The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)
My Lords, with the leave of the House, I shall repeat a Statement made yesterday in another place by my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy. The Statement is as follows:
“I would like to make a Statement on the Good Work Plan, published today, which sets out the Government’s vision for the future of the UK labour market and how we will implement the recommendations arising from the Matthew Taylor review of modern working practices.
The Taylor review was commissioned by the Prime Minister to examine the current labour market and employment law framework to help us understand the opportunities of future working practices as well as to identify areas where it has not been working for everyone.
The Government responded to the review in February, accepting the vast majority of the recommendations. Alongside this response, we also launched four consultations to seek views on how best to implement the recommendations. I am grateful to everyone who took the time to respond; their insights have been invaluable in informing our policy development.
The Good Work Plan that I am publishing today sets out a programme for ensuring that the UK labour market continues to thrive in future. The UK labour market has a very positive record in recent years. Since 2010 we have higher employment and lower unemployment in every region and every nation of the United Kingdom. Wages are now growing at their fastest pace in almost a decade. This success has been underpinned by an employment law and policy framework that combines flexibility with protections for workers. New ways of working and the rise of new employment models offer great opportunities, including innovative products and services for consumers as well as new ways in which individuals can find work, earn a living and develop their talents.
Our industrial strategy set out a long-term plan to embrace the opportunities presented by these changes and to boost the productivity and earning power of people throughout the UK. Good work and developing better jobs is at the centre of the vision of the industrial strategy, so I am proud to be the first Secretary of State to take responsibility for promoting the quality of work as well as the creation of new jobs. I have written to the independent Industrial Strategy Council to ask for its participation in considering the best ways to measure the quality of work in the United Kingdom, and I am very pleased that Matthew Taylor serves as a member of the new Industrial Strategy Council.
Another core element of the quality of work agenda is ensuring that we address the challenges for employment law and policy that the Taylor review identified. Most UK employers do the right thing and ensure that their workers benefit from the rights and protections to which they are entitled. We will not allow these high standards to be breached by a minority who try to deny workers their just entitlements.
Among these reforms are steps to improve clarity for both employers and workers. Matthew Taylor recommended that the Government should do more to help individuals and businesses to understand their rights and obligations. He highlighted that the existing employment status tests have contributed to a lack of clarity for both individuals and employers. We agree with this conclusion and will legislate to make improvements to reflect the reality of modern working relationships.
Matthew Taylor also recommended that a renewed effort should be made to align the employment status frameworks for the purposes of employment rights and tax to ensure that the differences between the two systems are reduced to an absolute minimum. Again we agree, and we will bring forward detailed proposals to align the two frameworks. We are also committed to addressing what Matthew Taylor termed “one-sided flexibility” where too much risk has been transferred to the individual, sometimes to the detriment of their financial security and personal well-being. We will legislate to give all workers a right to request a more predictable contract and address the obstacles that employees can face in building up continuous service. We will also legislate to end the injustice faced by waiters and waitresses and other staff in hospitality whose tips left for them by customers are diverted to their employer.
Another fundamental reform that Matthew Taylor proposed was the repeal of the so-called Swedish derogation, which exempts agency workers from equal pay requirements. The Government are therefore today bringing forward legislation to prevent this type of contract being used to avoid meeting the legitimate rights of agency workers. We are also today laying legislation to extend workers’ rights, including extending the right to a written statement to workers and making this available to all workers from day one. We are also bringing forward legislation to provide workers with a longer reference period for the calculation of holiday pay, and reforming regulations to make it easier for employees to have their voice heard in the workplace. This demonstrates how we are putting the Good Work Plan into action immediately.
We also recognise the vital role that effective enforcement plays in ensuring confidence to challenge when the law and regulations are broken, and in creating a level playing field between businesses. Matthew Taylor called on the Government to improve access to justice in the workplace. We have already committed to extending state enforcement on behalf of vulnerable workers to the underpayment of holiday pay, and the Good Work Plan sets out how this approach will mirror the tough financial penalties and enforcement approach that already apply to the underpayment of the national minimum wage. We are also taking steps to improve the effectiveness of employment tribunals, quadrupling the penalties that they can impose for persistent breaches of employment law.
We want to continue to improve the enforcement landscape further. In the light of forthcoming policy changes, we will also consider the case for creating a new, single labour market enforcement agency to better ensure that vulnerable workers are more aware of, and can exercise, their rights, and that businesses will be able to deal with a single body on matters relating to their workplace.
