My Lords, with the permission of the House, I would like to repeat a Statement made in the other place by the Parliamentary Under-Secretary of State for Small Business, Consumers and Corporate Responsibility, Margot James, on the independent review of modern working practices, which was led by Matthew Taylor and published earlier today. The Statement is as follows.
“Mr Speaker, the review sets out that British business is successful at creating jobs, enhancing earning power and improving life chances across the UK. Employment rates are the highest since records began. Unemployment and economic inactivity are at record lows. More people are in work than ever before and minimum wage rates have never been higher. This is a story of success and one which this Government will seek to sustain.
The UK economy’s continued success is built on the flexibility of our labour market, which benefits both workers and business. Businesses can create jobs and individuals can find work because our labour market regulation balances the demands of both. Minimum standards set a baseline, beyond which there is flexibility to set arrangements to suit all parties. Our dynamic approach responds well to fluctuations in the economic cycle without the structural weaknesses present in some other countries.
It is important that we preserve this success but also enhance it further. While the majority of people employed in the UK are in full-time, permanent employment, globalisation, demographics and especially technology are changing the way in which we work. We need to make sure that the British labour market stays strong and that everyone in the UK can benefit from it.
That is why, last year, the Prime Minister asked Matthew Taylor, chief executive of the Royal Society of Arts, to lead an independent review of employment practices in the modern economy. That review has now been published and I am delighted to lay a copy in the House Library today. It is a thorough and detailed piece of work, for which I am very grateful not only to Matthew and his panel members but to the numerous businesses, trade unions, organisations and individuals who have provided their views on this very important topic.
The review has a strong overarching ambition: that all work in the UK should be fair and decent with realistic scope for fulfilment and progression. Matthew has outlined seven principles to meet this ambition, and I urge honourable Members to examine these principles and the rest of the report in detail, since it is an important contribution to a critical subject.
In summary, these principles are: that our national strategy for work should be explicitly directed towards the goal of good work for all; that platform-based working offers welcome opportunities for genuine flexibility but there should be greater distinction between workers—or as the review suggests renaming them, “dependent contractors”—and those who are fully self-employed; that there should be additional protections for this group and stronger incentives for firms to treat them fairly; that the best way to achieve better work is through good corporate governance, good management and strong employment relations; that it is vital that individuals have realistically attainable ways to strengthen their future work prospects; that there should be a more proactive approach to workplace health; and that the national living wage is a powerful tool to raise the financial baseline of low-paid workers but it needs to be accompanied by sectoral strategies, engaging employers, employees and stakeholders to raise prospects further.
This is an independent review addressed to government. While we may not ultimately accept every recommendation in full, I am determined that we consider the report very carefully, and we will respond fully by the end of the year.
Matthew Taylor has been clear: the UK labour market is a success; the “British way” works. But he has also said that there are instances where it is not working fairly for everyone. For example, he highlights where our legislation needs updating or where flexibility seems only to work one way, to the benefit of the employer. We recognise the points he makes. We accept that as a country we now need to focus as much on the quality of the working experience, especially for those in lower-paid roles, as on the number of jobs we create, vital though that is.
This Government have made a commitment to upholding workers’ rights. The Prime Minister has said repeatedly, in this House and elsewhere, that as we leave the EU there will be no rollback of employment protections. The Queen’s Speech also sets out that this Government will go further than that and will seek to enhance rights and protections in the modern workplace. Today’s publication of the Good Work review, and the public consideration of Matthew’s recommendations that will follow, will help to inform the development of our industrial strategy in the autumn. I commend the Statement to the House”.
I thank the noble Lord for repeating the Statement on the review of modern working practices. We all look forward to studying it carefully and working with all concerned to respond to these new ways of working, as over time we have done with the invention of printing, photocopying, computers, mobiles and the internet. Working together we can make new technology and changing demands work for the whole of society.
However, I fear that the Government’s Statement looks only at two parts of the market: workers and business. There is in fact a vital third limb: the consumer or customer. I happen not to use Uber, one of the best known of the gig institutions, but many consumers do, including women, who often do not like to hang around on street corners trying to hail a taxi and who appreciate not having to carry cash in order to hire a cab. But it is not in their interest for a driver to be overtired, unwell or underinsured, and at work only because of pressing economic needs. Consumers need to feel safe, with a driver who is fit and healthy, awake and concentrating, and not worrying about their next fare; and they want to know that the driver is getting a fair day’s pay for a fair day’s work.
