacrifices that perhaps impose more burdens on private sector businesses, while saving Ministers' bacon and the Labour party's funding.

Frankly, those are our fears, and I hope that the Minister will be able to allay them by accepting new clause 2 or, if he is not in a generous enough mood to do that, perhaps by confirming that he will follow the procedures that I suggest and not use the powers under this Bill until a general Bill is introduced to do so—if, indeed, that is the conclusion of the review.

Tony Lloyd (Labour, Manchester Central)

I thought that the hon. Member for Runnymede and Weybridge (Mr. Hammond) made a fascinating speech. I congratulate him on becoming skilled at presenting an almost acceptable face for the modern Conservative party. He tries his very best to make calm, seemingly rational contributions on various issues. Indeed, he spoke for the Opposition in that manner in Committee, with one or two exceptions. Nevertheless, we get down to the visceral Tory inside him when he talks about giving sops to the trade union agenda and caving in on the worker-employee issue. Let us be a little more grown up than that. The worker-employee question involves very real issues. The simple fact is that there is genuine legal debate about the implementation of the fixed-term directive and whether the British Government's interpretation of EU law and its incorporation into national legislation is acceptable. The matter may or may not end up in the courts, but it is a serious issue.

Fixed-term contracts in higher education present us with an especially serious issue. Some 11 per cent. of employees in higher education are now on fixed-term contracts. Frankly, it ought to be astonishing that the hire-and-fire mentality is used to run our academic institutions. Let us be brutally honest: we are talking not about universities and higher education institutions dealing with the sudden excess demand that arises in the summer, when 27 more undergraduate courses in physics or philosophy may be required, but about universities cushioning themselves so that they can take on or get rid of staff at summary notice. Many of those people have been employed on fixed-term contracts for many years. Frankly, that is an abuse, and it would be a shame if the current system continued in perpetuity.

I understand the hon. Gentleman's argument—I am with him in that I, too, want to find a comprehensive solution to the worker-employee issue—but he may feel slightly slighted if I tell him that I do not believe that it is the Conservative party's ambition to sort out the issue in favour of those who are often in the most marginal employment circumstances and who will lose that sort of protection. I hold that view because at no time during their 18 years in government did the Conservatives go down that path. There is no evidence that they even wanted to recognise those issues. In fact, the opposite is the case, as they sought to cast into that employment never-never land far too many of our fellow citizens—people who are just as entitled to dignity at work as those who are formally given the legal status of employee.

The hon. Gentleman would have more credibility if he told us what the Conservative party would be prepared to do if it ever got back into government. What is the modern, Letwinised Conservative party prepared to do? We do not believe that it has any real credibility given the fact that Conservative Members' rhetoric runs in sharp contrast to many of the views that have been expressed. He did not talk about employers abusing their employees by imposing unacceptable employment conditions. He paid passing reference to the fact that that was not acceptable, but we need a little more than the condescending view, "We can recognise bad conditions when we see them." We need to consider how employment law can resolve such evils.

Philip Hammond (Conservative, Runnymede and Weybridge)

If the hon. Gentleman casts his mind back, he will remember that we had this exchange in Committee. I suggested that the Inland Revenue had generally been pretty adept at defining a person as an employee, despite all attempts by ne'er-do-wells to define them as something else. I suggested to him that that was a good model on which to base our discussion.

Tony Lloyd (Labour, Manchester Central)

I look forward to hearing the hon. Gentleman develop Conservative policy in this area. However, I remind him that an awful lot of the lags in legislation that this Government had to pick up in 1997 were a result of a deliberate and calculated policy. That sort of policy is always justified by the Opposition when the need for flexibility is discussed. He is right that flexibility is important. It is important to employers and it is right and proper that employment relations should be structured so as to allow industry to be maximally efficient. There is no argument about that, and certainly none that mainstream trade unionists would want to advance.

There is also an argument that flexibility cuts the other way and is also about giving the employee access to acceptable working conditions and the opportunity to take advantage of them. We did not hear a lot in the previous debate or even in the hon. Gentleman's opening remarks about the need for flexibility for employees. In that context, I appeal to my hon. Friend the Minister to reflect hard on what is being said, because the new clause has all the marks of a wrecking amendment. It is superficially attractive—it asks us to delay, to wait and to look for a little more information—but the real intent is to cement the current position more permanently, so the day will never dawn when employers are forced to face up to their real responsibilities.

Philip Hammond (Conservative, Runnymede and Weybridge)

Whether that day will dawn will be in the Government's hands when they complete the review. The point of the new clause and of what I have said to the Minister is to seek his assurance that no piecemeal approach will be taken using the order-making power in the Bill and that he will wait until a comprehensive solution has been proposed, consulted on and implemented across the board as a definitive remedy. Does the hon. Gentleman support that approach?

Tony Lloyd (Labour, Manchester Central)

No, I do not, and I shall explain why. The issues are intellectually and practically separable. A decision on what is right and proper in relation to the aspects of the Bill that are covered by the new clause can be made coherently on its own merits. My hon. Friend the Minister will have the legal capacity to make that decision if it is in the interests of the operation of industry, commerce, employers and employees. I urge him to do it at the right time, subject to proper consideration. Indeed, the hon. Gentleman is right to say that these matters require adequate consultation, but there will be no need to wait if we know what is the right thing to do.

I agree with the hon. Gentleman more generally that we must resolve the overall problem of the definition of employee and worker. I repeat that if he is asking us simply to delay the resolution of that problem, he will find no support among Labour Members. I hope that my hon. Friend the Minister will be reasonably robust in his response and tell him that he is making a good try. However, the real Tory view is coming out in little soundbites designed for the Federation of Small Businesses and in Conservative central office press releases. That is the real voice that he wants the country to hear. Alas, the mask begins to slip away as we reach the end of debate. We look forward to more of that mask slipping to reveal the real Tory party.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

There was much talk about tents earlier. On this occasion, we are in need of a tent; indeed, we have our own very large tent that is expanding by the day. People are flocking into it because we have our own view on all these issues. When the Government have been correct, we have supported them. Otherwise, we have taken an alternative view.

