Employment Rights Bill: Productivity

Question

15:06:00

Asked by

To ask His Majesty’s Government how the Employment Rights Bill will “support the Government’s mission to increase productivity”, as stated in their factsheet for the bill, and what evidence they have to suggest that it will increase productivity.

My Lords, last year we published a comprehensive package of analysis showing how the Bill could increase productivity. Evidence included in that impact assessment shows that making workers happier and healthier helps boost productivity. This analysis draws on the best available evidence and consultation with external experts and stakeholders. For example, research from the University of Cambridge shows: “The consensus on the economic impacts of labour laws is that, far from being harmful to growth, they contribute positively to productivity”.

My Lords, the Minister will be aware that small and medium-sized enterprises are the lifeblood of our economy. What analysis have she and her colleagues in Government carried out of the effect on small and medium-sized enterprises of day one rights?

My Lords, of course we have taken into account the impact on small and medium-sized businesses, but having an entitlement to fair, flexible and secure working should not be available only to those who work for larger organisations. At the moment, 9 million employees—almost 40% of the whole private sector—work in small and micro businesses. Any exceptions to policy based on business size would create a two-tier labour market, with some workers facing fewer protections, leading to an uneven playing field between employers of different sizes and reducing incentives for small businesses to grow.

My Lords—

My Lords—

There is plenty of time. We will hear from my noble friend first and then from the noble Lord, Lord Fox.

My Lords, the noble Lord, Lord Hunt of Wirral, will be familiar with the Cambridge Centre for Business Research 2024 policy brief, which my noble friend referred to. It is titled The Economic Effects of Changes in Labour Laws, and it tracks changes in legislative protection for workers around the world from 1970 onwards, including in the UK. The conclusions of this research speak directly to the Employment Rights Bill. On 5 March, Professor Simon Deakin, the CBR director and co-author of this brief, stated that “stronger labour protection is associated with higher employment and lower unemployment” and that “laws, including those regulating flexible working, working time, and employee representation, can have positive productivity effect”. In anticipation of Committee on the Bill, will my noble friend the Minister join with me in inviting Professor Deakin and his research colleague to come to Parliament and to brief us on their findings, and, if they accept, will the noble Lord, Lord Hunt, accept a challenge to put the case that the CBR’s conclusions are not supported by 50 years of global datasets underpinning its research and therefore do not justify the causative link?

I am grateful to my noble friend. He is citing one example. There are numerous examples of external support for our arguments. Academics at Warwick University, Oxford University, MIT and UCL all find a positive relationship between job satisfaction and productivity in their research—but, of course, I would welcome the opportunity to meet the academic to whom my noble friend referred.

My Lords, clearly, we have many hours in front of us as we scrutinise this Bill. Much will depend on definitions and explanation, not least a proper definition of zero-hours contracts and the role of agencies in employment. But the glaring omission is the absence of any mention of freelancers. Does the Minister agree that freelancers form the mainstay of many important sectors, not least our creative industries? Will she undertake to ensure that the Bill focuses as much on freelancers as it does on other sorts of employees?

The noble Lord is right: we will have many happy hours debating this Bill in Committee and on Report in due course. On the issue of freelancers, he will know that this is only one piece of legislation. The make work pay programme includes a much more substantial piece of legislation. Where issues cannot be resolved fully in this legislation, they will come up in the wider Bills going forward.

My Lords, this claim that the Bill supports productivity falls under the economic analysis section, which some have, perhaps rather unkindly, referred to as the economic fantasy section. The argument is similar to the one used for NICs Bill: increase the cost of employment; take out jobs at the lower-paid end; invest more in tech and innovation; and increase the average productivity of those left in employment. Does the Minister not agree that the danger with a flat economy, such as we have at the moment, is that we end up simply increasing unemployment, depressing real wages and lowering overall growth?

My Lords, we have to be clear about the fiscal inheritance which we inherited from the previous Government.

Oh!

I know noble Lords do not like to hear it, but I am happy to repeat it again. That, of course, demanded tough choices to fix our public services and create long-term growth and investment. The Government have more than doubled the employment allowance to £10,500 for the smallest companies, meaning that more than half of businesses with NICs liabilities either gain or see no change next year. Businesses will still be able to claim employer NICs relief, including those for under-25s and under-25 apprentices, where eligible. These are tough times economically, but we are determined to do everything we can to ensure that our growth agenda remains undimmed.

My Lords, is my noble friend aware of HSE analysis which shows that unionised workplaces have fewer accidents and injuries and better well-being, and of TUC research showing that unionised workplaces have more investment in skills, better family-friendly policies and a voice for working people? Does she agree that that is good for productivity?

I am grateful to my noble friend for making these points. I should reiterate that Britain’s working people and businesses will be the driving force of the UK economy, but the current labour market is not delivering for either. The productivity gap with France, Germany and the US has doubled since 2008; average salaries have barely increased from where they were 15 years ago; and the average worker would be more than 40% better off if wages had continued to grow as they did leading into the 2008 financial crisis. A final point: alongside its productivity performance, the UK lags the OECD average on most employment protections. We inherited an economy that was in decline, with poor productivity, and we intend to fix that.

My Lords, Jonathan Reynolds rightly met Rupert Soames, the chairman of the CBI, to listen to its concerns about the reference period for seasonal-hour workers. Will the Minister undertake to meet the FSB, which is looking for a rebate of statutory sick pay? The Government should consider this, at least for days 1 to 3.

My Lords, of course I am happy to meet with all the stakeholders. No doubt a programme will be put together to do just that.

My Lords, does the Minister accept that one of the best motivators in the workplace is employee share ownership? What do the Government intend to do to increase the extent of employee share ownership? What incentives might they consider?

The noble Baroness makes a very good point. It is slightly beyond my brief today, but I am sure that if there is scope we will embrace that idea, which is a very sensible one.

My Lords, as a former leader of the Unite the Union, I warmly welcome this Bill, but I would like to see it go a little bit further when we deal with sectoral collective bargaining. Can the Minister listen to employment rights experts when they say that sectoral collective bargaining underpinned by legislation is the right way to achieve wider and broader growth in the economy and, importantly, a growth in productivity?

The employment Bill that we have before us today is a very substantial piece of legislation. There will be further opportunities in the make work pay plan to come back to some of the wider issues and I look forward to debating those when the opportunity arises.

My Lords, at Second Reading last week, I asked the Minister to name one company—apart from the four that are routinely trotted out by the Government—that is supportive of this Bill. She did not answer the question, so I invite her to have another go, because we would really like to talk to them.

The noble Lord will know that we have had extensive discussions with all the employment bodies that are engaged. Those stakeholder discussions are continuing. I am sure that we can provide further details, but the important thing is that those stakeholders have been engaged and listened to. We are continuing with that engagement and that will help the policies going forward.