Enterprise and Regulatory Reform Bill

Jo Swinson Excerpts

Wednesday 17th October 2012 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

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

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 1—Removal of requirement for protected disclosures to be made in good faith—

‘The Employment Rights Act 1996 is amended as follows:

‘(1) Omit “in good faith”—

(a) in section 43C (Disclosures qualifying for protection), in subsection (1),

(b) in section 43E (Disclosure to Minister of the Crown), in paragraph (b), and

(c) in section 43F (Disclosure to prescribed person), in subsection (1)(a).

(2) Omit “makes the disclosure in good faith,

(b) he”—

(a) in section 43G (Disclosure in other cases), in subsection (1), and

(b) in section 43H (Disclosure of exceptionally serious failure), in subsection (1).’.

New clause 2—Duty on employers to prevent detriment caused by others to workers who have made protected disclosures—

‘(1) The Secretary of State shall make regulations requiring an employer, where a worker has made a protected disclosure under section 43A of the Employment Rights Act 1996, to take reasonable steps to ensure that the worker is not subjected to any detriment by any act, or any deliberate failure to act, by a person other than his employer done on the ground that worker has made the disclosure.

(2) Regulations under this section—

(a) are to be made by statutory instrument, and

(b) are not to be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.’.

Amendment 80, in clause 7, page 4, line 13, at end insert—

‘(1) Prior to the commencement of this section, the Secretary of State shall carry out an impact assessment into the effect of the introduction of proposed fees for the employment tribunal system and the impact this will have on the effectiveness of ACAS conciliation proceedings.’.

Government amendments 6 and 7.

Amendment 51, page 5, line 43, at end insert—

‘(e) preventing an employer or ex-employer of a prospective Claimant from applying for costs against the prospective Claimant under the Employment Tribunal Rules or other measures to provide an incentive to employers or ex-employers to take part in the conciliation process.’.

Amendment 52, in clause 11, page 7, line 27, after (2) insert

‘With the consent of the parties but not otherwise.’.

Amendment 53, page 7, leave out lines 29 to 38.

Amendment 54, page 8, leave out lines 1 to 10.

Amendment 81, leave out clause 12.

Government amendments 8 to 10.

Amendment 82, leave out clause 13.

Government amendments 11 to 13.

Amendment 70, in clause 13, page 9, leave out line 15.

Government amendment 14.

Amendment 71, page 9, line 32, leave out

‘in whatever way the Secretary of State thinks fit’

and insert

‘by the Secretary of State following consultation with the TUC and CBI’.

Government amendment 15.

Amendment 58, leave out clause 14.

Amendment 59, in clause 14, page 10, line 11, at end insert—

‘(c) and where the employer employs in excess of 10 employees at the time of the claim first being submitted to ACAS as per section 18A of this Act,’.

Amendment 92, page 10, line 14, at end insert—

‘(1A) The Secretary of State shall by regulations provide for an employer to pay a penalty to the Secretary of State for each period of time (as specified in those regulations) that passes during which an award of compensation under Part X of the Employment Rights Act 1996 has not yet been paid by the employer.’.

Amendment 72, page 10, line 17, leave out from ‘£5,000’ until end of line 4 on page 11.

Amendment 83, page 10, leave out lines 20 to 25.

Amendment 73, page 11, line 47, after ‘Fund’, insert

‘to be spent with the objective of promoting awareness of employment rights and promoting training for employment.’.

Amendment 94, in clause 15, page 12, line 4, leave out from ‘(protection),’ to end of line 5, and insert ‘after subsection (2), insert—

‘(2A) The disclosure of information relating to a private contractual matter to which the person making the disclosure is party is not a qualifying disclosure unless the worker making the disclosure reasonably believes it to be made in the public interest.”.’.

Government amendments 16, 17 and 31.

Amendment 57, in schedule 2, page 65, line 22, leave out ‘one month’ and insert ‘six months’.

[Jo Swinson]

New clause 8 will introduce sensible changes to the employment tribunal rules of procedure recommended by Mr Justice Underhill. I shall say more about the effect of those changes shortly. A number of other new clauses and amendments have been tabled both by the Government and by other Members, and I shall attempt to address them—as well as new clause 8—as comprehensively but as succinctly as possible. As Members will know, part 2 was subjected to thorough scrutiny by the hon. Member for Edinburgh South (Ian Murray) and his Committee colleagues, and all the clauses were accepted unamended.

Contrary to some of the views expressed in Committee, these measures do nothing to affect an individual’s employment rights. Instead, they deliver on the Government’s commitment to giving businesses more confidence to take on new staff and grow. We know that employment tribunals are a continuing cause of concern for businesses and, indeed, employees, and I should be surprised if Opposition Front-Benchers tried to argue that all is working swimmingly at present. The measures in part 2 are designed to alleviate the fears and problems by encouraging the earliest possible resolution of disputes, facilitating settlement agreements to help businesses to manage their staff more effectively, and ensuring that the tribunal system itself operates efficiently for all users.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Will the Minister give way?

[Jo Swinson]

I will in due course, but I want to make a bit of progress first.

I welcome this opportunity to set out the changes that we have proposed and respond to those made by others, continuing the work of my predecessor to bring reform to the employment tribunal system. Let me begin by explaining the amendments that we are making through new clause 8, which will amend existing provisions in the Employment Tribunals Act 1996.

Following his fundamental review of the rules of procedure for employment tribunals, Mr Justice Underhill made a number of recommendations about how the rules might be improved. In some instances, he felt that the primary legislation would need to be amended before desirable changes in the procedural rules could be made. These changes will help to achieve more effective and targeted case management which will benefit all tribunal users.

The first change involves deposit orders. Tribunals can currently require a party to pay a deposit of up to £1,000 as a condition of continuing to proceed with a weak claim. However, a judge cannot currently use a deposit order to weed out the weak elements of a particular claim, and must instead attach a deposit order to the entire claim as a condition of proceeding. That lack of flexibility does not aid effective case management. Enabling judges to make better-targeted deposit orders will give both parties a clear sense of where they should focus their efforts, encouraging a more realistic approach to settlement, and I believe that it will also lead to greater use of such orders.

The second change relates to the recoverability of witness expenses for people who choose to represent themselves at tribunals and seek a preparation time order in respect of their work on the case. An oddity in the current costs regime places people who represent themselves at tribunals at a disadvantage, as a tribunal cannot make a costs order for witness expenses and a preparation time order in respect of the same party. We are amending the Employment Tribunals Act 1996 to remove that unnecessary restriction.

The final change deals with the recoverability of lay representatives’ costs. Mr Justice Underhill considered that those who chose to be represented by a non-lawyer, and who had paid for that service and advice, should not be put at a disadvantage when a tribunal concluded that the other party’s conduct meant that a costs order was warranted. I agree that those who choose to engage lay representatives rather than lawyers should not be disadvantaged when it comes to the award of costs, and I intend to use the existing powers in section 13 of the Employment Tribunals Act to change the rules of procedure in order to allow for such costs orders. The new clause helps to clarify the scope of section 13 by introducing a definition of the word “representative”.

Let me now deal with new clauses 1 and 2, tabled by the hon. Member for North Ayrshire and Arran (Katy Clark), which amend clause 15. Along with the organisation Public Concern at Work, she has been a powerful advocate on this subject, and we discussed it recently during a Westminster Hall debate that she had initiated.