The Good Work Plan sets out a vision for the future of the UK labour market: a labour market that rewards people for hard work, celebrates good employers and is ambitious about boosting productivity and the potential for everyone in the UK to improve their earnings. I am grateful to Matthew Taylor and his panel, as well to the many other individuals and organisations who have contributed to the review of modern working practices and our subsequent consultations. Their input has been invaluable in helping the Government to ensure that the UK labour market is ready to embrace future opportunities without detriment to workers’ rights. I also thank the Business, Energy and Industrial Strategy Committee, the Work and Pensions Committee and the Scottish Affairs Select Committee for their continued contributions to the scrutiny of the recommendations and for their recommendations.
Alongside the Good Work Plan, the Government are today publishing their response to the first full strategy from the director of labour market enforcement. Sir David Metcalf’s strategy was published on 9 May 2018 and made 37 recommendations on labour market enforcement and raising awareness of employment rights. The Government’s response accepts the vast majority of the recommendations and sets out the steps that we will take on raising awareness of employment rights, improving intelligence gathering on abuses of those rights and on strengthening enforcement efforts. I will be placing a copy of this document in the Library of the House. The Home Secretary and I look forward to working with Sir David as the Government implement the recommendations that we have accepted as he prepares to set clear strategic priorities in the 2019-20 labour market enforcement strategy.
As Matthew Taylor concluded, the British model works. We have high employment, low unemployment and a long-standing and proud record of high standards for workers. We will consistently be in the vanguard of reform to maintain this reputation as new technologies and new opportunities for workers become available. This response to Taylor is in keeping with these high standards, and I commend the Statement to the House”.
My Lords, that concludes the Statement.
Lord Fox (LD)
My Lords, I join the noble Lord, Lord Stevenson, in thanking the Minister for repeating the Secretary of State’s Statement. There is perhaps an inverse law here. We are at the end of a long day in a long Session and very few noble Lords are left in the Chamber. Despite that fact, this stands to affect more people than anything else the House has debated this week. It is important and it will genuinely help to improve the lives of millions of UK citizens. For that reason, we welcome the Government’s response to the Taylor review. We welcomed the review when it came out and the Statement sets in motion a number of important steps in the right direction. This has been a long time coming and it is unfortunate that the Minister’s department, along with every other part of government, has a lot of things to do around Brexit, meaning that important work such as this takes too long and is slow to come out.
The Government are right to reject open hostility to flexibility in the job market. Many people want and need the right sort of flexible job environment. Hopefully, these steps will move that forward. Flexibility should not be open to abuse. Workers need real control and choice over the work they take, which means giving them new rights and enforcing existing ones more stringently. The Government’s response has been a bit underwhelming in some cases. If the Minister will excuse me, I will go over a few areas where we think more work should be done.
The Government have said that they will bring forward legislation clarifying employment status and aligning tax and rights, but there is scant detail. Will the Minister fill out the detail or, if not, the process by which it will be forthcoming? The Government have also failed to genuinely address the need for a “dependent contractor”, set out as an employment status for people within the gig economy. The existing status of “worker” needs to be updated and redefined for the sort of 21st-century work that the noble Lord, Lord Stevenson, referred to. We need that status to guarantee gig economy workers minimum earnings, sick pay and holidays. The Government have ruled out a higher minimum wage for hours not guaranteed as part of a contract, and are now going through lengthy consultation. We welcome consultation and, in other environments, the Minister has been criticised for not consulting sufficiently—but it needs to be quick and direct and it needs to get to the point. Action to stamp out abuse of zero-hours contracts must be swift rather than convoluted and kicked into the long grass.
Ministers have refused to rule out reintroducing fees for employment tribunals after the Supreme Court ruled them illegal. They should take that step immediately and rule out reinstating those charges. The Government must show how they will help gig economy workers access occupational pensions. That does not seem to have been addressed and I will come back to it in a moment in relation to sexual equality.
To close, I have three other questions. The Taylor review said that those working in self-employment should receive the same state benefits as those in employment. Why, then, are self-employed workers with fluctuating incomes punished by universal credit? In a good month, their benefit is cut, but in a bad month, their benefit does not rise as much because the minimum-income floor kicks in. Therefore, will the Business Minister undertake to work with the Work and Pensions Secretary to ensure that universal credit is responsive to this kind of fluctuating income, perhaps by measuring incomes over a rolling 12-month period rather than on a month-by-month basis? This unfairness needs to be addressed.
Secondly, around 55% of workers on zero-hours contracts are female. The trade unions warn that the gender pensions gap now stands at about 40%. That means that disadvantages to pensions for zero-hours employees disproportionately affect female workers. Therefore, to avoid further disadvantaging women, the Government must act on Taylor’s recommendation to improve pension provision among the self-employed. What will the Government do to ensure that women in less stable forms of employment will be able to enjoy a secure retirement?
