In the run-up to July’s general election, the Labour Party pledged that it would publish an Employment Rights Bill within its first 100 days and last week, just days before the deadline, the government did just that.
With MPs due to debate the Bill in Parliament next week, we explore whether this legislation will make life substantially better for workers or if, as Unite the Union has claimed, it “leaves more holes than Swiss cheese” for employers to exploit.
The Bill at a glance
The new legislation brings forward 28 individual employment reforms. It promises to end “one-sided flexibility” and create a level playing field in which “good employers aren’t undercut by bad ones”. Reforms are wide-ranging, and cover issues from zero-hour contracts and fire-and-rehire to day-one parental leave rights and strengthened trade unions. It also includes changes to statutory sick pay, with plans to remove both the lower earnings limit and the waiting period before workers start receiving money. To enforce all this, the government has announced the Fair Work Agency which would bring together existing enforcement bodies. Trade unions have welcomed many of these reforms, but some say that plans have been watered down and need to be strengthened.
Day-one rights. The eleventh hour publication of the Bill comes after months of behind-the-scenes bargaining between ministers, unions and business leaders. One of the most significant points of contention is around day-one rights. A key promise is that workers will have basic rights from day one, such as protection against unfair dismissal and access to bereavement and parental leave. With some businesses pushing back on this, the government has hatched a “compromise”: a statutory probation period in which it would be easier for employers to dismiss someone “fairly”. The government is pushing for this to last nine months, however this will be subject to a lengthy consultation in which businesses are expected to push for longer probation while unions call for less of it (or in some cases none at all).
Zero-hour contracts. The government has promised to “end exploitative zero hours contracts”. The proposal is subject to consultation, but currently stipulates that everyone who works regular hours over a 12-week period would have the right to a guaranteed-hours contract (unless they actively opt for a zero-hours one). However, some including Unite the Union argue that failing to ban zero-hours contracts outright leaves too many “holes” for “hostile employers” to exploit.
Fire-and-rehire. The practice of firing employers and re-hiring them on lower pay and/or poorer conditions has received much attention in recent years, perhaps most notably in the case of P&O Ferries which has of course been at the centre of recent political news. The Employment Rights Bill proposes to end the practice, however there are reports that there may be more leeway for companies facing insolvency to restructure if it is deemed necessary to save jobs. This is another part of the Bill that Unite the Union has criticised for not going far enough.
Subject to consultation. In many areas, a lot of detail is yet to be fleshed out. A lengthy consultation process is expected, and realistically reforms are unlikely to take effect until at least 2026. On flexible working, for example, the government has said that this should be “made the default where practical”. However, it still has not provided details of how this would be enforced. Similarly, while a “right to switch off” law will not be introduced, the Government could announce a “code of practice” like in countries such as Ireland, though plans for this are also likely to be subject to consultation.
Single status of worker. Labour’s ‘New Deal for Working People’ promised a ‘move towards a single status of worker and transition towards a simpler two-part framework for employment status’. This would replace three existing employment categories and aims to strengthen protections for self-employed and gig economy workers. In the ‘New Deal’ paper, Labour suggested that this may take “longer to review and implement” and promised to carry out a consultation on moving towards a single status of worker within the first year of government.
Trade union access
Among the bill’s less-discussed areas are its efforts to strengthen trade union rights. Mainly, it would repeal various pieces of legislation introduced under the Conservatives, such as most of the Trade Union Act 2016 which the TUC says included “unfair hurdles to workers taking industrial action”. According to the TUC, the new legislation would also introduce fairer balloting rules, greater protection for trade unionists and improved union access to workplaces. The government also plans to use existing laws to allow unions to use electronic and workplace voting.
Unions will hope that these more under-the-radar reforms prove the most significant of all, by creating a platform to rebuild union membership in the private sector (currently hovering at just over 12%). They have long argued that they need better access to workplaces and an easier route to recognition by employers before they can grow this number substantially, and the Bill certainly removes some of the barriers erected by the last government.
Why this matters
As we have previously explored in New Economy Brief, strong workers’ rights are not only good for individual employees but for the economy as a whole. Research shows that stronger worker representation on boards, for example, boosts innovation and can also promote investment in R&D. There is also evidence that growing inequality is linked to declining trade union membership and that efforts to promote trade union membership could help reverse these inequalities. With growth so central to Labour’s programme and with voters so desperate for living standards to improve, this suggests that strengthening workers rights as much as possible – particularly by improving trade union access – should be a priority.
