House of Lords

Tuesday 29th April 2025 Lords Chamber

Tuesday 29 April 2025

14:30

Prayers—read by the Lord Bishop of Derby.

Oaths and Affirmations

Tuesday 29th April 2025 Lords Chamber

14:37

Lord Hameed took the oath, and signed an undertaking to abide by the Code of Conduct.

AI: Cross-sector Legislation

Tuesday 29th April 2025 Lords Chamber

Question

14:39

Asked by

[Lord Holmes of Richmond]

To ask His Majesty’s Government whether they plan to introduce cross-sector legislation on artificial intelligence in 2025.

[The Minister of State, Department for Science, Innovation and Technology (Lord Vallance of Balham) (Lab)]

The Government remain committed to bringing forward AI legislation to realise the enormous benefits of this technology in a safe manner. We are continuing to refine our proposals to deliver this, ensuring that they are proportionate and incentivise investment and innovation. We will launch a consultation later this year. Most AI systems are already regulated at the point of use by the UK’s existing regulators. In response to the AI action plan, the Government are committed to working with regulators to support them in boosting their capabilities.

[Lord Holmes of Richmond (Con)]

My Lords, last month I published a report making the case for cross-sector AI legislation. Is it not clear that AI is already impacting, positively and otherwise, cross-sector, cross-society and cross-economy? If we do not have a cross-sector approach through legislation, how will we enable the clarity, the certainty and the consistency of approach which will bring forward the confidence to enable innovation and investment—good for citizen, good for consumer, good for creative, good for British business and good for our country?

[Lord Vallance of Balham (Lab)]

I thank the noble Lord for his question and enjoyed reading his report very much. There are three ways in which this cross-government AI approach will be looked at. First, as I say, the existing regulators will regulate their own areas. They will also be brought together more. The digital forum already brings together regulators around AI and has been given more money to ensure that the regulators can join up on this. Secondly, the development of assurance tools, which has been outlined in the AI Opportunities Action Plan, will allow us to understand that the actual use of AI is using tools that are validated. There will be a market in making sure that the validation system grows and becomes an important way of assuring users. Thirdly, the consultation around the newer models —advanced general intelligence and superintelligence, as it arrives—will require a cross-cutting general piece of work, which is where the consultation starts later this year.

[Lord Watts (Lab)]

My Lords, is it not the case that there has to be balance between AI and big tech and the creative industries? Do we not need to make sure that one of our major industries, the creative industries, are protected by any changes in the legislation?

[Lord Vallance of Balham (Lab)]

I am sure that the noble Lord is aware that the creative industries are some of the greatest users of AI. Of course, it is important that creativity is protected. That is why a consultation has been put out around the copyright issue, which has been discussed many times in this Chamber. In all walks of life, it is important that we understand what AI brings and where it must be controlled in order to allow other things to happen. That is true not only in the creative industries but in many other areas.

[Lord Clement-Jones (LD)]

My Lords, the Government failed to sign up to the declaration signed by 60 other countries at the recent Paris AI Action Summit. How much confidence can that now give us that any new AI Bill will prioritise a requirement for AI, in the words of the declaration, to be

“open, inclusive, transparent, ethical, safe, secure … trustworthy”

and sustainable? Given that the Government did sign up to the Seoul communiqué last year and hosted the Bletchley Park summit, are they now going backwards in this respect?

[Lord Vallance of Balham (Lab)]

I can assure the noble Lord that the Government are most certainly not going backwards in this respect. I can also assure him that the AI Security Institute which has been set up has driven much of this across the world. It is linked to similar units elsewhere; it is undertaking work on many models that are evolving; and it is making its own work open, including the approach it takes. There is a very robust system being developed to make sure that the UK is at the forefront of this, not in the following stream.

[Lord Kirkhope of Harrogate (Con)]

It is very encouraging that the Government’s AI opportunities action plan is proceeding, and I very much welcome it. The Minister just referred to the precautions—including the AI Security Institute, which clearly needs resources—that we need to take to protect interests of various kinds, and to regulators, where it was admitted by the Government that capabilities needed much enhancement. Has the Minister anything further that he can say to give reassurance to those who are concerned?

[Lord Vallance of Balham (Lab)]

Yes, regulation is clearly important, and that is why we formed the Regulatory Innovation Office, which is looking at AI, among other areas, including AI in healthcare. There are a number of actions being taken to boost regulator capability; that is one of the things that the Regulatory Innovation Office is working on. The regulators’ pioneer fund is also relevant to increasing and boosting the ability of regulators to undertake this. Development of capabilities takes place through the DRCF, the forum of the digital regulators that I have referred to, and there will be more in that area. In the SR, regulators have been encouraged to put in bids relating to boosting capability in AI.

[The Earl of Clancarty (CB)]

My Lords, one of the things that the creative industries are seeking—perhaps the most immediate priority—is the transparency of information held by tech companies. Is that going to happen?

[Lord Vallance of Balham (Lab)]

As the noble Earl is aware, transparency is one of the key issues in the consultation at the moment. We know that transparency of use of and output from AI systems is possible and should be encouraged. It requires technological advances to do that fully, but it is exactly what needs to happen to be sure what is being used, how it is being used and how the output relates to the input.

[Viscount Stansgate (Lab)]

My Lords, I do not know whether my noble friend knows but, this very afternoon, the University of Liverpool, in conjunction with the Parliamentary and Scientific Committee, is holding a meeting here in the House about AI and the law. I wonder whether, in preparation for the cross-sectoral legislation about which the Minister spoke, he can assure the House that the Government are in close touch with the legal profession, because the effect of AI in areas such as the law will be just as great as it is in other areas.

[Lord Vallance of Balham (Lab)]

I thank my noble friend. I am unaware of absolutely everything that is going on in the House this afternoon, and I am afraid that I was not aware of that. However, he is right to point out that the professions will be greatly affected by AI and the legal profession is certainly one of those. There is an enormous amount of work that could be done by AI, just as an enormous amount of work can be done with AI across the Civil Service. That is why there is a big push at the moment to adopt AI across the Civil Service. I think the same will happen in other professions, including medicine, law, architecture and many other areas.

[Viscount Camrose (Con)]

I note what the Minister said about remaining committed to AI legislation, but the uncertainty for everybody affected by AI, whether in the tech industry or elsewhere, is a real challenge. Can the Minister flesh out, in some small way, the scope, timing and purpose of planned AI legislation?

[Lord Vallance of Balham (Lab)]

I can certainly give the noble Viscount an indication of the scope. As I have said clearly, this is not going to deal with regulation that can be done by existing regulators. The use of AI in existing areas is something for the regulators that are specialists in those areas. It will not deal with the AI assurance tools, which will be developed separately, but it will look at artificial general intelligence and the emergence of new, cutting-edge AI—the things that we know will cut right the way across other areas and require particular attention.

[Lord Lansley (Con)]

My Lords—

[Baroness Kramer (LD)]

My Lords, perhaps the Minister could tell us why the UK did not sign the Paris declaration and which words the Government wanted removing from that declaration to make it acceptable.

[Lord Vallance of Balham (Lab)]

I am very happy to write to the noble Baroness and give her the precise details of that. However, I reinforce that the UK has been at the forefront of this, and the AI Security Institute is one of the most prominent actors in this space around the world.

[Lord Lansley (Con)]

My Lords—

[Baroness Foster of Aghadrumsee (Non-Afl)]

My Lords—

[Lord Baker of Dorking (Con)]

My Lords—

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

Can we hear from the noble Lord, Lord Lansley?

[Lord Lansley (Con)]

I am grateful. I draw the House’s attention to my register of interests. Is it the Government’s intention to use the powers in the Product Regulation and Metrology Bill, when enacted, to bring in product requirements based on ISO 42001 relating to AI governance, as a mechanism to bring us some degree of AI assurance through regulation?

[Lord Vallance of Balham (Lab)]

I referred to assurance tools, and that will be part of those. The noble Lord is quite right to raise the important area of standards, because they are critical here, and the UK is well linked to all the national and international standards bodies.

Wales: Nuclear Power Generation

Tuesday 29th April 2025 Lords Chamber

Question

14:50

Asked by

[Lord Jones of Penybont]

To ask His Majesty’s Government what plans they have to develop nuclear power generation in Wales.

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, we recognise the significant contribution that Wales has made to British nuclear power and value the experience and skills within the industry in Wales. We are committed to new nuclear, and I welcome interest in new projects in Wales. We have just consulted on a new nuclear planning framework, EN-7, which sets the criteria for development at previously designated sites, as well as empowering developers to identify new locations.

[Lord Jones of Penybont (Lab)]

My Lords, some weeks ago in this House, there were questions about the reluctance of the Scottish Government to approve new nuclear power stations. Now, I am not here to defend the Scottish Government—thankfully—but I can say that, despite the full support of the Welsh Government, the last UK Conservative Government failed to deliver the new reactor at Wylfa B. Given that, will the Minister give an assurance that a more positive approach will be taken to any new applications at Wylfa and Trawsfynydd to avoid the empty rhetoric of the past?

[Lord Hunt of Kings Heath (Lab)]

My Lords, I thank my noble friend and congratulate him on his outstanding leadership in Wales, particularly for the support from the Welsh Government for new nuclear. As far as Wylfa is concerned, I know that it is considered by many to be one of the best potential sites in the UK for new nuclear development. We will set out our plans in due course but, as a Government, we are strongly committed to nuclear energy as an essential baseload to our future mix.

[Lord Wigley (PC)]

My Lords, if the Government are serious about developing nuclear power with urgency in Wales, will they please take a twin-track approach, with priority being given to those sites which already have nuclear accreditation, such as Wylfa and Trawsfynydd, which the noble Lord mentioned, being developed as quickly as possible for climate and energy purposes, and for any other new site, which may need brand new planning safety approval, to be seen as a possible future site geared to economic growth objectives?

[Lord Hunt of Kings Heath (Lab)]

My Lords, I take the noble Lord’s point. EN-7, on which we are consulting, gives us a much more flexible policy on siting, but those sites identified in the current planning statement, EN-6, clearly have very favourable attributes, and this is where I think Wylfa has to be considered. His overall welcome support for new nuclear is to be acknowledged and welcomed.

[Lord Howell of Guildford (Con)]

My Lords, some of us have been talking to the main SMR producers this very morning. Their general message is that wait, delay and obstruction are their findings in dealing with the British Government, unfortunately. They are waiting for site sales to be settled, for the GDA and DCO processes to be accelerated, and, obviously, for the government lead that they all need. They say that they could produce earlier, by years, than anything that could come from Sizewell C or other, larger developments. They point to the facts that they could do it without government money and that the order books are rapidly filling up in all other countries. There really is a sense of urgency if our nation is to reach our desirable goals on reliable, affordable energy. Please can the Minister get on with the job?

[Lord Hunt of Kings Heath (Lab)]

My Lords, I agree with the last statement by the noble Lord, but I do not agree with what he said. The Government are very focused on development of new nuclear. He knows that, in relation to small modular reactors, we have a process by Great British Nuclear, which is going through a detailed series of negotiations, with final decisions to be made over the next few weeks. We were bequeathed that process by the Government that the noble Lord supported. His party did not open a single nuclear power station. I can tell him that, as far as SMRs are concerned, I have been to many fora discussing this with companies. They are clearly awaiting the outcome of the GBN process, and we will make progress following that.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, I welcome the Question from the noble Lord, Lord Jones of Penybont. The Minister needs absolutely no reminder from me of how important Wylfa is to the people and economy of north Wales, but, since the Government’s own calculations say that the delay is costing £90 million a year in lost revenues and lost opportunities in the supply chain and others, can he tell me what steps the Government are taking to prevent further delays at Wylfa?

[Lord Hunt of Kings Heath (Lab)]

My Lords, I think I have said that we will set out our future ambition for plans in due course. We have focused very much on getting Sizewell C over the line, and we hope a final investment decision will be made over the next few weeks. We have the SMR programme, we are very keen to see the development of AMRs as well, and we will set out our ambitions in due course. But there is no question about our commitment to taking this forward; we took the decision in 2007 to go back to nuclear. What is so disappointing is that the last Government had 14—it is all very well for noble Lords to shake their heads, complaining about what I am saying. They do not want to hear the facts. They had 14 years to sort this out, and they did not.

[Lord Blunkett (Lab)]

My Lords, in the light of the outage in Spain and Portugal over the last 48 hours, are not devolved and diffuse sources of clean energy absolutely crucial to our security? What measures will the Government take on the back of what is happening in Spain and Portugal to ensure that we can disconnect from the grid if need be in order to maintain sources across the country?

[Lord Hunt of Kings Heath (Lab)]

We have to be very careful in drawing any conclusions about what happened in Iberia in relation to our own situation—

[Noble Lords]

Oh!

[Lord Hunt of Kings Heath (Lab)]

I do not think we know the causes of what happened yet, so it is a bit early for noble Lords to start speculating on what direct relationship it has with this country. But I agree with what my noble friend says, that we want diverse electricity sources. That is what clean power is going to give us. We are going to have a number of renewable energy sources, we have nuclear as our baseload, we have gas, hopefully with carbon capture, with the ability to switch it on and off, and we will have clean, homegrown power. That is the way to energy security.

[The Earl of Kinnoull (CB)]

My Lords, the Inter-Ministerial Group for Net Zero, Energy and Climate Change met in March and issued a communiqué. The four Governments of the UK were represented there, the UK Government being represented by the Minister for Energy. In the section entitled “What was discussed”, four items are named, but nuclear energy is not one of them. However, it says that they talked about what would be mentioned at future meetings. This seems an ideal opportunity to discuss something which is at the core of net zero. Is the Minister able to comment on that and give an undertaking that, at future meetings of this important interministerial group, this will be on the agenda?

[Lord Hunt of Kings Heath (Lab)]

My Lords, that is a very good point indeed. Of course, one has to face up to the fact that the Scottish Government are not in favour of new nuclear development, despite the rich heritage there, and despite how much of Scotland’s electricity at the moment comes from nuclear development. But certainly, the noble Earl is absolutely right to say that, in these kinds of discussions, the role of nuclear is very important, not just for what it provides but for the growth it can bring to our economy, very highly skilled jobs and a lot of infrastructure investment as well. So the case for nuclear is very strong indeed.

