Skip to main content

Employment Law

Volume 737: debated on Monday 21 May 2012


My Lords, I would like to repeat the Answer given to an Urgent Question asked in another place today. The Answer is as follows:

“The Beecroft report was commissioned by the Department for Business, Innovation and Skills as part of both the Red Tape Challenge and the employment law review. Mr Beecroft was asked to give his initial thoughts on areas of employment law that could be improved or simplified to help businesses and job creation. The report was intended to feed into the work that the business department is carrying out to review employment laws to ensure they maximise flexibility and reflect modern workplace practices. This is important both to employers and employees and is designed to strengthen our international competitiveness in difficult economic times. It is worth noting that the UK is considered to have the third most flexible labour market in the OECD, and this is an important strength.

Mr Beecroft was asked to take a candid look at a wide range of issues and he submitted his report in October of last year. Over the last few months, Ministers have been working through Red Tape Challenge and the employment law review, and I can tell the House that of the 23 topics he raised we have identified actions in 17 of them. As part of consideration of the Beecroft report, it was clear that further evidence was required, most notably on the issue of no-fault dismissal for micro-businesses. This was published on 15 March, and I can tell the House that it will conclude on 8 June. Given that this date falls when the House is not sitting, the Government decided to bring forward publication of the report to this week, so that it could inform the debate.

Last week, the Home Secretary announced the outcome of the Equalities Red Tape Challenge, which directly impinges on employment and workplace issues. Our intention was therefore to publish the report in time for this week’s business department oral parliamentary Questions. As you know, Mr Speaker, it was our intention to publish the report this week, but I have noticed from the press that an earlier draft of the report is now in circulation. Therefore, in the interests of accuracy, and so that the House has the correct information in front of it, I can confirm that the report will be published this afternoon, and copies will be placed in the Libraries”.

That concludes the Answer to today’s Urgent Question.

My Lords, I have listened carefully to the Minister on Mr Beecroft’s proposals as we saw them last October. Is making millions of workers’ lives more insecure a price worth paying? That is a phrase that I cannot help remembering from a previous Conservative Administration. Beecroft himself said:

“The downside of the proposal is that some people would be dismissed simply because their employer did not like them. While this is sad I believe it is a price worth paying for all the benefits that would result from the change”.

That is Mr Beecroft for you—he clearly believes that it is a price worth paying. He is a major Conservative Party donor as well.

Why have the Government, given the situation that we are in, not put forward proposals to introduce a British investment bank to help get finance to business, but are prioritising making people less secure in work? Why have the Government not put forward a temporary national insurance contribution cut for small businesses to take on extra workers but are prioritising making people less secure in work? Why are they failing to do enough to accelerate infrastructure investment—which, after all, business organisations such as the CBI have called for, and could be threatened by Solvency II—but instead are prioritising making people less secure in work?

When there are 2.63 million unemployed, created by the double-dip recession made in Downing Street, does the Minister feel that making it easier to fire staff at will and causing even more insecurity will give hope to people who are desperately seeking a job? Does he think that firing at will will boost consumer confidence at a time when the economy has entered a recession caused by the policy of this Government? Does he agree with Dr John Philpott, the chief economic adviser at the Chartered Institute of Personnel and Development, who said:

“The vast weight of evidence on the effects of employment protection legislation suggests that … less job protection … results in increased firing during downturns. The overall effect is thus simply to make employment less stable over the economic cycle, with little significant impact one way or the other on structural rates of employment or unemployment”.

Does the Minister agree with Beecroft that small businesses have very limited administration skills and very few academic qualifications? Are not those problems that need to be addressed, rather than accepting the anecdotal evidence as a solution for creating more employment?

According to the OECD, the UK has the third least regulated labour market in the developed economies. That is one thing in the Statement with which I agree. Only in the USA and Canada is employment regulation less strict. As the Chartered Institute of Personnel and Development has said, some of the most severe restrictions on the employer’s right to dismiss staff can be found in countries such as the Netherlands, Norway and Austria, which all have unemployment rates lower than the UK’s. Even the Secretary of State has said:

“We don’t want to dent job security and consumer confidence”;


“Our labour market is already one of the most flexible in the world”.

Why, therefore, are the Government ignoring this evidence? Why do they believe that making people less secure at work will be a positive contribution to creating jobs?

In the Chartered Institute of Personnel and Development’s Labour Market Outlook of summer 2011, far more employers cited access to finance—28%—and candidates lacking the right skills—50%—as obstacles to business growth than cited employment regulation. Those are areas where the Government could give positive assistance, rather than being diverted by the dubious recommendations of the Beecroft report. Is this another example of the Government’s failure to back business and to take the tough choices, such as setting up a British investment bank, and, instead, of their playing to the band of Back-Bench Conservative MPs who promote these job insecurity policies?