Finally, the University of Greenwich study from 2016 found that disabled workers on zero-hours contracts were often unable to get their bosses to make reasonable adjustments required by the law. They were often afraid to raise the issue because they felt that it might endanger their employment prospects and put them back on to benefits. What are the Government doing to protect disabled people in insecure forms of employment? How will they ensure that the 21st-century economy works for disabled people and not against them? I look forward to the Minister’s response to those questions.
Lord Henley
My Lords, I thank the noble Lords, Lord Stevenson and Lord Fox, for their general welcome of this Statement. The noble Lord, Lord Stevenson, said it was a good start and that he was particularly grateful for the stress on quality; my right honourable friend takes pride in being the first Secretary of State to address that issue of quality. I also thank the noble Lord, Lord Fox, for his comments, particularly his opening remark about being rather sad about inverse laws meaning that, although a great many people were being affected by these policies, not many people—sadly, because of the timing and other business—are present for this debate. It reminds me of the remark that people used to make about discussions about money in certain local councils: namely, that the smaller the amount of money that was being discussed, the longer the item took. I will attempt to answer a number of the points, some of which obviously overlap.
First, both noble Lords were concerned about employment status and how we deal with the distinction between workers and employees. I can assure them that we are committed to legislation to improve the clarity of employment status to reflect the reality of modern working relationships. Obviously, more work needs to be done; we will bring forward detailed proposals on how the frameworks for employment and tax statuses could be aligned. It is, as has been made clear by many, very difficult, and I am not sure that we can ever get them completely aligned—but we will do our best. We are one of the first countries in the world to address the challenges in this area. As Matthew Taylor said, there are three levels of status. He believed that that was right and appropriate, but we want to bring a degree of greater clarity in this area.
Secondly, there were concerns from the noble Lord, Lord Stevenson, about the powers and resources available for enforcement in this area. We are increasing the resources available for enforcement: the budget for enforcing the national minimum wage was increased from £20 million in 2016-17 to some £25.3 million in 2017-18. The Employment Agency Standards Inspectorate has also received a 50% increase to hire more inspectors. But again, as my right honourable friend has made clear on a number of occasions, we want to make sure that it can do that job and bring to book those who are not performing adequately. We believe it is right that successful claimants get what they are due fully, which is why yesterday we launched a new naming scheme for employers who do not pay the employment tribunal awards. Again, I believe that a naming and shaming policy is exactly the right approach.
On the question of employment tribunal fees, raised by the noble Lord, Lord Fox, obviously I am aware of the case in the Supreme Court to which he referred. We are reviewing the fees strategy and looking at the balance between charging direct users and using taxpayer subsidy. The fee remission scheme—help with fees—is a crucial element of this strategy, and, again, we are considering whether the scheme needs to be adapted to facilitate better access to the courts and tribunals in the light of that judgment.
Lastly, on the question of zero-hours contracts, the noble Lord, Lord Fox, in particular referred to the position of some women with regard to zero-hours contracts. However, zero-hours contracts can affect all people, of whatever age and gender. I point out to him that, as he will be aware, Taylor noted that banning zero-hours contracts altogether would negatively impact far more people than it would help.
Lord Fox
My Lords, I think there is a slight misunderstanding. I mentioned at the very beginning that people welcome flexible working contracts, so I ask the Minister please not to put those words in my mouth. My point was that because more women work on flexible contracts, under which pensions are harder to sort out, naturally more women than men will suffer from a pension point of view because more women are on flexible contracts.
Lord Henley
I accept the noble Lord’s point. He will be aware that we made a number of changes to pension arrangements, which one of the noble Lord’s right honourable friends was responsible for as a Minister in the coalition Government, and that will have benefited a great many women and helped them to meet their pension contribution record. I just wanted to make the point that Taylor noted that banning zero-hours contracts would negatively impact more people than it would help. I apologise if I put words in the noble Lord’s mouth, but he accepted that that flexibility in employment is important to a great many people, and I do not think that many of us would like to deny that.
I also note what the noble Lord had to say about disabled workers and the 2016 Greenwich study. I would certainly like to look at that more carefully and if possible write to him. If we go back as far as 1996 and the disability legislation of that year, and amendments and improvements such as the Equality Act 2010, we see that we have made great leaps forward. I hope that what we have set out here, which will be of benefit to all workers, will also be of benefit to disabled workers and to others in due course.
Lord Henley
My Lords, I will respond to the noble Baroness and I look forward then to responding to the noble Lord. That is the order in which we normally do these things. I welcome the positive approach that the noble Baroness took in her comments on the Statement by my right honourable friend, about where it is going and how it might develop. I am not sure that I can answer her questions in much more detail than I have already set out to the two speakers for the Opposition Front Benches. A lot of this is ongoing work. There is much to be done and there will be further consultation. I appreciate that at times noble Lords feel that there is almost too much consultation but this is the right way forward on this process, having had the Taylor review and consulted on it, and having taken certain things forward.