[Earl Russell (LD)]

My Lords, the Welsh Government are clear that the development of Wylfa has the potential to be the single largest investment project in Wales. I welcome the response the Minister has given, saying that work will be done on this in due course, but could he be clearer on what “in due course” means? Can I push him further? Will serious consideration be given to using these sites for either long-duration energy storage or for data centres if the Government decide that they are not fit for future nuclear?

[Lord Hunt of Kings Heath (Lab)]

My Lords, I am very wary of getting into detailed speculation about the future of Wylfa. Clearly, it has great potential. I am not prepared to define “in due course”, but I can say to the noble Earl that we recognise the urgency of the situation in giving certainty to the market about our level of nuclear ambition going forward over the next 10, 20 or 30 years. On the issue of AI data centres and the links to AMRs, we very much recognise the potential there; we are discussing that with developers, and we are also looking at our regulatory system to ensure that it is fit for purpose in relation to that kind of development.

Defence Spending: Scotland

Tuesday 29th April 2025 Lords Chamber

Question

15:00

Asked by

[Baroness Curran]

To ask His Majesty’s Government what assessment they have made of the impact in Scotland of increased defence spending.

[The Minister of State, Ministry of Defence (Lord Coaker) (Lab)]

Scotland plays a vital role in the defence of the United Kingdom from strategic Ministry of Defence sites such as His Majesty’s Naval Base Clyde and RAF Lossiemouth. The new defence industrial strategy seeks fully to harness the potential of these spending increases across Scotland and the United Kingdom, using defence procurement and investment actively to generate wealth, boost export potential and increase and create high-quality jobs.

[Baroness Curran (Lab)]

I thank my noble friend the Minister for that reply. I know that he is in high standing in the defence sector in Scotland. Will he consider the establishment of a specific, proactive programme of employment within deprived communities to ensure that the benefits of increased investment in the defence industry are shared by all of Scotland?

[Lord Coaker (Lab)]

I thank my noble friend for that suggestion, which I will certainly ask the Ministry of Defence to consider. The increase in defence spending gives us a huge opportunity not only to protect our country better but to generate jobs and increase wealth across the regions and nations of this country. The idea of trying to ensure that deprived communities, particularly in Scotland but across the whole of the UK, benefit from that is something any Government should take seriously, and I certainly will take that back to the MoD.

[Lord Bruce of Bennachie (LD)]

My Lords, it is worth recording that Scotland has around 35,000 defence jobs and 11,000 people in the forces. We are building seven warships, and we have naval and RAF bases. Will the Government consider, in the new defence era, extending the engagement of the entire industrial complex of Scotland, including offshore oil and gas, the energy sector, IT and cyber, to ensure a proliferation of investment right across the economy and not just within the specialised defence sector? On recruitment, would it be worth considering reviving some of our traditional historic defence regiments, such as the Gordon Highlanders?

[Lord Coaker (Lab)]

I will take on board any ideas about how we improve recruitment, and that is one. The broader point that the noble Lord makes about defence investment is very important. Of course, we will continue to invest in the various sites I have mentioned. The noble Lord made a point about the involvement of the whole of business and the community in the new warfare and the new battleground of the future, so of course it will involve the oil industry and the business sectors because they are defending critical national infrastructure—the energy sources for our country. All those things become crucial not only in Scotland but across the whole of the UK. To deliver that, we need a whole society, whole community, whole business effort, which is what the new defence industrial strategy that we will be publishing soon will take on board.

[Lord Rogan (UUP)]

My Lords, defence spending in Northern Ireland lagged far behind the UK average for many years. In the new era of increased national defence spending, what does the Minister believe he can do, alongside colleagues from other government departments, to boost Northern Ireland’s contribution to the defence sector and in so doing potentially create many thousands of much-needed highly skilled jobs?

[Lord Coaker (Lab)]

Northern Ireland, as with the whole of the UK, including Scotland, will benefit from the increases in defence spending. Just one example of that is the huge new contract given to Thales in Belfast, which will generate a huge number of jobs. When you add not only direct employment at Thales but also the small and medium-sized businesses that will benefit from that, Northern Ireland will benefit from that increase in defence spending as well as other parts of the United Kingdom.

[Baroness Eaton (Con)]

My Lords, what role does the Minister see Scotland continuing to play in the UK’s ability to monitor and respond to threats in the North Atlantic and the Arctic region?

[Lord Coaker (Lab)]

Scotland is crucial to the defence of the United Kingdom, but beyond that is the importance of the role that the bases in Scotland play in the defence of, for example, the Arctic and the Greenland Gap. One example of that is RAF Lossiemouth, which is a crucial RAF base for the Ministry of Defence and for the defence of our country. The aircraft based there, such as the Typhoons and the various intelligence aircraft that are there to gather information, are crucial to us. RAF Lossiemouth, along with other such facilities in Scotland, are crucial to the defence of our country.

[Lord Foulkes of Cumnock (Lab Co-op)]

Just as we heard in the last Question, the SNP Government are prepared to accept nuclear-generated electricity—as long as it is generated in England or Wales. They have also done a U-turn on the independent nuclear deterrent—as long as it is moved down to England. Is there any depth of cynicism to which the SNP Government will not go?

[Lord Coaker (Lab)]

My noble friend is probably more able to comment on the SNP and the SNP Government than I am, but his question is serious and important. It gives us an opportunity to say that the base on Faslane—the nuclear deterrent provided there —is fundamental to the defence of our country. I note that even a former leader of the SNP is now talking about the need to maintain that nuclear deterrent, even if it were to be based in England.

Although the SNP has questioned the continuation of the independent nuclear deterrent, that did not stop it changing its policy in 2012 on being a member of NATO. I remind the SNP, as well as this House, all of Scotland and the whole of the UK, that NATO is of course a nuclear alliance. That provides protection for Scotland, and for the rest of the UK and our allies.

[Lord Walney (CB)]

With reference to the last question, the Scottish National Party is not represented in this Chamber so I am sure it will not mind me speaking about it. Whatever the views of the SNP Government or, indeed, any Administration, on a particular conflict, is it not vital that all parts of this United Kingdom get behind our defence sector? You can consider yourself pro-Israel or pro-Palestine, but to be pro-Scotland you have to back defence jobs in all parts of the UK, including north of the border.

[Lord Coaker (Lab)]

The noble Lord is absolutely right and makes a very good point. There are some 25,000 to 26,000 defence-related jobs across Scotland and that will increase, I would suggest, with the increased expenditure that we will see. There are RAF, Army and naval bases across Scotland as well, but the important point to make is that the defence of the UK requires the integrated union that we have. That is what people in Scotland and the rest of the country support. The defence of those values is important; it is as important to the people of Scotland, whatever their political persuasion, as it is to the rest of the UK. The noble Lord is right to remind us that the defence of the UK, whether it is Scotland or elsewhere, is of importance to us all.

[Baroness Goldie (Con)]

My Lords, I am always happy to talk about the SNP. Because of the SNP, Scotland is now the highest-taxed part of the United Kingdom, with many recruiters having to offer compensatory packages to attract high-calibre personnel to Scotland. Have the Government consulted with our Scottish industry partners on what effect these higher levels of taxation are having on them?

[Lord Coaker (Lab)]

I will check to see whether we have specifically consulted about the levels of taxation, but we will consult with Scottish industry and the broader UK industry about how we ensure that we get the defence industry we need. One of the present challenges is that we need to rebuild our defence industry—to rebuild our steel industry, for example, to ensure that we have the domestic sovereign capability to do the things we will need to do in the event of conflict.

I would say to the noble Baroness, who knows Scotland far better than I do, that shipbuilding efforts on the Clyde as well as Rosyth are seeing huge numbers of ships, with eight Type 26 frigates and five Type 31 frigates being built there. Scotland and Scottish industry should be proud of the way they are contributing to the defence of our country. The Scottish defence industry, as well as the wider UK defence industry, plays a huge role in that.

[Lord Beamish (Lab)]

My Lords, the Royal Navy’s shipbuilding in Scotland is very much dependent on other UK yards for fabrication and block work, for example, so a vibrant shipbuilding industry throughout the UK is important. Does the Minister therefore agree that it is disappointing that the Scottish Government have just awarded the ferry contract to Turkey—work that could have been done in the UK to support UK shipbuilding nationally?

[Lord Coaker (Lab)]

My noble friend raises an important point. We would all agree that this Government need to ensure that, as far as possible, the increases in defence spending benefit UK industry, British industry, and that is what we are seeking to do. We are doing that with the steel industry, and we want to see shipbuilding benefiting from the increases in defence spending. That requires a whole UK Government effort, not only at government level but with all the devolved Governments across the UK working together to ensure that we benefit from this increase in spending.

As I say, the crucial point, which has been brought home to us all, is the ability of this country to rebuild manufacturing, whether it be shipbuilding, steel or other industries, to ensure that we have the sovereign capability we need should we face a crisis. Frankly, this has been a wake-up call that may have come too late for this conflict, but for future conflicts we will ensure that we have capability now rather than at some distant point in the future.

Tax: Changes

Tuesday 29th April 2025 Lords Chamber

Question

15:10

Asked by

[Lord Leigh of Hurley]

To ask His Majesty’s Government what assessment they have made of the loss of tax revenue from wealthy individuals leaving the country following recent tax changes.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, the OBR has certified that the non-dom reforms the Government have implemented will raise £33.8 billion in total revenue over the five-year forecast period. That figure accounts for some non-doms who are ineligible for the new regime choosing to leave the UK in response to these reforms. The Government will continue to work with stakeholders to ensure that the new regime is internationally competitive and focused on attracting the best talent and investment to the UK.

[Lord Leigh of Hurley (Con)]

The ideologically driven decision to include overseas assets in IHT for both non-doms and former non-doms is described in the national press as Rachel Reeves’s biggest mistake. Despite what the OBR says, capital gains tax receipts have fallen by 10% and, as we heard on Friday, the national debt is ballooning. Does the Minister agree with me that, given that 30% of income tax receipts come from 1% of taxpayers and they are leaving in droves, it is a question not of whether this policy is reversed but of when? It is time to put country before party.

[Lord Livermore (Lab)]

I do not agree with the substantive bulk of the noble Lord’s question. He mentions the capital gains tax figures. The latest outturn data for capital gains tax relates mainly to capital gains tax liabilities in the 2023-24 tax year, so pre-dates the announcement of non-dom reforms by the previous Government and this one. This Government’s tax reforms to the non-dom regime and to capital gains tax keep the UK an attractive place to live and to invest, while ensuring that everyone who is a long-term resident pays their taxes here, helping to fairly fund our public services. The UK’s main rate of capital gains tax is lower than in any other European G7 country, as is our corporate tax rate, and our new residence-based regime is simpler and more attractive to new arrivals than the non-dom regime it replaces.

[Lord Rooker (Lab)]

Given the answer that my noble friend has just given, the best estimate I have seen is that the top 10% of taxpayers pay about 34% of their income in total tax while the bottom 10% pay 47% of their income in tax. Should we not be looking at the inequalities of the tax system a little quicker?

[Lord Livermore (Lab)]

I agree with my noble friend that it is important to look at inequality right across the tax system and across our society. This Government are of course committed to reducing that through measures such as the minimum wage increases we have seen recently. Of course, successful businesses and entrepreneurs who create jobs and wealth are the engine of economic growth in our society. We will support them to succeed while ensuring that the wealthiest pay their fair share towards the public finances.

[Lord Lilley (Con)]

My Lords, are the Government trying to prove the truth of the law first articulated by the late lamented Lord Harris of High Cross that punitive taxes on the rich do not redistribute income but redistribute people, to the immense loss of the Treasury in this country?

[Lord Livermore (Lab)]

No, we are not. The UK’s main rate of capital gains tax is lower than in any other European G7 country, as is our corporation tax rate. Our new residence-based regime is simpler and more attractive to new arrivals than the non-dom regime it replaces—the regime put in place by the party the noble Lord supported for 14 years.

[Baroness Kramer (LD)]

My Lords, my eldest granddaughter is a British subject and an American citizen. She lives in the UK and has started to earn some money, only to find that she cannot avail herself of something like an ISA because it would be taxed from day one in the US and vice versa. This is one of anomaly after anomaly and Catch-22 after Catch-22 that the UK Government have refused to address. Does the Minister understand that, with non-dom status gone, this is becoming a major problem and driving out people who are tax resident in more than one country?

[Lord Livermore (Lab)]

I absolutely understand the point the noble Baroness is making, but I do not necessarily agree that it is driving out the people she describes. I completely understand her point, but I am not sure I agree with the conclusions she is reaching.

[Lord Sikka (Lab)]

My Lords, the richest fifth pay 30% of their gross household income in direct taxes; the poorest fifth pay 16%. The richest fifth pay 11% of disposable household income in indirect taxes; the poorest fifth pay 27%. Altogether, the poorest pay a higher proportion of income in taxes than the richest. The Government can promote tax justice and stimulate the economy by cutting taxes for the poorest and eliminating the tax perks of the richest. How quickly can we expect action from the Government?

[Lord Livermore (Lab)]

As my noble friend will know, the UK’s approach to wealth through taxes on capital gains and inheritance generates substantial revenue for the Government and is on a par with other G7 countries. The OECD has said that capital gains and well-designed inheritance taxes can act as a more efficient and less administratively costly way of addressing wealth inequality than wealth taxes. Of course we want to ensure that we increase the incomes of the poorest people in society, which we have done, for example, through increases in the minimum wage.

[Baroness Penn (Con)]

My Lords, can the Minister confirm whether his Government agree with another of the OBR’s assessments, which anticipates that the Employment Rights Bill will have a net negative economic impact?

[Lord Livermore (Lab)]

The noble Baroness will know that the OBR has not included an assessment of that Bill in its latest forecast, because it has not yet progressed through Parliament.

[Lord Boateng (Lab)]

My Lords, does the Financial Secretary agree with the Chancellor of the Exchequer who said that

“it is not fair that people live in this country for very long periods of their lives benefit from our public services and yet operate under different tax rules from everyone else”.—[Official Report, Commons, 8/7/15; col. 325.]

Does he agree with that statement? Was that not in fact the statement of George Osborne, the Tory Chancellor of the Exchequer? If that is the case, is there not a lot of hypocrisy and cant being shoved at this from the other side?

[Lord Livermore (Lab)]

I agree with much of what my noble friend says. The previous Government resisted taking action in this way for many years, but then did a screeching U-turn and implemented a series of reforms. Their reforms raised £21 billion in revenue. Our reforms will raise an additional £12 billion in revenue.

