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Mr. Hammond: The hon. Gentleman is right; I think that the law currently allows a deposit to be requested at the pre-hearing. I think that the deposit is typically £150, although perhaps I am wrong, in which case the Minister will correct me.

Such remedies may be available, but I am seeking to make a more general point. As I said, I am not indifferent to the point made by the hon. Member for Amber Valley. I have firmly lodged in my mind the example cited in the Standing Committee involving a lawyer sending out a threatening letter suggesting that costs could be as high as £50,000, in an attempt to scare an applicant off. Such behaviour is clearly unacceptable.

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If the Minister recognises that there is a problem, he must address the issue of the maximum quantum of costs that can be incurred in mounting a response to an application. It seems perverse and illogical to suggest that it is okay to incur £10,000 of legal costs by going to an expensive legal firm for advice or £10,000 of own costs by using one's internal resources, such as an in-house lawyer, but that an employer who spends £4,000 internally and another £4,000 by taking the case in its latter stages to an external lawyer will be eligible only for reimbursement of a maximum of £4,000. If the Minister wants to address the concerns of the hon. Member for Amber Valley, he would best do so by introducing some means of capping the total cost and not by imposing a grossly unfair and discriminatory prohibition on firms or applicants who incur costs under both headings and may therefore suffer by comparison with someone who has incurred all their costs under one head.

I urge the Minister to think very carefully about his logic for introducing such provision, as it does not seem fair, equitable or appropriate.

Ms Joan Walley (Stoke-on-Trent, North): I do not wish to detain the House long on this issue. I am relieved that there is an amendment from the other place that will require or at least give discretion to an employment tribunal to have regard to ability to pay. I welcome my hon. Friend the Minister's acceptance of the amendment. These issues are at the core of the way in which we are taking forward employment tribunal procedures, and relate as much to regulations that were introduced some 12 months or so ago that changed the way in which costs were introduced so that any case that was unreasonable, as opposed to vexatious or frivolous, could incur costs. How can we say that something is reasonable or otherwise without the benefit of hindsight? How else can case law be established?

At the heart of this debate are the changes that were introduced a year ago, which increased the upper limit in respect of costs. I do not think that we would be having this precise debate now, with the statements that the shadow Minister has just made to the House, if we had not had those changes.

The changes in the regulations still give me some concern as to whether the Government's proposals will deal with people being deterred from taking cases to employment tribunals, or ensure that more is dealt with within the work force itself. Of course, we want particular concerns to be dealt with in the workplace. We do not want them to have a go to a tribunal, but there is still some failure to tie up the implications of those changes.

Comments have been made about how many cases are going to tribunals. How is the Minister monitoring the cases that are going to tribunals? Have we seen a change in the number of cases going forward since those regulations were introduced last July?

I am relieved that we have this amendment from the Lords. I wrote to the Minister on 26 June 2001 pointing out that there was still no requirement on tribunals to have regard to the ability to pay and drawing attention to the Kovacs case. In his response in a letter dated 16 July, the Minister said that that was correct

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As the Minister has pointed out, we now have the decision of the employment appeals tribunal, which sets out that there is no way in which a chairman of an employment tribunal could have any discretion as to whether costs should or should not be awarded—there is no way in which that could take place. Therefore, I am relieved that, finally, after 12 months of correspondence—and having raised the matter on Second Reading—we have an acknowledgement in the other place that that has to be taken into account.

The Minister said that chairmen of employment tribunals and indeed employment tribunals themselves should take into account ability to pay where it is appropriate to do so. Given that we do not have a requirement—we have only a discretion—I still have some concerns. I wonder whether the Minister could spell out in a little more detail for the record exactly which circumstances he is thinking of in which the chairman could have regard to ability to pay. That is a critical point.

The changes brought in 12 months ago could do far more to deter people from taking claims to employment tribunals because they were afraid. I am not thinking about the businesses, the employers; I am thinking about those who have valid cases, but who may be deterred from taking their cases to tribunals simply because they fear substantial costs may be awarded against them. I should be grateful if the Minister would give further attention to that when he replies.

5.15 pm

Mr. Lloyd: May I say to my hon. Friend the Minister that I welcome the amendments and the fact that the Government want to see them incorporated into the Bill? I think that it was the hon. Member for Tatton (Mr. Osborne) who talked about deterrence. Let us make it clear that, while most of us would accept the legitimacy of deterrence to prevent frivolous, vexatious or, indeed, scandalous claims—although these are sometimes quite subjective concepts—there is always a concern that deterrence will be applied to legitimate claimants. Not only might such claimants be deterred when they find themselves saddled with costs but they might not even dare to exercise their right of access to the tribunal. While we want to deter those who abuse the system, we certainly do not want to deter those who should have proper recourse to the tribunal. I hope that my hon. Friend the Minister will make it quite clear that that is the Government's approach, and that we are not here to deter legitimate claimants.

Mr. George Osborne: The Minister said in Committee that it was his objective to reduce by 30,000 or 40,000 the number of cases coming before employment tribunals. Does the hon. Gentleman share that objective? It is not entirely clear from what he is saying that he does.

Mr. Lloyd: Let me make it quite clear. If no one ever exercised their right of access to a tribunal because the internal mechanisms worked well, we would all be delighted. Conservative Members should not work themselves into a frenzy saying that the existence of the tribunals is, of itself, a bad thing, or that the use of an existing tribunal is a bad thing. Sometimes a society such as ours needs such provisions—I do not want to use the term "case law", because it would almost give tribunals too much of a legalistic nature, which we want to avoid.

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We need the tribunals to examine where the balance lies in industrial relations in our society; they perform an important role above and beyond the simple resolution of individual cases. We do not want the idea to go out from the Chamber tonight, or from anywhere else, that we regret either the existence or the operation of the tribunals. They are a necessary part of a modern, efficient society.

We are talking about how we should fine-tune the tribunals' function, and make them work better. In that context, the Minister has genuinely made progress. The opportunity for the tribunals to reflect on the ability of an individual to pay—whether it be the claimant or the respondent—is an important one, and the Minister is right to put it into the Bill and into regulations. It is also right that we should cap the number of avenues under which costs of different kinds can be given, because the whole idea of the granting of costs should not involve fines or penalties. The provisions may be there to deter the vexatious, but they are not there to say, "This person got it right, and the other one, who got it wrong, is therefore subject to this fine."

It is important that the ability to pay—even for the vexatious—is taken into account. We all have constituents who are, quite frankly, obsessive. Of course it is right and proper that we should deter them, and my hon. Friend the Member for North Durham (Mr. Jones) correctly pointed out that the pre-hearing scrutiny normally provides the most efficient way of taking out those cases. However, we do not want to end up with a fundamentally ridiculous situation in which even an obsessive is so burdened by debt that they cannot pay, which would make a mockery of the system.

Judy Mallaber rose

Mr. Hammond rose

Mr. Lloyd: If the hon. Gentleman will forgive me, I shall give way to my hon. Friend first.

Judy Mallaber: Does my hon. Friend recall the cases that were brought before us in Committee, which showed that this is not just a question of cases being vexatious and frivolous? We were told about a number of cases that it would have been perfectly reasonable for the applicant to think were well founded, but that were found to be vexatious or frivolous. Those applicants would not necessarily have thought that that would be the outcome when they entered the tribunal. We were told of several cases that illustrated that point.

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