In February, David Blanchflower, a former Bank of England Monetary Policy Committee member, said:

“There is zero credible empirical evidence supporting … [the] contention that Britain’s economic problems would be fixed by slashing workers’ rights”.

So, what evidence do the Government have? Would not having a different employment regime for businesses with 10 or fewer employees, and those slightly larger, be a disincentive for growing small businesses to take on extra staff?

The Minister for Employment Relations, Consumer and Postal Affairs is quoted as saying in October last year:

“I think it would be madness to throw away all employment protection in the way that’s proposed, and it could be very damaging to consumer confidence”.

Has he now changed his mind? Interestingly, according to Hansard, the Secretary of State failed to vote on his department’s own legislation on changing the unfair dismissal qualification from one year to two. Today he is reported in the Sun as saying:

“Some people think that if labour rights were stripped down, employers would start hiring and the economy would soar again. This is complete nonsense. British workers are an asset, not just a cost. I am opposed to the ideological zealots who want firms to fire at will”.

Why has he allowed his department to help write and support the Beecroft review if these are the views in which he sincerely believes?

We face many challenges and businesses are giving the Government strong signals about the important things that will help them create more jobs—such as resolving the issue of finance and ensuring that we accelerate infrastructure investment. Those are the positive things that we need to do to inject growth into the economy. I look forward to the Minister’s response to my questions.

I thank the noble Lord for his comments. The context of this is a review of employment law to make it easier to employ people and to improve the growth prospects of our businesses across the country. Surely all of us seek to achieve that. It was in the coalition agreement that employment law would be reviewed over the course of this Parliament. Mr Beecroft was asked to report as part of that review, to provide a candid view of the law from a businessman’s perspective. His recommendations are not formally adopted as government policy. The Government are pursuing a number of elements. Clearly, however, the report includes other proposals and any decision to take them forward will be based on evidence.

The noble Lord, Lord Young, used the expression “firing at will”. I think that he is referring to the element in the report that deals with no-fault dismissal. We currently have an open call for evidence on dealing with dismissal and compensated no-fault dismissal for micro-businesses. It is an exercise to shed light on the issue. It is right that we look at all the evidence before deciding on any change. We are examining existing dismissal processes as a whole, including awareness and understanding of the ACAS code of practice. We are also seeking views on the concept of compensated no-fault dismissal for micro-businesses, whereby the smallest employers would pay compensation as a means of ending a working relationship fairly. It is about getting the balance right. It is about giving business confidence to hire. That is why we have called for evidence, and we want to understand that evidence and make policy on the basis of it.

The noble Lord, Lord Young, raised a number of issues, one of which was the training of business management. We discussed that issue in the debate on the SIs to which he referred. He will know that we are looking carefully at this issue and that we are taking action to make improvements on the basis which the previous Government put in place. He is right to say that it is an issue.

The noble Lord also said that we should be focusing on access to finance for businesses. I agree with that, and, indeed, we are doing so. He will also know that we have a debate on that subject on Thursday, when we will discuss the issue at greater length.

My Lords, I thank the Minister for his Statement. I am glad that the Statement recognises that the UK already has a flexible labour market, and that the Government acknowledge that that is a strength. Indeed, the Government have recently increased parental rights, and that is an important addition. I recognise that the enterprise and regulatory reform Bill already tackles some of the issues raised in the Beecroft report.

Does the Minister agree that any changes to employment law need to support and facilitate the positive and flexible behaviour exhibited recently by, for example, Vauxhall workers and their trade unions? There needs to be recognition that that sort of behaviour—the product of good employer-employee relations—is very important for the development of our industry. It is therefore important to avoid any reforms that might undermine that positive relationship whereby workers are regarded as an asset and not as a cost.

Given that the Government have had this report since 12 October 2011—some seven months—and their response to it is simply to continue the call for evidence and the consultation, they appear to be somewhat lukewarm about it. Perhaps the Minister can enlighten us on the depth of the Government’s enthusiasm for it. Finally, does he share my belief that, at this time of international economic crisis, it is important that all Governments throughout the world should be allowed to think outside the box, and of bold and imaginative ideas for the benefit of the economy and of all employees?

I am extremely grateful to my noble friend for her comments. On the issue of co-operative behaviour between employers and employees and their representatives, I wholeheartedly agree that that must be the gold standard. She suggested that the Government might be somewhat lukewarm on the Beecroft proposals. I will not say that the Government are either enthusiastic or lukewarm. The fact is that they will consider each proposal on its merits. Some are being taken forward and some, no doubt, will not be, but we will do this in a balanced way. She invites the Government to think outside the box and be imaginative, and that is exactly what we seek to do.

Why do the Government not denounce the idea of firing at will at this stage? Is it not a complete affront to everything that the trade unions and responsible employers have fought for? Why has Vince Cable denounced this so emphatically? Do the Government think that he is right or wrong?

