Grand Committee
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall)
Good afternoon, my Lords. I remind the Committee that if there is a Division in the Chamber the Committee will adjourn for 10 minutes after the sound of the Division Bell. I was invited to inform noble Lords that should they so wish, the afternoon being as bright and sunny as it is, they may remove their jackets.
Public Bodies (Abolition of Victims’ Advisory Panel) Order 2013
(10 years, 10 months ago)
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Lord McNally
That the Grand Committee do report to the House that it has considered the Public Bodies (Abolition of Victims’ Advisory Panel) Order 2013.
Relevant documents: 1st Report from the Secondary Legislation Scrutiny Committee, 1st Report from the Joint Committee on Statutory Instruments.
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, that is enough radicalism for one afternoon.
This order abolishes the Victims’ Advisory Panel, which I will refer to as the VAP, using powers in the Public Bodies Act 2011. This Act followed the 2010 review of all arm’s-length bodies, which was conducted to increase transparency and accountability, to cut out duplication of activity and to discontinue activities that were no longer required.
As part of this review, we proposed to abolish the VAP, since its functions are no longer required and duplicate activity elsewhere. There is a clear overlap between the work of the panel and that of the Commissioner for Victims and Witnesses, also known as the victims’ commissioner, who has a statutory responsibility for promoting the interests of victims and witnesses and encouraging good practice in their treatment. That is why the VAP is one of the bodies specified in Schedule 1 to the Public Bodies Act 2011. The Secretary of State has the power to abolish those bodies by order, and it is such an order that we are debating today.
I will now cover briefly the background to the establishment of the VAP and the panel’s membership between 2006 and 2009, before explaining why the Government consider that this order to abolish the VAP is necessary and meets the criteria set out in Section 8(1) of the Public Bodies Act to improve the exercise of public functions.
The VAP was originally established in 2003 as a non-statutory panel to enable victims of crime to have their say, both in the reform of the criminal justice system and in related developments in services and support for victims of crime. The functions of the VAP were subsequently set out in Section 55 of the Domestic Violence, Crime and Victims Act 2004. The VAP was expected to advise Ministers and officials of the views of victims of crime, with particular reference to their interaction with the criminal justice system and its agencies. The panel was also to offer views on the prevention of crime from a victim’s perspective. The Secretary of State was required to consult the panel on appropriate matters concerning victims and witnesses of criminal offences or anti-social behaviour. Where the Secretary of State consulted the VAP in any particular year, the panel was expected to prepare a report to be published and laid before Parliament.
The Coroners and Justice Act 2009 made it a requirement for the victims’ commissioner to be appointed to, and act as, chair of the panel. The Act made no changes to the core functions of the VAP. Between 2006 and 2009, the VAP consisted of around 10 volunteer members, all of whom had either experienced crime first-hand or had provided support to victims. Of those original members, four agreed to extend their tenure beyond July 2009 to support the work of the Government and of Sara Payne as the victims’ champion, until the first victims’ commissioner, Louise Casey, was appointed in May 2010.
I thank the Secondary Legislation Scrutiny Committee for its report on this order. I welcome its conclusion that this order does serve the purpose of improving the exercise of public functions and is in compliance with the test set out in the 2011 Act, which I will set out in detail shortly.
I reassure the Committee that the Government did not prejudge the process by winding down the panel before the 2011 Act came into effect. As Louise Casey announced her decision to resign as Commissioner for Victims and Witnesses in October 2011, during the consultation on our public body reforms, the Government considered that the future of the commissioner’s role should be decided before taking a decision on the future of the VAP. Accordingly, no final decision was made on the abolition of the VAP until it was clear that a new commissioner would be appointed. While the Government decided not to undertake any further recruitment to the panel during the uncertainty around the panel’s future, this did not prevent potential future recruitment if necessary.
With the appointment of a new victims’ commissioner, who has a statutory duty to promote the interests of victims and witnesses, we consider that a statutory obligation to appoint and consult a small advisory panel on victims’ issues is no longer the right approach. The commissioner provides an effective and flexible approach to ensure that a broad and diverse range of victims’ views is independently represented to government.
The noble Baroness, Lady Newlove, the current victims’ commissioner, took up her post on 4 March of this year following her appointment on 21 December 2012. She has already met many victims and their families across England and Wales, as well as the criminal justice agencies, to seek their views. This follows the work of Louise Casey, the previous commissioner, who undertook a wide remit of consultation and provided advice and challenge to government concerning the treatment of victims and their families and the services they received.
Given the role now played by the victims’ commissioner, we consider that the abolition of the VAP improves the exercise of public functions for the purpose of Section 8(1) of the Public Bodies Act 2011, such that making this order is justified. I say this for the following reasons.
First, on efficiency, abolishing the VAP will reduce the duplication of resources and activity in respect of convening panels and their administration. The victims’ commissioner will undertake a wide range of activities designed to engage the views of victims. This allows for a much greater breadth and depth of views to be obtained, which the commissioner will feed back to government and its agencies on a regular basis to inform and shape policy development and service delivery for the benefit of victims.
Secondly, on effectiveness, the abolition of the VAP will not limit the opportunity for victims to articulate their opinions about the criminal justice system and their position within it. The post of victims’ commissioner is an effective way of ensuring that the views of victims are sought and can influence the development of justice policy. During her tenure, the previous commissioner, Louise Casey, met and received correspondence from hundreds of victims who shared their views and experiences. She used this feedback to inform her advice to government, including reports and a review of the needs of families bereaved by homicide.
Thirdly, on economy, the abolition of the VAP will mean that the Government will not need to recruit and run a new panel, which has in the past cost about £50,000 a year. We believe that this additional spend is unnecessary, given that the work which the panel previously undertook clearly falls into the remit of the victims’ commissioner.
Fourthly, on securing appropriate accountability to Ministers on issues relating to victims and witnesses, this still remains through the role of the victims’ commissioner. The victims’ commissioner promotes the interests of victims and witnesses, as is her statutory duty, and is accountable to the Secretary of State for Justice. The commissioner is required to produce an annual report for the Secretary of State for Justice in her role and the work that she has undertaken, to be shared with the Attorney-General and Home Secretary, which is published and laid before Parliament.
Further, we are satisfied that the abolition of the VAP, for the reasons already stated, does not remove any necessary protections. Abolition of the panel does not affect the exercise of any legal rights or freedoms either directly and indirectly. Victims of crime will be able to have their voice heard through the channels operated and promoted by the commissioner and the Government.
The victims’ commissioner regularly meets the Minister for Victims and the Courts and the Secretary of State for Justice. She has publicly stated that she sees her role as providing challenge to government where the criminal justice system or proposed reforms to it fail to meet the needs of victims and their families, as well as working with the Government to improve the criminal justice system.
