Into the mouth of a pedigree gift horse

It’s not easy being an Industry Minister. The DTI is caught between CBI
hostility to regulation and the TUC’s demand for more of it, trying to support
business while not hectoring it, justifying a hefty budget while showing value
for money results.

Nothing illustrates ministers’ dilemmas better than the case of the soar away
employment tribunals. As applications rocket, the DTI faces howls of protest
from businesses at the cost and nuisance value of tribunals, but warnings from
unions and others about infringing individual rights.

All the more extraordinary, then, that in its proposals to curb the
tribunals’ explosion, the DTI is at the point of looking straight into the
mouth of a gift horse with the pedigree to help. The horse in question is a
36-year-old with remarkable staying power – called Acas.

The challenge is a big one. A threefold increase in tribunal applications in
a decade, increasingly legalistic hearings and spiralling costs to business.
Several factors explain the trend. One is a phenomenon that deserves to be
called "litigitis" – citizens’ increasing propensity to turn to law
as soon as other routes fail.

Probably even more important are a growth in individual rights and the
shockingly bad management practice that continues to dog parts of British
business. Small firms who have fewer than 10 employees, for instance, account
for almost a third of tribunal applications while employing less than a fifth
of the workforce. Sixty per cent of small firms facing a claim have no
grievance or disciplinary procedure.

Enter Acas. For a paltry £32m a year, the service clears up thousands of
individual disputes before they get to tribunals. Disputes that cost employers
an average £2,000 a time, not including compensation awards that average
£2,700, plus potential recruitment costs.

Luckily, only a quarter of cases get as far as a tribunal – with Acas a
major factor in another 31 per cent being withdrawn and 44 per cent being

In other words, the Acas approach actually works. By keeping disputes out of
tribunals, Acas saves business far more than it costs the Exchequer. Yet the
DTI dispute resolution proposals ignore calls from the Industrial Society and
others to fund an increase in Acas’ conciliation services and good practice

Even worse, the DTI suggests that the service’s conciliation role is removed
in some cases and that Acas starts to "kitemark" other organisations
to conciliate.

And all of that before a new Acas arbitration scheme, specifically designed
to provide an alternative route to tribunals, has a chance to prove its worth.
At the moment, it seems, the DTI is backing the wrong horse.

By Patrick Burns, Policy Director, The Industrial Society

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