Other parts of the gig economy may not have face-to-face consumers in the same way, but all have customers of the firm’s business, who similarly need to be assured of the quality of the work, which is highly dependent on the motivation and decent conditions of what the report calls “dependent contractors”. It is true that contented workers make for higher-quality work. So as the Government digest the report, will they involve the consumers and customers of such services in addition to the other key players?
Will the Minister also undertake to involve trade unions fully in this work, which would help the Government as well as the people concerned? Traditionally, of course, vulnerable and exploited workers have had their standards raised and their rights protected through the intervention of trade unions. But as we know, for obvious reasons workers in these sectors are a real challenge to recruit. There have been other similar areas in the past where wages councils played an invaluable role. While I hope that the unions will seek to represent this group, we should be realistic and acknowledge how difficult that is and therefore we need other avenues for unions to be able to speak on behalf of these workers. The report calls for additional protections for gig workers and greater incentives for firms to treat them fairly, including through strong employment relations, but this will need trade union input. I hope that the Minister can give a clear assurance that this will happen.
I want to make one other point. The report does little to strengthen the ability of workers to enforce the rights they already have, beyond shifting the burden of proof in one case when determining the employment contract. The Minister and this House know that the level of employment tribunal fees is a real barrier to justice, so we will continue to press for the fees to be abolished. The Minister has repeated the commitment to workers’ rights, but without their ability to enforce them through tribunals, those rights are really just pieces of paper. It is in no one’s interest for this group to be exploited, but it will need a commitment on the part of the Government to ensure that that does not happen. This is an important area for the future of the economy, for the workers concerned, and for us as consumers.
At first read—and it is only a first read—the report does seem to be somewhat tame and appears to be a missed opportunity to grasp the challenge looking forward to the rest of this century of the contribution that the gig economy can make. The Government need to take up the challenge of grounding in the expectations of all employers the need to treat this group of workers fairly and preserve their rights. We will be looking to the Government to work with all stakeholders to ensure that the change in culture as well as regulation will ensure that this part of the economy is fair for all concerned.
My Lords, this report is welcome as it frames the need to reconsider working conditions in a clear manner. I should like to quote from it that,
“while having employment is itself vital to people’s health and well-being, the quality of people’s work is also a major factor in helping people to stay healthy and happy, something which benefits them and serves the wider public interest”.
This is an important and true statement that we should bear in mind when considering not only this report but the wider realm of employment and industrial strategy. We are living in a time of huge change in the world of work, so the Prime Minister was right to ask Matthew Taylor to carry out an independent review and produce a report. As noble Lords will have noted when I dropped it just now, the resulting document is comprehensive and hard to absorb in the short time we have had to do so.
The Government’s Statement points out that the report highlights the need to deliver additional protection to the increasing number of people we describe as platform-based, or rather, what we know as the gig economy. The most important distinction to make is between the creation of a new group of workers or dependent contractors and those who are truly self-employed. While this may seem to be tame to some, it is starting to move down the road of classifying people in a way that enables them to have the rights they deserve. So it should be no surprise that the Liberal Democrats broadly welcome the recommendations in the Taylor review. The right to request fixed hours and employment rights for those who are now classified as dependent contractors was set out in the Lib Dem manifesto, so obviously we support that. If enacted, it will provide additional protections for this group as well as strong incentives for firms to treat these workers fairly. It is clear that these rules will have to be backed up by policing. That will improve workers’ rights in the gig economy while maintaining flexibility for those who want it, and that is the key. Some people want flexibility, but others have it thrust upon them. Noble Lords may remember that the Government opposed these proposals during the coalition Government.
We should also remember of course that workers’ rights are ultimately underpinned by EU law. This is backed up by the UK’s ability to create and protect high-quality jobs, which in itself is dependent on the UK being part of the single market. As noble Lords would expect me to say, under Theresa May’s Brexit plans we will continue to see falling real wages and slowing economic growth, and jobs will begin to fall back. This is bad for all workers but it is worse for these workers. Furthermore, there are some people—including on the Benches opposite—who will seek to use Brexit not to strengthen workers’ rights, but to weaken or even abolish some of them.
That is why it is important for the Government not to get bogged down in this report and to move swiftly. The Minister has pledged to respond by the end of the year. We look forward to the industrial strategy and how that will play into this. We believe it is important that the Government proceed rapidly to a conclusion that accepts the clear direction of this report and brings forward proposals that will enact its substance. The longer the Government delay, the longer this important and growing band of workers will be deprived of justified employment rights. The longer the Government delay, the more suspicions will be raised that Brexit will be used to water down people’s rights. As the report says:
“All work in the UK economy should be fair and decent with realistic scope for development and fulfilment”.