The appointment of the noble Baroness, Lady Newlove, as the new victims’ commissioner last December was a key part of this Government’s wider commitment to strengthen the voice of victims and to improve the experience of victims and witnesses in the criminal justice system. For example, we have consulted on a revised victims’ code, which includes reference to the victim personal statement for the first time giving victims a louder voice in criminal proceedings. The victims’ commissioner plays a leading role in ensuring that as we deliver these reforms the voice of victims and witnesses is represented to government. I know that the noble Baroness, Lady Newlove, has confirmed in a letter to noble Lords circulated ahead of this debate that she considers the victims’ commission to be best placed to promote victims’ and witnesses’ needs and to represent their views to government. I hope noble Lords will agree with the current victims’ commissioner that the victims’ commissioner is able to fulfil this role fully and effectively without the VAP, a body that duplicates her activities. I beg to move.
Lord Beecham
My Lords, public outrage about the abolition of the Victims’ Advisory Panel has been conspicuous by its absence, and the Opposition and I have no qualms about the Government’s decision to abolish it in the light of the appointment of successive commissioners. For that matter, all of us who heard it were deeply moved by the speech made by the noble Baroness, Lady Newlove, on these issues; I think it was her maiden speech. We have every confidence in her interest, palpably stemming from those tragic personal circumstances to which she referred, and her ability to be an effective voice for victims and a conduit to government.
However, I note that in the Explanatory Notes to the order the Government cite three criteria which they purport to apply to all bodies that are being considered for abolition and find that none of the criteria were met in this case, including a requirement for political impartiality. Having said that, and I repeat that this is no reflection on the noble Baroness, I find that a slightly surprising conclusion in respect of this position because there are potentially significant issues in this area, such as restorative justice, community sentencing, which is now very much part of the political debate under the Offender Rehabilitation Bill, and criminal injuries compensation, which is a sensitive political issue where changes were recently made. No doubt the commission will comment on all these in due course. However, despite the unique qualifications of the noble Baroness, it might be thought to be better in future appointments to have somebody who is less engaged with the political process.
That view is somewhat reinforced by a recent article in the Law Society Gazette, which records that it thought that the views of the commission should be sought about some of the matters that are currently being debated, including the impact of the Transforming Legal Aid proposals on victims and witnesses and concerns about defence work or prosecution work being carried out by, as it put it, inadequate prosecutors. It approached the commissioner—it e-mailed her—and got a telephone call back saying that she had not commented. That was fair enough. The caller repeated that the issue had not been commented on, and matters were left there. However, it turns out that the person at the other end of the phone was a press officer at the Ministry of Justice. This gives rise to the question whether the staffing and support for the commissioner—any commissioner, not just the present incumbent—should be a little further removed than the Ministry of Justice, which of course is responsible for many of the issues with which the commissioner will have to deal.
I do not raise this in a way that is critical of the noble Baroness, but it raises the issue that future appointments need to be considered. The way in which resources are made available to the present commissioner might be looked at again, given that she may feel called upon from time to time to be critical of the policy of the Government of the day, and to have someone working on that line from within the department might be a little difficult. I put it no higher than that. Perhaps the Minister might care to consider that issue in due course with this commissioner, and perhaps it should be borne in mind with future appointments. We are content that the order should be passed.
Lord McNally
My Lords, I am slightly surprised that the noble Lord raised the question of political appointments, even in the terms in which he couched his remarks. I find it extraordinary that somehow we back away from making appointments from the rich vein of political talent that is in the House. The idea that someone has to be politically neutral to be a victims’ commissioner is, I think, absurd. I can think of some likely Members on Labour Benches, including the noble Lord, who would make an excellent victims’ commissioner. The noble Lord is tempting me to express my views on the Cross-Benchers. I have always said that I find it extraordinary that people can reach 60 or 70 years of age without deciding about their political opinions, but that goes way beyond this brief.
I do not accept the idea. As the noble Lord conceded, in the choice of the noble Baroness, Lady Newlove, we have somebody who has tragic personal experience but beyond that has revealed a capacity to campaign on this issue and link with the victims of crime, which makes her an excellent choice.
I have more sympathy with the noble Lord’s idea that if you ring up the victims’ commissioner and get an MoJ press officer, that probably needs to be looked at. We are, for very good reasons, bringing within the MoJ family various bodies that carry out independent and arm’s-length functions. How we handle that is important. We must make sure that to the public dealing with them, the arm’s-length nature of their independence is underlined, while we get the benefit of the kind of back-office co-ordination that makes sense of these things.
The basic point is that we have already brought forward a range of measures that are designed to ensure that the voice of the victim is strengthened. These include consulting on a new victims’ code, which includes an entitlement for victims to give a victim personal statement when they give evidential witness statements for the first time, ensuring that the victim can describe how the crime has affected them; and announcing the piloting of a recorded pre-trial cross-examination of vulnerable and intimidated victims and witnesses to help them give their best evidence in court. As I have said, the appointment of the noble Baroness, Lady Newlove, as the victims’ commissioner gives victims a national voice and has, as the noble Lord, Lord Beecham, said, cross-party approval.
I understand that the noble Baroness has press office support as victims’ commissioner and has a dedicated press officer who works part-time. However, that press officer is based in the MoJ. Whether that has caused the confusion or the call was from part of the MoJ press team, I do not know; I have only just heard the point made. The press support which the noble Baroness will receive is fully independent of the MoJ, although it is within our building. I appreciate the noble Lord’s point—it will be duly recorded and pondered upon—and I am grateful for his more general support for this action. I commend the order to the Committee.
Public Bodies (Merger of the Gambling Commission and the National Lottery Commission) Order 2013
Lord Gardiner of Kimble
That the Grand Committee do report to the House that it has considered the Public Bodies (Merger of the Gambling Commission and the National Lottery Commission) Order 2013.
Relevant documents: 35th Report from the Secondary Legislation Scrutiny Committee, Session 2012-13, 23rd Report from the Joint Committee on Statutory Instruments, Session 2012-13.
Lord Gardiner of Kimble
My Lords, this is an administrative change that will provide some efficiency savings but that will be principally beneficial for the policy synergies and economies of scale obtainable from a single regulator in understanding and regulating the whole gambling market. This merger was first proposed by the previous Government, and the coalition has continued this support.
The Public Bodies Act 2011 provides a legal framework that enables the Government to propose the merger of specified bodies. The two commissions are so specified. This merger will ensure an integrated approach to consumer protection and allow the merged commission to advise the Government on gambling in the round.
The functions of both commissions are broadly similar, especially with regard to social responsibility. The National Lottery Commission ensures that the National Lottery is run with all due propriety and protects the interests of every participant. Subject to these duties, the NLC must do its best to maximise the money available to good causes.
Similarly, the Gambling Commission is responsible for ensuring that gambling is conducted fairly and openly, that children and vulnerable people are protected and that gambling is not a source of crime and disorder. It aims to permit gambling that is reasonably consistent with its pursuit of these licensing objectives.
Nothing in the order would affect the way in which the National Lottery and the gambling industry are at present regulated by their respective commissions; the merged body will retain the statutory functions of the existing commissions. However, the gambling industry, including the society lotteries sector, has expressed some concerns that the NLC’s duty to maximise National Lottery returns might be seen to influence regulatory decisions on commercial gambling or the provision of advice to government in favour of the National Lottery.