I think we can all agree that, in an ideal world, legislation for whistleblowing would not be needed at all. In such a world, all employers would be open and receptive when an issue was raised, and would not seek to silence or drive out a person who brought important matters to their attention. However, as we know, such enlightened approaches to whistleblowing are not universal, so legal protection is required. We are equally keen to ensure that the protection offered by the public interest disclosure legislation is not abused by those who seek to rely on it for purely self-interested reasons. Clause 15, which has already been debated in Committee, will ensure that the whistleblowing provisions cannot be used to advance purely personal interests.

New clause 1 addresses a different aspect of the public interest disclosure legislation. It proposes the removal of the good faith test, which has been in place since the legislation was introduced. That would mean that individual whistleblowers would retain the benefit of employment protection even if their reasons for blowing the whistle were malicious, if they deliberately set out to cause commercial damage, or if they acted out of a desire for personal revenge.

There is clearly a balance to be struck. We are conscious of the recommendations of Dame Janet Smith’s inquiry into the tragic circumstances of the Shipman case. She suggested that the good faith test be removed to encourage more whistleblowers to come forward. We also recognise that the motivations of whistleblowers are not always clear-cut. Personal feelings, particularly when a relationship has broken down, sometimes make it difficult to understand the intentions of the person who is making a disclosure. Having said that, I should add that, as we have already made clear, we believe that the legislation is working well overall, and that the good faith test serves an important purpose.

We are also keen to avoid making a change that could allow individuals access to an uncapped award when their motives for blowing the whistle were malicious, and I therefore do not believe that there is a clear-cut case for removing the good faith test. However, I recognise that the hon. Lady has raised an important issue relating to this specific element of the public interest disclosure regime, and we will continue to look closely at the policy aims of the test to ensure that they are still being achieved.

[Julian Smith (Skipton and Ripon) (Con)]

Does the Minister agree that there is much more scope for whistleblowing in this country, given the number of whistleblowers in America and the incentives that they are given to come forward? Does she agree that there may be more work for the Government to do in future months?

[Jo Swinson]

I thank my hon. Friend for his intervention. It is a positive thing that we have an environment where people, rightly, feel able to come forward and blow the whistle. The legislation that was enacted was important and is generally working well. We are proposing small changes to it in this Bill, but it is absolutely important. For the reasons that I outlined, that legal protection is necessary and we should be proud of the fact that we have such legislation.

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[Julian Smith]

I am heartened by these amendments, because one of my concerns in Committee was that this process with ACAS could become far too formal. It is really important that as this early conciliation develops we make it as informal as possible.

[Jo Swinson]

I thank my hon. Friend for that intervention. He rightly says that we want that process to be a success, and enabling the technology of the telephone to be used in it is a helpful, albeit minor, amendment.

Opposition Members have tabled a number of amendments on the early conciliation process. Amendment 80 seeks to require the Secretary of State to consult on, and undertake an assessment of, the impact of the introduction of fee charging in employment tribunals on the effectiveness of early conciliation before commencing these provisions. Hon. Members will know that the power to charge fees in tribunals is one that already existed; we announced our intention to introduce fees in employment tribunals in January 2011, and subsequently consulted on the appropriate charging points and fee levels in December 2011.

We recognise that the introduction of fees to bring an employment tribunal claim may affect the behaviours of both claimants and respondents, and that there may therefore be an impact on how parties elect to engage with early conciliation. We considered the possible impact as part of the assessment that accompanied the announcement in November 2011 of our intention to introduce early conciliation—copies are in the Library of the House. As part of the implementation planning, we will publish further impact assessments. The proposed amendment would simply require us to replicate work that we have already done and will continue to do, so I am unable to support it. The amendment is unnecessary, but I can give the assurance that we are, of course, continuing to take into account the impact that our approach will have.

[Ian Murray (Edinburgh South) (Lab)]

I wonder how the Minister would deal with an issue that has been raised by the chair of ACAS, Ed Sweeney. He said that the introduction of the fee structure could have an impact on the effectiveness of conciliation at ACAS.

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[Jo Swinson]

As the hon. Gentleman will find if he checks Hansard, I have just said that we recognise that our approach could have an impact; it may affect the behaviours of both claimants and respondents. We have already published an impact assessment, but we will keep this matter under review. Of course, if at a future point a further change is necessary as a result, we will come back with it. The Bill does not need to provide for that consultation process, given that it is already ongoing.

[John Cryer (Leyton and Wanstead) (Lab)]

We also need to address the question of ACAS’s capacity to deal with the extra cases—no matter how the process is run, their number will increase. Is there not an implication in terms of extra resources, for ACAS to deal with what could be an extra 100,000 cases a year?

[Jo Swinson]

I thank the hon. Gentleman for his intervention, which highlights the crucial role of ACAS in this area. My predecessor gave reassurances in Committee, but I say again that ACAS will be adequately resourced. It is absolutely essential that that is the case in order to deliver early conciliation. Indeed, I remind hon. Members that in his evidence to the Committee, the chair of ACAS, Ed Sweeney, said that he was confident that the Government would make sure that ACAS will be adequately resourced. I am glad to be able to give that reassurance to the House.

Amendment 51 would add a power to make regulations which would prevent an employer from seeking costs against an employee at tribunal, or to take any other measures that would incentivise employers to take part in the conciliation process. Amendment 57 would have the effect of providing those individuals bringing claims under a particular Act, whose limitation period would otherwise expire during the period of early conciliation or within one month of the conciliation process ending, with an additional six months in which to lodge their claim with the tribunal.

I recognise the intent behind the amendments tabled by Opposition Members; they clearly share our belief that resolving disputes is best done between the parties, rather than at an employment tribunal—as, I believe, do those involved in the process. There has been broad support for the introduction of early conciliation, both in the House and from employers and employees, who recognise the benefits that it offers. It is the benefits—savings in time and cost, and in the considerable stress of the tribunal process—that will encourage parties to engage in conciliation, rather than a change in the rules to prevent respondents from seeking a costs order.

The rules on costs orders are clear: costs may be ordered by a tribunal where a party has acted vexatiously, abusively, disruptively or otherwise unreasonably in bringing or conducting proceedings. However, it is rare that parties act in such a manner; the vast majority of cases are where there is a genuine disagreement between the parties, which is why only 1,311 of these awards were made in 2011-12.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Do the Government recognise that the reason behind the amendments is the concern that many hon. Members have that the Government’s plans will reduce access to justice?

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[Jo Swinson]

I do recognise that there is genuine concern, particularly in respect of the new fee regime. It is important that a remission regime is in place as well; it is important to point that out. However, the amendments would provide protection for people who are behaving in a vexatious and abusive manner. No matter which side of the dispute that occurs on, we should not be encouraging it. Where a claimant is behaving unreasonably—this is at the discretion of the tribunal—it would be inappropriate for employers to be prevented from seeking a costs order if the tribunal considers that the claimant’s behaviour justifies such an order.

[Mr Chuka Umunna (Streatham) (Lab)]

If the Minister accepts that there are serious concerns about the introduction of fees and its impact on access to justice, why does she not look at the case management powers in the interlocutory stage of case proceedings and perhaps expand deposit powers to act as a disincentive for vexatious claimants? That would not have an impact on access to justice as her Government’s proposals are having.

[Jo Swinson]

A range of measures in the Bill will help to improve access to justice. Of course, the most important thing is to make sure that fewer people end up going to employment tribunals in the first place. [Interruption.] I have just discussed the measures on early conciliation, which is a much better way of resolving disputes. We also have measures on rapid resolution, which I will come on to deal with and which have been discussed in Committee. Those are the ways of ensuring that people are able to get the best resolution to their disputes. Obviously there will still be a role for employment tribunals and there will be cases that, for whatever reason, cannot be managed through those other, better options for resolving them. In imposing a fee, there will still be access to justice through the remission regime for those who are otherwise unable to afford it.

