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Statutory Redundancy Pay (Amendment) Bill (Money)

16th June 2009

Jonathan Djanogly opposes a 'money' resolution in respect of a union-sponsored Private Member's Bill to increase statutory redundancy pay as it would put a significant financial burden on business and the taxpayer at a time of unprecedented recession.

Mr. Jonathan Djanogly (Huntingdon) (Con): Let me make it plain that the reason why we oppose the Second Reading of this union-sponsored Bill, and the Government's haphazard attempt this afternoon to find a compromise, is that all those proposals, and the money resolution, will reduce access to employment opportunities at a time when the Government should be doing exactly the opposite-and, as I shall show, at a significant cost, not only to business but to the taxpayer.

Since 1999 the weekly limit for statutory redundancy and unfair dismissal payments has been increased in line with the retail price index, rounded up to the nearest £10. In 1998 the sum was £220; in 2004 it went up to £270; in 2007 it was raised to £310; in 2008 it was increased to £330; and on 1 February this year it went up to £350. The limit has already increased by 6 per cent. this year, and earlier today we debated in Committee the Government's plans to increase the weekly limit immediately by more than 8 per cent. to £380, at a time when we are experiencing negative RPI inflation. The Government also wish to bring the increase forward by five months, even though we have already had an inflation-busting increase this year.

Tonight we are debating the implications for the public finances of an increase from £350 to something in the region of, let us say, £470. Sadly, we seem to be entering some kind of tragic bidding war between the soft left on the one hand and the hard union left on the other. Redundancies are, of course, a last resort for employers, including for the largest employer-the state. Employers do not want to lose the investment they have made in their employees, and will try to retain their staff as long as possible. They will make people redundant only when they are forced to reduce their labour costs.

The Minister will realise that increasing the weekly limit on statutory redundancy pay, especially to the extremely high level suggested by the hon. Member for Chorley (Mr. Hoyle)-or rather, by the unions-would make redundancies far more expensive for employers, including the state. Employers, including the state, will now have to implement more redundancies to reduce their labour costs by the same amount as before. If the Bill is passed, the cost to employers could mean a rise in unemployment, resulting in a significant additional cost to the Exchequer in terms of payment of unemployment benefits and lost tax revenues.

The Department for Business, Innovation and Skills had its statutory instrument approved this afternoon. The impact assessment was based on an increase in the weekly limit on statutory redundancy pay from £350 to £380. The Government estimate that business would incur up to £121.2 million in extra costs. It is obvious that an increase from £350 to £470, as proposed by the Bill, would lead to significantly higher costs, and could have a devastating impact on many businesses across the country. Unemployment is increasing every week, and it is therefore likely that the cost to businesses would be greater than is suggested by any current estimates.

What is recognised in the motion, however, is that the Exchequer, too, will be faced with enormous costs if the Bill is passed. Again, all we have to refer to is the impact assessment based on an increase from £350 to £380. In the assessment, the Government estimate that that will cost the Exchequer up to £53.9 million. We have seen what an increase of 8 per cent. will cost the taxpayer. An increase of around 34 per cent., from £350 to £470, would cost the taxpayer considerably more. I calculate the amount to be in the region of £210 million, which strikes me as a conservative figure. I should be grateful if the Minister could explain the cost implications of the motion for the state.

Given the perilous position of the public finances, we know and the Minister knows-I think he more or less accepted it in his opening speech-that the country simply cannot afford this unnecessary measure. The Government-a Government on their last legs-are desperate to appease the trade unions that back them. That is what is so bizarre. I had thought that following this afternoon's concessions to the unions by the Government, the private Member's Bill would be withdrawn and there would be no need for the motion. That seems not to be the case, which shows just how feeble and unable to deliver the Government have become. They now need to focus on the reality of the situation, which is that they are imposing a large and unnecessary burden on both business and the taxpayer.

Conservative Members cannot support an arrangement that makes businesses, or the taxpayer, subject to such large and unnecessary additional burdens, especially during the almost unprecedented recession in which we find ourselves. I hope that the Minister will sort out this mess before the Bill returns to the House.

10.8 pm

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