The key to addressing this is for the merged body to be absolutely clear as to the statutory regime within which each such decision is taken. The commission will ensure that decisions are taken within the appropriate legislative framework and that they do not take into account considerations that are irrelevant in that context, such as those applicable only to the other regime. Therefore, when making a regulatory decision on commercial gambling, which includes the society lotteries sector, considerations about the impact that this might have on the National Lottery will be irrelevant, and vice versa.
The merged organisation, like the individual commissions at present, will continue to give reasons for its decisions and be subject to judicial oversight via judicial review or the gambling appeals tribunal if, for example, it is thought to have taken into account irrelevant considerations or misused confidential information.
In addition to the preservation of separate legislative regimes and protections for the National Lottery and other gambling, the DCMS is taking further steps to ensure that its oversight of the merged commission continues to provide the appropriate level of accountability. The Minister for Sport and Tourism has written to the Gambling Commission to set out what the Government will require of the merged commission. This letter was copied to the House of Lords Secondary Legislation Scrutiny Committee by way of response to its report dated 26 April 2013. I have ensured that copies of this letter are on the table here for your Lordships’ perusal. I apologise that it has not been possible to make a copy for your Lordships available earlier, but I know that the noble Baroness, Lady Jones, has received a copy.
The Gambling Commission will put in place arrangements to ensure the following: that only relevant considerations are taken into account when making decisions; that the merged commission gives adequate reasons for these decisions; that appropriate information barriers are in place to avoid any actual, or perceived, conflicts of interest arising in the exercise of its functions under the relevant legislation; and that those handling operator-specific information are properly trained in data security protocols. In order to support these requirements, the commission is already planning to establish a sub-committee to make recommendations to the board on National Lottery issues.
All these assurance measures will be reflected in the management agreement, which will be settled between the DCMS and the merged commission in due course. This agreement will inform and underpin the department’s relationship with the merged commission. It will specify the steps that the merged commission will be expected to take to demonstrate impartiality and that the chairman and commissioners are responsible for implementing appropriate governance arrangements to manage any real, or perceived, conflicts of interest.
Given the distinct and self-contained statutory regimes relating to the National Lottery and other gambling matters, we believe that any such conflicts can be readily managed and that it is unnecessary to be prescriptive about the precise governance arrangements in legislation or the management agreement. This will preserve the merged commission’s ability to amend arrangements in the light of experience while continuing to respect the general principles set out in the management agreement. The Gambling Commission and the National Lottery Commission both support this merger.
Together, the collocation of the two commissions and the shared service arrangements that they have in place have, since January 2012, generated efficiency savings, while steps have already been taken to embed National Lottery expertise within the Gambling Commission. These actions have generated upfront costs but alongside the merger provide a sound basis for savings over the medium and long term. Once costs have fallen away, these initiatives will save more than £1.1 million per annum. The merger of the two commissions will itself generate a total saving for licence fee payers and lottery good causes of £330,000 over the 10-year assessment period considered by the Public Bodies Act.
In summary, this order will create a single organisation that is better able to provide comprehensive advice and guidance to the Government on all gambling issues, including the continuing protection of the public. The two organisations are already integrated in a number of respects, and approval of this order will allow us to realise further savings and additional benefits. I recommend this order to your Lordships.
Lord Faulkner of Worcester
My Lords, the short speech I was planning to make has changed dramatically as a result of the Minister’s opening speech, which I very much welcome. I was going to raise the conflict of interest between the Gambling Commission and the National Lottery Commission, an issue which the Secondary Legislation Scrutiny Committee picked up on and which I referred to during Committee on the Public Bodies Bill in March 2011. I made the point that from the inception of the National Lottery, the National Lottery Commission has operated with an inherent conflict of interest in that, as the Minister said, it is required to maximise the return for good causes but at the same time is supposed to protect players’ interests. I do not believe that the National Lottery Commission has, up to now, succeeded in doing that.
In drawing attention to this during Committee on the Public Bodies Bill, I expressed the hope that the merger of the two bodies would be resolved in future. The Minister was not quite right to say that the previous Administration had supported this merger. The Joint Committee on the draft Gambling Bill supported it, but the Government of the time unfortunately rejected the merger of the two bodies. To avoid wearying the Committee now, I will not quote what Lord McIntosh said for the Government on that occasion about those being two different jobs.
I listened very carefully to what the Minister said about how in future this conflict will be resolved. I want to read carefully what he has said, but the objections that I raised in March 2011 on the Public Bodies Bill seem substantially to have been met by what he has said this afternoon. I would like just one assurance, if he is able to give it to me: that he feels that the resources available to the Gambling Commission will be sufficient to do this job properly, because along with the obvious need for the National Lottery to be a success, player protection is very important.
Baroness Jones of Whitchurch
My Lords, I thank the Minister very much for his explanation of the order. I also thank him for the helpful information that he sent in advance of the debate, including the letter from Hugh Robertson to the chair of the Gambling Commission. I will return to that letter and that issue shortly.
First, I make the more general point that I understand that much of the impetus for this merger is to save money, and I do not doubt that there are savings to be made. I know that the House of Commons Culture, Media and Sport Select Committee report questioned the figures provided and felt that the overall savings should be greater. It is of course incumbent on any organisation in receipt of public money to spend that money wisely. I hope that the Gambling Commission will be held to account for this expenditure in due course.
However, I will not focus on the financial implications as I want to explore other, more pressing issues with the Minister this afternoon. We share the growing concern that gambling is running out of control. The spiralling rise of online gambling, now a £2 billion a year industry, risks damaging the health and well-being of a generation. We already know that nearly 1 million people are in danger of becoming problem gamblers and that there are already 500,000 hard-core addicts. Meanwhile, one of the Gambling Commission’s clear functions is already to protect children and vulnerable adults from being harmed or exploited by gambling, so by most measures it would appear that it is failing in that task. In that context, we need to be satisfied that the proposed merger is in the public interest and that the new, merged Gambling Commission is fit for purpose in the light of this crisis. Therefore, I should like to ask the Minister some questions.
First, is there a danger that we are rushing this decision without giving the proposal adequate consideration? The Commons Select Committee that considered this matter made two important recommendations, which need to be addressed before a final decision is made. Regrettably, I do not think that Hugh Robertson’s letter adequately addresses these issues. I take the point that we have had very little time to consider that letter. For example, the Select Committee recommended that the Gambling Commission outline the governance arrangements that it will put in place to ensure that there is a robust separation of its duties to oversee the lottery and gambling organisations to avoid the conflicts of interest to which my noble friend referred. It recommended that the details be published by the Gambling Commission in time for consideration of the order in this House. I agree that this information would have been extremely useful if it had been before us today, but it does not seem to have been provided by the Gambling Commission, unless my internet searches have failed on this occasion.
What is more, I do not believe that its original suggestion that it would set up a sub-committee to deal with lottery issues is adequate to address the governance issues. The Select Committee also recommended that the DCMS outline what steps it would take to monitor the Gambling Commission’s execution of its combined duties and what action it proposed to take if it was seen not to be acting even-handedly. I understand that Hugh Robertson’s letter is intended to address this issue by setting out what the DCMS would like to see in the management agreement with the Gambling Commission. However, we have not seen the response to Hugh Robertson’s letter from the Gambling Commission, and I should like to hear what it has to say on the matter.