[John McDonnell (Hayes and Harlington) (Lab)]

My amendment 51 seeks to prevent employers from applying for costs and using the provisions as an incentive to take part in conciliation. Is the Minister saying that such a power already exists in law and that she does not feel it should be codified? Or is she simply opposed to codifying it?

[Jo Swinson]

As far as I am aware—I am sure that inspiration will reach me if this is not the case—tribunals already have the power to impose costs, but the amendment would seek to limit the circumstances. Where proceedings have been brought or conducted in a vexatious, abusive, disruptive or otherwise unreasonable manner, it is important that the tribunal route retains the discretion to award costs. That happens in a tiny number of cases, because even when a case reaches tribunal most people engage with it in a spirit of genuine concern and with a genuine problem, but there will be some cases in which a relationship is vexatious or in which someone seeks to settle scores. If that is the case, it is appropriate for costs to be ordered in such a way.

Let me turn now to amendment 57, the proposal to amend the period for lodging a claim from one to six months for those whose limitation period would otherwise expire during the early conciliation period or within one month of the early conciliation process ending. The amendment would affect only a small number of individuals: those whose claim was brought under the Trade Union and Labour Relations (Consolidation) Act 1992 and who had sent their claim to ACAS towards the very end of the limitation period.

We want all claimants to have the confidence to engage meaningfully in early conciliation without the fear of running out of time to bring a claim. That is why we have provided for all claimants to have a minimum of a month following the end of the early conciliation period in which to lodge a claim, regardless of its nature. It is difficult to see why individuals should require longer than a month to prepare and submit the necessary form to the tribunal, bearing in mind that they will already have gone through the early conciliation process and have been considering the matter for some time, and it is even more difficult to see why such a lengthy extension should apply to such a narrow range of claims. We want all people to be able to engage in early conciliation and to have the confidence to do so and, if it does not work, to pursue other options. I am therefore unable to support amendments 80, 51 and 57.

Opposition Members have proposed three amendments to clause 11, amendments 52, 53 and 54, which relate to the composition of the Employment Appeal Tribunal. As my predecessor, my hon. Friend the Member for North Norfolk (Norman Lamb), explained in Committee when a similar amendment was voted down, we believe it is right that when the issue under consideration is related solely to a point of law the matter should ordinarily be heard by a judge sitting alone. That is always the case in the EAT, of course. However, when the judge considers that there is merit in sitting with a panel, they will be able to do that, and the Lord Chancellor can also order it for specific proceedings. I am therefore unable to support the proposed amendments.

Government amendments 8, 9 and 10, to clause 12, provide for confidentiality of negotiations before the termination of employment. Since the introduction of the clause in Committee, my Department has sought and received feedback from a number of key stakeholders. Some, including the Employment Lawyers Association and some business representative groups, told us that the original wording of subsection (1), which stated that employment tribunals should not take account of offers of settlement in their deliberations, could be open to misconception and misunderstanding. Although the Government believe that the original drafting of the clause would have the desired effect—namely putting an offer of settlement outside the deliberations of the employment tribunal in unfair dismissal cases—we wish to allay those fears and are amending the drafting of subsection (1) for the purposes of clarity and the avoidance of doubt. Subsection (5) is rendered unnecessary by that redrafting, so amendment 10 is a consequential amendment to remove it. In the proposed amended clause, just as in the original, employment tribunals will remain able to consider an offer of settlement in claims being brought on other grounds.

Amendment 9 does nothing more than reflect the difference in terminology between tribunals in Scotland, where the term “expenses” is used in employment tribunal proceedings, and those in England and Wales, where the term “costs” is used. Clause 12 was debated at some length in Committee—I have no doubt that Opposition Members have fond memories of that—and none of the amendments changes the purpose or effect of the clause, which were accepted then.

Opposition amendment 81 would remove clause 12 in its entirety. It is worth going back to consider the original aim of the clause. It is aimed at helping employers and employees come to a consensual end to employment relationships that are just not working out by facilitating the use of settlement agreements. A settlement agreement offers potential benefits to employers and employees, including a much quicker resolution than that offered by the tribunal, where the average time taken to resolve a claim is 24 weeks. Employers have the security that they will not face a tribunal case that would distract them and other workers from their business activities, and employees end up with the certainty of a cash payment, avoid the time and stress of tribunal, and leave with their head held high and possibly a reference. We want to encourage more businesses and individuals to consider the use of settlement agreements as a viable and potentially preferable means of parting ways than an emotionally draining performance management or misconduct route or a costly and stressful employment tribunal.

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[Julian Smith]

I am heartened that the Minister is not seeking to make any changes to the clause. Is she surprised that the Opposition are so unenthusiastic about helping the 4.5 million small businesses that will benefit from the clause?

[Jo Swinson]

It is intriguing, given the experience of Opposition Front Benchers as employment lawyers. It is worth bearing in mind that compromise agreements already exist and existed for 13 years under the previous Government. They have a lot of merit, but tend to be used by large firms in particular—large firms, which can afford to employ expensive employment lawyers. Small and medium-sized companies often feel very afraid of taking on such conversations and that is what we are seeking to address.

I recognise that there are concerns about how the clause might work in practice and what safeguards there may be for individuals, many of which my colleague, my hon. Friend the Member for North Norfolk, addressed in some detail in Committee. I strongly believe that in clause 12 we have found the right balance between protecting individuals and giving employers the flexibility and confidence they need to manage their businesses effectively. It is about balance. The settlement agreements measure provides a mutually beneficial solution for employers and employees as regards ending the employment relationship. Let us be clear that this is not, as some have suggested—and as Opposition Members have been suggesting from a sedentary position—the first step to no-fault dismissal or Beecroft-lite. We have made it abundantly clear that we will not go down that path.

[John Cryer]

Will the Minister give way?

[Jo Swinson]

I will give way shortly.

We believe our approach to settlement agreements is a more effective way of dealing with workplace problems, as it offers a positive outcome for all parties. Settlement agreements are by definition voluntary and consensual. Individuals will still need to get independent legal advice before signing an agreement and can decline it if they want to do so. That approach has the benefit that an agreed settlement gives an employer surety that they will not face a tribunal case on any grounds covered by the settlement agreement, which a no-fault dismissal regime would not provide. Employees are at liberty to reject an offer when it is not right for them and our approach does not remove an employer’s obligations not to discriminate or prevent an individual from bringing other evidence to support a case of unfair dismissal.

[Ian Murray]

rose—

[Jo Swinson]

I shall give way first to the hon. Member for Leyton and Wanstead (John Cryer).

[John Cryer]

Earlier, the Minister mentioned the possibility of no-fault dismissal. That is exactly what the Opposition are suggesting. It will be illegal to quote protected conversations later, so no-fault dismissal by the back door will be introduced. What mechanism will she use to monitor the workings of this clause so that that does not happen?

[Jo Swinson]

I cannot make it clear enough that this is not no-fault dismissal. The proposals in the Beecroft report would have removed at a stroke the employment rights of 30 million individuals, whereas what we propose is a voluntary and mutually beneficial process that will end the employment relationship only if the employee agrees to it. That is entirely different. The suggestions that are being made are not founded in fact. The hon. Gentleman says that we should consider how things proceed, and compromise agreements have been on the statute book for some time.

[Debbie Abrahams]

Will the Minister give way?

[Jo Swinson]

I will finish answering this intervention and take the intervention from the hon. Member for Edinburgh South, and then I will be happy to take an intervention from the hon. Lady.