We hope the Government accept that point and bring forward rules and laws that help to bring it about.
My Lords, I shall first respond to the two asks from the noble Baroness, Lady Hayter, the first of which was that we should take into account the consumer. She is absolutely right. I read the report fairly rapidly myself and she is right about that. Thinking about it, it is very much focused on workers and businesses. We ought to look at it through the eyes of the consumer, such as the lady waiting for her Uber late at night who wants to know that the driver is indeed safe, healthy and wide awake. That is certainly something we will feed back into the consultation over the next few months.
Secondly, the noble Baroness raised the involvement of trade unions. They have been fully involved in this whole process. Matthew Taylor has been exemplary in reaching out to all kinds of people, not least the trade unions. As she knows, trade unions these days are very much focused on public services. Their representation not just in the gig economy but in the private sector as a whole is much diminished. In part that is because many companies in the private sector have exemplary employee relations and have done an extremely fine job. There is much the public sector can learn from the private sector in some of these areas. Nevertheless, I assure the noble Baroness that Matthew Taylor has indeed reached out to the trade unions.
The noble Baroness also raised employee tribunals. I have a note on that, but maybe, since it is a fairly narrow area, I will write to her about it. She knows we are consulting on this to reduce the threshold to enable help for industrial tribunal fees, but I will write on that point.
The noble Baroness ended by saying that she thought this was a slightly tame report—I think that is the word she used. I argue, as I think the noble Lord, Lord Fox, would, that it is a balanced and fair report. It is not sensational, in part because the system is working quite well. The statistic that really surprised me on reading the report was that there has not been nearly as much change in the labour market over the last 20 years as I thought. Actually, 63% of people in full-time employment are on a conventional employment contract, and 20 years ago the figure was 64.6%. I thought a bigger change had happened. Nevertheless, as the noble Lord, Lord Fox, commented, this is an important and growing part of the economy. It is quite right that we should look at this issue now and get the balance right between flexibility on the one hand and proper job security on the other. It is an extremely important balance to get right.
I assure the noble Lord that the Conservative Party and the Prime Minister are not using Brexit as any excuse for watering down employee rights. The Prime Minister has been absolutely clear that she wishes to maintain and even enhance employee rights, and this is an area where maybe we can enhance employee rights.
The noble Lord asked for a rapid response. Of course, that is tempting, because I think we all agree with the spirit of the report. It is easy to talk in generalisations today, but it may take a little longer to get some of the distinctions right between employee, self-employed, worker and dependent contractor, and nail them down so they have legal validity.
I think we all agree with the noble Lord that all employment should be fair and decent, with scope for fulfilment. It is easy to say that that is just motherhood and apple pie, but there is no doubt that companies that treat their employees fairly and decently and as proper colleagues have much better results.
My Lords, the remarks of the noble Baroness, Lady Hayter, about Uber were extremely important. They illustrate that quality, reliability and excellence of products and services are essential. Does my noble friend accept that there is a real threat to the quality, reliability and excellence of taxi services in London, which, in black cabs, enjoys the finest service in the world? Whatever is done as a result of this report, it should try to ensure that there is proper equality of treatment between those who provide a service as well.
My Lords, I concur entirely with part of what my noble friend said: that black cabs in London provide a remarkable service. However, Uber provides a remarkable service in many respects. As the noble Baroness, Lady Hayter, said, it is now an extremely valuable and important service. I do not think that there is any contradiction in having a successful Uber service, or one similar to it, running alongside the excellent black cab service in London.
My Lords, I think it is apparent that this side of the House would not agree with the Minister’s throwaway line that,
“the system is working quite well”.
That is not the theme of the report. Nor is it true, if one looks at manifold evidence from public opinion polls, that job security is not prevalent as an issue and a worry for almost all classes of worker. It is being economical with the truth to make generalisations about workers preferring casual hours to guaranteed hours. There may be some people—students are a good example, out of term time or even in it in some cases—who prefer such hours, but does the Minister accept that you cannot get a mortgage on a zero-hours contract? Has the Minister done any research on whether that is true? If not, will he do some research and let the House know, perhaps in a letter? Is it possible to get a mortgage on a zero-hours contract? If it is not, does that not mean that we live in a two-class society—with different types of contract of employment —in respect of one of people’s most vital needs: to be able to get a mortgage, with those on such contracts falling away financially from people who are able to buy a house?