The Minister will recollect that, in Committee, I suggested that we should be able to incorporate the concept of worker into the Bill. To put us into line with the EU directive, it was not unreasonable for us to do so. I shall not rehearse our discussion in Committee of the various examples of people who are workers but are not covered by the fair social requirements of the Bill. I am worried that the Conservatives' new clause would not merely allow the Government's review of employment status to decide this issue, but put in its way blocks such as the requirement to prepare and publish reasons for the action and an assessment of additional costs in relation to it.

This issue must be addressed to put us in line with other countries, and I expect the Government to do that sooner rather than later. I look forward to them addressing it as soon as possible.

Joan Walley (Labour, Stoke-on-Trent North)

Before my hon. Friend the Minister replies, I want to express my concerns about this issue. I did not have the dubious distinction of serving on the Committee that considered the Bill, so I was not party to the shorthand that has been used to describe employees and workers. Clause 45 is about fixed-term work and I hope that he will take full account of the views expressed.

The hon. Member for Runnymede and Weybridge (Mr. Hammond) referred to dinosaurs in the trade union movement and to scandals of various kinds. However, I remind him of the scandal of workers whose employers classify them as such not for reasons of flexibility but because they want to deny them basic employment rights. That cannot be right, especially when we come to interpret important European directives.

I flagged up this issue on Second Reading, and I have corresponded with the Minister on it since then. I am grateful to him for considering the points that I have made and I am fully aware that a review is under way. However, the regulations on part-time workers apply to the broader category of workers. The directive that gives effect to the part-time workers regulations and that which gives effect to the fixed-term work regulations contain an identical definition of worker. Therein lies the problem.

Clearly, the Government will not accept the new clause, but it refers to the distinction in relation to considering future definitions. On logical grounds—and perhaps legal ones—it is unsatisfactory for the proposed fixed-term work regulations to have a restricted application. That will give rise to uncertainty and confusion for workers and employers. Part-time workers will have protection under the part-time workers regulations, but fixed-term workers will not have protection under the fixed-term work regulations. However, part-time fixed-term workers will have protection under the part-time workers regulations. That is an anomaly.

The representations made by the TUC in respect of establishing consistency on how to define workers and employees should be addressed as quickly as possible. I would not like the House to accept a new clause that would further prevent the Government from considering the distinction between workers and employees. They need to resolve the matter quickly, especially in view of constituents such as mine who are not receiving their fair employment rights because of the failure to resolve the issue.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I agree with my hon. Friend the Member for Manchester, Central (Mr. Lloyd) that it is a shame that the new Tory veneer of the hon. Member for Runnymede and Weybridge (Mr. Hammond) has faded away and that the old Tory is revealed in the claim that these policies are dictated to us by the trade union movement. It is water off a duck's back.

The hon. Gentleman alleges that contributions to the Labour party have influenced its policy. We would love to know who contributed to the Conservative party when it was in government between 1979 and 1997. That would be fascinating to hear, because it might enable us to draw the same conclusions and to make the same cheap points. The truth is, however, that we do not know because it is a secret. We do not know who contributed a penny of the considerable funds that went to the Conservative party up to 1997. Labour party funding is open, transparent and governed by law. We introduced the legislation that insists on all political parties being similarly frank about the money that they receive. Before we are criticised, we deserve to know who funded the Conservative party in their 18 years in government.

Llew Smith (Labour, Blaenau Gwent)

The Labour party was born from the trade union movement. Why should we apologise for that or refuse to recognise that we are influenced by it?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

My hon. Friend is right; we have nothing to apologise for. It is interesting to note that the trade union movement in many other countries donates money to mainstream right-of-centre political parties. We have the curious anomaly in this country that no one would consider donating money to a party that, alone among the mainstream right-of-centre political parties, until recently opposed the provision of decent and civilised standards for people at work. Conservative Members should think about that extraordinary paradox.

Kevan Jones (Labour, North Durham)

Does my hon. Friend agree that, unlike company shareholders, who have no say in donating money to the Conservative party, individual trade union members have a right not only to opt out, but to vote on the union's affiliation to the Labour party and on donations?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

Another important point. Were we to have a transparent debate on who funded the political parties that have been in government over—to pluck a figure out of the air—the past 23 years, the Conservatives would regret the day they moved on to this territory. It was unworthy of the hon. Member for Runnymede and Weybridge to suggest that the trade union movement donates funds on any basis other than the desire to have a properly funded party that is broadly sympathetic to free and independent trade unionism. If he doubts that, he should accompany me when I meet my hon. Friend the Member for Manchester, Central to discuss what policies the trade union movement proposes.

The hon. Gentleman is also mistaken in thinking that we need primary legislation because of the employment status review. We already have similar powers to extend a wide range of employment rights to non-employees by using the order-making power in section 23 of the Employment Relations Act 1999. That has been in effect since October 1999 without creating the problems that he foresees. We have to take additional order-making powers in the three main clauses because they do not relate to employment rights per se, so we cannot rely on section 23 to extend their coverage to non-employees.

On the substance of the new clause, I am happy to reaffirm that we will review employment status in relation to statutory employment rights under section 23. The mechanics of the review have commenced. We hope to publish the consultation document in late spring, when we intend to set out a radical approach. I assure the hon. Gentleman that we do not intend to use powers contained in the clauses in advance of that comprehensive review.

David Heath (Liberal Democrat, Somerton and Frome)

The hon. Member for Manchester, Central (Mr. Lloyd) mentioned the problem in the higher education sector. It is crucial that we sort that out effectively and I hope that it will be a priority. The current situation is untenable for lecturers and for the interests of academic work. It needs urgent attention.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

We will consider that and other aspects of the employee versus worker issue.