Over the past year—at least over several months—the Government have considered how the process could be improved and have come forward with our proposals. The consultation on exactly how the agreements should take place is running and is open until 23 November. The hon. Member for Leyton and Wanstead is free to input his views and I encourage him to do so. Just as we have considered the current scheme, I am sure that if the scheme is found not to work in future years, any Government would be happy to reconsider it.

[Ian Murray]

The Minister is being incredibly generous in taking our interventions. Does she not accept that settlement agreements, while they can be used where there is no dispute, are likely to create dispute?

[Jo Swinson]

I do not think so. Clearly it is important that the conversation is conducted in a mature and respectful way, and the guidance, on which we are consulting and which will include things such as guideline letters and templates, is expressly designed to make that easier for employers. The problem the hon. Gentleman raises is precisely the opposite of what the proposals will address, because now, where protected conversations can happen if there is a dispute, that creates a perverse incentive to employers to try to manufacture a dispute. Hopefully, the proposed measures will make it much easier for people to have that conversation without having to pretend that there is a dispute where none exists.

[Debbie Abrahams]

I am grateful to the Minister for giving way—eventually. I fear that this is another example of poor legislation from this Government. As I understand it, the provisions regarding protected conversations will not apply in certain conditions, including where an employer is deemed to have behaved in an improper way, yet there is no definition of “improper” in legislation. Will the hon. Lady comment on that?

While I have the chance, I will make the intervention I wanted to make earlier. We know from the OECD that the UK is one of the most lightly regulated countries in the world, next to the United States and Canada. Exactly what evidence does the Minister have to draw on that the measures will improve growth?

[Jo Swinson]

The hon. Lady is being slightly uncharitable in saying that I gave way “eventually”. I took her intervention immediately on finishing my response to her hon. Friends. My approach is to take interventions because the function of Report stage is to ensure that amendments receive proper scrutiny, and I am determined to make sure that hon. Members can have those discussions and receive reassurances where there are concerns.

On the question about settlement agreements and the protections that remain, obviously the agreements should not be used in a way that results in an employee feeling under pressure or that they have to take the agreement. If there is any bullying behaviour or suggestion of discrimination, of course there would be no protection for that conversation. The hon. Lady asks about the definition of “improper”. The consultation on that is under way, and I encourage her to make her views known to it. In general terms, our aim is to reflect, without prejudice, unambiguous impropriety, which would include cases of discrimination and bullying, where there would be no protection for the employer.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

The Minister is being very generous. Does she accept that, under the proposed arrangement, the conversation could come out of the blue for employees, with no warning that their performance may not be up to the standard or that they may not be performing in the manner that the employer requires; and that that will itself generate massive insecurity among the UK work force, which will serve to undermine growth, not aid it? No one will feel confident in buying a car or even a fridge if they think that the next day, out of the blue, they might have a conversation about their performance and be offered a settlement agreement which they feel they have no choice but to accept.

[Jo Swinson]

I recognise that the hon. Lady is genuine in raising her concern, but I think it is misplaced. Employees will not be forced to accept a settlement agreement; it is purely voluntary. She says the conversation will come out of the blue, but clearly we want employers to behave responsibly, with good employment relations and good human resource management. As I mentioned, we are taking steps to produce guidance to make it easier for employers to act in a proper way. The risk that an employee will go into work and their manager will say that they have issues with some aspect of the employee’s performance exists now. Employers and employees having confidence that they can have these conversations at an early point is better than their fearing the conversations, which allows problems to fester and grow.

[Catherine McKinnell]

The Minister talks about encouraging good and positive behaviour, but I am concerned that the measure encourages precisely the opposite sort of behaviour—that it will encourage an employer to approach an employee for the very first time about their performance with an offer to terminate their employment, rather than help them to improve it. There can be no doubt that there is inequality of arms in that conversation for a vulnerable individual who may be facing unemployment. Has the Minister properly considered that?

[Jo Swinson]

It has properly been considered. It is important to repeat that the protection is for conversations relating to a settlement agreement. A settlement agreement, by definition, is a negotiation, so it is unlikely to be a case of take it or leave it. The measure is about starting that conversation and enabling people to say, “We think this is an issue. Is this working out?” I think that enabling employers and employees to have those conversations without the fear described by many within the business community will improve management and not lead to the consequences the hon. Lady fears.

[Stewart Hosie (Dundee East) (SNP)]

I understand what the Minister is saying but I think a little honesty here would be helpful. If an employee behaves badly, they can be sacked. If a business is in trouble, an employee can be made redundant. It is no-fault dismissal by the back door when the conversation and what she describes as a negotiation, with such an imbalance of arms, means that contractual terms of redundancy can be diminished by an offered settlement to go with no fault. That is what this is really about.

[Jo Swinson]

I do not appreciate the hon. Gentleman’s implication. The provision is about making sure that those conversations can take place. Legal advice will have to be sought and given to the employee at that point, before any agreement is reached. Guidance will be given—as I said, we are consulting on that. We are building on and improving the existing procedure for compromise agreements, which have worked well in many cases. We are taking a provision that has been in employment law for many years and improving it.

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[Mr Speaker]

Thank you. I am grateful.

[Jo Swinson]

Thank you, Mr Speaker. I think it is fair of my hon. Friend the Member for Skipton and Ripon (Julian Smith) to point out that many business owners are genuinely concerned about how employment law currently works.

[Mr Umunna]

The Minister has indeed been incredibly generous about giving way. For the record, Mr Speaker, I think it is of assistance to have a range of experience in this House. We have lawyers and many business owners in the shadow BIS team and we speak with the benefit of professional experience.

Does the Minister not acknowledge that employers can have these conversations with employees, as long as they follow fair procedures? That is all we are asking for.

[Jo Swinson]

The procedures are far more likely to be used by large companies, and many business people, particularly those in small and medium-sized enterprises, fear to take them up. That was borne out by much of our consultation, both formal and informal. I do not know whether Opposition Members genuinely believe that there is no concern among business about tribunals and employment law—

[Mr Umunna]

indicated dissent.

[Jo Swinson]

Well, people watching this debate or reading it in Hansard will see that that concern among businesses exists and is not being taken seriously by the Opposition, but I shall be happy to be corrected.

[Mr Umunna]

The Minister knows full well that, for example, we welcomed the setting up of the Underhill review, because we acknowledge that there are issues, but it is really a question of degree. Of course we have to take into account the concerns of business, but our job as politicians is to take into account the concerns of society as a whole and to balance the different interests, and that is what she has got wrong.

[Jo Swinson]

I agree that the job of politicians is to balance those interests, but I disagree with the hon. Gentleman that we do not have the right balance. As hon. Members have pointed out, very different proposals emerged from some quarters, but the Government have said firmly that we will not go ahead with the no-fault dismissal plans that were put forward. That shows that we are taking a balanced approach.

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[Jo Swinson]

I encourage the hon. Lady to speak to employers in her constituency about the issue, which is raised frequently. As to evidence of employers’ fears of employment tribunals, let us look at the previous Government’s record in office. The fear of employment tribunals can put people off employing staff. If people are more likely to employ staff, they are more likely to grow their businesses and create wealth for this country. But let us look at the record of the Opposition. In 1998 there were 90,000 claims going to employment tribunals. By 2010, despite the measures that the Labour Government apparently took to try to improve that situation, the figure was 236,000—a huge jump in the number of tribunals, which of course has created a concern for businesses.