The noble Baroness started off by talking about the one-sided nature of some contracts. She and I probably come from a very different position in terms of how we think a Government should act. I am sure that she believes that the Government should act a great deal more than is the case with my rather hands-off approach. However, I agree with her that, particularly with employment contracts—although one has also seen it in the past with landlord and tenant contracts—there can be occasions for Governments to intervene to bring in a degree of equality between the two parties. This is the approach that my right honourable friend sets out in his Statement and in the general approach that he has taken to contracts.
The noble Baroness then asked about fees. I do not think that I can go much further than I did in what I said earlier to her noble friend. We are reviewing the fee strategy following the UNISON judgment and are looking at the balance between charging direct users and using taxpayer subsidy. There will be further thoughts in due course on how that will develop and I am sure that we will bring them to her attention.
Lastly, the noble Baroness commented on the new enforcement agency proposals and on the impact that they were likely to have on ACAS. If I could say anything more at the moment, I would, or I will write to the noble Baroness, but, again, I think that that will be ongoing work. I hope that she will be patient and look forward to the completion of that work. I will now sit down and wait for the noble Lord, Lord Lea, to make his intervention.
Lord Lea of Crondall
My Lords, I thank the Minister for his overview. I would like to pick up the point made by my noble friend Lady Drake about the quality of employment contracts. My last few years at the TUC were dominated by an attempt to put flesh and bones on to the quality of the employment contract. This is an important study but there is a very shallow focus, and perhaps I may explain what I mean by that.
If you talk to anybody about the economy—indeed, if you talk to anybody in the Treasury—and you compare our economy with other leading economies across the channel, you will find that our productivity performance is a major source of deep concern. Of course, this is also a matter of statistics. A higher level of employment with a rate of economic growth of, say, 2%, will probably mean lower growth in productivity. The problem of low productivity is a statistical inversion.
The big question facing the country on this front is: what are we going to do about the rate of growth of productivity? Productivity is the basis of living standards. To say that there is a lack of productivity is another way of saying that there is a growth of inequality of outcomes in the British labour force and a growing disenchantment among young people. This might go back to a growing inequality of opportunity in education. It is no criticism of this report and the Government’s response to it to ask the Minister to reflect on the fact that there are some huge problems that are not within the scope of this report, and it is the productivity puzzle.
One of the recommendations—number 14, I think—is about an adjustment to the information and consultation regulations. This interests me, as many continental countries have much more statutory regulation in this field than we do. When the trade unions in this country had double or treble the membership they have now—which is partly to do with the new types of employment relationship—it was very difficult. Does the Minister recognise that although this report ticks a lot of the boxes set up by Taylor, and is a step forward—whether on recognition, zero-hours contract issues, recognition of the IC regulations and so on—it is not as if this country looks as if it has a happy future economically?
There is nothing here about works councils or anything remotely like that; that is a key example. A friend of mine went to Gothenburg in Sweden to visit the company he was going to take over, and was invited to a buffet lunch with the works council, whose leader said, “We have one question, Mr Struthers. If you take over our company, how will that improve our world market share?” He got home to Peterborough or wherever it was and reported this and people were astonished that, at a works council, a workers’ representative had asked that. It is almost inconceivable because the world market share is not brought within the purview of our workers or their representatives—that is true to this day. It is a million light years away. We are looking through the other end of the telescope when it comes to these sorts of questions—the fundamental questions facing Britain, its social inequalities, its morale and so on. That should be the wider template upon which this discussion goes forward.
Lord Henley
I thank the noble Lord for his intervention about the quality of employment contracts, the work he did 20 years ago when he was last at the TUC and his concerns about productivity, which he feels the Statement does not address. He connected those concerns about productivity with high employment, and I am grateful to him for stressing that we have high employment. I think there are now 32.48 million people in work, and that is something one can be very proud of. He is right to address productivity, but this Statement is not about productivity. I refer him back to the industrial strategy, which we published a year ago. He will remember our debate on it just under a year ago, on 6 or 7 January; I think that it was the first one we had when we came back from our Christmas Recess—let this year’s roll on. One of the things that my right honourable friend wanted to point to was the general problem that we have with productivity—to the extent that we can measure it, because it is a very difficult thing to measure. We accept that our productivity is not what it should be. In that industrial strategy we laid out a whole array of policies to address that point.
The noble Lord asked whether I would reflect on the problems of productivity. I give him an assurance and a guarantee that both myself and my right honourable friend—in fact the whole department and the whole Government, because that industrial strategy goes beyond the department and belongs to the Government —have concerns about productivity, and those concerns are addressed in that industrial strategy.