[Lord Wallace of Saltaire (LD)]

My Lords, do the Government remember the distinction made by the previous Conservative Government between people who were from somewhere and people who might be from anywhere? It was made with the clear intention of saying that people who liked going abroad were somehow not fully loyal to England; they were more European or something else. Given that distinction, which the previous Conservative Government and their Prime Minister made, is it not now a little hypocritical to say we need to defend those who might easily move away to Dubai, Thailand or Monaco, rather than the interests of people who are committed to this country?

[Lord Livermore (Lab)]

I remember the “citizens of nowhere” comment that the noble Lord refers to. I think that, like much of what the previous Government did, it was not an encouraging thing to say. But let us remember that it is not for me to justify what the previous Government did. This Government are committed to addressing unfairness in the tax system so that everyone who makes their home in the UK pays their taxes here. I think that is absolutely the right principle from which we should proceed. Both the previous Government and this Government increased taxes on non-doms because it is necessary to raise revenue to repair the public finances and fund our public services. That is the fairest way of raising the necessary revenue while ensuring the UK remains an attractive place to live and invest.

[Baroness Neville-Rolfe (Con)]

My Lords, last Friday there was an important debate here about the serious threat that the current and increasing level of national debt poses for the UK. The Chancellor has failed to give herself enough headroom, and her fiscal rules are flawed. Hence, every reduction in tax receipts ought to be met by further spending cuts or by an increase in taxes elsewhere. Now we hear that tax revenue from wealthy people, such as non-doms, is going down sharply as many flee the country because of the Government’s policies. There is a clear tipping point. Will the Government reverse their non-dom policies? If not, which taxes will they increase to compensate for the loss of revenue?

[Lord Livermore (Lab)]

No is the answer. The noble Baroness says that taxes should rise or spending should be cut. I ask her the same question: she says repeatedly that we are raising the wrong taxes, but she never says which taxes we should be raising. She says repeatedly that we should cut spending, but she never says what we should cut spending on. The OBR’s March forecast shows that the Government meet our fiscal rules with the same headroom as at the time of the Budget, thanks to decisive action to reduce spending and to grow the economy. Average borrowing over the next five years will be 2.6% of GDP, compared with 5.6% of GDP over the previous 14 years. There is now a significant fiscal consolidation during the course of this Parliament, taking borrowing as a share of GDP from 4.5% to 2.1%, achieving the biggest current budget surplus in over 20 years.

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, that concludes Oral Questions for today.

[The Deputy Speaker (Baroness Fookes)]

My Lords—

[Noble Lords]

Order!

[The Deputy Speaker (Baroness Fookes) (Con)]

I was going to give your Lordships the opportunity to rise and leave or enter the Chamber, but not while I am on my feet.

Bus Services (No. 2) Bill [HL]

3rd reading
Tuesday 29th April 2025 Lords Chamber

Third Reading

Relevant documents: 13th and 19th Reports from the Delegated Powers and Regulatory Reform Committee. Welsh legislative consent sought.

15:23

Motion

Moved by

[Lord Hendy of Richmond Hill]

That the Bill be now read a third time.

[The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)]

My Lords, I will make a brief statement on legislative consent in relation to this Bill. The Government accept that legislative consent from the Senedd would be required for Clause 22(6)(b) and Clause 24(4) in their current form. The Government are considering options to ensure that the constitutional requirements for consent are met. This includes either amending the clauses to remove the provisions in question or by seeking consent. My expectation is that this issue will be addressed during the Bill’s passage in the other place.

A privilege amendment was made.

15:24

Motion

Moved by

[Lord Hendy of Richmond Hill]

That the Bill do now pass.

[Lord Hendy of Richmond Hill (Lab)]

My Lords, it has been a great privilege to take this Bill through the House. I am grateful for the scrutiny, challenge and wisdom from all sides during the debates on this important legislation.

The Government are clear in their ambition to reform and improve transport for passengers. Better connectivity—and the bus is the predominant mode of public transport—delivers growth, jobs and housing, in line with this Government’s plan for change. Ensuring that local leaders have the powers they need to have the best bus service for their local areas and communities is a critical step.

Your Lordships’ input as the Bill has progressed through this House has meant that it leaves this place a better Bill than when it was introduced. I hope that, in turn, the Government have shown themselves willing to listen and able to work with your Lordships.

I move to thanks. First, I give my gratitude to my noble friend Lady Blake of Leeds, who has given me her guidance and supported me on the Front Bench. I thank the noble Lord, Lord Moylan. I may not always agree with him—he seems to believe this Bill to be some sort of anti-enterprise activity, when it is not, and I must admit that I am still surprised by such a strong advocate of local authority independence over so many years having such a new-found desire for government intervention—but our engagement has been well-humoured and, more importantly, has given rise to some important issues that we have explored in your Lordships’ House. I thank the noble Earl, Lord Effingham, who has provided his views in his customary eloquent and courteous way.

The noble Lord, Lord Holmes of Richmond, and the noble Baronesses, Lady Brinton, Lady Grey-Thompson and Lady Jones of Moulsecoomb, have all campaigned effectively to improve accessibility and highlight the importance of inclusive transport. This has resulted in the Government tabling a package of amendments and supporting those brought forward by my noble friend Lord Blunkett on Report. I am very grateful to my noble friend for his constructive and pragmatic approach to the issue of floating bus stops.

There have been other notable contributions. The noble Lords, Lord Bradshaw, Lord Goddard of Stockport and Lord Burns, and the noble Baroness, Lady Pinnock, have provided wise words and, as ever, I am grateful for their contributions. I have enjoyed discussing the merits of bus safety with the noble Lord, Lord Hampton, who has raised issues of critical importance. As ever, the wise words of my noble friends Lord Snape, Lord Whitty and Lord Berkeley have added value, and I extend my thanks to them for sharing their counsel.

I particularly want to mention the late Baroness Randerson. I spoke in remembrance of her at this Dispatch Box at Second Reading, and I am sure I speak for others, as well as myself, in saying how sorry I am that someone who had such passion for and expertise in transport and such passionate support for this Bill was not here to lead her party in scrutiny of it. Thus, I am pleased that we were able to make the provision in the Bill on zero-emission buses even more comprehensive. I extend my gratitude to the noble Baroness, Lady Pidgeon, for stepping in for her party, and for our constructive and positive discussions through the Bill’s passage.

Finally, I extend personal thanks to all the officials who have supported me, especially the Bill team, legal colleagues, the drafting team in parliamentary counsel and everyone else—to name but a few of the many excellent people involved, I thank Nicola, Kenny, Jenny, Hamish and Saskia.

I look forward to following the Bill’s journey in the other place. I expect we will reignite some lively debates on its return to your Lordships’ House. With that said, I truly believe that this Bill is the most substantial and positive change in years for the bus network, passengers and the bus industry. This is the right way forward. I beg to move.

[Baroness Pidgeon (LD)]

My Lords, it has been a privilege to lead the Lib Dem Benches on this important legislation, and somewhat daunting to have to follow at short notice our great friend Baroness Randerson and her work in the area of transport, specifically her passion for buses.

I believe the Bill is stronger for our detailed scrutiny and amendments, particularly on cleaner buses across England and the accessibility of the bus network as a whole. I thank the Minister and his Bill team for their genuine engagement at every stage of this legislation. I thank the noble Lord, Lord Moylan, and his Back-Bench colleagues for their contributions, though sadly not always their support for our amendments. Likewise, I thank in particular the noble Lords, Lord Hampton, Lord Blunkett and Lord Holmes, and the noble Baroness, Lady Jones of Moulsecoomb, for their contributions.

Particular thanks go to my noble friends Lady Pinnock, Lady Brinton, Lord Goddard and Lord Bradshaw for their strong support and contributions, and huge thanks go also to Adam Bull, our legislative support officer, who has supported our Benches every step of the way.

The Bill now moves to the other place, where I hope the wider issue of funding our bus services will be picked up in order that we can see the transformation of bus services across the country that we all desire.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I too thank the Minister for his engagement with the Bill. He swatted away all our amendments so beautifully and sweetly—it was a pleasure to finally win an amendment. I hope that he will say to the Government at the other end how important the review of village bus services is going to be and perhaps not to swat it away. I particularly thank the noble Lord, Lord Moylan, who managed to get his party to vote for my amendment. That was an amazing achievement. I look forward to seeing the Bill return.

15:30

[Lord Holmes of Richmond (Con)]

My Lords, I add my thanks to the Minister; it was a pleasure engaging with him over the course of the Bill. He is a Transport Minister who not only knows transport but really cares about it. Can I raise with him the opportunity for an update at this stage? We had a detailed debate about floating bus stops on Report, and from the Dispatch Box he said that the Government would effect a pause in all new floating bus stop schemes. It was very encouraging that the Minister said that, because the Bill does not provide for such a pause. We are a day beyond a month since he made that statement. When he responds, can he give us an update as to what the department has done to bring about that pause in all new floating bus stops? Has the Secretary of State written to local authorities? Will there be a note that goes round? For example, has the department spoken to Streatham to ask it to pause its scheme which it is looking to roll out? I thank again the Minister for his engagement; I would welcome an update on how the department and the Government are looking to put in place provision to enable a pause on all new floating bus stops.

[Lord Hampton (CB)]

My Lords, I add my thanks to those expressed by other noble Lords. It was the Minister’s expertise and enthusiasm in particular that shone through. I thank too the Bill team and the Table Office. We got some truly cross-party support, and it was great fun. It is true to say that, since it has gone through this House, it has become a much safer Bill than when it began here.

[Lord Moylan (Con)]

My Lords, I thank the Minister’s private office, the Bill team and the other civil servants involved in the Bill, who have dealt with the Official Opposition with promptness, courtesy and responsiveness in an exemplary way. I also thank the Minister for his openness and engagement with the Opposition during the Bill. That contributed greatly to its swift and efficient passage through Committee. The Minister sets an example that many of his colleagues on the Front Bench could follow in relation to transparency, engagement and so forth, which could help with the dispatch of our business in your Lordships’ House. I thank the Opposition Whips team, in particular Abid Hussain and Henry Mitson. I express particular thanks to my Whip throughout all this, my noble friend Lord Effingham.

I am trying to be positive when I say that this is not the worst Bill introduced by the Government so far, but none the less it remains a pretty poor Bill. It does damage and removes private entrepreneurialism from the bus sector, where, as we know, private enterprise and the spirit of private enterprise are the only keys to economic growth. It is here primarily to gratify the unions and certain local authorities and not to do very much indeed for passengers. Most importantly, it gives powers to local authorities that they are neither equipped nor funded to exercise. To that extent it is, as I have said earlier, a somewhat bogus Bill.

We have improved the Bill in your Lordships’ House. We have added a purpose clause so that we know what it is meant to be about and what standard we can hold the Government to. We have ventilated further the £2 bus cap and what the consequences are of removing it, which is a further amendment that passed. We have also brought into the Bill the very sensitive issue of special educational needs transport and the effects that the reduction in the threshold for national insurance contributions has on that sector and its survival—which is so important. As I say, that is now part of the Bill as it goes to the other place.

We have removed unnecessary language—dangerous language—about what was expected from bus drivers in dealing with crime. As the noble Baroness, Lady Jones of Moulsecoomb, has said, we have also seen amendments to review services to villages, which we were glad to support. The noble Lord, Lord Hampton, has introduced an amendment which focuses on improving the overall safety of buses and the way in which bus services operate. The amendment from the noble Lord, Lord Woodley, sadly not in his place—as indeed he was not when the amendment was moved on his behalf by my noble friend Lord Moynihan—has added important protections to the Bill in relation to violence against women and girls.

Finally, it is worth noting the flanking action by my noble friend Lord Holmes of Richmond and the noble Lord, Lord Blunkett, which saw improvements made to the Bill in relation to floating bus stops, the back of which I think we would all like to see. So, it leaves your Lordships’ House a better Bill.

The Minister said something about the Bill coming back. I see no reason for it to come back. All those amendments are very worth while, and I hope that the Government will embrace them in the other place and simply move on.

[Lord Berkeley (Lab)]

My Lords, I add my voice to the many noble Lords who have thanked my noble friend the Minister. It is his first Bill. He is a real expert on buses and transport generally, and the House owes him a debt of gratitude for the way he has dealt with the Bill. We have made changes, as other noble Lords have said. It has been a very friendly and useful debate. The key thing is for us all to try to encourage more people to use the buses, whether that is in the countryside or in towns. That is the key; the Bill will go a long way to encouraging people to do that.

[Lord Hendy of Richmond Hill (Lab)]

My Lords, I shall of course be far more enthusiastic than the noble Lord, Lord Moylan, on this excellent Bill. I expect it will be back, but this is the briefest of replies. In answer to the noble Lord, Lord Holmes, on the floating bus stop issue, my honourable friend the Minister for Local Transport is, in colloquial terms, “on it”, and I will write to the noble Lord about how far he has got following this session.

Bill passed and sent to the Commons.

Employment Rights Bill

Committee stage
Tuesday 29th April 2025 Lords Chamber

Committee (1st Day)

Relevant documents: 7th Report from the Constitution Committee, 20th Report from the Delegated Powers and Regulatory Reform Committee. Northern Ireland legislative consent granted, Welsh and Scottish legislative consent sought.

15:38

Amendment 1

Moved by

[Lord Fox]

1: Before Clause 1, insert the following new Clause—
“PurposeThe purpose of this Act is to—(a) improve the fairness and security of employment;(b) facilitate cooperative arrangements between employers and workers, including the protection of workers’ rights and wellbeing;(c) make provisions about pay and conditions in certain sectors; (d) facilitate constructive workplace relations between employers and workers representatives, including trade unions;(e) make provisions about the enforcement of labour market legislation.”Member’s explanatory statement
This amendment inserts a new Clause at the beginning of the Bill to set out its overarching purpose and provides a framework for understanding the aims of the legislation.

[Lord Fox (LD)]

My Lords, in moving Amendment 1, I will also speak to Amendments 283 and 327.

In February 2023, Keir Starmer launched Labour’s five missions. The first is to get the UK’s economic growth to the highest sustained level in the G7 by the end of Labour’s first term. I need hardly remind your Lordships that it is with that mission, and the four others, that the Labour Party went on to win the general election with a majority. Since then, the Government have unwisely raised employers’ NICs and introduced this Bill. It is through those lenses that business views the Government’s attitude towards it.