The fixed-term work directive is incorporated in the Bill and covers pay and pensions. I can tell my hon. Friend the Member for Stoke-on-Trent, North (Ms Walley) that we discussed that directive in Committee. Unlike the part-time workers directive, it is not clear that the term "employee" causes a problem by leaving groups of workers outside the embrace of the fixed-term work directive. People have mentioned agricultural casual workers, but we established that they have a contract and are employees for the purposes of the Bill. It would not be possible to walk through a Post Office sorting office without tripping over a sociology student from Sheffield university who is employed as a casual worker by a contract of employment and is, therefore, covered by the fixed-term work directive. Incidentally, part-time people on fixed-term contracts are covered by virtue of the fact that the part-time workers directive covers workers and employees.

The biggest problem that we discussed in Committee related to employment agency staff. The social partners who signed the fixed-term work directive specifically excluded agency staff because they decided to have a directive that was aimed purely at agency staff, one of the three groups of atypical workers. It would be ludicrous to extend the Bill to cover employment agency staff in advance of the review under section 23 and of the directive, which the Commission is now producing since the social partnership broke down. That is why the fixed-term work directive should not be extended to cover workers at this stage. We could consider the issue in the review.

I am sure that the hon. Gentleman was not daft enough to think that I would accept his new clause, and I hope that I have reassured him on that fundamental point.

Philip Hammond (Conservative, Runnymede and Weybridge)

I suppose I should return the compliment given by the hon. Member for Manchester, Central (Mr. Lloyd): he sometimes manages to look like the acceptable face of old Labour, and one has to peel away the veneer to see what is going on behind. For all the talk of big tents, some people will be relieved to know that the small tents are alive and well. They are close at hand should we ever need them, as I suspect some of us might in the forthcoming debate.

There is a proper issue at stake. I have acknowledged that and the hon. Member for Manchester, Central is doing me an injustice in suggesting that I pay lip service to it. Apart from anything else, there is a ridiculous confusion. There is no point in having legislation that cannot be understood by a reasonably educated English-speaking person. Clearly the confusion between worker and employee has become intolerable and needs sorting out. We merely want to ensure that that is properly and objectively dealt with on the basis of the facts, of the benefits that are likely to flow from any changes and the costs of making the changes.

We are trying to disentangle the real issue from what I characterise as political horse trading. The hon. Gentleman might deny that until he is blue in the face, but the Opposition and most of the 56 million people in this country do not believe that difficult discussions do not take place on items of the trade union movement's agenda, because it funded the Government to the tune of £9 million to fight the general election campaign that put them here. We want to ensure that this issue is not lost in political horse trading but dealt with properly and objectively on the basis of the facts. I ask the hon. Gentleman to accept that at face value; it is up to him whether he does so. I detected in some of his comments a hint of the old attitude that any job that does not conform to a conventional work pattern is a Mickey Mouse job. We must try to get away from that.

Tony Lloyd (Labour, Manchester Central)

I shall read with interest not only the hon. Gentleman's speech but my own, and I think that if he reads my speech carefully he will detect no such attitude. Flexible working is in the interests of an efficient economy and, very often, it is in the interests of employees; but we must get the balance right.

Philip Hammond (Conservative, Runnymede and Weybridge)

The hon. Gentleman must understand that such work involves not only flexible working times and patterns for employees but what the Minister described as atypical forms of work. Typically, atypical workers will be difficult to unionise, and I understand that there will be an instinctive reluctance on the part of the trade unions to embrace atypical forms of work. That is a legitimate, self-interested approach, but I suggest to the hon. Gentleman that we must change our attitude in the interests of maintaining flexibility in the economy and trying to maintain our competitiveness against our European neighbours, many of whom are now beginning to embrace concepts of flexibility in the work force after years of our deriding them for not doing so. We must accept that atypical workers will form an important part of this country's total labour force.

In this debate the Minister has, perhaps tactically, thrown up a little smoke in anticipation of the debate to come. I know, Mr. Deputy Speaker, that you would not want me to stray too far into the subject of trade union funding for the Labour party, but the Bill is about delivering part of the trade union agenda. I am not saying that that agenda is wholly wrong or that we should reject it, but we are entitled to question the relationship between the Government, acting as the Government of the day, the Labour party, recipient of substantial largesse from the trade union movement, and the trade union movement, which has an open and published agenda, some of which is being incorporated in the Bill. Indeed, some of it has been incorporated at a late stage in the Bill's passage. That is a legitimate public concern, and we would be failing in our duty as an Opposition if we were not probing the matter and asking questions.

Judy Mallaber (Labour, Amber Valley)

rose—

Philip Hammond (Conservative, Runnymede and Weybridge)

I give way for the last time.

Judy Mallaber (Labour, Amber Valley)

Will the hon. Gentleman at least accept that the motivation of Labour Members on issues such as those that I pursue, including rights for part-time workers, the worker-employee issue that I raised in Committee, decent working conditions and the ability to combine family and work, arises from genuine individual concern and just happens to be the same as that of the trade unions? Will he please stop casting aspersions on our motivation, because it is not influenced by the question of whether there is money in the equation? I espouse those views regardless of money. Does he accept that Labour Members' motivation is honourable?

Philip Hammond (Conservative, Runnymede and Weybridge)

I suggest that the hon. Lady get herself a slightly thicker skin. We have a Government who got themselves elected in 2001 on £9 million of trade union money and a pledge to bring the trade unions to heel and impose a solution to reform our public services. So far, all we have seen is repeated backtracking. Conservative Members are entitled to ask, "What is going on?" We are scrutinising a Bill that implements a significant number of items on the TUC's published agenda. There is nothing wrong with that published agenda, but we are entitled to ask questions.

Andrew MacKinlay (Labour, Thurrock)

rose—

Philip Hammond (Conservative, Runnymede and Weybridge)

Although I said that I would not give way again, I am tempted to give way to the hon. Gentleman.