[Catherine McKinnell]

I would be interested to hear the Minister’s analysis of how many of those employment tribunal cases were equal pay claims that were rightly going through the tribunal system. On the evidence, or the apparent lack of evidence, about the genuine fear of employment tribunals, I wonder whether the hon. Lady is in fact making a case for better business support, rather than legislating to make it easier to sack people, which seems a little counter-productive to growth.

[Jo Swinson]

This is not about making it easier to sack people. This is about making it easier for people to come to a mutual agreement, which is, by definition, not sacking.

[Richard Fuller (Bedford) (Con)]

May I offer my hon. Friend some reassurance that she is charting a middle course? She has heard the concerns of the lawyers on the Opposition Benches who, instead of recognising that our business leaders are going out every day to do the best they can for their employees, assume that they need to be corralled and controlled. There are Members of the House who would like to see the Minister go further in her measures in the Bill to make it easier for business leaders to hire more people so that the current recession becomes a job-filled rather than a jobless recession.

[Jo Swinson]

I think I thank my hon. Friend for his intervention. The fact that there is criticism from both sides shows that a balanced approach is being taken. I shall make progress as I know that other Members want to speak.

[Ian Murray]

I am grateful to the Minister for allowing me to intervene. Let us nail once and for all the myth about employment tribunal claims. The Government used this as the supposed evidence for changing a range of workers’ rights. The massive increase in employment tribunal claims arises from multiple claims, which have risen substantially, but the individual number of multiple claims has stayed exactly the same for the past three or four years. Indeed, employment tribunal claims are dropping.

[Jo Swinson]

The fact remains that there is a massive backlog of employment tribunal claims, there are massive problems with the way the system is working, and there is significant concern in the business community, which has been expressed in the House and in Committee. I shall move on to the other amendments before allowing other Members to have their say.

Government amendments 11 to 15 to clause 13 will ensure that the power in the Bill to amend the unfair dismissal cap cannot be used to introduce a cap based on an individual’s pay without there also being a specified upper limit. My hon. Friend the Member for North West Leicestershire (Andrew Bridgen) raised a concern in Committee that, as it stands, the power in clause 13 could be used to introduce a pay-based cap with no upper limit. Clearly, such a step would increase potential compensation for the very highly paid and could thereby increase risks and uncertainty for employers. As my hon. Friend the Member for North Norfolk who is now the Minister of State, Department of Health, made clear at the time, this is not the Government’s intention. On the contrary, we are seeking to give employers greater confidence in dealing with disputes and to ensure greater realism about the level of awards in order to encourage settlement.

We launched a consultation on proposals to change the cap on compensation for unfair dismissal on 14 September, alongside our consultation on settlement agreements. The consultation includes looking at the overall level of the cap and also the option of introducing a pay-based cap alongside a specified upper limit. We therefore seek to make these amendments to ensure that the power in clause 13 reflects the Government’s policy intentions.

Opposition Members have proposed three amendments to this clause, the first of which, amendment 82, would delete the clause in its entirety. It has been a matter of common agreement for many years that the compensatory award should be subject to an upper limit. What that limit should be is the issue in question. This clause recognises the agreement that exists about the need for an upper limit, but provides a power for the Secretary of State to vary that limit subject to specific considerations. As I have said, we are consulting on what the appropriate limit should be. I am therefore unable to accept the amendment.

Amendment 70, tabled by the hon. Member for Hayes and Harlington (John McDonnell), seeks to remove the upper limit of three times median salary. The effect of this would be to allow the cap to be set at any amount. This would clearly run counter to the objectives that I set out a moment ago of greater confidence for business and greater realism for claimants. The hon. Gentleman tabled a further amendment to the clause, amendment 71, which would require the Secretary of State to consult the TUC and the CBI before deciding on a figure for median annual earnings where the figure published by the Statistics Board is more than two years old. I cannot envisage a situation in which such information would not be produced by the ONS in any two-year period but, should such an eventuality ever arise, the Secretary of State will be under a duty to act reasonably and rely upon relevant information. The Secretary of State and other Ministers meet the TUC and CBI regularly to discuss a range of matters, so there is little to be gained from placing a requirement to consult the TUC and the CBI on the face of the Bill. I am therefore unable to support either of the hon. Gentleman’s amendments.

I turn now to the amendments to clause 14 tabled by my hon. Friend the Member for Bedford (Richard Fuller). Amendment 58 would delete clause 14 in its entirety. Amendment 59 seeks to restrict the imposition of a financial penalty to those businesses employing more than 10 people—that is, to exempt micro-businesses. I want to make it clear, as did my predecessor in Committee, that the introduction of this discretionary power for tribunals is not intended to penalise employers indiscriminately. It will be used only when an employer has breached an individual’s employment rights, and when that breach has been accompanied by aggravating features—for example, where there has been a deliberate decision to act in a way that breaches the employee’s rights, or where the same employer repeatedly acts in an unlawful manner.

When we first proposed the introduction of financial penalties, we had thought to make the imposition of the penalty automatic when there was a finding in favour of the claimant, but we listened to the concerns expressed by business during the resolving workplace disputes consultation last year and revised our proposals to give the tribunal discretion to decide when a penalty was appropriate. Good employers—those who try to do right by their employees—have nothing to fear, regardless of their size. A genuine mistake will not be grounds for the imposition of a penalty. However, those businesses which the tribunal considers have acted deliberately or maliciously will rightly, I believe, face the prospect of a financial penalty. They will no longer be able to gain a competitive advantage over businesses that abide by their obligations.

I cannot stand here and defend bad employers. I recognise the good work that my hon. Friend the Member for Bedford has done to support the interests of small businesses, and I am sure he does not want to defend bad employers either. I hope he will not press his amendments, as the Government are unable to support them.

[Richard Fuller]

Of course I do not wish to defend bad employers but as the Minister knows, almost all employers are good employers who do the right thing. Will she address the general principle, which is not so much about the points that she mentioned? Why are the Government trying to get in on the financial action? This is about money that will go to the Government. It is nothing to do with the relationship between the employer and the employee. The money will not go to the employee. Why is it so important that the Government get their take?

[Jo Swinson]

My hon. Friend is right to point out that the majority of employers are good employers. I am sure hon. Members in all parts of the House find that to be so when they visit local businesses in their constituencies. Even in the case of good employers, a mistake will occasionally be made and they will end up at a tribunal. That is why, in response to the consultation, we removed the automatic imposition of a penalty. Any penalty will be based on the circumstances of the case and will be imposed by the people who have heard all the facts—the tribunal. It will be imposed only on employers who have deliberately flouted the law or done so in a malicious or aggravated way.

On the point about financial penalties, this is not some kind of revenue-raising scheme; it is about ensuring that the right incentive structure is in place by creating a further penalty for businesses that deliberately flout the law. That will incentivise the right kind of behaviour. For the reasons I have just outlined, that will be fairer on the vast majority of businesses that are good employers and that should not lose out to those employers that gain some kind of advantage by treating their employees badly.

[Richard Fuller]

The Minister again mentions an additional penalty for those employers. Is she aware that the Law Society has stated:

“Uplifts on compensation of up to 25% are already available in cases of unreasonable breach of the Acas Code on Disciplinary and Grievance Procedures”?

Is that not a sufficient additional penalty?

[Jo Swinson]

I do not believe that what we have at present is sufficient. Although they make up a small portion, there are clearly too many employers who do not comply properly with their obligations. I think that it is quite right that we send a clear signal and make it clear that those employers can expect to face a bigger consequence at a tribunal than those well-intentioned employers who try to do the right thing but fall foul of the law because of an error—after all, we are all human.