Incidentally, the Minister also asked the Gambling Commission to put his letter on its website in time for this debate, but at midday today I could not find it there. Again, that might be a failure on the part of my internet search skills, but at the moment there seems to be an ominous silence from the Gambling Commission.
Also, the Minister’s letter does not adequately address the Select Committee’s question about what action the DCMS would take if, for example, there was evidence that the funding of good causes was suffering as a result of the merger. Therefore, first, given that the Select Committee’s report on this issue was published on only 2 July and that, as I understand it, the Commons will not be considering this order until September, does the Minister not think that a decision on the order should be delayed to allow all the information to be presented to this House and fully considered?
Secondly, the Minister will be aware that there are anomalies in how the National Lottery is treated compared with other society lotteries—for example, in the specified percentage required to be given to good causes and the duty of 12% that is paid to government. I gather that the DCMS is due to hold a consultation on the minimum that should be donated to good causes, and I welcome that. Also, as I understand it, the recent High Court judgment on the status of the Health Lottery, run by Richard Desmond, ruled that this was a matter for government rather than the courts. Would this merger not have been a convenient time to address these issues and the protections that need to be put in place to regulate other society and commercial lotteries that may be established?
Thirdly, is the Minister satisfied that the Gambling Commission is operating in a sufficiently transparent way? The vast majority of society lotteries raise significant sums of money for the causes which they support, but the percentage of income which they donate varies considerably. I tried to explore this a little in a recent Written Question to the Minister. In his reply, he said that the commission publishes aggregates of the financial details of these schemes. However, is that really good enough? Does the Minister feel that the Gambling Commission could do more to share information about the individual profits and donations of these lottery schemes, and, again, does he feel that this could have been addressed as part of the merger?
Crucial to any changes has to be the need to protect the £2 billion given to good causes by the National Lottery, which has become a respected national institution. The Gambling Commission could do more to reassure us that it has robust governance systems in place to ring-fence and nurture the development of the lottery while cracking down on exploitative commercial and on-line gambling.
I hope the Minister will address these concerns and more fully consider a postponement of the final decision on this order to allow for the letters to be read and for all the information to be presented to us in a proper form so that scrutiny can take place. I look forward to hearing his response to these questions.
Lord Faulkner of Worcester
My Lords, I should have put on the record at the start of my speech my entry in the register. I am a gambling regulator as a member of the Alderney Gambling Control Commission.
Lord Gardiner of Kimble
My Lords, I thank noble Lords for the points that have been raised and hope that I can allay some residual concerns. Perhaps the noble Baroness and any other noble Lord would care to have a meeting with me and my officials before the House rises if there are any issues that I might not be able to satisfy in my closing remarks. I will be very happy to discuss further any issues that I cannot satisfy today.
The noble Baroness, Lady Jones, referred to problem gambling. I strongly support the Gambling Commission and its advisory body, the Responsible Gambling Strategy Board, in their efforts to determine whether the level of gambling-related harm is increasing and what can be done to reduce it. The conundrum with which all Governments grapple is how to balance the enjoyment of the large majority who gamble safely—of course, gambling brings considerable economic and other benefits, whether employment, tax or proceeds for good causes—with finding ways to identify those at risk of harming themselves and reduce the risk of such harm.
We need the gambling industry to help drive the search for improved ways of mitigating the risks as the quid pro quo of being allowed to trade. It should be recognised that the level of problem gambling is less than 1% of the population, but we must be watchful through appropriate legislation and the work of the commission, which is informed by the Responsible Gambling Strategy Board.
I was going to say that this order has been supported by this Government and their predecessors, but the noble Lord, Lord Faulkner, reminds me that that might not be the case. I also have in my notes a suggestion that this measure was supported in both the Conservative Party and Labour Party manifestos at the last election. I had therefore better look back into the records to see how all this corresponds with the facts. However, I can say that this issue has been at large for both Governments to consider.
The order will merge two bodies with similar responsibilities, aims and objectives, as I have said. Having a single regulator that understands and regulates the whole gambling market will provide desirable policy synergies. This can be achieved while effectively managing sensitive data, handling two sets of legislation and preserving the commitment by the regulator’s predecessors to consumer protection. This is well within the capability of the Gambling Commission. While creating a single entity ensures a common approach and in-the-round advice on gambling to government, this merger will also generate savings for the industry and lottery good causes. This is a clear benefit because we want as much of these savings as possible to remain for good causes.
Neither committee in either House objected to the merger but both have requested that we publish guidance on how the Gambling Commission will maintain its impartiality. As I said earlier, a copy of the Minister’s letter to the chairman of the Gambling Commission outlining the governance arrangements that the Gambling Commission will implement is available. I am mindful of what the noble Baroness has said and I may need to reflect on that and discuss it with her. In particular, it is important that we look at the response from the Gambling Commission.
This merger has been under consideration and we have been talking to officials for a very long time. Indeed, if it had not been for the National Lottery licence competition, this proposal might well have been presented by the previous Government. For that reason, I do not think that the merger itself is a rushed affair. However, we need to make sure that the fine tuning and governance arrangements are fit for purpose. I would like to have discussions with the noble Baronesses on that.
Apprenticeships (Alternative English Completion Conditions) (Amendment) Regulations 2013
Baroness Garden of Frognal
That the Grand Committee do report to the House that it has considered the Apprenticeships (Alternative English Completion Conditions) (Amendment) Regulations 2013.
Relevant documents: 3rd Report from the Joint Committee on Statutory Instruments.
Baroness Garden of Frognal
My Lords, these regulations introduce an amendment to the alternative completion conditions for English apprenticeships. As noble Lords know, employment is usually a precondition of any apprenticeship. Indeed, experience of genuine employment is what sets apprenticeships apart from most other forms of vocational training and gives apprentices a real head start in their careers.
Apprentices have a unique opportunity to learn from one or more mentors, and to develop, practice and hone real occupational skills. The apprentice will work alongside the master, watching, copying and refining their skills. For his part, the employer will demonstrate, guide and correct the apprentice’s work. Both apprentice and employer have a real stake in the apprentice’s development and success. Noble Lords will be aware of the value of this approach and of the part employment plays more generally in guaranteeing the quality of the training offered through apprenticeships and of its contribution to the apprentice’s future value to prospective employers. However, in a very limited number of cases an exception to employed status is needed, and this is what the alternative completion conditions specify.
This issue was thoroughly debated during the passage of the Apprenticeships, Skills, Children and Learning Act, and there was agreement on all sides that some specific groups should not be denied access to apprenticeships because they could not meet the requirement for employment. Regulations were approved last year to cover three types of exception. First, there are apprentices who begin their training while in employment but are made redundant during the course of the apprenticeship due to changes in the employer’s circumstances. Secondly, the provisions support athletes hoping to represent the nation in an Olympic, Paralympic or Commonwealth Games discipline. Thirdly, there are a very small number of jobs or occupational areas in which employed status is not the norm. A few of these were approved for apprenticeships last year, and today I am looking for the Committee’s support to add one further case.