Amendment 1 is an attempt to set this legislation in context, and I thank the noble Lords, Lord Sharpe of Epsom and Lord Hunt of Wirral, for also signing it. It was quite difficult to come up with wording that the PBO would let past its eagle eyes, but I am sure that the Minister will not find much of this objectionable. For example, proposed new paragraph (a) sets out the need for “fairness and security” as drivers for the Bill; I am sure the Minister will agree with that. Proposed new paragraph (c) is well represented in this Bill, as large parts of it set out new rules around trade unions.

However, I will spend some time discussing proposed new paragraphs (b) and (d). I cannot read this Bill without the feeling that it envisions just two states of employment—happy workers represented by unions and abject employees working in non-unionised concerns—but, of course, that is not true. Even in the very welcome conversations with the Minister, there seems to have been little recognition that the vast majority of people in this country are in employment where the facilitation of co-operation agreements between employers and workers is not automatically dependent on their union status. Let us remind ourselves that, for most people, those co-operative arrangements work pretty well, and that the proportion of UK employees who are trade union members is around 22% in this country. Constructive workplace relations can be forged in many ways other than via direct representation of employees by their unions.

When the Minister generously gave her time to meet with me on this Bill, she explained that discussions between government, employers’ organisations and the unions had been constructive and amicable. I am sure they were, but those selfsame employers’ organisations have also raised serious alarm over this Bill. The British Chambers of Commerce, the CBI, the IoD, the FSB and Make UK all sent a joint letter, which I am sure all noble Lords have received and read. The B5, as it is known, is not alone: all manner of industries—including hospitality, food and drink, and employment agencies—have raised serious concerns about the Bill. The telling phrase in the B5 letter is:

“For us the challenge has never been what the government wants to achieve, but the unintended consequences of how they implement it. Unfortunately, the Bill locks in several irreversible policy directions that will force business to make difficult choices between jobs, investment and growth”.


The Minister may well say that she is getting equally forceful lobbying from the unions. Indeed, I believe that the noble Lord, Lord Hendy, will provide ample evidence of that with his later amendments. She may say that the Government are pitching this Bill in the middle of these respective positions—and she may claim, on that basis, that the Bill is in the right place. However, Governments are elected not to work out the average position of policy but to make the right decisions. I ask the Minister to take on board the concerns of business and, importantly, to recognise that there are issues in this Bill, which, if not addressed, will impede the Government’s chances of delivering their mission of economic growth.

Small and medium-sized enterprises are the backbone of the UK economy, accounting for a huge proportion of the business population and employing approximately 16.7 million people—around 61% of private sector employment, according to data from the Federation of Small Businesses. In that regard, the Minister should recognise that the impact of many of the measures in the Bill will disproportionately affect small and medium-sized businesses. These smaller businesses have neither the administrative horsepower nor the reservoir of human energy required to meet the collection of tasks that the Bill will introduce. Given their economic footprint and vital role in local communities, SMEs must be central to the purpose of the Employment Rights Bill. Placing SMEs at the heart of the Bill’s purpose offers an opportunity to foster better employment relations while supporting enterprise, resilience and long-term growth.

15:45

It has proved a step too far to include an explicit mention of SMEs in Amendment 1. However, any effort to improve employment relations and a culture of fairness at work will not succeed unless it meaningfully supports and engages SMEs. This depends on clear, proportionate and practical regulation. In that regard, as Committee progresses, we will seek to make things easier for SMEs—and, indeed, for all other businesses.

At this point, I highlight the following measures. There needs to be a change in the polarity of the guaranteed hours obligation offer to offer a more streamlined right to request. There also needs to be a recognition that the current arrangement does not work in the case of seasonal jobs; we will come to that. There needs to be a confirmation that the probation period will be nine months; this should not be left hanging while the Act commences. The statutory sick pay arrangements for SMEs need to be changed to ensure that the costs are shared. There needs to be a clearer picture of the role of tribunals, with the ability quickly to strike out cases that cannot succeed, and a better understanding of how the public funding of claimants will work.

Overall, your Lordships needs to understand what the statutory guidance will look like. We need to know how this Act will work and what it will mean in practice. In many respects, the Government are asking your Lordships to stand back and allow them to formulate the details of the Bill gradually, as more and more government amendments flood in and consultations still progress—with outcomes set well after the Government hope to finish the Bill. Some might say that they are making it up as they go along, but I will not. Either way, this is not the way to formulate important legislation such as this. We need to know what it actually is. The consultations should precede, not succeed, the drafting of a Bill. Government amendments should be few and trivial, not many and fundamental. The operational details of the proposed legislation should be clear and obvious, not opaque.

That last point is why I have included in this group Amendment 283, on a code of practice, and Amendment 327, which would tie commencement to the publication of a code of practice. These would allow the Government to set out all of the issues that need to be clarified, including how the Bill will operate in practice if and when it becomes an Act, and would ensure that the Act does not commence until this process has happened. In other words, the details would be nailed down firmly before the Act gets under way.

At first sight, Amendment 283 might seem like a long list but, in fact, it is not half of how this Bill will reach into working life. The amendment would require the Secretary of State to publish a code of practice that provides employers with guidance on complying with the Act. The code should set out best practice, compliance monitoring and enforcement procedures. It should ensure necessary consultation with stakeholders and would enshrine a review every five years. We need to see a draft of this code before this Bill progresses to its final stage; I would be happy to discuss with the Government how to make this happen. I beg to move Amendment 1.

[Lord Hunt of Wirral (Con)]

My Lords, briefly, I thank the noble Lord, Lord Fox, for bringing forward this important purpose clause amendment, which I must tell him—I know he is always surprised when I praise him—is a very cleverly worded amendment to which my noble friend Lord Sharpe of Epsom and I were very happy to add our support.

I do not know why this Bill has had to be rushed through within 100 days. Given the significance of this legislation, surely it would have been better if the Government had committed themselves to ensuring thorough and proper scrutiny. However, we have seen the introduction of 160 amendments on Report in the House of Commons—amendments which, in many cases, received no or little meaningful examination.

Even more concerning is the fact that the Government have tabled 27 amendments for Committee in this House. We have received a letter from the Minister warning us that there are more amendments in the pipeline on fire and rehire, the fair work agency, employment Bill time limits, trade union reform and maritime employment. What on earth is going on? Why was not this Bill properly prepared? This has meant that the letter to which the noble Lord, Lord Fox, referred is virtually saying to the House of Lords, “Please, on behalf of all the employers—and, indeed, all the businesses in the UK—we rely on you in the House of Lords to scrutinise this Bill properly”. I just do not think that this is the right way to treat Parliament. We owe it to the legislative process and to the public we serve to ensure that our scrutiny is neither rushed nor compromised.

No doubt the Minister will argue that a purpose clause is completely unnecessary. However, we respectfully disagree, and not only for the reasons raised by the noble Lord, Lord Fox. It is vital for the Bill clearly to articulate its overarching aims: not simply to modernise employment rights in name but to set out a clear ambition to create a fairer, more secure labour market; to encourage genuine co-operation between employers and workers; to protect rights and well-being in the workplace; to ensure proper standards for pay and conditions across sectors; and to guarantee robust enforcement of labour protections. I have to say that, without a purpose clause, this Bill risks being directionless and, worse, risks unintended consequences that neither workers nor businesses can possibly afford.

I think also—and I hope the noble Lord, Lord Fox, will agree—that a purpose clause is particularly important where there are a large number of delegated powers to make regulations within it. In effect, the Government are saying, “Please give us the power to do whatever we would like to do whenever we would like to do it”. The committees of this House have, time and again, urged Governments to turn their back on these Henry VIII clauses and present Parliament with clear cases to amend primary law, not do it through secondary legislation.

Well, there is growing concern about this Bill, which is why the British Chambers of Commerce, the Confederation of British Industry, Make UK, the Institute of Directors and, in particular, the Federation of Small Businesses, which between them represent thousands of businesses across the country, have published this open letter to the House of Lords, asking for urgent changes to the Bill. They did so because they are deeply concerned that, as drafted, the Bill will make it harder, not easier to create fair, secure and co-operative workplaces. They warn that the Bill will increase risk and uncertainty for businesses precisely at the moment when we need businesses to invest, to hire and support in particular those who are at the margins of the labour market.

I do not think that the substantive concerns of all the businesses quoted by the noble Lord, Lord Fox, have been listened to. I just hope that the Minister can respond when she winds up this debate. I look forward to the speeches from all sides of the House. I will not quote in detail from the letter, but it does remind me of the words of Milton Friedman. If I am ever to find myself quoting Milton Friedman, I suppose that this is the moment. He said:

“One of the great mistakes is to judge policies and programmes by their intentions rather than their results”.


Well, fine phrases about modernising employment rights and updating legislation are no substitute for carefully considered, properly scrutinised measures that deliver real-world improvement. So that letter from all those businesses is not a warning but a plea to this House. It is a recognition that we as the revising Chamber have a unique and critical responsibility to ensure that this Bill works. They are not closing the door on the Government but offering, at the end of the letter, to work with us all and with Ministers to help improve legislation.

In conclusion, if we are to get all these amendments, can we hear from the Minister how many more amendments we are going to get and when? The Government Chief Whip is constantly referring us to the Companion. I have never quoted from the Companion before, but it has pretty severe words for a Government who choose to table amendments at the last moment, without proper notice. So could we hear from the Minister what further amendments are planned, when we will receive them, and which parts of the Bill will be fundamentally altered? Here we are, at the start of Committee, still not knowing what the Government are proposing.

In an unguarded moment, the Minister disclosed to me that she has an implementation plan, which I understood from her was in draft. This House ought to see the draft implementation plan. Why can we not see it? Perhaps we could help the Minister produce the final draft. We should not get an implementation plan half way through Committee. Could we hear from the Minister on when we will see the implementation plan? A lot of businesses up and down the length and breadth of this country are totally uncertain about what the detail of this Bill will be. It is about time that we heard from the Minister about what the Bill seeks to do, what its purpose is and whether we can see it in its full form before we go any further with Committee.

[Lord Monks (Lab)]

My Lords, I will speak to Amendment 1 and avoid the temptation to engage in a mini-debate across the whole width. So far, I feel I have been sitting in a Second Reading debate. I have given speeches in this House before, reflecting similar sentiments to those in this amendment about fairness and co-operation. These are the words used in the amendment from the noble Lord, Lord Fox. I gave them in the context of the debates on Conservative anti-union laws, which we have addressed in this House in my time. Sadly, no one on the Conservative Benches, except for the noble Lord, Lord Balfe, who is in his place, paid any heed. The laws then proceeded to the statute book and the result was an imbalance in British employment law very much in favour of employers.

The Bill goes some way towards correcting that. Once it has been implemented, I hope we can look again at a system of mature collective bargaining of which we all can be proud. But first, we must replace the imbalance, and do so speedily, because it is glaring. Change is desperately needed; our labour market is characterised by high inequality—only two OECD countries have a bigger gap between rich and poor and between top earners and the very low-paid.

16:00

Wages are stagnant. Living standards and skills are poor compared with our European neighbours’. How many people have recently been shocked to find that the gap with Ireland is as wide as it is? We know that productivity, which we have debated in this House, has languished for quite a long time. Insecure forms of work have been growing. There are negative effects on health outcomes in this country compared with others. Large-scale inequality is really bad news.

I say to the Conservative Party that it needs to recognise that the Thatcher experiment with deregulated labour markets and some unwise privatisations—think Thames Water—and an economy heavily dependent upon a volatile financial sector that too often resembles a giant casino or adventure playground for private equity and hedge funds, and generates low rates of investment outside property, has failed comprehensively.

It is a time for a change of approach, and this Bill, together with a new industrial strategy which is being worked on, can help provide it. I call on the Opposition, probably in hope rather than expectation, to give it a fair wind.

[Baroness Stowell of Beeston (Con)]

My Lords, I am generally somewhat nervous about purpose clauses, but I can see the argument in the case of this Bill, because there is a lot of confusion about what it is trying to achieve. Indeed, it serves to highlight the incoherence of this Government’s approach to generating economic growth, because it places far too much of a burden on businesses and will deter them from innovating, recruiting and investing in skills training, which we know is so very important right now.

That is particularly pronounced within the tech sector, which is one of the Government’s priority sectors because it has the potential to drive a vast amount of growth, but it is also one where we need to do far more to encourage investment so that our homegrown tech firms can scale and compete around the world. We must not forget that investors have a choice as to where they invest, and they will not go to countries where the costs are higher.

Although it is not properly an interest to declare, it is perhaps worth reminding your Lordships that until very recently, I chaired the Communications and Digital Select Committee of your Lordships’ House, and during my term in the chair we looked at the tech sector quite a bit, as noble Lords would expect. Our final inquiry was about scaling up in AI and creative tech.

I am sure the Minister, who is also a DSIT Minister, has seen that techUK, the industry’s trade body, has this morning raised some genuine concerns about the Bill. Its website says:

“With no economic modelling underpinning these proposals, businesses are being asked to shoulder new burdens without a clear understanding of the impact. There is a growing risk that entrenched positions will lead to a worst-case outcome, one that stifles innovation and investment in jobs. This is counter to the government’s pro-growth mission. We urgently call for further discussion and refinement to ensure the Bill supports businesses and protects workers”.


Alongside techUK, the Startup Coalition, which focuses specifically on start-ups, says in its briefing note on the Bill that it is concerned that without careful tailoring, the barriers the Bill currently introduces into hiring and scaling at the early stages of business development could undermine the start-up ecosystem and the economic growth it drives.

I do not know whether I would have succeeded had I tried to do this, given what my noble friend said about the punctiliousness of the Table Office—and I would be interested to hear more from my noble friend about this—but I suggest that any purpose clause also refers to growth and competitiveness. When the Minister winds up, I would welcome her explanation of how this Bill supports the Government’s growth agenda.

I know, from talking to a range of tech firms and businesses from all sectors and of all sizes, that while they all support good employment practices and condemn those firms that do not uphold high standards—as do I—there is frustration that the good employers are paying the price, literally, for the poor conduct of the bad. For them, the Bill represents a desire by the Government to do something to them that makes it even harder for them to create the economic growth that the Government have promised the electorate and, indeed, their workers. Let us be clear: it is business, not government, that generates economic growth.

As I say, a purpose clause has some merit in the context of this Bill, but I would like growth and competitiveness to feature within it. If we were to do that in the purpose clause and get some agreement from the Minister up front today, that would help to shape the Bill as we go through Committee, so that it actually delivers on what I think it is trying to do: to ensure that there are good employment practices that support economic growth and competitiveness.