Andrew MacKinlay (Labour, Thurrock)

I think that there is a third angle. [Hon. Members: "A third way?"] No, a third angle—there is a substantial difference. I have been listening to the debate, and I can no longer restrain myself from speaking. I am of the view that the trade unions are far too acquiescent, and they do not flex their muscles on the Labour party's national executive. They have not exercised their right to interfere with manifestos. This is a matter that will come out in memoirs, but it needs to be said. My criticism is that trade union officials sit on their hands at the national executive committee when the manifesto is being drawn up; they are too deferential to people from the Prime Minister downwards, and then they go to the TUC conference—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. Before the hon. Member for Runnymede and Weybridge (Mr. Hammond) responds, I point out that we are dealing not with memoirs but with new clause 2, and I trust that he will bear that in mind when he responds to the intervention.

Philip Hammond (Conservative, Runnymede and Weybridge)

Of course I shall bear it in mind, Mr. Deputy Speaker. I hope that the hon. Member for Thurrock (Andrew Mackinlay) will stay to regale the House with his thoughts in the next debate.

The Minister accused me of being veneered. I always think of veneer as rather cheap, and I prefer to be thought of as solid. He suggested that my veneer was peeling away, but we are beginning to see some veneer peeling away on the Labour Back Benches. We have a Prime Minister who appears to be biting the trade union hand that feeds him, and who describes as "wreckers" people who oppose the Government's mandated agenda for reform of the public services, and we have Conservative Members who seek to advance the trade union agenda. It will be interesting for us and, I suspect, for the public, including my constituents who only narrowly avoided a strike by South West Trains today, to see how the Minister responds to some of those issues later this evening.

I sense the House is ready to move on to the next debate. Conservative Members are somewhat reassured by what the Minister has said about the non-piecemeal implementation of the results of the review being undertaken by his Department. We look forward to a full and proper debate on the conclusions of that review before any secondary legislation is proposed. The Minister has previously indicated that there will be proper consultation and an opportunity for parliamentary review. In the interests of economy of time, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 5 — Participation in official industrial action

Tony Lloyd (Labour, Manchester Central)

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

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this it will be convenient to discuss new clause 8—Dismissal and participation in industrial action—

'(1) The Trade Union and Labour Relations (Consolidation) Act 1992 (c. 52) is amended as follows.

(2) Subsection (2B) of section 238 (dismissals in connection with other industrial action) shall cease to have effect.

(3) Section 238A (participation in official industrial action) shall cease to have effect.'.

Tony Lloyd (Labour, Manchester Central)

It is interesting that new clause 5 is grouped with new clause 8 in the name of Conservative Members. I think that, once again, we will see a sharp divide. There has been talk of big tents, but there are big marquees on the Conservative Benches and tents on the Labour Benches—we know which interest the Conservative party ultimately seeks to represent in these issues.

The hon. Member for Runnymede and Weybridge (Mr. Hammond) does not seem to understand that it is possible to have the concept of fairness in the workplace. We ought to strive towards that and try to ensure that our legal regime is fair for employees and employers because, in the end, that proper balance is in the interests of individual industries companies and society in general. The hon. Gentleman must accept that an attempt to erode the advances made by the Employment Relations Act 1999 would be not only counterproductive but grossly unfair. The Minister for Pensions, my right hon. Friend the Member for Makerfield (Mr. McCartney), who is in his place, was the architect of that pioneering and transforming legislation. Not only the House but the country owes him a debt, because that measure moved industrial relations a long away from the confrontational view of the world of work that characterised the 18 years of Conservative Government. The Conservative new clause coupled with mine—in fact, I hope it is not coupled with mine—would move the clock backwards.

Among other things, the 1999 Act provided recognition that when a lawful industrial dispute occurred, it was not only unreasonable and unacceptable, but incompetent to allow an employer simply to dismiss the work force. That power to dismiss was used relatively rarely. I am sure that we will hear a lot from Conservative Members about South West Trains and all manner of cases, but the notion that a large organisation like South West Trains would seek to dismiss its work force is ridiculous—a work force cannot be got rid of or replaced overnight from the queue at the benefits office. However, some individual employers used that lack of legal protection for employees on strike and got rid of them to resolve an industrial dispute. There is in such action nothing of the concept of fairness at work, nor of negotiation, nor of trying to find an acceptable balance. It is simple abuse of power by one party—the party privy to all the power.

It is a matter of fact that the right to strike is recognised in international obligations, for example, the International Labour Organisation convention. The legitimate right to strike is accepted throughout the world. Nothing in that suggests that there is a desire to strike, or that there is always a happy conclusion to strikes—industrial disputes can be bitter and difficult to resolve. However, sometimes the only industrial weapon that employees have at their disposal is withdrawal of their labour. The 1999 Act acknowledged the right to strike and provided that an employer who tried to dismiss people during the first eight weeks of an industrial dispute would be deemed to have acted unfairly, so employees would have recourse through industrial tribunals. It is right and proper that there is protection that forbids employers to take arbitrary action during the initial phase of an industrial dispute.

It is also a matter of fact that the overwhelming majority of industrial disputes last for nowhere near eight weeks. Eight weeks is an extraordinarily long time for people to withdraw their labour. I remind the Opposition that people who go on strike do not simply not go to work: they do not get paid, they have no money to support their families, and they get none of the things that take people to work in the first place. To strike is no small action.

The eight-week cut-off undoubtedly reflects some sort of compromise. Those who argue that there is a trade union agenda would say that many trade unions wanted more than eight weeks, but the Government at the time took the view that since the provision was a new one, eight weeks was appropriate. However, since the passage of the 1999 Act, we have gained experience of the practical operation of the legislation.

Let me tell the House about a company in the constituency of the hon. Member for Caernarfon (Hywel Williams), in which constituents of many of my colleagues representing that part of Wales work. Friction Dynamics was originally part of the Turner and Newell group; it made brake linings and had been in existence for many years. The current owners took over in 1996, and between that time and roughly this time last year, the relationship between management and those who worked for the company deteriorated. Many of the employees had worked there for many years—far longer than Mr. Craig Smith, the current employer, had been at the company.