In 2012, the first set of alternative completion conditions were approved, with the assurance that these would be reviewed regularly. We remain adamant that only very exceptional cases must be allowed in order to ensure that the quality of all apprenticeships is not compromised. The Government have carefully considered all subsequent applications and decided that only one of the three submitted should be taken forward. The advanced apprenticeship in maritime occupations shares common features with the others previously approved in Schedule 1. Apprentices will be engaged in a commercial activity and supported by experienced colleagues involved in a collective venture.
I assure noble Lords that this is not the thin end of any wedge. Extending alternative completion conditions to able seamen and trainee officers in the Merchant Navy will ensure the best start to naval careers and reduce the maritime sector’s reliance on recruiting personnel from overseas. The exceptions provided for under the regulations reflect the Government’s desire to ensure that otherwise able candidates are not excluded from the possibility of gaining an apprenticeship by force of circumstance. The regulations accordingly tread a very careful line between recognising and providing for such circumstances and continuing to guarantee the quality of the qualification to which training will lead. That is consistent with the Government’s recent response to Doug Richard’s review of apprenticeships.
On that basis, I commend the regulations to the Committee.
Lord Greenway
My Lords, I thank the Minister for outlining these regulations. I say at the outset that I very much welcome them. I declare an interest as the patron of the Maritime London Officer Cadet scheme. This change has arisen out of an anomaly that arose that restricted apprenticeships in the Merchant Navy.
The apprentice framework for maritime occupations unfortunately fell between two stools—two sets of statutory requirements, one being the specification of apprenticeship standards for England, the SASE, and the other the regulation supporting European Community guidelines on maritime transport state aid. To satisfy the former, trainee officers had to be employed but were forbidden from being employed by the European regulations, so there was a problem there. I am delighted to say that although it has taken a while, things have worked out well, and these new regulations do not alter that.
I do not need to tell your Lordships that the Merchant Navy annually recruits some 800 or 900 entrants into the business. Deck officer and engineer cadets generally have two to three years’ training. In the Merchant Navy, we prefer to call them cadets, not apprentices, but they are in fact the same thing. It is very important that we continue to train sufficient numbers of these young officers, because although our Merchant Navy has declined over the years, these young officers can still get very worthwhile jobs working for foreign companies, and after being at sea for a number of years they can come ashore and fill the multitude of maritime-related jobs ashore, not least in the City of London. I very much welcome these regulations.
Lord Young of Norwood Green
My Lords, I, too, welcome these regulations. I listened carefully to what the noble Lord, Lord Greenway, said. He is an expert in this field, and it seems that this is a seaworthy recommendation from the Government.
I have a couple of comments to make. The Explanatory Memorandum states:
“It is intended that the certifying authority, which will be the Alliance of Sector Skills Councils, will issue guidance from time to time on the administrative arrangements relating to the application and awarding of apprenticeship certificates. This guidance will cover circumstances where the standard completion conditions do not apply. The Secretary of State is not intending to issue guidance”.
I am quite pleased. The Alliance of Sector Skills Councils should have the right experience and occupational awareness, but there ought from time to time to be some check that that guidance meets the necessary standards and criteria. I would welcome the Minister’s views on that.
I am not expecting an answer from the Minister today, but I was somewhat surprised to see that the number of under-19 apprenticeship starts as a proportion of the total for all ages in England shows a decrease in 2010-11 and 2011-12 at the same time as the total annual number of vacancies for apprenticeships increased from around 43,000 to just over 100,000. Furthermore, the proportion of candidate applications for apprenticeships for under-19 year-olds had decreased from 2009-10, while it had been increasing for over-19s. I find it surprising that demand is less than supply. My experience is that it is usually the other way round. I like to quote British Telecom apprenticeships; you can get into Oxford or Cambridge more easily than you can get a British Telecom apprenticeship. There are something like 300 apprenticeships and usually about 25,000 applications.
I am really puzzled by those figures. I am not expecting an answer this afternoon. The only thing I can think of is that the figures do not compare like with like and are about a decrease for under-19s as a percentage of the total. That could be because the number of apprenticeships available in that range has also slightly decreased, if my memory serves me right, although the overall figures have gone up. I think that is the answer, but this is an important area. I apologise for slightly extending the range of questions, but as it occurred in the Explanatory Memorandum, I thought it was fair game. Apart from that, I am happy to endorse the government recommendation.
Baroness Garden of Frognal
My Lords, I thank noble Lords for their contributions and for their support for this statutory instrument. I was interested to hear the expertise of the noble Lord, Lord Greenway, on this and to learn that the Merchant Navy prefers the term “cadets” to “apprentices”. In most fields, we see cadets as slightly different from apprentices, but the maritime world has its own long-established ways of doing things. It was also good to hear that when people get these qualifications it means that they will bring expertise back into land-based fields. The City of London has a great tradition of maritime-based trade and expertise. I can see that that is a good career option for people from the maritime world.
I assure the noble Lord, Lord Young, that the Government have a close relationship with the Alliance of Sector Skills Councils and that there will be monitoring and checking as we continue with these measures. The Government are trying to address the decrease in the number of under-19s in a number of sectors, although the total number of apprenticeships has increased significantly. We are, for instance, looking at a grant for employers and various other incentives, which should make it more straightforward for employers to bring the under-19s into different schemes.
I have indeed heard the noble Lord talk about the BT apprenticeships, which are highly sought after. I spent an interesting day on Friday visiting British Airways and its apprenticeship scheme. I was told that there had been 20 applications for every place on the programme. Some large employers are doing enormously valuable work in bringing in apprentices. It is extremely encouraging to see the enthusiasm of young people who find themselves on these programmes and their real commitment to, and focus on, work. We certainly wish that to continue while apprenticeships grow across all sectors.
I have probably answered the queries of noble Lord, Lord Young, at least in part. I think that there is widespread agreement that this is a good move forward.
National Minimum Wage (Amendment) Regulations 2013
Lord Popat
That the Grand Committee do report to the House that it has considered the National Minimum Wage (Amendment) Regulations 2013.
Relevant documents: 4th Report from the Joint Committee on Statutory Instruments.
Lord Popat
My Lords, the regulations before us increase the minimum wage rates for all workers and increase the maximum amount for living accommodation that counts towards minimum wage pay.
These regulations increase the main minimum wage rate—that is, the rate that applies to workers aged 21 or over—by 12 pence an hour from October, from £6.19 to £6.31. This increase follows the recommendation of the Low Pay Commission. It takes into account the need for caution as we recover from this recession. Even though the economy remained weaker in 2012 than had previously been forecast, levels of employment in the low-paying sectors have been relatively resilient. The commission concluded that an increase of 1.9 per cent will go a long way towards maintaining the relative earnings of the lowest paid, while at the same time being affordable to businesses of all sizes.
The Low Pay Commission’s recommendation for the adult rate was based on extensive and sound economic evidence, analysis, research and consultation. We are confident that the commission was right to take a prudent approach. We believe that it is important that we do not do anything that would reduce employment or employment opportunities for the lowest-paid workers.
