It is now less than a year before a general election must be called in the UK. What impact could the result have on business and HR?
When the political party manifestos are published a few weeks before the next general election (which must be held on or before 3 June 2010), the sections on employment reform are likely to be unusually brief. Any appetite for change has been blunted by the recession and weariness with new legislation.
British Chambers of Commerce employment and pensions policy adviser Abigail Morris says a period of consolidation is needed, where existing laws are simplified and business is offered proper guidance about how to comply with them.
For David Yeandle, head of employment policy at industry body EEF, even modest reforms would be unwelcome. “Whether they like the legislation or not, most companies have found how to live with it,” he says. “What we continually get told by them is either do something substantial or don’t do anything at all. There’s nothing that our members are knocking on our door for to get rid of.”
John Thurso, Liberal Democrat spokesman on Business, Enterprise and Regulatory Reform (BERR), argues that it would be “lunacy” to embark on a programme of radical change because it would distract employers from more pressing concerns. “Anybody who is in business and politics is sensitive to the fact that if you want to change things, the middle of a recession is not the time to do it,” he says.
But with the Conservatives currently looking set to win a clear overall majority, they may feel emboldened to take decisive action in other areas affecting business and HR. They are already committed to a £2.6bn package of tax breaks to boost employment, funded by money that would otherwise go on unemployment benefit.
A revolution in skills and training provision is also planned. With more than 750,000 young people not in any kind of employment, education or training, the Conservatives argue that the existing system is outdated.
Nick Holley, director of the HR Centre of Excellence at Henley Business School, is dubious about using tax breaks to implement government policy. “Lawyers and accountants are very skilful in getting the money but not actually achieving what the government sets out to achieve,” he says. “They will take the letter of the law and not the spirit of the law.”
Ben Willmott, senior public policy adviser for the Chartered Institute of Personnel and Development (CIPD), is concerned about the Tory emphasis on apprenticeships. “It seems that the funding will come from the current Train to Gain budget. Increasing apprenticeship provision is certainly welcome but there are lots of other issues around the UK skills gap that need to be addressed.”
The Tories also promise to take back control of social and employment policy from Europe, arguing that these are vital areas for the UK’s prosperity and social wellbeing. Yeandle says that even if the next election is delayed until the deadline of 3 June 2010, the next government will still have scope to amend aspects of the agency worker and works council directives. This is because they will not yet have become part of UK law before the election. “But it won’t be straightforward, and I suspect [the Conservatives] won’t want to make use of a lot of parliamentary time on this,” he adds.
Proposals made by the party’s Economic Competitiveness Policy Group include opting out of the EU Social Chapter and producing UK rules on a number of employment measures to boost economic performance. According to David Coats, associate director of The Work Foundation, this would require wholesale renegotiation with the EU.
“It would require a new treaty for the UK to come out of the Social Chapter and you only have a new treaty if all 26 member states agree,” he points out.
Tom Clougherty, executive director of the Adam Smith Institute, the free-market think-tank, warns that the economic situation is likely to mean tough decisions affecting the public sector, whoever is in power.
“When you look at it practically, you need to cut £100bn off public spending to make it sustainable,” he says. “They are going to have to look at public sector pay, which certainly seemed out of kilter with private sector pay before the crisis. Now it seems almost absurd by comparison. The number of jobs is going to have to be evaluated and they are also going to have to look at the pensions.”
Coats predicts “some really profound disagreements” between public sector unions and a Conservative government. “I am confident it will be the centrepiece of public services employment relations in the first two or three years of a Tory government. Public finances are going to be under real strain.” He adds that Labour would also need to address this issue, but believes disagreement with the unions would be less profound.
All parties save some of their most headline-grabbing ideas for the launch of their election manifestos to ensure maximum impact. But, according to Cougherty, there is another reason why Labour has given so little away about its plans for the next parliament. “There are a few ministerial hobby horses limping through parliament, but it has run out of ideas,” he argues.
At last year’s Labour Party conference, the then secretary of state for BERR, John Hutton, spoke of the need for change so the UK could emerge stronger and fitter from the recession. But as far as employment and business policies were concerned, the emphasis was what Labour had done since 1997 rather than on what it would do in the future.
One rare Labour ministerial speech to impress Coats was made by James Purnell, secretary of state for work and pensions, to the Young Foundation conference in September. Purnell highlighted the need to ensure that work is engaging and that employees gain a sense of wellbeing in the workplace. “Just as we care about getting people back to work, so we also care about the nature of the work they do.”
Coats says a CIPD employee engagement survey, published in 2006, shows that barely one-third of employees are engaged in their work. “Whatever people are doing does not seem to be working,” he claims.
Like other commentators, Coats does not favour a fresh bout of employment reform. Instead, he argues that government, employers, trade unions and other stakeholders need to reach a consensus on establishing a properly functioning system of employment relations.
“At present, we have a very unstable hybrid that brings together the old system of collective bargaining, enlightened HR management and piecemeal intervention by the state through employment legislation.”
Key policy proposals
The Conservatives promise a revolution in skills and training by creating 100,000 extra apprenticeships a year through a £775m cash injection. Measures would be introduced to make it easier for companies to run apprenticeships with a £2,000 bonus promised for each one created by a small to medium enterprise (SME).
The party is also committed to giving companies tax breaks for job creation and to simplifying employment law so recruitment becomes easier. A new all-age career service would be set up with advisers in every school and college. Control of social and employment policy would be transferred from Europe to the UK.
The Liberal Democrats pledge to switch resources from the employer-led Train to Gain programme into adult education and apprenticeships.
On the economy and business, the emphasis would be removing red tape, introducing independent checks on the costs and benefits of regulations. ‘Sunset clauses’ would be used to ensure that regulations remain fit for purpose so they can be scrapped, replaced or adapted if necessary.
Labour is also committed to reducing the amount of time and money that businesses spend on compliance. It backs the long-term strategy set out in the Leitch Review, which says the proportion of adults with level 2 qualifications needs to reach 90% of the workforce by 2020. The aim is to achieve this through a voluntary partnership between government, employers and unions. If insufficient progress is made, then an employee entitlement to workplace training will be considered.
Hopes and fears for the next parliament
- Abigail Morris, of the British Chambers of Commerce, says: “The main overarching thing is more working together of departments and more simplification of legislation, such as the Equality Bill.”
- Nick Holley, of Henley Business School, believes the core issue is lack of skills at primary and secondary school. “I would like to see the government fix our education system so people coming into the workforce have adequate literacy and numeracy skills.”
- EEF’s David Yeandle wants to keep the mandatory retirement age at 65 but suspects the Tories will want to scrap it. “It makes planning easier and is quite a good trigger for employees and employers to have a serious discussion about retirement issues.”
- The CIPD’s Ben Willmott wants more focus on the health, work and wellbeing agenda. “A relatively small investment in funding wellbeing in the workplace can have a disproportionate impact on reducing the burden on the NHS.”
- Tom Clougherty, of the Adam Smith Institute, says: “Flexible working is more or less a cross-party issue and is something I am wary of. A requirement that may not be a major burden to large companies can be crippling to smaller organisations.”