Reforming capital gains tax. The Centre for the Analysis of Taxation (CenTax) has published a report on the revenue and distributional effects of capital gains tax (CGT) reform. They find that equalising capital gains tax rates with income tax rates, introducing an ‘investment allowance’, “eliminating current ‘leaks’ in the CGT tax base” and other reforms could raise £14bn a year and boost growth while also making most CGT payers better off.
Is taxing the rich better for growth? The National Institute for Economic and Social Research (NIESR) has modelled how different taxes might affect growth. It found “the best way for governments to raise revenue would be through income taxes targeting the earners who are least likely to spend or work less as a result. If governments direct the revenue raised from this tax towards productive investment, while assuring financial markets of a clear, credible plan for future economic stability, the effect on economic growth can be maximised.”
A Clean National Wealth Fund. How should the NWF be designed? A briefing from E3G proposes to give the fund a clean growth mission, launch a sequencing roadmap for its institutional design, and guide it through a ‘Net Zero Investment Plan’ for the whole economy. It also argues that the government should “Commit to an urgent review of the impact of fiscal rules on the capitalisation of UK public banks”, and more.
Exclude National Wealth Fund from fiscal rules. Analysis from New Economics Foundation (NEF) has found that the NWF could raise £100bn over the next ten years if it follows the example of Germany’s national investment bank (the KfW), which is free to issue its own bonds while its liabilities are excluded from the fiscal debt target.
How should the NWF interact with GB Energy? A new briefing from Common Wealth outlines its thinking on the institutional design and relationships between GB Energy and the NWF. The authors propose that GB Energy should be “a public developer, not a mere subsidiary of a public financing institution” and that the NWF should “invest directly in domestic energy related supply chains, stimulating and directing supply in a distinct but complementary fashion to the demand-pull functions of GB Energy”.
Growing support for public sector net worth. Mark Carney, the Bank of England’s former governor, and Andy Haldane, its former chief economist, are the latest in line to offer their support for redefining public sector net debt as public sector net worth (PSNW) under the fiscal rules. (Read last week’s New Economy Brief for an overview of the debate around redefining public debt.)
Bond markets support borrowing to invest. Interestingly, and counter to some unhelpful recent speculation, Haldane notes that “A lasting 4 per cent of GDP per year investment boost could raise national income by 10 per cent in perpetuity,” and that using some of the headroom opened up by moving to PSNW for public investment “would more likely lower rather than raise sovereign bond yields” because “[i]nvestors, in countries as companies, value rising income and assets.”
Renters’ Rights Bill doesn’t go far enough? As the Renters’ Rights Bill entered its second reading in the House of Commons last week, Joseph Rowntree Foundation’s (JRF) Rachelle Earwaker argues in the Times that the Bill “falls short in tackling the most pressing issue of affordability”. She proposes capping annual rent increases by the rate of inflation or earnings growth to protect tenants from rent hikes.
Growing pressure for rent controls. The London Renters Union have published an open letter to Angela Rayner calling for a devolution of the power to establish rent controls to metro mayors. The letter was signed by a number of trade unions and other signatories including think tanks, renters’ groups and an estate agency.
Making homes more affordable by reducing investment demand. UCL’s Institute for Innovation and Public Purpose (IIPP)’s Josh Ryan Collins has outlined the reforms needed to address the crisis in UK housing affordability. The report draws attention to the need to reform property taxes, mortgage markets and the planning system to curb speculative investment demand in the housing market.
Private banks fund ecosystem destruction. A report from UCL’s IIPP looks at how banks from the US, UK, France, China and Japan are exacerbating the global climate crisis. The authors looked at financial flows from these banks to multinational companies whose supply chains exacerbate the risks of overstepping planetary ‘tipping points’. This is causing “deforestation in the Brazilian Amazon and the degradation of Indonesian peatlands—ecosystems critical for global climate stability.”
Climate change and national security. Why don’t we treat climate change as a national security priority? A report from the Institute for Public Policy Research (IPPR) calls for a “rapid national security risk assessment of climate change” so that security threats – like the collapse of the system of ocean currents that threatens the ability to grow many crops in the UK – stop being “consistently and significantly underestimated” in policy decisions. (Read BioScience’s 2024 state of the climate report for more on the latest ‘perilous’ impacts of climate change.)