I will now speak about the minimum wage rates for young people. In the debate on last year’s minimum wage regulations, noble Lords discussed the Government’s decision to accept the Low Pay Commission’s recommendation that the youth rates should be frozen at the same level as 2011. While this was not an easy decision, it was one that we felt was needed to avoid jeopardising the employment of young workers. The Low Pay Commission found that the labour market position of young people has stopped deteriorating and that there were some signs of improvement, although it is too early to know if these will become a trend. As a result, the commission concluded that a further freeze in the youth rates was not necessary. However, it recommended a smaller increase than for adults in order to help to protect the labour market position of young people. The draft regulations increase both the 16 to 17 year-old rate and the rate for 18 to 20 year-olds by 1% to £3.72 and £5.03 per hour respectively.
I am sure that noble Lords share the Government’s concern about the position of young people in the labour market. Their employment prospects have suffered more than those of other workers in the difficult economic circumstances. We believe that the tough decision that we made last year has helped to stabilise their position and that the 1% increase in the youth rates set out in the regulations is the correct approach. It strikes the right balance between retaining the attractiveness of work for young people and not deterring employers from taking on someone who may require more training in the first instance.
Lastly, I shall explain why the Government rejected the Low Pay Commission’s recommendation to freeze the apprentice rate and, instead, are increasing the rate by 1%. I should start by saying that the Government fully recognise the challenges that the commission has faced as a result of the uncertain economic environment. Its report contains substantial detail about the evidence that it considered and we thank the commissioners for all the hard work that they have put into developing their recommendations.
The commission’s underlying analysis of the labour market is of its usual high standard and the Government entirely accept its assessment of the low-paid labour market. However, rather than accept the freeze that the commission recommended, we have decided to take a different approach. The Government entirely share the concerns expressed by the commission about non-compliance with the apprentice rate. We are clear that employers must pay their staff at least the minimum wage. The Government are fully committed to the minimum wage and its effective enforcement. That is why we are increasing compliance activity, raising awareness with employers at risk of unintentionally falling foul of minimum wage rules, and ensuring that individuals are up to date about their rights. We are also ensuring that our guidance is as clear, comprehensive and consistent as possible. However, we believe that concern about non-compliance does not translate into a freeze in the apprentice minimum wage rate.
After careful consideration, we concluded that there are important reasons why we should make a modest increase in the apprentice rate. Apprenticeships are a key government policy and it is important that they are truly beneficial for both employers and apprentices. Increasing the apprentice rate by 1% will maintain its relative position compared with benefits and the youth minimum wage rates. This should ensure that apprenticeships remain an attractive route into work for young people.
As with all the minimum wage rates, the apprentice rate needs to balance affordability for employers with a fair deal for the lowest-paid workers. Many employers go further and pay more to reflect the value that a worker adds to their business. However, the apprentice rate acts as a safety net for many, and we do not want to see these young people falling further behind their peers in other areas of the labour market.
Although we are increasing the apprentice rate, I emphasise the need for caution. That is why we concluded that a rate which reflects the increase in benefits and public sector pay and which is in line with the increases in the youth minimum wage rates is appropriate. Evidence in the Low Pay Commission’s report concluded that the majority of apprentices paid on or just above the apprentice rate are young people.
We believe that the commission has played, and continues to play, a vital role in achieving the success of the minimum wage. Going against a commission rate recommendation is not something that this Government have done before; nor is it something that we took lightly. The commission has provided high-calibre analysis and advice since its inception in 1997 and we will continue to work with it to ensure that the minimum wage continues to support as many low-paid workers as possible while, simultaneously, not damaging their employment prospects.
We consider that the changes to the minimum wage rates contained in the regulations are appropriate and that they balance the needs of low-paid workers against the challenges that businesses face. I ask your Lordships to consider these regulations.
Baroness Donaghy
My Lords, I had not intended to speak in the debate but I am pleased to do so now that I have heard the Minister’s explanation of the regulations.
I was a founding member of the Low Pay Commission when it was first established. We created its infrastructure and recommended the first minimum wage. The Low Pay Commission has always been thorough and has always acted on an evidence-based footing. It is fair to say—the Minister implied this—that it has always been conservative with a small “c” on the issue of youth rates and apprentice rates for the reasons he set out. It had to get the balance right between making sure that the rates were not so large as to discourage employers and not so small as to discourage apprenticeships. Therefore, the Government have got this right.
The only additional point I would make is that there is an extra challenge coming in from the side on the issue of unpaid internships, which complicates apprenticeships in many areas. It is extremely important that we support the recommendations but also bear in mind that the issue of youth rates, internships and the application of the minimum wage is becoming more and more of a grey area.
I have always maintained, and I do now, that although there were staff whose job it was to maintain the application of the minimum wage, there were never enough. I would like the Minister to respond on that. Certainly, in many areas of industry it was quite clear that there were two levels of pay—one declared and one undeclared—but the difficulty was in getting people to complain. In areas such as the textiles centre in the south-west of Birmingham, people might go to their advice centre but they would not want their name reported because they knew that they would probably never get another job in the area if they made the complaint. They worked the legitimate number of minimum wage hours but then, off the books, they would be asked to work an extra seven or eight hours and, therefore, the average made it clear that it was not any longer the statutory national minimum wage. That practice is still happening and, if anything, is probably worse.
So, in supporting the general idea—I do not want to go against the Low Pay Commission normally, but I think in this case it has acted on the side of generosity—I would ask the question about ensuring the application of the statutory national minimum wage and that the law is carried out on the ground.
Lord Young of Norwood Green
My Lords, I, too, in principle welcome the Government’s proposal. I am always pleased to see their conversion to supporters of the national minimum wage. As someone else remarked in another context, it was not always thus. However, it is good to see that there now seems to be an enthusiastic endorsement of both the principle and application of the national minimum wage. We do not want to be in a situation where it decreases the number of jobs. We could argue that what has a major impact on jobs and the number of jobs available is the amount of growth we can get in the economy, but I do not think that this is the right place to debate the Government’s economic strategy. However, it is well known that we do not feel they have got it right—said he with the gift of understatement.
I endorse the comments of my noble friend Lady Donaghy. The Minister referred to the importance of effective enforcement and the problem of non-compliance. Are there any statistics of the number of complaints going into either ACAS or any of the other bodies? There is an employment rights helpline and I would be interested to know what the statistics are on complaints about non-compliance with the national minimum wage.
Other than having those concerns, we endorse the proposal.
Lord Popat
This has been a valuable short debate and I thank noble Lords for their important questions. A couple of specific points were raised and I shall respond to them in a moment. However, first, I should like to emphasise that the Government are committed to the minimum wage because of the protection that it provides to lower-paid workers and the incentives to work that it provides.
These regulations support the Government’s commitment to delivering fairness and supporting business, and I believe that they are fair and appropriate. The increase that the Government have recommended is reasonable, bearing in mind that the personal allowance of a large number of low-paid people has gone up in the past 18 months, which will help them to earn more money net of tax.