My Lords, I explained in my answer to the noble Lord, Lord Young, that we have an open call for evidence, which closes on 8 June. I hear what the noble Lord says but it is important that we listen to all the evidence, and that is what we are doing. I should emphasise that this proposal does not extend beyond micro-businesses, so it will not apply to every single employer in the land. However, the Government are keeping an open mind.

My Lords, I am sure that many on this side would equally deprecate anything that could possibly be said to smack of firing at will, and I very much doubt that the Government’s proposals will involve anything that could be so pejoratively described. This report was perhaps commissioned before the recent downturn in financial circumstances, and many of the proposals will no doubt potentially be very expensive. Can the Minister assist me on the issue of parental leave? I know that the Government were understandably committed to improving that but I understand that the Beecroft report has costed it at approximately £150 million. Can the Minister assist the House on whether the Government have changed their mind or whether, considering that, they remain committed? Is it a matter on which they will generally be taking soundings and listening to representations?

My Lords, the Government remain committed to the coalition commitment to introduce a system of shared parenting by 2015, and we are of the view that it will bring benefits to businesses. We have always said that we would introduce it from 2015 and we will shortly be publishing the government response, outlining the next steps. It is not something that we are rushing into. At the forefront of our minds is getting this right so that it does not impose additional burdens or costs on businesses.

My Lords, I am sure that the Minister will not be surprised to learn that many of us feel that the introduction of what one might call a “hire and fire society” is not likely to help either the economy or future productivity. Many workers, even in small businesses, will lose any sense of security, and that is surely very damaging for any workforce. Therefore, I hope that the Government will seriously reconsider this departure from existing practice. With regard to the Government’s point that it may involve more employment opportunities for people in small firms, one has to recollect that small firms are mostly low-paying employers, which the taxpayer already subsidises. To some extent, the welfare system, including the welfare reforms that the Government are introducing, already subsidises low-paying employers, so why do they need any extra so-called assistance? I do not think that it is assistance at all. It will simply undermine a workforce’s sense of security and that will not help the economy or, indeed, future workplace relations. Therefore, I hope that the Government will seriously reconsider their proposal.

My Lords, I say to the noble Baroness, Lady Turner, that, although we will not go so far as to reconsider the whole thing, in the consultation we are taking account of comments such as the one she has made.

My Lords, the one thing that employers want is stability. I have noted that every time there is a change of Government, there has been a change in the employment laws. That cannot help. It should be borne in mind that in many of our cities, including my native city of Glasgow, unemployment is climbing. The Government are encouraging people who are out of work to move to other parts of the country. They will not do that if they feel insecure and there is a possibility that they will be sacked. It must be borne in mind that it is the small companies which we are depending on to get people into the Labour market. I understand that it is consultation and I hope that he bears that in mind. Apprentices who are taken on as trainees are employees like everyone else. It would be a sad day if a young apprentice were taken on to a job and lost out on not only the job but the apprenticeship. Will the Minister ensure that there are no further leaks from departments? That was a justified complaint when the Conservatives were in opposition. We should not have documents leaked from government departments.

My Lords, in response to the first point made by the noble Lord, Lord Martin, about the importance of stability for employers, I definitely agree with him. The question we are addressing is whether the scales have tipped too far against growth. That is what must matter to all of us, surely. With regard to the noble Lord’s comments on apprenticeships, I share his enthusiasm for them and agree with him on that point.

My Lords, I believe that there is a problem in how the current system works in that SMEs—I am involved with some—do not have their own HR staff. They go to professionals for help and the professional advice is inevitably always very conservative. Even when there is a good case that someone should be fired, which should happen only when they have been given the chance of training and have gone through the right appraisals, advice is often given to pay off employees rather than let the matter go to an industrial tribunal. The result is a psychology in this sector that that has to happen, when in fact it should go through to the end of the process and be resolved properly and equitably. It results in vexatious claims that wrongly scare SMEs when they do not fulfil the rights that they have when an employee should be dismissed. Will the Government consider that area of professional advisory conservatism to avoid the professionals being told, post event, that they were wrong?

I thank my noble friend who is absolutely spot on. A number of measures will be coming forward that will contribute to that. One of those, which is perhaps not so relevant for smaller businesses, but which is indicative of what we are trying to do, is to involve ACAS at an earlier stage.