My Lords, on the noble Lord’s general point about the underlying theme of the report, I shall quote to him from the beginning of it—these are Matthew Taylor’s words and not mine—where he says of our flexible labour market that,
“the British way is rightly seen internationally as largely successful”.
Everything that comes through this report tells us that while the system is not perfect it is actually working quite well.
The noble Lord is right that even where people are working quite a few hours under a zero-hours contract they still find it very difficult to get a mortgage because the mortgage company sees it as zero hours. That is why one recommendation of the report, and it is an eminently sensible one, is that where an individual consistently works a number of hours on a zero-hours contract, after a year they can request that it be converted to a fixed-hours contract. That is one of the report’s recommendations that we will take extremely seriously.
My Lords, it seems that both the noble Baroness on the Opposition Front Bench and my noble friend are under some misapprehension regarding the relationship between Uber and black taxis. It is now perfectly easy, on a free app, to summon a black taxi on one’s iPhone and there is no competitive advantage, as far as Uber is concerned, in that respect. It also emerged from the debate the other night that it is very necessary for there to be some control over the number of minicabs. At the moment, neither Transport for London nor this House nor anyone else has any control over the number of minicabs given licences.
My Lords, I think it is right to say that students and early-retired people welcome flexibility, but there is a real problem for people, particularly lone parents with children and so on, in maintaining an acceptable and predictable income in a zero-hours contract economy. Many retailers use zero-hours contracts, yet senior managers in retail have said that because demand is predictable, zero-hours contracts in retail are lazy management. What will the Minister say to the lone parent who, as a cinema usherette, does not know from week to week whether she is going to work four hours a week or 34? Will he, in that case, take it up with his colleagues in the DWP, because the benefits which make her income possible are always falling behind her hours and she therefore never knows from week to week whether she can afford to get the fridge repaired or buy her son his trainers?
The noble Baroness makes a very good point. Certainly, some 20% of those on zero-hours contracts are students who are using it to top up. Equally, people who have retired use it to top up, and it is much less satisfactory for people for whom it is their main source of income. One point that Matthew Taylor makes in his report, and it is a good point, is that some employers are quite lazy about this: they do not have to schedule the hours properly because they know that they have people on tap. One of his recommendations in the report is to address that issue.
I thank my noble friend. I congratulate Matthew Taylor on his excellent report and I particularly congratulate the Government on achieving record levels of employment and record low unemployment. It is important that we recognise the benefits to this country’s employment market of flexibility. We have achieved great success; indeed, I point out that when I was business champion for older workers, I found that it is not only students who welcome zero-hours contracts, it is also older people. Does the Minister agree that we need to recognise the increasing importance for people in a pre-retirement phase of being able to work flexibly, part-time and zero hours? Indeed, when McDonald’s offered all its workers on zero-hours contracts the opportunity of fixed contacts, 80% said they wanted to stay on the zero-hours contracts.
I thank my noble friend for her contribution. Of course, flexibility suits older people greatly and is something much to be encouraged. The great success of the British way is that we have very high levels of employment. The great weakness of the British way is that we have very low levels of earnings, and that is something that we are going to address through the industrial strategy.
Is the Minister aware that I had the privilege of working with Matthew Taylor on the child trust fund? I put it to the Minister that this report is excellent. Do the Government recognise that there are three levels—or parties—involved, and that, as the noble Baroness, Lady Hayter, said, the consumer is one? Clearly the workers are absolutely fundamental as well, but fair competition among employers is the third dimension. Is this not an opportunity for Her Majesty’s Government to act almost as a referee by looking at all these aspects and making sure that at every single level there is now fair competition, fair wages and a fair opportunity for all parties to work together?
My Lords, as the noble Lord said, there are three parts to this. The report focuses very much on workers and business, and, as the noble Baroness, Lady Hayter, said, we ought possibly to look at this issue also through the eyes of the consumer. This is an ideal opportunity for the Government to act, if you like, partly as a referee: ultimately, we do have a clear responsibility in this area and when we have had a chance to consider the report I am sure that we will not disappoint my noble friend.
My Lords, the House at this stage will naturally want to reserve judgment on the totality of the report and its recommendations. That said, at face value it is an important and positive step. Of course, one of the major deterrents to a good workplace is the issue of discrimination. Will the Minister say at this stage what the report indicates in terms of race and sex discrimination, and discrimination against people with a disability? If the report has tackled those issues, will he say what remedies are suggested?