Contemplation of industrial action was triggered by changes that Mr. Smith wanted to make. Some of those changes affected the company's health and safety regime, others involved arbitrary and swingeing cuts of 15 per cent. in basic pay rates, and cuts in shift premiums. The management proposed those serious changes, and the members of the Transport and General Workers Union in the company balloted on and took industrial action: they went on strike. After striking for one week, those people tried to go back to work, but Mr. Smith locked them out of the workplace—an arbitrary action.

Hon. Members might say the strike and the lock-out were equally arbitrary, but let us not attempt to judge the merits of either. I am not here to discuss the merits of Mr. Smith's stewardship of the company, although there are serious questions about how he got there and how the company got into that position. However, during the period of the lock-out, there was no meaningful attempt on his part to negotiate with the trade unions or his employees, only his insistence that he would make the proposed changes. I mentioned that Mr. Smith tried to change the health and safety regime. During the dispute, someone still working in the company lost some fingers; that was because health and safety protection was poor after the employer reduced it.

At the end of the eight-week period, Mr. Smith decided summarily to sack all the members of his work force who had been on strike for one week and had been locked out for a further seven. If Conservative Members rise to justify Friction Dynamics' actions in that case, we will know exactly what the Tory party is about, but I trust that they will speak to the issue. Hard cases define whether law is good or bad. The case I describe does not represent a romantic retreat into old-fashioned trade union defence. This is 2002, and I am talking about a real work force comprising real people whose rights in the workplace were arbitrarily snuffed out by their employer.

Betty Williams (Labour, Conwy)

At the start of my intervention, I declare that I am a full paid-up member of the TGWU. I thank my hon. Friend for mentioning Friction Dynamics, from which 87 workers were deplorably dismissed during the events he describes. Many are constituents of mine, and they have assured me that they give new clause 5 their wholehearted support. I am sure that my hon. Friends are aware that they brought their case here to Westminster; they lobbied us hard, seeking support for their cause. The 1999 Act gave protection to my constituents for eight weeks—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. The hon. Lady appears to be starting a speech. She has made a long enough intervention. I call Mr. Lloyd to continue his speech.

Tony Lloyd (Labour, Manchester Central)

rose—

Andrew MacKinlay (Labour, Thurrock)

On a point of order, Mr. Deputy Speaker. If it is to be the habit that everyone declares what they are, I should make it clear that I belong to the TGWU, I am closely associated with the Graphical, Paper and Media Union, and I formerly worked with the National and Local Government Officers Association, now part of Unison. In fact, Mr. Deputy Speaker, if you cut me in half, you will find that I am like a stick of rock, with trade unions running all the way through me.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

If hon. Members interests are on the Register of Members' Interests, it is important that they declare them; otherwise, it is entirely a matter for individual Members to decide.

Tony Lloyd (Labour, Manchester Central)

In a way, that is the point, Mr. Deputy Speaker. The hon. Member for Runnymede and Weybridge had a little fun suggesting that there was something terribly unpleasant about the relationship between trade unions and other members of society, specifically Members of Parliament. The trade union agenda for the work force at Friction Dynamics was extremely clear. It was explicit. It was felt that the work force had been dealt with atrociously by the management and that they were legitimately seeking recourse to Parliament to persuade Members that an injustice had been done. Parliament was asked to resolve an injustice. There was no Luddite trade unionism; instead, the proper and acceptable use of the parliamentary system was employed.

Vincent Cable (Liberal Democrat, Twickenham)

I am not aware of the case of Friction Dynamics, but it seems to be an appalling one. Is it not the case that if the employer had refused to negotiate, to seek conciliation and to engage in arbitration, the dismissals that he pushed through would have been unfair, and the unions would have been able to have the employees reinstated through the tribunal process?

Tony Lloyd (Labour, Manchester Central)

They would not have been able to have the employees reinstated because the tribunal would not have that capacity. It is a romantic view to bring back reinstatement. There are many examples of employees who have gone to tribunals following dismissal. The idea of going back to the same workplace would be ridiculous. I do not say that unkindly, but there would not be that possibility.

The hon. Gentleman has touched on a point that I intended to make—

Llew Smith (Labour, Blaenau Gwent)

I, too, am a member of the Transport and General Workers Union. I do not apologise because I am quite proud of that fact.

The hon. Member for Runnymede and Weybridge (Mr. Hammond) seemed to imply that there is virtually no difference between a strike and a lock-out in the context of Friction Dynamics. I was staggered. The Friction Dynamics' work force are defending their conditions and health and safety standards. Is it surprising that they would want to do so? Surely going on strike in those circumstances is different from a lock-out, where conditions are removed from the work force.

Tony Lloyd (Labour, Manchester Central)

That is right.

Almost certainly the employer's ambition from the beginning was to engineer an industrial dispute. It is up to the employer now to demonstrate that that was not the case and that he did not sack the members of his work force with a view to eroding the terms and working conditions of those at Friction Dynamics.

As a trade unionist, I would not be prepared to defend that form of industrial relations. I am the chairman of a company limited by guarantee. It does not make profits and I receive no personal remuneration. However, I must take serious responsibility as an employer, and the company's employers are the people. Come the day when I could be accused of abusing other people's employment rights in the way that is alleged of Friction Dynamics, I would be ashamed even as a Conservative Member, let alone a Labour Member.

Norman Lamb (Liberal Democrat, North Norfolk)

I am a member of the Law Society and a consultant to a law firm. I associate myself with the hon. Gentleman's remarks while declaring those interests.

The case to which the hon. Gentleman has referred highlights what I would regard as a loophole in the provision that provides for an eight-week protected period. I agree that it is ludicrous that locking out the work force for seven weeks after an initial one week on strike enables the employer to take advantage of the provision.

Does the hon. Gentleman accept that his new clause goes much further than addressing that loophole? It removes entirely the concept of an eight-week protected period for people on strike.