Opposition Members also seek to amend clause 14. Amendment 92 seeks to address the issue of non-payment of employment tribunal awards by proposing that an employer should pay a penalty for each period that an award made in an unfair dismissal case goes unpaid. I recognise, and indeed sympathise with, the amendment’s aims, but I am afraid that it would not have the intended effect. When I took over this brief, I was genuinely shocked by the level of employment tribunal awards that are unpaid. The figures for 2009 show that six months after an employment tribunal makes an award as many as 40% of claimants had not received the money they were rightly due, which is clearly unacceptable.

Whatever people’s views on the rights and wrongs of the employment tribunal process and how it could be improved, when an employment tribunal grants an award and the case has been heard properly, the claimant should be able to get their money. Like my predecessor, I am very concerned at the figures for non-payment. When a tribunal finds in favour of a claimant, it cannot be right that they are unable to get the money they are owed.

We are consulting on two changes that I believe might have some effect on the number of awards paid promptly. They include proposals to put a date on a tribunal’s judgment specifying when payment should be made and to charge interest from the date of judgment where an award is unpaid after 14 days. These charges will apply to all cases, not just to unfair dismissal cases. Importantly, in that scenario the interest will be added to the award and paid to the claimant. That consultation closes on 23 November and I encourage the hon. Members who have tabled amendments to take part and feed in their views.

I want to consider what more we can do on this issue. I have already discussed it with my colleague and fellow Minister for Equalities, the Under-Secretary of State for Justice, my hon. Friend the Member for Maidstone and The Weald (Mrs Grant). We are both clear that action is necessary, but we cannot take action without first understanding the underlying problem properly. The previous Government attempted to resolve the problem by introducing a fast-track enforcement process, but it still persists. The process had some success, but not enough people have been accessing it and, even for those who have, it has not been successful in all cases.

I have therefore commissioned research from the Department on the reasons why so many awards go unpaid. Once we have that information, which I anticipate will be early next year, we will be able to take whatever steps we can to ensure that claimants receive the award they are entitled to. Therefore, I ask my hon. Friend not to press the amendment and I commit to taking the proposal away and considering it further to see what we could do in the light of the research findings.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

I raised with the Minister’s predecessor the case of a constituent who found herself in that situation. She was, in effect, dismissed for being pregnant and was awarded £24,000 by a tribunal but to this day has still not received any of it. In the issues the Minister is considering, in the consultation and in the wider concern she has expressed about how we can best address this, will she also seek to work with colleagues across the Government to look at companies that change their status in order to avoid paying out awards when cases are brought against them?

[Jo Swinson]

I do not know the details of the case the hon. Gentleman describes, but I am more than happy to look into it. Given that he was in contact with my predecessor, I am sure that the information will be available in the Department. I think that we need to look at the whole range of issues. There is clearly a range of reasons why an award would not be paid, and they might all require different solutions. If a company has become insolvent, for example, there is a different set of problems than if companies are simply choosing not to pay. Trying to understand where exactly the problem lies is the first step towards ensuring that we can tackle it properly, because I agree that cases such as the one he outlines are unacceptable.

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[Debbie Abrahams]

Will the Minister tell us what the evidence is for those caps?

[Jo Swinson]

As I have said, this is a new measure and these are the figures we have put in place. I do not know what figures the hon. Lady thinks should be set. It is important that there is some certainty for businesses and so, after progressing with this measure and putting it in place, we can then review it and see how it works. By ensuring that the specific amount is not set in primary legislation, we will have the ability to amend it through secondary legislation, which will give the required flexibility. Amendments 72 and 83 would undermine the objectives of the financial penalty regime and so I am unable to accept them.

The final amendment to clause 14, amendment 73, tabled by the hon. Member for Hayes and Harlington, seeks to specify the purpose for which any moneys accruing to the Exchequer from the imposition of financial penalties should be used. Hon. Members will know that the Government already fund the activities to which the amendment refers through ACAS, with an annual grant in aid allocation of about £45 million a year. As my predecessor made clear in Committee, the purpose of the financial penalty is not to raise revenue for the Exchequer. It would not be appropriate to expect ACAS to function with some element of its annual funding being dependent on what is ultimately a discretionary decision by a tribunal. The existing mechanism for funding ACAS is the right one, so I am unable to accept the amendment.

Amendment 94 seeks to address a point we covered in Committee. I understand that its aim is to prevent a disclosure relating to a breach of a private contract from being a qualifying disclosure for the purposes of a whistleblowing claim, unless it is clearly in the public interest. My predecessor, my hon. Friend the Member for North Norfolk, explained in Committee our reasons for not wanting to take that route. We believe that such an approach would have the potential for unintended consequences and would not in itself address the concerns raised by the Parkins v. Sodexho decision. For example, the issue in that case could have been reframed as a health and safety issue, with similar issues then arising in relation to the disclosures of minor breaches of health and safety legislation, which are of no interest to the wider public. Not only are we closing the loophole identified in the Parkins v. Sodexho case, but by introducing the public interest test we are removing the potential for the opportunistic use of the protection. That will prevent any cases similar to the Parkins v. Sodexho case in the areas that would otherwise be uncovered by the amendment.

[Ian Murray]

I am grateful to the Minister, who is being incredibly generous in giving way. What would she say to the Law Society, which says that the clause will not do what the Government intend it to do?

[Jo Swinson]

I think that it will do what the Government intend it to do—basically what it says on the tin. It is about making sure that the public interest disclosure regime has to have a public interest test. That is what was meant when the legislation was initially framed and formed. The case law that has come up since then has showed that there was a loophole, and I think, to be fair, that the Opposition have accepted that it needs to be closed.

Following my discussions with the hon. Member for North Ayrshire and Arran, the House may wish to be aware of the steps that the Government are taking in the NHS to encourage whistleblowers. As I said during the recent debate on the issue, the Government fully support the rights of NHS staff to raise concerns in the public interest. That right has been enshrined in the NHS constitution and further strengthened through changes made to the constitution and the handbook in March this year. The Department of Health is continuing to build on the rights set out in the Public Interest Disclosure Act 1998 further to highlight the statutory protections available for those who raise concerns. I want to stress that the Government fully support genuine whistleblowers and want to encourage individuals to bring issues to light, but we need to ensure that the balance of protection for employers and individuals is correct. We believe that the current clause achieves this, and I am therefore unable to support the hon. Lady’s amendment. However, I welcome the constructive work that she, among others, has been doing on the issue.

The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) asked about the level of £5,000 and penalties. The provision is intended to mirror the national minimum wage compliance regime, so there is method behind it, but it will be possible to amend it if necessary.

I turn now to our amendments 16, 17 and 31 to clause 17. Members who followed the progress of the Bill through Committee will recall that the original clause, then clause 16, was accepted into the Bill without debate. The purpose of the clause then, as now, was to amend specified primary legislation to replace all references to “compromise agreements”, “compromise contracts” and “compromises”, where they occur in an employment context, with the terms “settlement agreement” or “settlement”. By renaming compromise agreements, we are addressing any conscious or sub-conscious reluctance by a party to use these agreements arising from the perception that they are conceding or “giving in” on some or all of their arguments. The original drafting of the clause—with the agreement of the Under-Secretary of State for Skills, the hon. Member for West Suffolk (Matthew Hancock)—extended the change of name to Northern Ireland in so far as it related to the National Minimum Wage Act 1998. Having since considered matters further, my Northern Ireland colleagues have concluded that such a change should not be made in isolation and should form part of the wider review of employment law that they have recently launched. As a consequence, it is necessary make minor amendments to restrict the effect of the name change to England, Scotland and Wales in only that Act.