[Baroness O’Grady of Upper Holloway (Lab)]

My Lords, I admit that I am a little perplexed by Amendment 1, particularly in the light of the latest TUC-commissioned poll that was published last night. Not only is the Bill popular with the public, including a majority of Conservative and Reform voters, but, when they are faced with robust arguments against its key provisions, the Bill becomes even more popular with voters.

I am not sure that your Lordships or the public need this amendment to know that the Bill is about fairness, security and the right to an independent voice at work. The public are already well aware and, frankly, appalled that, under the previous Government, low pay and insecurity became mainstream in British working life. They want change.

Underlying this amendment—this might be my suspicious mind—is the worry that it is really about undermining the role of independent trade unions in representing workers’ interests. The ILO uses the term “workers’ organisations” for a reason. International law upholds the right to collective bargaining and freedom of association. Independent trade unions are workers’ best chance of getting their rights enforced and built on for better pay, safer workplaces, training opportunities and family-friendly hours, and they provide a democratic voice at work.

Without repeating the arguments from Second Reading, I encourage your Lordships to look at the evidence about just how far Britain has fallen behind other countries in employment protection, and how giving ordinary working people a stronger collective voice can help deliver more responsible businesses and a healthier and more equal society.

I encourage the noble Lord, Lord Fox, to cast his mind back to Labour’s introduction of a national minimum wage. He may remember that the Conservative Party and the business lobby said that a national minimum wage would cause mass unemployment and that businesses would collapse. In reality, the national minimum wage is now widely respected as one of Britain’s most successful policies. It has made a difference to millions of working lives in the teeth of opposition from the business lobby at the time. It is worth remembering that.

I end by saying that it is time to get on with and get behind the Bill, so that Britain takes the high road to improving business productivity by treating workers fairly, as human beings and not just commodities.

[Lord Balfe (Con)]

My Lords, it is a great pleasure to address a quorate meeting of the TUC General Council. I should declare an interest at the beginning: I am the honorary president of BALPA, the British Airline Pilots Association, a union that covers all the people who fly you on holiday and back again. Its motto or strapline for many years was

“every flight a safe flight”.

It regarded its job as to deal not only with the members but with safety. In dealing with the companies that we dealt with and still deal with, aircraft safety and looking after passengers was as much at the front of our mission as anything to do with pay and conditions. Of course, we were interested in them—we were a trade union, after all—but we were a responsible trade union. I stand on this side of the House pretty convinced that probably a majority of the members of BALPA support this party. Let me remind the House why.

Most people do not join a trade union for any political purpose. They often join, as I did at the age of 16, because it is there. Nowadays, most trade unions, particularly the better ones, have a free legal advice service and will get you a discount on your car insurance. I have told this story once before, I think, but at a point when we had a silly dispute between my family and the bursar of our local private school, I rang up the union solicitor and he drafted me a letter to send to the bursar very quickly. I apologised and said, “I am sorry. I dare say this is not what you are normally here for”. I will always remember his reply. He said, “Mr Balfe”, for I was that in those days, “we are not here to judge our membership. We are here to help them”. At the basis of virtually every trade union official and action is the desire to help the membership. Nobody I know regards going on strike as anything other than a defeat, because it means the members do not get paid, you often lose pension entitlement, and you lose your wages. You know, people go to work to get their work done, to get a reasonable wage.

I always had a lot of time for a person who is almost unmentionable in modern politics, Edward Heath, because I thought that he came nearer to understanding the TU movement than probably any leader of the Conservative Party and maybe any leader overall. Indeed, I remember when I was a much younger trade union person in the 1960s asking a group of Conservatives who they thought was the best Secretary of State for Labour there had ever been. The result was unanimous: Sir Walter Monckton, Conservative Minister under Churchill, was reckoned to be the one who listened to them the most. You always have to have a runner-up in these things just in case one falls down, and that was Iain Macleod.

16:15

We do not have to have this level of political enmity between the workers and the trade union movement and the political establishment. My view is that many of the Thatcher reforms are at the base of the problems the TU movement has today: the emergence of things such as broad lefts, not to mention the appallingly low turnout when it comes to union elections. Many of the reforms just have not worked—if you say “worked” was what they were supposed to do. They were supposed to invest people with interest in their unions, getting them all fired up to vote in elections. As an almost lone supporter of Sharon Graham, who is my union general secretary—not to be confused with the one I am president of—I can say that the fact is that if you go to the Cambridge branch of retired members of Unite, they are not really interested in politics at all. Many of them quite like Sharon because they think, “Oh well, she looks after the members instead of looking after herself”, which I am afraid was an image that had grown up in the movement.

So what I am hoping for—we are a bit off the point but, after all, this is Amendment 1—is that, by the time we finish with the Bill, we will have knocked together a consensus so that trade unionism is not always at the front and the punchbag for people who want a row. The fact of the matter is that, if you analyse the Labour Party’s funding, most of it comes from very rich people, not from trade unions at all. If you look at today’s Times—or maybe it is the Telegraph—the headline is about the unions taking on the Government because they are not going to implement the full terms of the pay review body. But none of the unions concerned pays a penny to the Labour Party. They are actually completely independent. Many people, until they ended up with me as the Conservative trade union envoy, did not even realise that the BMA was a trade union at all. They thought it was a collection of doctors who sat around with stethoscopes around their necks and tried to bully the Government. I explained to the Conservative Front Bench of our great leader, the noble Lord, Lord Cameron, that the BMA was a trade union; we used to say, “There’s only one union in Britain you really need to be afraid of, and that is Hamish Meldrum and the BMA”, because in terms of getting money out of the Government for his members he was the most successful union leader of probably any of them at all.

So I wish the Bill well. I will certainly be keeping an eye on it, with a view to shaping legislation that will put to bed the silly rows that we are always having and get a genuine partnership between the state and the trade union movement.

In my final sentence, I will take your Lordships back 100 years, to the papal encyclical Rerum Novarum, which is the fundamental basis of Christian democracy and Christian democrat trade unionism in Europe, where I was for almost 50 years. I see the noble Lord, Lord Monks, in his place there. He was secretary general of the ETUC, and is well aware of the way in which continental trade unionism works. It is not perfect, but in many ways it is better than the bunfight that passes for dialogue in Britain.

[Baroness Carberry of Muswell Hill (Lab)]

My Lords, I follow on from the excellent points that have been made by my noble friends on this side of the Committee by addressing, perhaps more specifically, the letter of Amendment 1. I preface my remarks by saying that I might be new to this, but I am a bit puzzled because I thought that the Benches opposite did not like purpose clauses. In the past, when Labour proposed such clauses, there was some push-back, and this side has been accused of poor practice and of risking provoking unintended consequences.

My main problem with the proposed new clause is that the list provided is not exhaustive and understates the Government’s ambition with this Bill. If we were to put our heads together to produce an exhaustive list of purposes, perhaps we might include the purpose that the Bill helps give effect to the Government’s manifesto promise to make work pay. We might also want to add that the ambition is to help stimulate economic growth, building on the extensive international evidence we have that shows that labour market protections lead to improved economic outcomes, including higher productivity. We might also want to mention that the Bill aims to end exploitative practices and redress the balance between employer and worker, and that it seeks to modernise trade union legislation.

My general point is that perhaps we do not need such an extensive list. I invite the noble Lord, Lord Fox, to clarify for us in his response in what way a non-exhaustive list, as provided in this amendment, is any better in advancing understanding of the intentions of the Bill than no list at all.

[Lord Hendy (Lab)]

My Lords, I too rise to address Amendment 1. It is a pleasure to follow my noble friend Lady Carberry. I am not clear about the purpose of Amendment 1. It seems to me that the Government have laid out the purpose of the Bill in the Long Title. It has been given a very Long Title that sets out its ambit.

What I am clear about, however, is the need for this Bill. Last August, a report by Professor Deakin and Dr Barbakadze of Cambridge University, Falling Behind on Labour Rights, stated that

“on almost every measure of employment protection, the UK is significantly behind the average for other countries in the Organisation for Economic Development and Cooperation (OECD), 38 countries generally understood to be those with a high level of economic and social development globally … As they stand, labour laws in the UK are barely half as protective as those found in France and significantly below other notable European countries … This strongly suggests that there is significant scope for improvement before British labour law is even close to matching that of our nearest neighbours”.

My noble friend Lord Monks mentioned inequality in the United Kingdom in comparison with other countries. The OECD has also considered that. It currently ranks Britain as the eighth most unequal of 40 major economies in terms of income inequality. Among EU member states, only Bulgaria and Lithuania are more unequal than the United Kingdom. The European Participation Index ranks the degree of worker participation in business decision-making in different European countries. The UK is rated 26th out of 28, with lower participation than all countries except Latvia and Estonia.

There are many other metrics by which the current state of play can be judged, and the status quo is simply not acceptable. I will not mention them all, but I will mention just three. First, median pay in this country is currently just over £600 a week. Median does not mean average; it means the pay point of half the working population. In other words, half of workers earn less than just over £600 a week, although half earn more than that. Secondly, of those on universal credit, 37% are actually in work. Thirdly, we find that 6.8 million people are in insecure work; three-quarters of them—that is, some 5 million workers—are in what is described as “severely insecure” work.

The Bill does not do all that I think it should. I had the honour to serve as the legal adviser on the working party that drew up A New Deal for Working People. It is clear that there are major differences. In later debates in Committee, I will seek to move some amendments to redress some of what I consider to be the shortcomings. Overall, however, the need for the Bill is simply unarguable. We cannot go on in the way that we are at present, with workers denied a voice at work, working in insecure conditions and on extremely low pay. The Bill will go a long way to assist in putting that right.

[Lord Empey (UUP)]

My Lords, I hope this Bill does not turn into a Punch and Judy show between employers on one side and organisations and trade unions on the other, because it obviously has a number of meritorious proposals. However, the forensic introduction to the amendment by the noble Lord, Lord Fox, illustrates that this piece of legislation is a work in progress. I understand why the Government deem it so important, but they have to concede that a lot of it is being done on the hoof, which is undermining the Government’s position.

I had the privilege of being Employment Minister in Belfast for three and a half years, and I worked very closely with business and trade unions during that period. The last piece of legislation I did had the racy title—I am sure the Minister would be very happy to adopt it—of the Employment (No. 2) Bill. It is the sort of thing that lets the blood course through your veins. But the one area where we have failed as a country for years and years is skills. We talk about it, we have apprenticeship models, we have this, that and the other, yet we still have not solved the problem. We got rid of the old-style tecs, colleges and so on, and we have been stuck in a rut ever since.

It is obvious that there have been abuses and insecurity, and there is no point in trying to deny that; I listened carefully to what the noble Lord, Lord Monks, had to say. However, there is something that I feel a bit concerned about. We live in a world where, by and large, the major trade unions operate with large employers, whether it is the public sector or big organisations, but the bulk of the industry—the bulk of the growth in employment and everything else—comes from small businesses and micro businesses, and they do not have the capacity or the risk-taking capability in how and when they employ people.

It strikes me that there is a risk of issues creeping into what we are trying to do in this country that could have the unintended consequence of making it less likely for people to employ individuals. We have to look at the international situation. We cannot ignore what is going on. There is a revolution taking place that is having a negative effect. We also have the employer national insurance contribution. We cannot ignore that either; it is a big deal.

16:30

If we come to a point where an employee on day 1 has the same rights as someone who has been there for some considerable time, there is a large risk, particularly for a small or micro business, that in taking on one individual you get a square peg in a round hole. That does happen; let us face it. If you have only half a dozen employees, you are in serious trouble. I accept that in this day and age we do not need a two-year waiting phase—in my experience, the biggest offender of using that system was the Civil Service—but, as we go through the Bill, there has to be some recognition that small employers have to be taken into account.

I understand what the noble Lord, Lord Fox, is trying to do. Whether we add to the purpose clause—the noble Baroness, Lady Stowell, had a couple of additions in her mind—is probably not the point, but I hope we do not turn this into a bunfight. There are things we can do here that will be positive and will help people, but we must have cognisance that we do not want to damage the potential for people to be employed by making things so difficult for the small employer that they are frightened away from the necessary investment and recruitment that we so desperately need. Yes, we have to be fair, but we have to be practical.

I listened carefully to what the noble Lord, Lord Hunt of Wirral, said, and there were some very good points. This is a patchwork quilt that we are getting as we go along. For such important legislation, I think we have to pause and get our act together so that the House can see exactly what the big picture is and, if we have a clause such as the noble Lord, Lord Fox, and his colleagues are suggesting, that it at least matches what follows in subsequent parts of the legislation.

There is some good stuff here and there is potential, but there is also risk. I hope that, after we have progressed through the amendments, we can send legislation back to the other place that is in better shape than it is today.

[Baroness Neville-Rolfe (Con)]

My Lords, I am speaking from the Back Benches to make two brief points. I apologise for not speaking at Second Reading.

First, if we have to have a purpose clause—it is not an approach that I particularly favour—it has to include a reference to competitiveness, growth and perhaps, as the noble Baroness, Lady Carberry of Muswell Hill, has suggested, productivity. Does the Minister agree?

Secondly, like my noble friend Lord Hunt of Wirral, I am shocked at the number of government amendments made to the Bill at such a late stage, and to legislation that is so important to all parts of business, all employers in the public sector and of course all employees, and their representatives, whom the noble Lord, Lord Monks, rightly referenced.

I have some sympathy for the Minister. I had a similar experience with the Procurement Act, although it was not quite as bad because we had consulted extensively, and it was a Lords starter. But like this Bill, it was introduced before it was ready and needed a large number of amendments. As the responsible Minister, I was very keen to listen to criticism of the detail and respond by agreeing to amendments or tabling government amendments that responded to the genuine difficulties, and I think there are genuine difficulties with this Bill. We worked across the House very well and I hope the noble Baroness will consult her Front-Bench colleagues, the noble Baronesses, Lady Chapman and Lady Hayman of Ullock, who engaged constructively in scrutiny on all the procurement detail.

Another good example is the minimum wage legislation referenced by the noble Baroness, Lady O’Grady. I remember when I was at Tesco persuading the then Labour Government that they should not include a requirement to put the national minimum wage on all payslips. It was going to cost us millions and require a change in our IT systems. Labour listened and the implementation of the Act went more smoothly as a result. It is very important to listen to the practicalities when making these changes. They can affect different parts of the Bill in different ways.