Tony Lloyd (Labour, Manchester Central)

It certainly goes further than addressing the loophole to which the hon. Gentleman refers.

What is the right that Conservative Members will be seeking to erode even within the eight-week period? It is not only the right to maintain employment, although the employer will not be stopped from sacking people; we are talking about the right to go before an industrial tribunal for assessment. I accept that that is much better than nothing, and that in some instances there can be exemplary payments. However, I think that the maximum award that a tribunal can make is £50,000. Someone who loses his job, especially in an area of relatively high unemployment, can lose much more than £50,000, through loss of income and loss of pension entitlement for example. The House should reflect on that. This is not a trivial point.

The right to go to a tribunal is not the equivalent of the right to stay in work to ensure that the process of arbitration is carried forward under ACAS or whatever.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am not familiar with the Friction Dynamics case, but I understand that the hon. Gentleman is making an impassioned plea on behalf of the work force. Will he tell the House something about the economic fundamentals of the business? Is it a hugely profitable business with an avaricious owner who is seeking to make yet larger profits, or is it, as I suspect, a marginal business that is placed under threat of its very existence by competition from abroad? What are the circumstances?

Tony Lloyd (Labour, Manchester Central)

I am not in a position to reveal the company's balance sheet. It has not been shown to me. I can tell the House that Mr. Craig Smith was engaged in a lawsuit in the United States before he bought the company. It is alleged that moneys that he used to fund the purchase of the company were in fact compensation payments to the victims of contact with asbestos. Mr. Smith might want to tell a different story, but not all of Mr. Smith's actions are those of a reputable employer.

If the hon. Member for Runnymede and Weybridge is saying that a company in financial and commercial difficulties may arbitrarily erode working conditions, refuse properly to negotiate and then sack its work force, he has a different view of the rights and responsibilities of employers. That is not merely my belief, but the view of the overwhelming majority in this country.

Philip Hammond (Conservative, Runnymede and Weybridge)

Of course I am not saying that. I am saying that the hon. Gentleman must tell us the whole story. What happened before the strike began? If Friction Dynamics is a business that is up against the wall, facing foreign competition and its very existence is under threat, what concessions were the work force willing to make? We need to know all the circumstances. If the hon. Gentleman is to hang his entire argument on a specific case, he needs to ensure that Members are fully informed of the circumstances of that case.

Tony Lloyd (Labour, Manchester Central)

The information given to the House is fairly comprehensive. The actions of an employer who engineers a dispute by imposing swingeing cuts in pay rates and eroding the fabric of the health and safety regime are not those of a high-quality employer who is determined to build a modern Britain.

We are talking of an employer who follows a week's industrial dispute by a lock-out—he is not at the forefront of modern management techniques. He is an employer who then sacks his work force.

There is a little more information, that may be merely colour or emotion on my sad part. The company is the subject of an improvement order that was issued by the Health and Safety Executive because its health and safety standards are not up to scratch. That is the sort of employer about which we are talking. Conservative Members may be delighted to defend such companies, and that is fine. At least we know clearly where the tents begin and end. However, I do not want to be in a tent that defends such companies. I want to be in a world that says that the summary dismissal of employees in industrial disputes is not the way, even after eight weeks, to resolve industrial disputes. We should be moving forward by using mechanisms of arbitration.

Michael Weir (Scottish National Party, Angus)

I understand that the work force of Friction Dynamics agreed to a pay freeze for four years. It was not a rapacious work force but one who was willing to help out the company. Yet they have been treated as the hon. Gentleman has described.

Tony Lloyd (Labour, Manchester Central)

I am grateful to the hon. Gentleman as I had forgotten that; it provides me with a reasonable answer for the hon. Member for Runnymede and Weybridge, who may now begin to accept that the company is no employment angel.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am not going to comment on an individual case about which I do not have the facts. I suspect that the hon. Gentleman has gone a long way down the line of reciting allegations about an individual; I certainly do not want to follow that route. For the benefit of Members who may not be fully aware of the history, will the hon. Gentleman confirm that the item that he is putting on the agenda in his new clause has not sprung from the Friction Dynamics case? It is a long-standing item on the TUC agenda to remove the eight-week limit.

Tony Lloyd (Labour, Manchester Central)

With great respect, that is a silly point. We are talking about Friction Dynamics, which is a real company; 87 people are involved. That may not matter to the Opposition Members, who may simply wish to discuss the new clause as a theoretical exercise. However, the world of work is not a theoretical exercise; it is real and matters enormously to the 87 people who have been sacked, their families and their communities.

The House must make up its mind whether it simply regards the actions of a company like Friction Dynamics as unacceptable or whether it wishes to use its legislative capacity to begin to move the agenda on. It should not seek to tip the balance towards the mythical trade union agenda imagined by Opposition Members, but should recognise that, at the moment, relations are one-sided; an employer who can dismiss employees has too much opportunity to exercise arbitrary power. We do not want a shift so that trade unions can determine working conditions; we are simply asking for equity and justice. It is desirable for employers to get back to the arbitration process.

Greg Knight (Conservative, East Yorkshire)

Will the hon. Gentleman reflect again on the point made by my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond)? Having moved a new clause, it is incumbent on him to tell the House its scope because we are legislating. I do not know the circumstances of the case so I shall not comment. A bad employer may well be involved, but it is still incumbent on the hon. Gentleman to explain to the House the full scope of the new clause that he is asking us to accept.

Tony Lloyd (Labour, Manchester Central)

I am not sure whether the right hon. Gentleman was here for the early part of the debate.

Greg Knight (Conservative, East Yorkshire)

I was here for all the hon. Gentleman's speech.