I commend the Government amendments to the House and hope that I have fully explained why we are unable to support the other amendments in the group.

[Mr Speaker]

Before I call Mr Murray to speak to the new clause from the Opposition Front Bench, I have a short statement to make. Nominations for the Chair of the Procedure Committee closed yesterday, and an election was held by secret ballot earlier today. The following candidate was elected: Mr Charles Walker. The full breakdown of voting is set out in a paper which will be available from the Vote Office. I congratulate the hon. Gentleman on his election.

--- Later in debate ---

[Jo Swinson]

I thank hon. Members who have taken part in this debate. I note the point made by the hon. Member for Hayes and Harlington (John McDonnell) that I spoke at length at the beginning of the debate. I wanted to ensure that I covered all the issues raised and to be fair to Members in taking all interventions offered, which is the spirit in which I have approached the debate. That obviously meant that my remarks were rather lengthy.

I want to respond to the points raised in the debate, because hon. Members are keen to get to the next business. The hon. Member for Edinburgh South (Ian Murray)—the shadow Minister—queried clause 13 and said that it would hit middle earners, but I fear that his analysis of the situation reinforces unrealistic expectations. The average award at an employment tribunal is less than £5,000. In reality, only 0.3% of unfair dismissal claimants are awarded more than the annual salary. The purpose of the measure is to provide additional certainty and to help challenge those unrealistic expectations, but he has not characterised it entirely fairly.

[Gregg McClymont]

Will the Minister give way?

[Jo Swinson]

I will give way to the hon. Gentleman, but I remind him that Labour Members are also keen to get to the next business.

[Gregg McClymont]

If the average award is around £5,000, why is there a rush to get rid of the system?

--- Later in debate ---

[Jo Swinson]

As I was saying, the measure provides additional certainty and encourages both employers and employees to recognise that high awards are unlikely. Because of the current cap, some people can be misled into believing that high awards are likely, and end up pursuing that route when they could be better served by early conciliation and the other approaches outlined in the Bill.

I welcome the shadow Minister’s offer to work constructively on solving the problem of unpaid tribunal awards.

[Tom Greatrex]

Will the Minister give way?

[Jo Swinson]

I will give way, but I encourage hon. Members not to intervene to raise points that have already been debated—we have gone over a lot of the ground already. This will hopefully be something new.

[Tom Greatrex]

I was unable to make a speech because of the length of the Minister’s contribution, but I would like to raise a specific point on unpaid awards. I have raised a case from my constituency previously but did not get to give the full details. Will the Minister meet me and my constituent to go through some of the circumstances? The problem cuts across the Government, and involves not just the Department for Business, Innovation and Skills. Sometimes companies avoid paying the awards they should be paying, which challenges some of the points made by Government Members about who has confidence in the system.

[Jo Swinson]

I would be happy to meet the hon. Gentleman and his constituent, who, I am sure, is very grateful for the work he has done on this case. It is important to constituents to have the support of their MPs on such issues.

In response to my hon. Friend the Member for Bedford (Richard Fuller), I point out that representations from business suggested we should not proceed with financial penalties, but the ability of a tribunal to impose a penalty when it believes an employer has acted wholly inappropriately is right. I reinforce the point that good employers have nothing to fear, and I welcome the fact that he will not press the amendments to a Division.

I took a lot of interventions on clause 12, but I want to respond to some of the specific points made in the debate. The issue of jobseeker’s allowance was raised. The rules and decisions that currently apply to the regime of compromise agreements will apply to settlement agreements. When assessing claims, jobcentre staff could take into account the facts of the case, how the agreement was instigated and what the reasons for it were. We are also in discussions with the Department for Work and Pensions to ensure that those rules are applied appropriately. Obviously, because it is a voluntary agreement, it will not be a sacking if the employee does not wish it to be, but equally it could be negotiated in such an agreement that the reason for leaving could be deemed to be dismissal. That could help individuals by providing them with additional clarity around jobseeker’s allowance and insurance protection, although I add the caveat, of course, that people would need to look at their specific insurance policies and that those policies would vary from case to case. As I said, however, the wording in the final agreement could assist in such cases.

The shadow Minister suggested that there would be a problem with tribunals grinding to a halt when trying to define the word “improper”. That is not expected to be the case. Tribunals already play a valuable role in interpreting legislation. At the moment, they interpret what “reasonable” means in unfair dismissal cases, and we expect them to consider the meaning of “unambiguous impropriety”, as already happens in the civil courts and case law, in their deliberations on this test. He gave the example of a scenario in which an employer offers a settlement agreement but says that the amount will reduce each day until it is accepted. As my predecessor said in Committee, we would consider that the type of improper behaviour to which the protection would not apply. As I said, however, that consultation is ongoing.

On clause 12, the shadow Minister gave the analogy of somebody in a relationship suddenly saying, “I don’t love you anymore.” That is not a fair analogy. The appropriate analogy would be: “We need to talk.” When something is not working out, encouraging early dialogue is a good thing. That is the spirit behind all these changes, whether on early conciliation, rapid resolution or streamlining and improving the employment tribunal system. Ultimately, our aim is to have fewer tribunals taking place. That would be good for employees and employers, and I commend the Government amendments and new clause to the House.

Question put and agreed to.

New clause 8 accordingly read a Second time, and added to the Bill.



Clause 7

Conciliation before institution of proceedings

Amendments made: 6, page 4, line 18, leave out ‘send’ and insert ‘provide’.

Amendment 7, page 5, line 33, leave out ‘sending’ and insert ‘providing’.—(Jo Swinson.)

Clause 12

Confidentiality of negotiations before termination of employment

Amendment proposed: 81, page 8, line 19, leave out Clause 12.—(Ian Murray.)

Question put, That the amendment be made.

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[Jo Swinson]

Directors’ pay has been very much in the news recently, for reasons that the hon. Member for Hartlepool (Mr Wright) has outlined. Between 1998 and 2000, the average total remuneration of FTSE 100 chief executive officers increased fourfold, which was much faster than the increase in prices or in average remuneration levels across other employers. It was also much faster than the increase in the FTSE 100 itself. There was clearly an issue to be addressed, and the Government opened up the debate on directors’ pay a year ago. We drew attention to the fact that top pay in large public companies had grown rapidly without any clear connection to performance, and we asked what could be done about it. We encouraged business and investors to face up to this difficult issue.

In January, the Prime Minister and the Secretary of State committed to taking action, and in June we introduced bold measures into this Bill. I know that the Bill Committee enjoyed a thorough and engaging debate on this issue before the summer break, and I am pleased that our reforms have received such wide support inside and outside Parliament. Investors agree that this comprehensive package of reforms will help them to tackle excessive pay and to restore a clearer link between pay and long-term performance.

We have tabled six minor and technical amendments to the clauses on directors’ remuneration, which I will outline before I speak briefly in response to the other amendments that have been tabled. The technical amendments will tighten up the legislation and ensure that it is as robust and clear as possible. Business and investors support those amendments. Amendments 25 and 30 correct a technical drafting oversight. They clarify that, for the purpose of identifying when companies will be affected by the new provisions, the relevant financial year is the one beginning on or after the day on which the provisions come into force. That is to ensure that companies whose year starts on 1 October are subject to the provisions.

Amendments 26 and 29 make it clear that the definition of “quoted company” shall be the same as that which already appears in the Companies Act 2006. Amendment 27 broadens the definition of what is meant by a remuneration payment so that remuneration paid to a director in his or her capacity as an executive manager of the company or its subsidiary is also captured. Importantly, that will mean that companies cannot circumvent the new restrictions by paying someone a small fee for being a director and a large salary for being a manager.