My Lords, the terms of the report did not include discrimination. Unless I have missed something in the report—I read it last night—it does not come with up recommendations around discrimination but looks purely at new forms of employment: that is, the relationship between self-employment and people working in the gig economy, who may now be called dependent contractors. It does not deal directly with the issues that the noble Lord raised.
I welcome the statement that,
“the best way to achieve better work is through good corporate governance, good management and strong employment relations”.
That is an extremely good summary, and if that is what the eventual recommendations and implementation achieve, it will have been a historic report. I have three brief questions. First, one of the problems about our low-wage economy is that we are getting a lower tax base. Therefore, this is not necessarily good news for HMRC; a lot of the so-called independent contractors and bogus self-employed do not pay very much in the way of income tax.
Secondly, there has been increasing confusion between the statutory national minimum wage and the national living wage; people are getting very confused about those two things, to the detriment of both issues. Thirdly, there are recommendations about changing the remit of the Low Pay Commission—I declare an interest as one of the founding commissioners in 1998. One of the reasons for the tripartite success of the commission is that it has focused on a fairly narrow range of issues. My concern is that if these were widened to include quality of work on a sectoral basis, it might eventually weaken the power of its recommendations. Would the Minister care to comment on that?
My Lords, the noble Baroness is clearly right about the lower tax take. Clearly, if earnings are higher, the tax take will be higher. It is rather shocking. These are the figures in America: in 1970 the average median salary among the lowest-paid 90% of people was $34,000; in 2013 it was $31,000—it has gone down. This is the problem that all western economies face: earnings are stagnant and falling. Our children’s generation may be facing a less prosperous future than we do. This is the huge dilemma that we all face. When she says there will be a lower tax base, she is absolutely right. The whole point of improving productivity is to improve earnings. It is in all our interests to improve earnings—to see wages grow.
The noble Baroness also talked about the confusion between the living wage and the national minimum wage. She has now confused me so I shall have to write to her. She went on to talk about the Low Pay Commission. When the previous Government brought in the living wage and the trajectory for it, that was a political decision; it was not made by the Low Pay Commission. One of the criticisms of the minimum wage is that politicians cannot resist the temptation to get involved in it. To some extent, the Low Pay Commission has been subverted by politics. I guess that was inevitable. Actually, the increase in the living wage was one of the great triumphs of the coalition Government.
My Lords, I have not read the report yet, so I would be grateful if the Minister could put me right. Not all western countries are in the difficulties that the States and the Anglo-Saxon type economies are in. Sweden does not have the kinds of problems that we have. It has some, but not on the scale that we have. The major difference between Sweden and similar countries is that the difference in income between those at the top and those at the bottom has not widened in the way that it has in the UK and the States. To start to address this, we have to look at that as well—not just the quality of the work but the totality of the distribution of income in the workforce. Do the Government have any plans for doing that?
The noble Lord is right that the disparities in Sweden are smaller than in the US, the UK and other parts of the world. They are smaller but they are not non-existent. It is a big issue in the Scandinavian countries as well. We intend to address that through our industrial strategy. The second issue that the noble Lord touched on is that growth in productivity, in so far as there has been any, used to trickle down into the incomes of all people—everyone was brought up by improvements in productivity. That link seems to have been greatly weakened over the years, so that when there is growth, it goes to the top 10% and not to the 90%. The noble Lord is quite right that we need to look at that very carefully.
My Lords, one of the protections we offer workers is through employment agency legislation, but this legislation does not apply to many of the organisations that get gigs for gig workers. Do the Government intend to extend the protections of employment agency legislation to those who supply gigs?
The Minister expressed surprise that there had been so little change in employment over the period: 63% and 64% were the figures given. But that masks the fact that currently in the north-east something like 70% of all new work—jobs growth—is defined as insecure work. Does that not indicate the need for more assertive action from the Government to address what is very rapidly coming round the corner at us?
I assume that the noble Lord means that what is coming around the corner are the new technologies and artificial intelligence—the digital economy, if you like—which are going to have a big impact on the labour market. Andy Haldane, the chief economist of the Bank of England, is predicting that, I think, 17 million existing jobs will disappear as a result of new technologies. Other people say that the new technologies are nothing like as profound as some people think they are and that the impact will be a lot less. Nevertheless, if we are going to thrive in this digital age, we have to skill people to do so. We need a much more digitally literate and technically well-trained workforce. I am sure that that will be something that will be a key part of our industrial strategy.