The noble Baroness, Lady Donaghy, and the noble Lord, Lord Young, both raised two very important issues. The LPC was established with the right infrastructure in 1997 and it does excellent work. It is quite independent of the Government and represents people from trade unions and other organisations. With the minimum wage, there is widespread acceptance that what we are recommending is appropriate.
With regard to enforcement figures, in 2012-13 the Pay and Work Rights Helpline received around 58,000 calls. Of these, the overwhelming majority—over 90%—were dealt with by the helpline. Just under 3,000 calls were referred on to the enforcement agencies for further action. We are making a real effort to ensure that employees are aware of the minimum wage and that employers are aware of the onus on them to pay the minimum wage to their employees.
I hope that noble Lords feel that they can accept the regulations. I trust that my response has been appropriate. If it has not been, I shall be very happy to write to noble Lords.
Lord Young of Norwood Green
I thank the Minister for that. For clarification, when he said that out of the 58,000 calls to the helpline 3,000 were referred to the enforcement agencies, I presume that that meant 3,000 calls from those receiving the national minimum wage. Am I right in that presumption?
Lord Popat
That is correct. In fact, the information that I have is that just under 3,000 calls were referred on to the enforcement agencies for further action—in other words, the enforcement agencies were going to take further action to resolve any outstanding issues or discrepancies between employers and employees.
Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2013
Lord Popat
That the Grand Committee do report to the House that it has considered the Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2013.
Relevant documents: 4th Report from the Joint Committee on Statutory Instruments, 6th Report from the Secondary Legislation Scrutiny Committee.
Lord Popat
My Lords, I beg to move that the Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2013 be considered by the Committee.
This draft order introduces an additional limit on the compensatory award for unfair dismissal, which is based on 52 weeks of an individual’s pay. This limit will exist alongside the existing overall limit, currently at £74,200, with the applicable cap in individual cases being the lower of the two caps. This order is an exercise of the power found in Section 15 of the Enterprise and Regulatory Reform Act 2013. The power allows the Secretary of State to vary the limit on compensatory awards for unfair dismissal in certain ways.
There are two ways in which the limit can be varied. This first is in the order before us today: the introduction of a cap based on an individual’s pay, provided that this cap is no less than 52 weeks’ pay. The second way is to change the overall level of the cap. This power is also limited. The overall level of the cap cannot be less than median annual earnings or more than three times median annual earnings. The current overall limit of £74,200 falls within this range. We do not intend, at this time, to use this aspect of the power in Section 15 to change the overall limit further.
The purpose of this order is to address the effects that the recent rapid increase in the limit has had. The current cap stands at £74,200, greatly in excess of the average unfair dismissal award of less than £5,000 which includes both the basic and compensatory elements of the award. The potential, however unlikely, for high awards creates unrealistic expectations among both employers and employees. The uncertainty that this potential creates for employers can discourage them taking on new staff while claimants may believe that if they pursue the claim, rather than accept a settlement, they will receive large sums.
I am sure that noble Lords will agree that it is important, particularly if we are to achieve our shared objectives of growth and increased early dispute resolution, to manage expectations about the level of tribunal awards. The Government consulted on the unfair dismissal compensatory award cap through the Ending the Employment Relationship consultation. Following analysis of responses to the consultation, the Government are not minded to change the overall specified cap but have decided that it is appropriate to introduce a cap based on an individual’s salary to run alongside the overall cap. The Secondary Legislation Scrutiny Committee highlighted this decision in its 27 June report, and I am thankful to it for providing the opportunity to put to rest any concerns about the consistency of the Government’s approach to consultation.
As the committee pointed out, statistically speaking, there was not unanimous support for or against any option. Half of respondents were in favour of the cap before us today and 45% were not, while 37% felt the overall cap was appropriate, and 39% felt it was not. If these numbers were the only evidence that we had from the consultation, our decision would indeed be inconsistent. However, these data are only a part of the evidence we received. As we have only 30 minutes today, I will refer to only a few key points.
First, among respondents who opposed the pay-based cap, almost 40% opposed any cap at all on rewards. Noble Lords will appreciate, however, that all Governments have agreed that it is necessary to have a limit on compensation for unfair dismissal. Secondly, as our government response clearly stated, very few respondents made any suggestion of an alternative level for the overall level of cap. Of the 26 respondents who suggested an amount, eight suggested £26,000, six suggested £78,000, five suggested £52,000 and three suggested £50,000. The remaining four suggested amounts in the range of average annual earnings and three times that amount. Moreover, these suggestions were not backed by supporting evidence. Without support or evidence, the Government chose not to initiate a legislative change to the overall cap at this time. I am sure noble Lords will agree that we do not want to choose a new cap arbitrarily.
Thirdly, a key component of consultation analysis is to consider the quality of evidence provided. We were, on balance, convinced by respondents’ arguments for a salary-based cap; it is a tailored approach to unfair dismissal awards that is fair to claimants. It is right that the cap is based on pay because the compensatory award is meant to reflect loss caused by the employer’s actions in dismissing the employee. Since the compensatory award is based on financial loss, it makes sense to link it to the individual’s pay. Let us also not forget that this change is about correcting perceptions.
We estimate that only 0.25% of people who bring an unfair dismissal claim receive an award which exceeds their annual salary. This estimate is based on the total award, that is, both the basic and compensatory awards combined, so the number affected by limiting the compensatory element of the award would be likely to be even lower. This order has no effect on the basic award, which is currently capped at £13,500.
The Government are committed to promoting growth in the UK economy and take the view that this cap will facilitate that growth while still being fair to individuals who have been unfairly dismissed. I commend this order to the Committee.
Lord Monks
My Lords, I thank the Minister for that explanation of the Government’s position. I note that he did not address much the report of the Secondary Legislation Scrutiny Committee, which criticised the Government for inconsistency in the way that they have conducted the consultations and come to their conclusions. This is partly because the last time this issue was considered the Government were not enthusiastic about a pay-based cap but they have changed their position in the intervening period. That is an argument with the Secondary Legislation Scrutiny Committee. Perhaps the Minister will find an opportunity to explain the Government’s view on that point a little more. However, on the substance of the issue—
Lord Monks
The Minister will be grateful that I do not propose to go through my opening remarks again. I am sure that he has got that particular point. The Division neatly ended a paragraph of thoughts and so I will move on to another: the purpose of the change.
We are being asked to believe that because people can see a crock of gold in this compensatory award at present, the cap has become an expectation which encourages claims and then deters employers from undertaking recruitment because they are afraid that this gathering mass of people will all think that they are going to get their name up in lights with the top award. It seems far-fetched in the extreme to say that the picture being presented is a real one. I instead come to the conclusion, which I would test on the Minister, that this is simply about reducing the amount of money that some employers have to pay to some employees. It is a step at the expense of the employee in favour of the employer.