Amendment 28 tightens up the provisions relating to payments made to former directors. This will ensure that, where former directors are allowed to benefit from long-term pay schemes that mature after they have left, the payments must be consistent with the company’s remuneration policy—and if not, approved by a separate shareholder resolution. I am sure the House will agree that these minor and technical amendments will strengthen and improve the legislation, and I hope all Members will join me in supporting them.

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[Jo Swinson]

I beg to move, That the Bill be now read the Third time.

We have spent the past two days carefully scrutinising this Bill. Right hon. and hon. Members have clearly invested a lot of time examining the detail, and rightly so. We used all of our time on the first day debating the proposed new measures, and I thank the Opposition for ensuring that they received thorough scrutiny.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

rose—

[Jo Swinson]

I give way to my Scottish colleague.

[Thomas Docherty]

It is my understanding that it is custom and practice for the Secretary of State to move Third Reading. Where is he today?

[Jo Swinson]

I am sure that my colleague the Secretary of State has a very busy diary, but he may well be making an appearance—

[Chris Ruane (Vale of Clwyd) (Lab)]

Parliament is not important enough—

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[Jo Swinson]

Parliament is certainly important enough. I hope not to disappoint the hon. Member for Dunfermline and West Fife (Thomas Docherty) in my speaking on Third Reading. As he will know, my right hon. Friend the Secretary of State spoke on Second Reading and has been very involved in this Bill, so I am sure that I will be able to deal with the issues raised.

[Mr William Cash (Stone) (Con)]

In view of the fact that the sunset provisions have not been discussed because of the programme motion—[Interruption.] They may have been discussed in the past, but amendments tabled by my hon. Friend the Member for Bedford (Richard Fuller) were not reached. That is the position. In that context, will the Minister be good enough to explain how it will be possible to bypass European legislation under these arrangements?

[Jo Swinson]

I am sorry to disappoint my hon. Friend by correcting him, but these issues were discussed—

[Mr Cash]

Not this afternoon.

[Jo Swinson]

Yes, they were. In fact, the hon. Member for Bedford (Richard Fuller) intervened on my hon. Friend the Under-Secretary of State for Skills when that discussion was taking place—[Interruption.] I suggest to the hon. Member for Stone (Mr Cash) that had he wanted to raise those points, he could have been present for the debate on Report.

I thank the Opposition for ensuring that the measures that we have added to the Bill have received thorough scrutiny. That detailed consideration follows earlier scrutiny in the Public Bill Committee and I extend particular thanks to its members, led for the Opposition by the hon. Members for Hartlepool (Mr Wright), for Edinburgh South (Ian Murray) and for Newcastle upon Tyne Central (Chi Onwurah).

[Mr John Redwood (Wokingham) (Con)]

When does the Minister think the first loans will be made by the green investment bank under this legislation?

[Jo Swinson]

As my right hon. Friend will know, the Government have made £3 billion available through the green investment bank, which has already started to allocate that money. Some £200 million has been allocated and the first money has been not just allocated but spent. We know that that institution will certainly be a great success.

At the end of our proceedings in Committee, the hon. Member for Hartlepool observed:

“The Committee has been serious about the need to scrutinise an important Bill and about the manner of its deliberations and questioning”.––[Official Report, Enterprise and Regulatory Reform Public Bill Committee, 17 July 2012; c. 728.]

The Bill is important. It is also part of a wider Government strategy to promote growth, support business and create jobs. Legislation alone cannot guarantee and generate economic activity, but it can help to provide the right conditions for growth and that is what this Bill does. It contains a suite of measures that will lift unnecessary burdens from business and ensure that markets are fair and dynamic to inspire the confidence of business and consumers alike.

The move to a low-carbon economy is a big challenge and, indeed, a big opportunity for this country. Some analysis suggests a demand for more than £200 billion of investment in the next decade to develop the necessary innovative technologies. The challenge is even greater given how new those markets are and the long-term nature of returns on green infrastructure investment, which may deter private sector investors. The coalition Government are meeting that challenge squarely by establishing the world’s first green investment bank and we have made significant progress.

As we were able to announce earlier this afternoon, we have today made an important step forward in the UK’s transition to a green economy with confirmation of the state aid approval that will allow the bank to make commercial investments. That is a significant achievement and means that the bank is firmly on track to be fully operational in the next few weeks.

The Government are deeply aware of the need to do all we can to support business expansion and job creation. The Public Bill Committee heard from business representatives that reform of the employment tribunal system remains a top priority for their members and that the measures in the Bill will increase the confidence of business to recruit. Our reforms will encourage parties to work together to resolve their disputes outside the adversarial, stressful and often costly tribunal system, which will mean that employers will have the confidence to take on and manage staff.

Good leadership and governance of companies is crucial and there should be no reward for failure. Our reforms to directors’ pay, which are supported by both business and investors, will mean greater transparency and more power for shareholders to hold companies to account while allowing genuine success to be rewarded. A free and open market place is key to a growing economy. Pressure from competitive markets helps businesses to boost productivity and that benefits consumers. The Government are helping by setting up the new competition and markets authority to provide a single, strong voice in this area. It will have a duty to promote competition for the benefit of consumers.

The Bill will also strengthen powers to tackle cartels. Cartels damage the interests of business and consumers alike and I am very grateful to the Public Bill Committee—again, I thank its members—for its considered debate on the issue. As a result of the amendments tabled in Committee by Opposition Members, the then Minister, my hon. Friend the Member for North Norfolk (Norman Lamb), made it clear that we would reflect on the points made with a view to improving the provisions. As a result, we have refined how we propose to tackle the problem of cartels, but in a way that still delivers the key objective of ensuring that we have effective powers against them.

Unnecessary regulation stifles growth and strangles innovation. In our red tape challenge, we are examining swathes of regulation and scrapping those that are no longer needed. The Bill supports that work by ensuring that any new secondary legislation can be time-limited. The CBI hailed that step as the "big prize for business". We are making specific reforms, including removing the right to claim compensation from employers for breach of most statutory health and safety duties unless employers have been negligent. We are also streamlining the duties of the Equality and Human Rights Commission. Let me state again for the record that we greatly value the work that the commission does and that the streamlining will in no way reduce its impact. The Government are committed to tackling the barriers to equal opportunity and to promoting economic growth. Unnecessary and complicated regulation restricts our ability to achieve that aim. The repeals in the Bill play a part in tackling the red tape and bureaucracy that holds businesses back.

Ensuring that our copyright laws are fit for the modern age is critical to the growth of the UK's creative industries—one of our most successful export sectors. It is also important for those industries that can make use of materials that may be in digital or other form. We have worked closely with stakeholders on those provisions and will continue to do so. The Bill will help to ensure that we strike the right balance on rewards for creative endeavour, sanctions for unlawful use and greater freedoms when an originator cannot be identified.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

I congratulate Ministers on their painstaking work to identify barriers to growth and enterprise. Is the Minister as disappointed as I am that the Front-Bench spokesmen for the Labour party, whose policies contributed so much to our present position, have learned nothing and still oppose sensible, practical measures to get the economy going, add jobs and ensure that we get people out of the despair of unemployment and into the sunlit uplands of well-paid jobs?

[Jo Swinson]

In the spirit of consensus, I will say that, on some issues, Opposition Front Benchers have said that they will work with the Government, but I am disappointed that, on others, they have not done so or recognised what we are doing in the Bill. The Bill is good for business and good for consumers, and therefore good for the UK economy. I commend it to the House.