Finally, we have heard a lot about Europe and comparisons with Europe. I have spent a lot of time in Europe, but I would be interested to hear also about what is going on in the growing markets of Asia and—I suppose until more recently—the growing market of the United States.

[Lord Evans of Rainow (Con)]

My Lords, I will speak briefly to Amendment 1 from the noble Lords, Lord Fox, Lord Sharpe and Lord Hunt. Paragraph (c) would

“make provisions about pay and conditions in certain sectors”.

My noble friend Lady Stowell of Beeston made some very good points about the tech sector—those entrepreneurs and businesses of the future. It was very important to hear what she had to say. However, I wish to stand up for the hospitality sector. Do any of the Members opposite know what it is like to run a hospitality sector business and the challenges of employing people to cater and serve in that sector?

UKHospitality recently launched the social productivity index, which shows that the hospitality sector is also a key driver in socially productive growth, not only contributing to economic expansion but fostering social mobility and regional development. With 57% of the workforce working 30 hours or fewer per week, the sector offers flexible employment options that make it particularly accessible to students, carers and parents—I do not know how many noble Lords in this Chamber today at some stage in their career worked in hospitality, but it is an excellent first opportunity to get into the world of work.

Unfortunately, in broad terms, the proposed changes in the latest set of amendments to the Bill seem destined to result in a framework of requirements that are more likely to hinder than to promote growth in the hospitality sector. In particular, without further addressing the concerns of businesses and considering alternative options, it is felt that the Bill is likely to lead to reductions in staff recruitment, the rate of wage growth and the level of investment. The Bill looks likely to hinder hospitality businesses and restrict growth. It seems to assume that all employers are bad actors with regards to their dealings with their staff. This is patently not the case for the majority of businesses, which recognise the need to recruit and retain staff and ensure they are supported and secure at work.

There still appears to be a disregard for seasonal business models and unpredictable trading in sectors such as pubs and wider hospitality businesses, which are required to adapt quickly to changes in trade patterns determined, for example, by weather or other events outside their control. A reduction in businesses’ ability to respond quickly and proactively to changing demand will undoubtedly result in higher operating costs. That will naturally need to be met by either increasing prices, reducing other staff costs or reducing investment.

These impacts are compounded by the Budget announcements on employer NICs and national living wage rates. Spiralling employment costs will be exacerbated by the additional cost and administrative burdens that the Bill will layer on top, all impacting investment and growth. The unintended consequences of this Bill are slower wage growth and recruitment. I am sure the Minister does not intend that to be the case. Can she reassure the Committee that it will not be the case if the Bill goes ahead as it is?

[Lord Moynihan of Chelsea (Con)]

My Lords, I support this important amendment and endorse the serious concerns just now expressed by the noble Lord, Lord Fox, and my noble friend Lord Hunt of Wirral. I declare my interests as a businessman, an entrepreneur and an investor.

The noble Baroness, Lady O’Grady of Upper Holloway, questioned the need for a stated purpose for the Bill. I am not sure what the logic is there: the most likely reason for a Bill having no purpose is a lack of clarity by its sponsors as to what they are trying to achieve. The noble Baroness, Lady Carberry of Muswell Hill, complains that the list stated in the amendment is non-exhaustive, which I agree with, and then somehow jumps to the conclusion that no list at all would be preferable. Again, I am afraid the logic of that escapes me.

I am far less experienced than my noble friend Lady Neville-Rolfe, but I feel that there is always an obvious advantage in having a purpose clause. In the case of this Bill, I am sure the Government must agree that those who will face the task of interpreting the meaning of the Bill in the future should be given as much clarity as possible, through a purpose clause, as to why the Bill was passed and what its purpose was. Courts in the future will far prefer to have a lucid statement of what the new law sets out to accomplish, rather than being given too wide latitude and freedom to interpret the Bill in this way or that. So I commend the overall objective of the noble Lord, Lord Fox, and hope that the amendment, or similar, will form part of the eventual Bill.

This very lengthy Bill will, if passed without a purposes section, be more open to abuses of the extensive powers it contains. This amendment would put a few appropriate, albeit modest, restraints on the ability of a Government to go too far in applying these powers. To be clear, this proposed purpose clause from the noble Lord, Lord Fox, is just a start and, for me, not completely satisfactory by any means. The list is indeed not exhaustive. In addition, the additional amendments would burden companies with yet another compliance code of conduct, which will serve to send sensible non-executives screaming from the room and possibly off to Dubai. We have to let boards focus on managing their businesses, serving their customers and making sure it is a well-run business, not having to implement new compliance code after new compliance code that will only ever be observed with lip service.

On this point of a non-exhaustive list, I wish to add to the list of purposes of the Bill, in addition to the wording that my noble friend Lady Neville-Rolfe suggested, an additional purpose of supporting, improving and not reducing flexibility in employment relationships. We will move on to the issue of flexibility in the next group of amendments, so I will not expand on that point here, but I recommend the addition of that purpose, as well as the wording proposed by my noble friend Lady Neville-Rolfe, to the list in Amendment 1.

[Baroness Noakes (Con)]

My Lords, I have never been much enamoured with purpose clauses, although they are a convenient way of having an early debate on the principles of a Bill before we get stuck into the detail. Indeed, we can see that the opportunity and attraction of another Second Reading debate is irresistible to noble Lords. Part of the reason is probably that when we have Second Readings nowadays, at most about four minutes are allowed, but when we get into Committee we have 10 minutes, which is a wonderful way of proceeding.

The noble Lord, Lord Fox, has tried to encompass the Government’s aims for the Bill in his wording of Amendment 1, but in doing so he has not covered the whole content of the Bill. I agree with the noble Baroness, Lady Carberry, on that, although we probably will not agree on much else during the passage of the Bill. For example, Clause 75 repeals the Strikes (Minimum Service Levels) Act 2023, which we knew the party opposite hated when we enacted it. That Act empowered employers to set minimum service levels in a few defined public services so that service users, such as NHS patients and commuters, did not have to suffer the massive disruption that we have seen inflicted by the unions that are active in the public sector. Repeal of the 2023 Act takes away the power to protect public service users, and does nothing that fits within the purposes put forward by the noble Lord, Lord Fox, in his Amendment 1. Does that mean that Clause 75 should not be in the Bill? If not, what is the purpose of a purpose clause? Perhaps the noble Lord can answer that.

16:45

Another clear purpose of the Bill, though it is not spelled out in Amendment 1, is to allow trade unions to increase their memberships by giving them powers to push into non-unionised areas. Trade union membership has been declining; only about 20% of the workforce is signed up, and they are disproportionately in the public sector. If trade union membership were a good thing, it would not need this Bill to give the unions power to barge into workplaces uninvited. The real purpose of the Bill is to provide payback to the Labour Party’s paymasters. That too should be in the purpose clause if it is to be comprehensive.

I have a problem with purpose clauses in general—and this one in particular—because they do not focus on outcomes. I believe that one of the outcomes of the Bill will be to reduce employment opportunities for some important groups of workers. The young, the disabled and those with patchy employment records or a history of ill health are already an employment risk. Giving them day-one rights and the increase in statutory sick pay just raise the risks of employing these people, so many employers will do their best not to take them on to the payroll. Similarly, the complexity and inflexibility of the rights to guaranteed hours will reduce opportunities for those who want flexible working, because employers will not expose themselves to the risks of acquiring those employees to obtain such rights.

In general, the Bill will make employing people an unattractive proposition. It will probably incentivise businesses to look to non-human resource solutions wherever possible, which might be great for suppliers of capital investment but not so great for the humans who want jobs. Whatever the Bill’s intentions, its consequences are likely to be negative for many employees. I am neither for nor against Amendment 1, but I am absolutely clear that it neither covers the Government’s full aims for the Bill nor captures the consequences of the Bill if it is enacted in anything like its current form.

I am also ambivalent about the concept of a code of practice, which is the other part of the amendments in this group tabled by the noble Lord, Lord Fox. My main reason for this is that it will be a complete monster. This is a 300-page Bill and, if the Government keep tabling amendments like the complicated ones in their first batch last week, it will be very much longer. I struggle to see how a single code of practice can avoid becoming so large and unwieldy that it becomes inaccessible. It will end up like the Financial Conduct Authority rulebook.

That also speaks to whether it is wise to load the business sector with so much in the way of new rules and regulations. I am sure that will be a theme of many of our debates, particularly in relation to small, micro and medium-sized businesses, as a number of noble Lords have already referred to, and I certainly look forward to that.

[Lord Frost (Con)]

My Lords, I support Amendment 1, although possibly not for quite the same reasons as those already expressed in this Chamber, and I regret I was not able to speak at Second Reading.

When dealing with a purpose clause, one cannot avoid spending a moment dwelling on the broader principles behind the Bill before coming to the amendment itself. It is worth noting that one of the reasons the British economy has surprised so many people over the last decade or so on the upside, despite all the gloomy predictions, is because it is an extremely flexible and responsive economy, particularly in the labour market. Most indices of these things put us in the global top 10 of labour market flexibility, which I regard as a good thing, although clearly many noble Lords who have spoken do not.

There is a paradox here, in that flexibility is the best way of delivering security—maybe not in any individual job, but security of employment and income over a period. The Government seem to think that the only way to ensure job security is to put in place more and more intrusive and detailed legislation to require it. That is why we are going to be discussing, no doubt at great length and with huge complexity, this massive Bill which tries to do just that. It is damaging that the Bill is being made up as it goes along to such a large extent; it just multiplies the complexity and difficulty.

I do not think that is the right way to look at job security. The best way to look at it is that flexibility produces security. If it is easier to change the terms and conditions of a job, or easier to dismiss people if they do not fit, then it is also easier to re-employ or shift resources from low-productivity to high-productivity sectors and to deliver growth in the economy. The approach in the Bill protects insiders at the expense of entrepreneurs and those who are outside the labour market, so it is not surprising that the representatives of trade unions are so supportive of it. The trade unions represent the insiders, but they are not the only people who have an interest in labour market flexibility.

I make these points because they go to the difficulty of drafting a satisfactory purpose clause for this Bill. It is desirable to have a purpose clause for something that is so complex and sprawling in the way it tries to legislate. The noble Lord, Lord Fox, has written it as cleverly and clearly as he possibly could in the circumstances. It is cleverly written, but the difficulty is not so much that it is not sufficiently exhaustive but that it contradicts the contents of the Bill. It sets out a number of things which the Bill simply does not do. For example, in paragraph (a) of the proposed new clause, it talks about “fairness”. Well, that may be fairness for employees on one definition but not for employers or those who are outside the formal labour market. Whose fairness are we talking about?

Paragraphs (b) and (d) in the proposed new clause do not “facilitate”—to use the word in the amendment—good labour relations; they actually make them more bureaucratic, complicated, difficult and hard to implement. Paragraph (c) makes provision for pay and conditions but, arguably, it should not be doing that at all—that is not the business of the Government but the business of employers and employees. The only one that is an accurate description of what is in the Bill is paragraph (e), the simple statement that it is to

“make provisions about the enforcement of labour market legislation”,

which it certainly does.

I am not sure that there is a satisfactory way of dealing with this. Nevertheless, I support this purpose clause amendment, because it seems to me that if it were to pass, the logical consequence, to be consistent, would be that large parts of the rest of the Bill would have to fall away to be consistent with the expressed purpose in this purpose clause. If the Bill were to be internally consistent with the things that we say are desirable, then much of this Bill is simply not consistent with that. Now, what goes first—the purpose clause or the rest of the Bill? I think we know how that is going to play out. Nevertheless, that is why it is difficult to get to a satisfactory purpose clause for this Bill. It would be good if much of the Bill fell away—no doubt we will come on to that in the next seven days—as it is going to cause a lot of damage to the economy and to growth.

To conclude, I support the amendment, if not perhaps for exactly the same reasons that others have supported it. It will enhance and make clearer, to some extent, what is a very sprawling, complex and unsatisfactory Bill.

[Baroness Coffey (Con)]

My Lords, I will speak to all of the amendments in the group. I spoke at Second Reading. As my noble friend Lady Noakes pointed out, we only had four to five minutes then, so this gives us an opportunity to consider further what the purposes should be. In the document published by the Labour Government, the Deputy Prime Minister and the Secretary of State for Business and Trade referred to the fact that this would be about getting more people into work. So far under this Administration, we have, unfortunately and regrettably, seen unemployment rise.

At the same time, comments have been made by noble Lords on the other side, such as by the noble Lord, Lord Monks, who referred to income inequality. What he may have forgotten is that, under the previous Labour Administration, income inequality rose. Meanwhile, under the recent Conservative Administration, income inequality fell. So, this is a case of trying to make sure that, as we take the legislation through, we focus on the outcomes it will have for people right across this country, rather than dogma. There is a combination of factors where, frankly, flexible labour has generally improved the prosperity of people in this country.

The noble Lord, Lord Hendy, complained that people in work were on universal credit. That is a large point of it. We have finally got rid of tax credits, which went earlier this month. Those had been introduced by previous Labour Governments in order to increase people’s pay—which employers were not doing. It was done in a rather crude way, such that capital was not taken into account. When we were moving people from tax credits to universal credit, we discovered—particularly early on, when we were doing some of our test and learn approach—that there were people with capital of over £100,000 who were still receiving tax credits and who decided that, although they would be entitled to one more year of such a transition payment, they did not think it was right to do so.

It is about that sort of element, of trying to consider what we want to see as an increase in prosperity and productivity. However, I am concerned, given the recent increase in unemployment and all the messages that we are receiving from businesses, small and large, that we will instead start to see a significant increase in unemployment and indeed more people going on to benefits. As I say, the whole point of universal credit is that you will be better off working than not working. The approach is to try and support people as they reach higher salaries.

My noble friend Lady Neville-Rolfe is right to say that, if we were considering further things to add to the proposed new clause set out in Amendment 1, competitiveness and growth should be there. I would add that the outcome should also be about increasing the number of people in employment. I know that the Secretary of State for Work and Pensions has set an exceptionally ambitious target of 80% of people being in work—which would be the highest in an exceptionally long time—but, to do that, she needs to work with other parts of her Government to make sure that more jobs will be created, so that people can go into those jobs at the rate that is set.

