A key speech by Labour shadow chancellor Rachel Reeves this week has sought to give new energy to her party’s workers rights’ plans while retaining her balance on the union-business tightrope. How successful was she? Adam McCulloch reports.
Labour’s “new deal for working people” includes a ban on zero-hours contracts, an end to “fire and rehire”, a new system of pay bargaining in social care, the repeal of anti-union laws, and employment rights from the first day of a job. An employment bill would be published in a Labour administration’s first 100 days, the party has said.
At root, productivity remains the key medium-term determinant of wages. It is the collapse in our productivity growth which explains our wage stagnation” – Rachel Reeves
But some companies and lobby groups have warned the party that these proposals may actually lead to less secure jobs because they could lead to longer probation periods, more fixed-term contracts and a switch to agency staff – thus activating the laws of unintended consequences.
Giving the prestigious Mais lecture on Tuesday, shadow chancellor Rachel Reeves told the audience that the UK was “in a moment of deconvergence, trailing and falling further behind our counterparts”.
“At root, productivity remains the key medium-term determinant of wages,” she said. “It is the collapse in our productivity growth which explains our wage stagnation.”
Her critique of the current government’s policies – a status quo that
“serves neither workers nor businesses” – did not mention some of the new deal’s policies by name.
There was no direct mention of the plan to repeal strike ballot laws, for example. The speech may not have given any obvious signs Labour was planning to row back on pledges, but it is unlikely to have completely assuaged the concerns of watchful union leaders.
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On the other hand, business leaders may have been able to read into it signs that Labour is listening to their concerns.
Labour wants to end the current government’s short-termist approach that “disregards the importance of public investment”, said Reeves. Part of this would see the much-criticised and “broken” apprenticeship levy replaced by a new Growth and Skills Levy with adult education budgets being combined under a new national institution, Skills England.
A major factor in boosting skills was ensuring women had a greater part to play in the economy. Reeves said: “We know too that it is women who disproportionately work in our everyday economy, and women who have borne the brunt of the economic and social disruption of recent years … if we fail to offer women the same opportunities as men, we fail to make use of their talents.”
Reeves confirmed that a Labour administration would guarantee basic rights from day one – sick pay, parental leave, and protection from unfair dismissal. Seeking to assuage businesses’ fears she added this would not prevent “fair” dismissal: “We will ensure that businesses can still operate probationary periods with processes for letting go of new hires”.
All workers would gain the right to a contract that reflected the number of hours they regularly worked, based on a 12-week reference period, thus ending “exploitative” zero-hours contracts. Again, Reeves was careful to emphasise that these changes would not stop employers from offering overtime or meeting short-term demand, such as in the build-up to Christmas or seasonal work in agriculture or hospitality.
Fewer strikes under New Labour
Many of those from the unions watching out for signs of dilution may have been surprised by Reeves’s degree of certainty over trade union legislation – with the caveat as mentioned previously over strike ballot rules. She said Labour would reverse changes since 2010 that had “done nothing to prevent the worst period of disruption since the 1980s, but instead have contributed to a conflictual, scorched-earth approach that has stood in the way of productive negotiation”. She pointed out that these policies didn’t exist under Blair and Brown when there were fewer strikes and less disruption.
The consensus among commentators is that the degree of union involvement in pushing for the reforms makes it less likely they are diluted in the way the £28 billion green investment pledge was earlier this year.
Whether this will be enough to reassure unions remains to be seen – earlier this month Labour leader Keir Starmer was warned by the UK’s largest unions that he must enact a radical package of employment laws within 100 days of winning an election. Unite general secretary Sharon Graham has even warned that the union would consider disaffiliation if the new deal was altered to “curry favour with big business”.
Angela Rayner, the party’s deputy leader, whose portfolio covers workers’ rights, has been consistent in spelling out what a Labour administration would seek to do – calling the proposals the “biggest levelling up of workers’ rights in decades”.
However, when it comes to particular aspects of the plans, business organisations have been in contact with Labour to see how much wriggle room there might be.
Adam Marshall, the former director general of the British Chambers of Commerce who now works as an adviser, told Bloomberg: “A lot of businesses are looking for ways around the proposals, like the use of fixed-term contracts, looking into using contractors. I’ve heard about probation periods. People are concerned about the risk to their business.”
Unfair dismissal rights
The provision of unfair dismissal rights from day one, replacing the current two years of employment, is another area where businesses are wondering whether there is compromise to be had. Companies may consider looking to extend probation periods beyond six months to get around this.
Rolling fixed-term contracts would also give employers the opportunity to let go of staff at little cost, leaving companies to use agency workers to maintain flexibility.
Employers are also concerned about the loss of flexibility inherent in the zero-hour contracts ban. Some argue that staff should be allowed to request zero-hours contracts where it suits them, so long as companies always offer the alternative of predictable hours.
Alex Hall-Chen, principal policy adviser at the Institute of Directors (IoD), told The Guardian that there was a “really valid role for zero-hours contracts, not just for the employer but for the employee. She said: “This is not us saying there’s no need for reform: I think everybody recognises that there are issues with the system.”
Rupert Soames, president of the CBI, has been more critical. He said: “Do we want to have an economy where businesses are keen to employ people because it’s easy, or do we want to have one where actually stable employment conditions mean more to people?”
Soames urged Labour leaders not to introduce measures that would make firms reluctant to take on workers because it is harder to lay them off – what he described as a “European model” of labour market laws.
Single status of worker
As Labour is perhaps closer to coming into government, efforts to influence policy by businesses and unions are bound to gather pace. Some on the left have already noted what they feel is a watering down process. For example, there has been a shift from promising a “single status” of worker to just offering a consultation on the idea.
Others, namely Sharon Graham, have been hawk-eyed over terminology. She has raised the talk of stopping “exploitative” zero-hours contracts as a hint that the party may be moving away from a total ban on them.
Many of the concerns from business and unions carry echoes of 1997 and the election of Tony Blair’s New Labour. Back then, businesses and the Conservative party were predicting that great economic woes would stem from the adoption of a national minimum wage.
Understandably, Labour at this point of the election cycle – and with a strong lead in opinion polls – has to give itself flexibility over policy and not become beholden to detailed commitments that will be used as a cudgel against it in future. But it’s undeniable that the thrust of its policies signal a sea change from the past 14 years, and will give businesses – and HR – much to ponder.
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