Tony Lloyd (Labour, Manchester Central)

Had the right hon. Gentleman listened, he would have realised the full scope of the new clause, which aims to remove the present eight-week time limit on protection against unfair dismissal. That would apply to Friction Dynamics, Ciba-Geigy and any company or organisation in the land. All legal protection is bound to be based on real-life events. This is not a game or a theoretical or intellectual exercise; it is not something that we are debating in the learned debating societies of our best universities. It is about real people and real employers; it is about companies and employees. In this case, the employer, instead of choosing to work in harmony with his work force—the hon. Member for Angus (Mr. Weir) made the point that the workers had already made significant sacrifices to try to maintain the company's viability—was prepared to abuse the power and rights that, sadly, the law gives him.

Philip Hammond (Conservative, Runnymede and Weybridge)

I am grateful to the hon. Gentleman for giving way; he has been generous in accepting interventions. Can he not conceive of any circumstance during an industrial dispute, however long it has gone on, in which it would be appropriate for an employer to dismiss the work force for breach of contract? For example, people may simply refuse to do the job that they have been employed to do. Can the hon. Gentleman not conceive of such a situation arising? Under his new clause, it would never be possible fairly to dismiss a striker.

Tony Lloyd (Labour, Manchester Central)

Holding out for the bad employer is not a rational way of going about dispute resolution. Bearing in mind that taking industrial action involves a real cost to employees, only a tiny number of industrial actions last anything like eight weeks. I invite the hon. Gentleman to look at the statistics; he will find that it is all there in evidence.

Conservative Members believe that they can score a political propaganda point in this kind of debate. However, if they seek to make cheap politics out of the situation, they should remember that they do so at the expense of people's livelihoods and families. The present law is defective, and does not give protection to employees; it gives too much opportunity for the arbitrary exercise of power by employers, which is why the new clause attempts to move things on.

Llew Smith (Labour, Blaenau Gwent)

When we debated earlier amendments, we were accused of merely responding to the demands of the trade union movement. Does my hon. Friend not think it ironic that the Opposition spokesperson appears to be responding to demands of rogue employers, of which Friction Dynamics is one?

Tony Lloyd (Labour, Manchester Central)

I agree, and I invite the hon. Member for Runnymede and Weybridge to make his position clear. I have outlined the case; the hon. Gentleman has tried to hide behind the protection of saying, "Well, of course I do not know the details." I have given him the details; if he wants to challenge them, he should do so. But comments on the case should relate to real people. As I said, this is not an empty exercise; it is real and is happening now.

I have spoken for longer than I intended. I know that Opposition Members are champing at the bit because they want to reinvent their version of the class war. I shall therefore conclude my speech and make way for others.

Hywel Williams (Plaid Cymru, Caernarfon)

Hon. Members may find it instructive and useful if I give some objective information about the dispute at Friction Dynamics, which is in my Caernarfon constituency. Conservative Members may not wish to hear the facts, but I shall give them none the less.

The dispute has dragged on for 43 weeks, and resulted in the workers being sacked after eight weeks. It is still awaiting resolution, which may not come until next May—more than a year since the dispute started—at an industrial tribunal. The current owner, Mr. Smith, took over in 1997.

Philip Hammond (Conservative, Runnymede and Weybridge)

On a point of order, Mr. Deputy Speaker. Do the sub judice rules that we normally follow in the House not apply to employment tribunal cases?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

I am not aware that the comments of the hon. Member for Caernarfon (Hywel Williams) affect anything that is sub judice.

Hywel Williams (Plaid Cymru, Caernarfon)

Thank you, Mr. Deputy Speaker.

The current owner took over in 1997 and tried to impose a four-day week without overtime, attendance at meetings without pay, removal of bargaining agreements and a no-strike agreement. The employees had agreed to a four-year pay freeze, as the hon. Member for Angus (Mr. Weir) said. They tried to negotiate, but came to the reasonable conclusion that their employer was not interested in agreement. They have a proven commitment to the company and its predecessors; many of them have worked there for 20 or 30 years—all their working lives, in fact. Some trained there as young apprentices.

The workers would not act without thinking or without just cause, particularly given their present circumstances. They would have been aware of the consequences of being out for 43 weeks, and perhaps over a year. The union held a ballot strictly in accordance with the law, and the workers initially went on strike for a week. I accompanied them on their first day back and witnessed the employer himself locking them out; that is the nature of the relationship that he has fostered. The dispute continued. As I said, the workers were sacked after eight weeks and are still out after 43 weeks; they maintain a 24-hour picket and have acted with dignity and moderation. They, and the union, have always been willing to negotiate.

The community in Caernarfon is solidly behind the strikers, including, Conservative Members may be interested to learn, the local business community, which has made a substantial donation to the strike fund. It realises the damage that the dispute is doing to local businesses, not least to Friction Dynamics itself. It realises the damage that is being done to investment in business in north-west Wales. It wants to see the dispute resolved, but resolved with justice.

The employer has been enabled to sack the workers. He has been encouraged in his intransigence and unreasonable attitude by the power that the eight-week rule has afforded him. Some hon. Members might say that if protection from the sack is justified for eight weeks, it is justified thereafter. I would agree, but I would also point to the practical and catastrophic effects that have resulted from the entrenchment of the employer's power to be unreasonable.

It cannot be right or reasonable that a strike is dragged out for 43 weeks, and eventually for more than a year. Workers at Friction Dynamics and in the community of Caernarfon cannot understand why that is allowed to happen. They do not want a tribunal. They want their jobs back in circumstances of justice and fairness. They see justice denied and justice delayed. For that reason, I am glad to support new clause 5.

Vincent Cable (Liberal Democrat, Twickenham)

I shall deal with new clauses 5 and 8 together, as I believe that that is a more helpful way to deal with the issue. The two new clauses pull the existing balance in different directions, and in many respects in extreme directions.

The eight-week rule was a carefully crafted compromise. One new clause seeks to eliminate it entirely, and the other seeks to make it indefinite. Both seem fundamentally unreasonable. A useful starting point—here, I believe, the hon. Member for Manchester, Central (Mr. Lloyd) was on the right track—is to put the debate in context. We are living through a period in which industrial action is at a very low level. In the last year for which recorded figures are available, 500,000 days were lost, as against an average of 660,000 over the past decade and about 7.5 million for the 1980s, with comparable figures for the 1970s. During the present period of economic boom, one would expect more industrial action.