After thinking through what will happen with this legislation, I made the point at Second Reading that the Bill started off at 149 pages—and I am conscious of the 100-day deadline set by the Deputy Prime Minister to present it—and that it had basically doubled by the time it left the Commons. Not a huge amount of time was set aside for consideration of the additional 103 pages that were considered on Report there. As we have already heard, we are starting to see more amendments come in from the Government that this House needs to consider.

17:00

Although it may seem like red tape, I understand the intent of the further amendment from the noble Lord, Lord Fox, talking about a code of practice. I assume that the Government do not want to see many more employment tribunals, because they take so long and often lead to even more complications in case law that need to be considered. If a very small company wants to take on another person to work—my noble friends made this point eloquently—it simply will not have access to the wide number of legal efforts that will be required in crafting changes to ongoing business as it starts to see growth. Indeed, I remember a particular business in Southwold where, frankly, the work was entirely dependent on customer demand: however, that suited a number of the people in that town and the villages around it, who would add hours of work, recognising the opportunity to get some more pay.

In rural and coastal areas, the median salary is considerably lower than in many towns and cities around the country. Of course, the employer would only be able to do that based on the quality and demand from customers for that role. People had no expectation that they would simply be given an extra contract, recognising the contracted work they already had elsewhere, in quite the same way that I think the Government seem to consider that anybody on certain kinds of contracts is entirely reliant. Thinking about the purpose of the Bill, we should certainly seek to increase the number of people in employment, given that they are the words of the Deputy Prime Minister and the Secretary of State in their Next Steps to Make Work Pay when they describe the intended outcomes of this legislation.

On the amendment I referred to, at times it feels that so much guidance ends up becoming somewhat like the FCA rulebook, as has been said. As we start to take account of other legislative decisions or “clarity”, as the Government said in relation to the Supreme Court’s recent ruling, it will be critical—to avoid industrial conflict, a backlog or a significant increase in employment tribunals—for the Government, in due course, to set out not only the implementation plan that we have heard of but how employers can get on and do their jobs.

Ultimately, I am conscious that the Government did put this in their manifesto, but we need to make sure that the legislation is fit for purpose and that it does not end up creating unemployment rather than employment. I also believe that the way that the noble Lord, Lord Fox, tabled his final amendment in this group is a sensible approach of saying that nothing else can start until it is clear for employers how they are expected to undertake this massive legislation, which will add to the already complex employment law situation we have today.

[Baroness Meyer (Con)]

My Lords, I, too, support what the noble Baroness, Lady Noakes, and the noble Lord, Lord Frost, said. I too am very worried about this Bill and its outcome, which be to kill job creation, drive away investments and slow economic growth. It could drive unemployment, fuel inflation and trigger social unrest. It risks taking us back to the economic chaos of the 1970s, when trade unions held the country to ransom.

Back then, strikes paralysed the country. Businesses went bust and the UK entered a period of stagnation and crisis known as the “winter of discontent”. Some of us are old enough to remember it. Inflation soared to 24% in 1975. The economy flattened. The country was forced to beg the IMF for a bailout of around £3.9 billion; that is worth around £20 billion today. I remember the queues, the power cuts and the garbage piling up in the streets. I remember the feeling of helplessness as Britain slid deeper into decline.

Most of all, I remember the humiliation of seeing our great nation ranked as one of the worst-performing economies in Europe. While France and Germany grew richer, we grew poorer. Our reputation was in tatters and we were known as the “sick man of Europe”. It took bold leadership and tough decisions to turn the tide. That leadership came in the form of Margaret Thatcher. Love her or hate her, she saved Britain from economic collapse. She imposed the discipline that was needed to rebuild our economy and restore our standing in the world.

See where we are now. As has been pointed out, if we have consistently outperformed many European countries in recovering faster from the financial crisis and the pandemic, it is because of the flexibility of our economy. Do we really want to follow the French example, where unemployment rates are at 7.4%, with youth unemployment at 19.2%? That is a result of high labour costs, rigid laws, excessive bureaucracy, early retirement and overly strong—

[Lord Evans of Rainow (Con)]

Unions.

[Baroness Meyer (Con)]

Unions; thank you. Remove flexibility and you remove opportunity. This will especially attack young people looking for their first job. We will end up with more workers’ rights but fewer jobs. That is why we need to examine this Bill and take account of all of the amendments—or, possibly, just scrap the Bill altogether.

[Baroness Lawlor (Con)]

My Lords, I support—

[Noble Lords]

Front Bench!

[Lord Katz (Lab)]

I remind noble Lords that we are in Committee, not at Second Reading. We have heard a few speeches now that have strayed a little from the precise content of the amendments that we are speaking to. I urge noble Lords to concentrate on those amendments rather than making Second Reading speeches so that we can get on and make progress.

[Baroness Lawlor (Con)]

My Lords, I support the amendment moved by the noble Lord, Lord Fox, for reasons of transparency and clarity. As we have heard today, there is too much being added to the Bill. We have not had proper sight of the Government’s amendments until it is too late. How can any business plan for the future with this hotchpotch of a Bill changing by the day?

On top of that, I echo what my noble friend Lady Neville-Rolfe said and I would add a competitiveness and growth purpose here. We had it in the Financial Services and Markets Act. It helps to focus people’s minds on the law, on the overall purpose, on what we mean by the economy we run and on what its aims are.

I cannot agree with the noble Lords opposite who point out, with different conclusions, that our labour laws are streets behind those of European countries. Like the noble Lord, Lord Fox, I believe that the dynamism in Britain’s economy is due to it being a competitive market economy—one that has historically been open to trade and competes and, for that reason, can offer job security and good wages on a competitive basis. Part of that is a flexible labour market.

I am worried that this Bill—particularly given that the purpose is not economic growth and competitiveness—will stultify and freeze growth and, as a consequence, the labour market. The people who will suffer will be workers themselves, who will not get jobs or job security. For these reasons, I support the noble Lord, Lord Fox.

I close by remembering a German economist who worked under Chancellor Merkel in her global economics department at the time of the discussions around whether Britain would remain in the EU or leave it. This economist implored Britain to stay, because, without Britain, Europe would have a frozen economy, its labour market would lack dynamism and its competitiveness with the wider world—with the Asian and global markets—would stultify. It therefore seems very bizarre that we are trying to put the clock back on labour market legislation and stop the flexibility which should be at the heart of any dynamic market economy.

[Lord Sharpe of Epsom (Con)]

My Lords, I will speak to Amendments 283 and 327 in the name of the noble Lord, Lord Fox. I note that my noble friend Lord Hunt of Wirral has dealt with the purpose clause in Amendment 1 very comprehensively, so I will say no more on that. I remind the Government Front Bench that it was the noble Lord, Lord Monks, who opened the attacks on Margaret Thatcher. My noble friend is perfectly within her rights to defend the great lady’s record.

There is a growing troubling feeling in many of the businesses that we have spoken to, across sectors, regions and sizes, that the Government see them not as partners in growth or employers to be supported but, as my noble friend Lord Evans of Rainow, noted, as bad actors to be restrained. The sense is that the Government have concluded that virtually all businesses cannot be trusted to do the right thing, and so they are pressing ahead with a centrally planned, top-down approach to employment reform. It is an approach that prioritises control over co-operation, uniformity over flexibility and ideology over evidence. This approach does not benefit businesses: it burdens them with cost and complexity; it strips away the flexibility on which many sectors rely, especially those with seasonal, part-time or rapidly evolving workforces; and it will impede their functionality.

The noble Baroness, Lady O’Grady, said that this Bill is popular, but it is not popular with the Federation of Small Businesses, the British Chambers of Commerce, the CBI, the Institute of Directors, Make UK, nor the Recruitment and Employment Confederation—and, as we have learned from my noble friend Lady Stowell, it is not popular with techUK. They have all raised serious concerns and called for urgent changes.

If there is a groundswell of support out there, it is an incredibly well-kept secret. If there is a group of employers which believe that these changes will make them more confident to hire, invest and grow, we have yet to meet them. Judging by the open letters, briefings and consultations that have been submitted to Parliament, neither have the Ministers opposite. Let us not pretend that this Bill is being driven by the demands of business, because it is not.

I move on to the amendments. The Government claim that this Bill is about protecting workers, but it is time that we recognised that protection cannot come at the cost of opportunity. For many workers, the most important protection is the ability to get a foot on the ladder, gain experience, build skills and find stable, long-term employment.

In that regard, I commend the noble Lord, Lord Fox, on his Amendment 283. I agree with my noble friend Lady Noakes that, in some ways, it risks creating a monster, but I think that, in this case, and because of the nature of this Bill, it will be a friendly monster, because it will at least provide some certainty. As we know, and as anyone who has had a conversation with businesses will tell you, businesses crave certainty more than anything else. The fact that the code of practice is written as it is reflects the complexities in the Bill, the vast array of delegated powers that the Government are about to award themselves and, of course, the lack of certainty.

The noble Lord is entirely right to focus his attention on SMEs. It is worth reminding the Committee that 48% of business turnover and 60% of employment is accounted for by SMEs. In many cases, they will be the businesses without extensive HR departments to help them interpret the facts in this Bill. Therefore, the Government will have to do it for them. This is not perfect, but it deals with the main issues. We would prefer to see no need for this amendment, but, because of the other factors that I have mentioned—the delegated powers and so on—we have no choice.

We need a framework that recognises the diversity of business models, the pressures that employers face and the legitimate role that they play in building opportunity. This is not an employers versus workers situation. We are all committed to improving workers’ rights but we must do so in a way that is realistic, pragmatic and supportive of the broader economy. Without that, we risk achieving the opposite of what we intend: fewer jobs, more uncertainty, greater barriers for the people we are trying to help and, frankly, less equality.

17:15

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, I thank the noble Lord, Lord Fox, for his detailed engagement with our Bill and for Amendments 1, 283 and 327. I thank all noble Lords who have contributed to this wide-ranging debate, which has revisited many of the debates that we had at Second Reading.

Amendment 1 seeks to insert a new clause of the beginning of the Bill to set out the overarching purpose and to provide a framework for understanding the aims of the legislation. I thank the noble Lord, Lord Fox, for his challenge on this issue, but it is important to reflect on why we are bringing the Bill forward and what we hope to achieve through it.

The plan to make work pay sets out a significant and ambitious agenda to ensure that workplace rights are fit for the modern economy, to empower working people and, importantly, to contribute to economic growth. Delivery of that plan was, as we have heard, a manifesto commitment and part of the mandate on which the Labour Government were elected. On 10 October, the Government fulfilled their manifesto commitment to bring forward legislation within 100 days of entering office by introducing the Employment Rights Bill.

The noble Lords, Lord Fox and Lord Hunt, and others have asked about the later amendments that have been tabled. I reassure noble Lords that these are technical amendments and that the Committee will have adequate opportunity to scrutinise them all properly. The noble Lord, Lord Hunt, and others asked about an implementation plan. I reassure noble Lords that that will be shared as soon as it is available. We agree that businesses need guidance on the timescale and implementation of the measures in this Bill. We are working at pace to ensure that they have that information.

There is strong support for the measures included in the Bill. The Institute for Public Policy Research found that every constituency in the UK has a majority or plurality of people who believe that workers’ rights should be strengthened. My noble friend Lady O’Grady mentioned the latest poll. In addition, the TUC’s polling and that of HOPE not hate of over 21,000 people across the political spectrum has found strong support for key policies in the Bill. More than seven in 10 of UK voters—72%—support a ban on zero-hours contracts. Three-quarters of voters support giving all workers the right to statutory sick pay and ensuring that it is paid from the first day. Three-quarters of voters support giving all workers protection from unfair dismissal from the first day in their job.

This is a comprehensive Bill which delivers on a clear mandate from the British public. Once implemented, the Bill will represent the biggest upgrade of workers’ rights in a generation. Good employers support this package, because many of them are already delivering these standards. What they do not want is to be undercut on an uneven playing field.

I can give a few examples; I know the Opposition like to ask this question. Centrica, the Co-op, Richer Sounds, Nationwide, IVC Evidensia and IKEA UK and Ireland have all given their support to the measures in the Bill, and a lot of SMEs have done likewise, so it does have resonance with the business community.

Modernising the world of work will raise standards and tackle undercutting so that businesses are empowered to compete in a race to the top. I can reassure noble Lords that the Government, of course, recognise the concerns about the costs to business. The £5 billion figure from our impact assessment is a top-end estimate of the costs, which will largely represent a direct transfer to the lowest paid in society, with the bottom end of the range close to £1 billion.

The costs, therefore, are likely to be under 0.4% of our national wage bill and could even be as low as 0.1%. Furthermore, improving workers’ well-being, increasing productivity, reducing workplace conflict and creating a more level playing field for good employers would grant significant benefits worth billions of pounds per year. That is why delivering the benefits of the Bill would offset the costs.

I can reassure noble Lords that a number of these measures, as I have already said, have strong support from businesses, and we will of course carry on consulting them as we put these plans into practice to ensure that they are as effective as possible. The noble Baroness, Lady Stowell, mentioned the tech sector and will know that I am very minded of this. We will continue to engage with the tech sector on a regular basis to make sure that it contributes everything it can to the Government’s growth strategy.

The noble Lord, Lord Fox, and others have mentioned SMEs, and we will have the chance to debate this later in the Bill. In short, we do not agree that there should be two-tier employment rights: employment rights for all is a fundamental principle.

The noble Lord, Lord Empey, and the noble Baroness, Lady Stowell, talked about skills. We are absolutely committed to a new skills agenda, which is why Skills England is modernising our skills provision. It is an area where, traditionally, the unions and employers have made common cause to make sure that the upskilling of the workforce happens on a comprehensive basis.

This Bill shows the Government’s commitment to strengthening collective bargaining rights and trade union recognition. Our approach will foster a new partnership of co-operation between trade unions, employers and the Government. In response to the point made by the noble Lord, Lord Fox, our reforms remove hurdles that frustrate the voices of workers, but trade unions will still need to win a majority of workers’ votes in a ballot to be recognised by an employer. If workers do not want to be represented by a trade union, they will have the option to vote against recognition in that ballot.

On Clause 1 and the proposed list of priorities, I agree with my noble friends Lord Hendy and Lady Carberry that the purposes are already covered in the Bill. My noble friend Lord Hendy pointed out that the Long Title already addresses the purposes within the Bill, and as my noble friend Lady Carberry pointed out, the list is not exhaustive. If we are to have a list, it would need to be a whole lot longer than it is at the moment and cover a whole range of other aspirations already covered in Labour’s Plan to Make Work Pay.