My Lords, I apologise for leaving shortly after the first two speakers; I nipped out to pick up the report. I agree completely with the noble Baroness on the Liberal Democrat Bench—I am sorry but I cannot remember her name—on the flexibility at Vauxhall that she reminded the House about. It is also important to remind the House not only about Vauxhall, but that over a period of real restraint, apprentices have been going to Jaguar Land Rover and many other organisations on their days off to have training. If that is not flexible, I am not sure what is. Red tape is possibly a good thing to look at, but I am anxious that the Government do so with the overall view of what modern workplaces look like. They are very different from perhaps the view that some noble Lords have of workforces. Flexibility is a way of life. That does not mean exploitation but co-operation and the way in which people work together. It may not be red tape but it certainly is a red ceiling. There is an opportunity to look at why women are not getting on further in their workplaces. I do not know whether it is red tape or how to describe it but it is a fact that women are still restrained in their grades and not allowed to go further. I welcome the opportunity for a comment from the Minister on that as well.

I can find very little to disagree with in what the noble Baroness has said. I absolutely welcome the restraint that I know employees are exercising in this extremely difficult time. We really need and are grateful for their help where this is happening, and I agree with her that it is widespread. People are working beyond the call of duty, and that is a huge accolade for our workforce. We spoke earlier about the need for co-operation between workers and employees, and that must be for the good.

The noble Baroness asked about the Government’s aspirations for women in the workplace. She will know that there is a great deal of work going on and that the Government are very much focused on this as an important issue.

Is my noble friend aware that unemployment in Germany has fallen by a significant margin over the last five years, largely as a result of supply-side measures that have been introduced by the German Government? Will my noble friend please draw these measures to the attention of the Business Secretary and ask him why he has not already followed the German example, if he really is serious about reducing youth unemployment?

Is the Minister aware of the great amount of academic research on the impact of employment protection legislation which has gone on over the last 15 years? The standard finding of this research is that employment protection legislation has no positive or negative effect on the level of employment. The reason is very simple: as is constantly said, of course, if it is easier to fire people, you are more likely to hire them; but you are also, believe it or not, more likely to fire them. The two balance out. Are the Government aware of this research?

My Lords, I am aware of a considerable amount of research. I bow to the noble Lord’s greater knowledge of the academic research, of course. The Government are absolutely committed to flexibility for employers and employees. We have consulted and continue to consult widely on a number of issues and, as I have said before, we will not take action unless it is on the basis of evidence.

Will the Minister explain to the House how the no-fault dismissal idea is compatible with the Government’s declared commitment to well-being? Will the Minister agree that job insecurity and unemployment are the greatest threats to mental well-being, and also that high morale in the workplace is the best assurance of high productivity and therefore growth? Will the Minister agree that any unsuitable member of staff can in fact be moved on by good supervision and management? Will he therefore assure the House that this Government will encourage good supervision and management, rather than heartless employers?

I am sympathetic to what the noble Baroness says. As I have said, we are keeping an open mind on this issue of no-fault dismissal. It is a fact that the smallest businesses are less likely to have access to human resources and legal advice and are therefore less likely to feel confident in applying procedures. I think that is one of the key issues. We want to examine whether a no-fault dismissal system for microbusinesses would be helpful in dealing with this, particularly in increasing their confidence in employing people.

My Lords, in repeating the Statement, the Minister said that,

“the UK is considered to have the third most flexible labour market in the OECD and this is an important strength”.

Will the Minister tell the House which other OECD countries operate a no-fault dismissal policy? In his Statement, the Minister also indicated that there is clear evidence that employers have dismissed people simply on the basis that they are not liked. If that is the case, is he not therefore proposing in this Statement and in the report a gateway for discrimination against a vast range of people in employment: women, people with disability, and others? The Minister indicated that the report was about the confidence to hire. Does he agree that it is also a blank cheque to fire?

My Lords, the noble Lord asked whether any other countries had in effect a micro-exemption. Germany does. He was also concerned about discrimination. Broadening the question, I will say that the Government will not tolerate discrimination in the workplace.

My Lords, will my noble friend confirm that the whole thrust and purpose of the review is to get people hiring again, not to get them firing, and that it is part of a growth assessment? Does he agree that it stands to reason that there must be one set of rules for large employers—the Vauxhalls, the Tescos—with huge HR departments? If one of their workers underperforms, they can provide them with the necessary supervision, training and reskilling. However, where a firm has only two or three employees, if one underperforms then up to 50% of the workforce is underperforming. The firm will not have an HR department or supervisory skills, and did not employ a firm of global headhunters to hire the person in the first place. Therefore, different rules need to be considered.

My Lords, if the Government are interested in the totality of the German system, rather than cherry-picking bits of it, they should look at two-tiered boards and the involvement of the whole workforce through works councils and strong trade union collective bargaining. If the noble Lord is interested in the success of the German model, will he look very carefully at evidence of the whole of the German experience, because it seems that there is no evidence available from the way Mr Beecroft has gone about his business?

My Lords, of course we looked very closely at countries we admire, such as Germany. However, we are a different country, we have a different history and we are in a different position. Therefore, we have to do things our way. I emphasise that we will do this in a careful, measured and flexible way.