This is one of many steps that have been taken in this area in recent times, particularly with the raising of the qualifying period for unfair dismissal from one year to two, which took 3 million workers out of the scope of unfair dismissal legislation. That was perhaps the biggest but there have been a number of other changes. I suggest that this is another salami cut into employment rights at work. It is not the biggest—I do not want to exaggerate my case—but it is one under which some employees will lose, while some employers are going to gain from it. I hope that the Minister will acknowledge that that is really what it is about rather than this romantic story that the Government seem to be advancing: that all this reduced compensation will mean fewer claims, which means more employment, to put it in the reverse way from how I put it before. Is this not simply about reducing the amount that employers have to pay to workers who they have unfairly dismissed? Those workers have been not just dismissed but unfairly dismissed.
Baroness Donaghy
My Lords, I shall make a couple of points. My noble friend Lord Monks has already referred to the Secondary Legislation Scrutiny Committee’s report. I understand that in the absence of clear consensus on views, sometimes the Government have to take a leadership position, which this Government have done. Unfortunately, it is not a consistent position. I question why the Government have decided not to take action on the basis of no consensus on one issue and to take action on the basis of no consensus on the second issue.
Lord Young of Norwood Green
My Lords, we have had a fair amount of consensus this afternoon on previous statutory instruments but I think that this is the one where we part company, as we have signalled in previous debates on this issue under the Enterprise and Regulatory Reform Act. If there was one move that the Government made that we firmly endorsed, it was to encourage the mediation process through ACAS. We supported that; we thought that it was constructive and sensible. If only the Government had pressed the pause button after having done that and had waited for a period of time to see its effect, that would have been profoundly important. However, the Government were not satisfied with that. As my noble friends have commented, they have gone on to introduce a number of other significant changes. One change was increasing the period of service required before a claim for unfair dismissal could be entered from one year to two years, and my noble friend Lord Monks has referred to that. That is a profound change in itself.
The consultation process that the Government went through was, as someone somewhere else said, “a damn close run thing, Carruthers”. The figures are really quite marginal. In some cases, they swing the other way on whether or not there should be caps. As my noble friend Lord Monks said, the Secondary Legislation Scrutiny Committee itself pointed out in paragraph 20 of its report:
“It is of course for Government to decide on policy-formulation in the light of consultation responses. We note, however, that there was a lack of consensus on both the key issues relating to compensation for unfair dismissal canvassed in the 2012 consultation process. In the case of the overall cap, the Government saw this as reason to make no change. By contrast, an even division of opinion among respondents has not held the Government back from implementing its proposal to introduce a pay-based cap. It is hard to see these outcomes as demonstrating consistency in the Government’s response to consultation”.
We welcome the Government’s response on that point. However, we cannot help feeling that the lower paid will again face the consequences of this and that it will have an impact on older workers, who may have longer service with an employer.
We do not believe that this will address the real issue. Unfortunately—my noble friend Lady Donaghy is right—this is based on perception, as the Government have admitted, and on the wide publicity that has been given, not only in the tabloids but in the broadsheets, to the one or two cases which return significantly large figures. This is an ill-conceived proposal and we would like the Government to think again. However, in any event, I welcome the Minister’s response.
Lord Popat
My Lords, I thank noble Lords for their valuable and detailed comments during this short debate.
The order focuses on giving adequate recompense to those who have been unfairly dismissed while also providing certainty for business on its potential liability. It will bring expectations more in line with the likely amount of award that can be expected in an unfair dismissal claim at tribunal. Secondly, it will enable employers to hire with more confidence, as this individualised cap will reassure them about potential liabilities.
A number of points were raised which I should like to address in my remaining time. The noble Lord, Lord Monks, referred to reducing the cost to employers. We estimate conservatively that, as I said earlier, only 0.25% of unfair dismissal claimants might be affected by the cap. This is about allowing employers and employees to take informed decisions on how to resolve disputes. If they know in advance the likely outcome of a tribunal, it will help the two parties to settle in advance.
The noble Lord, Lord Monks, also said that the Government were inconsistent in their approach to considering the consultation response. As I said in my opening remarks, although there was not unanimous support for any single option, when considering the totality of the evidence and not only the bald figures that we received from this information, the Government were convinced by the response argument for a salary-based cap. The cap applies to many different circumstances. A pay-based cap is a more individualised yet clear method of ensuring that parties know the potential level of award while still fairly compensating claimants.
The large gap between the expectation and the reality is a problem for both employees and employers. It is unfair to allow a situation where the mis-sold promise of big pay awards means that individuals make decisions based on flawed assumptions. We want to ensure that individuals can make informed and intelligent decisions based on more realistic information and an assessment of likely awards. This is not about pushing the parties down any particular route; it is there to help them.
A number of other issues were raised on the same subject. The order will give business clarity about the potential cost to employers in cases where they have to fire employees. Certainty is very important for employers when they employ people. It is also important that we do not give unrealistic hope or expectation to employees who are unfairly dismissed. The order clarifies the position for both parties.
We are competing in the global world and it is important that our employment legislation is clear-cut. This order is clear-cut for both employees and employers. I hope that I have covered all the points raised. If I have not, I shall be happy to write to noble Lords.
Lord Young of Norwood Green
My Lords, the Minister said that a pay-based cap will make the system more consistent. It may make it more consistent, but is it fair? The impact for someone on lower pay of losing their job can be far higher than on someone on a significantly higher pay rate. It is not just consistency that you look for when making this kind of legislation, it is whether it treats people fairly. The Minister did not address that issue and I would welcome his views on it.
Lord Popat
My Lords, as I said earlier, 0.25% of cases at the tribunal for unfair dismissal have resulted in compensation of £74,200, but 90% of the cases that have gone to the tribunal have resulted in compensation of just under £5,000. Therefore, even somebody on the minimum wage will probably be able to get the right level of compensation. All parties recognise the need for a cap. As I said earlier, the median award is £4,560, which is below the median salary. Therefore, for 99.75% it is quite reasonable for low-paid people to have this cap or the maximum of £74,200.
Baroness Donaghy
I was making a general point about the Government allowing, if you like, propaganda about excessive amounts of money to simmer around in the pot, whereas we all know that the reality is that the award figure is very low. I should have mentioned earlier that, even when the minority of the minority of the minority are awarded compensation, 40% of them do not receive it. They have to either accept nothing or go through the civil courts to chase the employer for the award. Therefore, the talk about caps and limits and about putting employers off employing people goes along with the propaganda about large amounts of money, when the reality is that those amounts are small and 40% of them do not get paid. Does the Minister not feel that he could at least put forward a consistent point of view about this and not put a cap on the pay-based awards?
Lord Popat
The noble Baroness raises a very important issue. This large amount of £74,200 has been in place for some time. We are trying to clarify matters, and the most reasonable or most equitable way of doing this and of speeding up the tribunal process or the agreement between employers and employees is to bring in a cap of either 12 months’ salary—which is quite reasonable because it gives the employee 12 months to find an alternative job—or £74,200. As I mentioned earlier, 95% of the awards given in the past have been settled for less than the median of £4,560. We have put information on median awards on ET1 claim forms to help to address issues of perception. We are also improving the guidance to help employers and employees to have better information.
The Government have given due regard to the comments of the Secondary Legislation Scrutiny Committee and have concluded that the order meets the requirements of the Act. I commend it to the Committee.