Philip Hammond (Conservative, Runnymede and Weybridge)

Does the hon. Gentleman agree, though, that we are having this debate against a backdrop of what appears to be a change in trend, with a rising tide of trade union militancy facing the country?

Vincent Cable (Liberal Democrat, Twickenham)

Indeed, there are specific points that relate to the public services, which I had intended to deal with and which present specific problems. Had new clause 8 been directed to that issue, I would have had more sympathy with it. In fact, the hon. Gentleman's new clause is broadly couched and would withdraw the eight-week rule from all employees in all disputes. I will address the current wave of unrest in a moment.

I agree with the hon. Member for Manchester, Central that we are in a period of relatively subdued industrial action. It hardly calls for a major upheaval in the legislation, or one that tilts the balance radically in one direction or the other.

Mark Simmonds (Conservative, Boston and Skegness)

Does the hon. Gentleman accept that new clause 5 would increase industrial discord and strike action above its present level?

Vincent Cable (Liberal Democrat, Twickenham)

I doubt that new clause 5 would do that, but I do not support it. I doubt that the new clause would make a great deal of difference. Essentially, we are debating a point of principle, rather than its consequences.

The underlying point made by the hon. Member for Manchester, Central is that the right to strike is a fundamental right and should not be qualified in the way that it currently is. I do believe that workers have a right to withdraw their labour. There should be a right to strike, but it is not an unqualified right. There are conditions: strike action must be reasonable and must take account of third parties. We will come to that when we deal with the issue of the railways, as I am sure that we will.

Tony Lloyd (Labour, Manchester Central)

It is one thing for the hon. Gentleman to interpret what I said, but it is another for him to make up things that I did not say. Of course the right to strike is conditioned. I pointed out that the dispute that I described had gone through the full legal provisions, a ballot and so on. It was a legal strike. A strike is quite a constrained activity in our society. Employees cannot simply walk out or withdraw their labour at a moment's notice. Those days hardly existed, and do not exist now.

The hon. Gentleman spoke of the new clauses tilting the balance. Does he seriously believe that the change that would be introduced by new clause 5 would have any dramatic effect, taking into account the fact that the overwhelming majority of strikes—not just 99 per cent., but 99.999 per cent.—last for far less than the eight-week period that the provision covers?

Vincent Cable (Liberal Democrat, Twickenham)

As I said a few moments ago, I doubt that the new clause would have any dramatic effects one way or the other. The hon. Gentleman raised it as an issue of principle, and I believe that on the issue of principle, he is wrong. If we confined the discussion to the effects on the firm described—the hon. Gentleman told a horrific story, and a rather moving one—I am sure that the facts that he gave are right and I have total sympathy with the work force involved, but the attempt to create legislation around one case seems fundamentally unsatisfactory.

As my hon. Friend the Member for North Norfolk (Norman Lamb) said in an intervention, if there is genuinely an anomaly about a lock-out being included as part of a strike, that is a ludicrous situation and the legislation should be amended to deal with it, probably in another place.

The hon. Member for Manchester, Central is in danger of creating a situation in which, say, an entirely different trade union, in a different environment, might embark on a prolonged period of industrial action—which, as the hon. Gentleman said, is difficult and might be costly to the work force—without any regard for its consequences for the industry. The union might refuse to embark on arbitration or conciliation, in which case the employer might well have a genuine feeling of grievance, but there would be no opportunity for the employer to bring the dispute to an end.

Although the hon. Gentleman was correct to say that the right to go to a tribunal is not equivalent to holding on to one's job, the fact remains that after the eight-week period, workers do have protection through the tribunal system. Statute 238A, which is the cornerstone of the Bill, provides a considerable degree of protection. I do not know what happened in the case described, when the 87 workers took the employer to a tribunal, but it provided them with a considerable level of protection, although perhaps not perfect protection. New clause 5 is an excessive response to what was clearly an unjust situation and an unjust action by that employer.

New clause 8 goes wholly in the other direction. By allowing a dismissal to take place for a strike without any period of protection whatever, it would effectively withdraw the principle of the right to strike. It would be likely to make many employers use dismissal as a first rather than a last resort.

Philip Hammond (Conservative, Runnymede and Weybridge)

My understanding is that until the Employment Relations Act 1999 came into force, that was the situation. The eight-week rule did not apply, and I do not remember it being a burning issue in this place or outside.

Vincent Cable (Liberal Democrat, Twickenham)

I remember that there were emotive debates around the 1999 Act, when it was felt that some degree of balance should be restored. I believe that it was, and I would defend the current position.

I would have some sympathy with the hon. Member for Runnymede and Weybridge if his new clause were more narrowly drawn. There is a real issue now in the public services, which is quite different from the Friction Dynamics case. In the case of the public services, the victims of the dispute are the general public. We need legislation to deal with that. In some parts of the public services, there are already restrictions on the right to strike. The most obvious and extreme case is the police force, but others are constrained in different ways.

There is an argument for restriction within the public services, and I define public services widely to include the railways, because of the subsidy element. That restriction might well be linked to a willingness to arbitrate. There would be a case for saying that the eight-week protection could be withdrawn in certain circumstances in essential services if the parties to the dispute had refused to arbitrate. The arbitration element in that does not tip the balance towards the employer. If arbitration is compulsory, the employer is bound to take the result. The outcome is taken out of management's hands. There is a concession in both directions. If new clause 8 were more narrowly drawn, I would have more sympathy with it. If the Government come under growing pressure from industrial action, perhaps they will amend the Bill in another place. However, the new clause would apply across the national economy, including manufacturing industry, which accounts for only 10 per cent. of industrial action. That is excessive and inappropriate and I cannot therefore support it in its current form.

The rest of the debate is in Hansard.