The noble Baroness, Lady Neville-Rolfe, raised other issues that could be included in that list. Again, I assure her and others that all these issues have been consulted on extensively in the Bill. I would like to reassure noble Lords that there is no need for such a clause to be inserted to achieve this aim. The Explanatory Notes set out the purpose of the Bill clearly and provide further detail on the aims of the legislation. These notes were updated when the Bill transferred to this House and will be updated again when it receives Royal Assent. The Government have also published a series of fact sheets, which are available on GOV.UK and aid the understanding of the Bill’s aims.

Finally, from a legal perspective, inclusion of such a clause could risk producing unintended consequences on the interpretation of specific provisions within the Bill, which have been drafted to achieve the particular purposes concerned. While I understand what the noble Lord, Lord Fox, is trying to achieve, and I appreciate the debate that he has created, I hope I have persuaded him that it is not appropriate to include this in the Bill.

Amendment 283 seeks to require the Secretary of State

“to publish a code of practice providing employers with guidance on complying with the Act”.

This has had much less attention in the debate but, nevertheless, I will attempt to address the concerns that the noble Lord raised.

We have consulted and remain committed to consulting widely on the detail of implementation. The Government have also committed to ensuring that, where appropriate, guidance is published to ensure that all stakeholders have the information they need to make necessary adjustments. However, a Bill-wide code of practice, as suggested in the amendment, would be duplicative of the policy-specific guidance and codes of practice that the Government will already produce to support workers, employers and trade unions in implementing the reforms.

There is existing provision for the issue of guidance and codes of practice across employment law. Where relevant, the Bill amends those provisions to reflect that they will need to be updated to take account of the changes made by the Bill. This includes codes of practice issued by ACAS under the Trade Union and Labour Relations (Consolidation) Act. Such codes are subject to consultation requirements and must be laid in draft in both Houses for approval, and we are already working closely with ACAS to plan ahead for this work.

Where new statutory guidance is required, this is also provided for, such as in Clause 30, which inserts new Section 83D into the Procurement Act to make provision for the issue of codes of practice on relevant outsourcing contracts by appropriate authorities.

By requiring a single Bill-wide code of practice, this amendment would also risk delaying the Government in offering certainty on the details of policy and regulation on individual issues as they become available. I hope I have persuaded the noble Lord that this would therefore result in duplication and unnecessary delay.

Amendment 327 would prevent the implementation of measures in the Bill until the point at which the Government produce a Bill-wide code of practice. Some measures in the Bill will not require any further guidance before they are implemented—for example, the repeal of the Strikes (Minimum Service Levels) Act 2023. Delaying the date on which these measures can commence would unnecessarily delay the point at which workers can benefit from measures in the Bill.

Codes of practice are used to provide guidance to employers on how to comply with employment law. By nature they are detailed, building on and clarifying requirements set out in statute. There are several measures in the Bill where further consultation will be required to develop regulations setting out key details of reforms. Within six months, it would not be possible for all the outstanding policy details to be finalised to inform the content of a Bill-wide code of practice. Codes should bring clarity, but these timelines would risk patchy or unclear content if we were to go ahead on the basis of these amendments.

I agree with the need to ensure that workers, trade unions and employers are sufficiently supported for the implementation of the Bill, but this amendment is unnecessary and duplicative. I hope I have persuaded the noble Lord that the codes of practice that he envisages would not help to provide the detailed guidance that employers and workers require. I thank him for raising the issue, but I hope I have persuaded him not to press those amendments.

[Lord Hunt of Wirral (Con)]

The Minister has shared with the Committee that there is an implementation plan. As we are now moving to consider each clause, the first few in particular, it would be helpful for the Committee to be made aware of the part of the implementation plan that governs each and every clause. Is she able to share it with the Committee and, if so, by when? Might we at least see a draft of the implementation plan, so that businesses across the UK know what lies ahead?

[Baroness Jones of Whitchurch (Lab)]

I know the noble Lord has already raised this, and he tempts me, but there has to be further consultation. He will understand that. Part of the legislation obviously requires further consultation to take place. We are still looking at the timescales for all this, and we obviously understand the need to provide guidance as soon as we can, but what I can say that will be reassuring to everybody concerned is that this will be a phased process; this is not a day-one process. We just need to make sure that the phasing of all this makes sense for employers so that it can be done on a proper basis and with the appropriate guidelines behind it. We are working on it, we will share it as soon as we can, and we understand the need for it, but it is not available at this time.

17:30

[Lord Fox (LD)]

My Lords, I thank all noble Lords for their contributions to this debate. The noble Baroness, Lady Carberry, may be relatively new to this House, but she is not wrong that purpose amendments are often the source of great opprobrium across your Lordships’ House—and I am afraid I am something of a serial offender in that regard. But the aim of this amendment has certainly partially been achieved, in that I think we have started the process of flushing out some of the issues.

I have a great deal of respect for the noble Baroness, Lady O’Grady, and I think she gave a very spirited speech, but I think that she gave a spirited speech to the speeches that came after hers and not to mine. If she reads, in tomorrow’s publications, the words of what I said, I think she will find that at no point did I speak against the Bill. I was seeking through this process to achieve two things from the Benches opposite. First was a recognition that there is much work to be done to bring employers into this process, and I did not hear that empathy from the Benches opposite or from the Minister. The second point on which I was seeking recognition is that a lot of this legislation is arriving late. The Minister said she would give this House an adequate time to consider it; it is already too late for it to be adequate time, because this stuff is arriving well past due date. We are not getting adequate time on the programme that we are currently getting, and there needs to be a recognition of that. If the Government want to reach across the House and support all the good things in the Bill, then they have to have some empathy about the things that are wrong with it and with the process of the delivery. That was my main purpose in this purpose amendment, and it has not achieved that purpose to date. I hope that, going forward, we can get some recognition of what is required.

On Amendments 283 and 327, I thank the noble Baroness, Lady Coffey, who I think got my point: we need an operator’s manual for the Bill. The Minister absolutely cemented the reason why we need one, because she then went on a journey across several different bits of legislation and all sorts of codes and practices and stuff. If I am sitting in the HR department of one person in a business of 12 people, I need a guidebook that takes me to the right guides and the right legislation. The information may already exist, but I do not need to go on a website trawl to find it; I need a signpost that takes me to the places that I need to know to operate this legislation when it becomes an Act. That is what Amendment 283 is seeking to achieve. If this stuff already exists, then it will not hold up the process; it is merely a question of bringing it together and saying, “You get this bit there and that bit there”. The more that can be done within a code of practice to deal with that, the easier it will be for businesses to comply, and the easier it will be to avoid a proliferation of tribunals, which I am sure no one in this House is seeking to achieve. With that, I beg leave to withdraw Amendment 1.

Amendment 1 withdrawn.

Amendment 2

Moved by

[Lord Moynihan of Chelsea]

2: Clause 1, page 2, line 8, leave out from beginning to end of line 11 on page 4

[Lord Moynihan of Chelsea (Con)]

My Lords, I rise to move Amendment 2. I apologise to noble Lords if anything in my moving of this amendment is maladroit or otherwise at fault: it is the first time I have moved an amendment, let alone a group of amendments.

Why am I suggesting that new Section 27BA be removed in its entirety? The primary reason is the onerous inflexibility that it imposes on employers, the creators of jobs. The Bill as it stands, in theory, works even for those key groups who, as has been reported widely, much prefer flexibility in their employment arrangements—to take just a few examples: students, working mothers, part-time creatives and casual workers of all stripes. It is acceptable to them because they do not have to accept the guaranteed hours that the employer is required to offer them. To them and other groups of workers, some of whom may indeed prefer to be offered guaranteed hours, the employers will be required to offer those guarantees, but, once the offer is made, the employees can accept them or not. Thus, this new section creates considerable additional flexibility on the demand side. Many people looking for jobs will find those jobs more attractive.

On the supply side, however, flexibility is enormously reduced, to be replaced by stark uncertainty for all employers, particularly for sectors such as the NHS, hospitality, retail, care work, the gig economy, delivery driving, Christmas work, warehouse work and so many more. The absolute importance of flexibility to the employer can hardly be better illustrated than in the reports on the Guido Fawkes website as to how unions and the Labour Party itself have happily offered zero-hour contracts in the past.

At Second Reading, I stated that this Bill in general will kill business across the country, serving to shrink rather than grow the economy. This unfortunate section is just one part of that but an important one. In general, as I have just discussed, on the demand side, the removal of significant elements of flexibility creates distortions in the employment market, leading to employers, in many cases, being far more reluctant to offer employment. In consequence, the level of employment will fall, not increase. For smaller businesses, just creating the offers required by this section in the first place will involve onerous costs in time and money, making the employer highly reluctant even to start the process of seeking new employees. Some of the subsections in the new section raise the likelihood, in real life, of employers doing their level best to covertly figure out which employees will be flexible and which will seek inflexible, guaranteed arrangements, and, having come to a conclusion, hiring the one who wants flexibility and not the one who does not. That destroys the whole intent of this clause. The Government might denigrate such behaviour by a small business employer, but few in the Government have ever run a business.

A further problem is that the new section envisages the employer having to go to all the lengths of creating the guaranteed-hours offer, and to present it to the candidate employee, without having any idea whether the candidate will take the offer. This imposes considerable friction and inefficiency on the economy and more unnecessary costs on the poor benighted employer.

Interestingly, I read through the several pages of this new section—quite possibly ineptly—but I cannot find anything about what happens in a hypothetical situation where an employer presents the required offer then says to the prospective employee, “Will you be wanting these guaranteed hours?” and, if the prospective employer says yes, the employer then does not make an offer of employment to them. It seems odd that I cannot find that; maybe it is there somewhere. In my view, if the ability of the employer to renege in that way after having been forced to make that offer is in fact there in the Bill, it would be a good thing. The Government may or may not agree, but, even if I were right in saying that this loophole existed in the current drafting and the Government, having been alerted to it, were to choose to close that loophole, it would just drive similar behaviour by employers underground.

The Bill is driven in great part by a belief in what is “fair” to employees, and so forth. I have seen in my short time here that “fairness” is often used in this Chamber; “outcomes” is not used so much. Whatever the Government’s view may be as to the crucial importance of fairness, with the best will in the world, the government drafters who focused on fairness will not have been able to bring to the issue anywhere near the level of seriousness as to outcomes with which a business owner facing survival or destruction for their business will view this matter.

This new section is just one component of an extensive and intrusive Bill that will, if implemented, see the UK’s economy further driven into the ground, with more and more parts of that economy and key players in it either becoming economically inactive or, as we are seeing on a daily basis, leaving the country. On Report, I imagine my party will oppose the entire Bill, but in the meantime, I state that it can be significantly enhanced by removing this new section in its entirety. I beg to move.

[Lord Wolfson of Aspley Guise (Con)]

My Lords, I rise in support of Amendment 8 in my name. I declare my interests as stated on the register, in particular my role as chief executive of Next plc, the job I have held for 24 years, which makes me the UK’s longest-serving FTSE 100 chief executive. I add that Next employs over 25,000 part-time employees—and, I hasten to add, it does not use zero-hours contracts.

I start by assuring the Minister that I have sympathy with the intentions behind this section of the Bill. Zero-hours contracts can leave employees feeling obligated to accept hours from employers, who can feel no obligation to provide work. I commend the Government’s intention to tackle this lack of reciprocity. In the Minister’s polling, I would have come out as one of those people not in favour of zero-hours contracts.

Amendment 8 would increase the Bill’s effectiveness by clarifying the distinction between zero-hours contracts and legitimate part-time contracts, because there is a world of difference between tackling potentially abusive zero-hours contracts and eliminating the flexibility that legitimate part-time contracts provide to those who need and want them. My concern is that the requirement to offer additional contract hours to those who voluntarily work extra hours will inadvertently prevent those additional hours being offered at all.

I am not exaggerating when I say that if the threshold for low-hours contracts is set too high, it will take a wrecking ball to the UK’s part-time economy. It will deprive millions of people of a valuable source of flexible income, and multiple industries of the flexibility they need to offer excellent services in sectors where demand is variable and volatile.

It is important to understand the nature of flexible part-time work. The vast majority of part-time workers provide an important supplement to their household income but are not the mainstay. They are people such as a parent whose childcare responsibilities mean they cannot work full time, students balancing their studies with their earnings, carers for elderly relatives, and those seeking to transition into retirement. What this diverse group of people has in common is that they value the guaranteed regular income their part-time contracts provide but also appreciate and value the ability, at their discretion, to add hours of work when they have more time available: for example, during university holidays, during term time for parents of school-age children, or at times when household costs rise—for example, in the run-up to Christmas.

These reciprocal arrangements benefit all involved. From a business perspective, sectors such as retail, hospitality, health and travel can maintain excellent services despite the intrinsically variable nature of demand in consumer-facing businesses. These flexible additional hours allow businesses to respond to seasonal peaks and unexpected surges in demand, and to do so in a way that offers voluntary additional hours to those who want them.

I hope this gives some sense of how important flexible part-time work is for the 8.5 million part-time employees in the UK. This flexible work will be under threat if the threshold for low-hour work is set too high in the Bill. My worry is that the Bill will make it almost impossible for businesses to offer additional voluntary hours to workers with contracts below the low-hour threshold. There are two reasons why: first, the complexity of trying to comply with the law, and secondly, the risk it creates for businesses that offer additional hours to part-time staff that they will end up with permanent and unaffordable overstaffing.

17:45

I will start with complexity. Business will have to track who should be offered extra hours—as currently drafted, pretty much every day of the year—calculate correct entitlements and then determine compliant contract offers without clear guidance as to what a compliant offer will actually be. For the company I work for, I estimate that it would be at least a year of systems work and several million pounds of cost just to develop the system needed to manage this process. Small businesses will find this process overwhelming.

It is not just the complexity of the compliance that matters; there is a more important problem. Restaurants and shops simply cannot afford to have as many people working in February as they do in December. That is a fact. They cannot take the risk that extra hours to cover seasonal peaks or summer holidays then become permanent costs for the rest of the year. Faced with the choice of managing an impossibly complex system, along with the inherent risk of having to contract staff for more hours than a business will need, we will have no choice: we will simply not be able to offer additional hours to those staff on low-hours contracts.

Consider the practical consequences. A retail business facing heightened demand at seasonal peaks will be unable to offer additional hours to its existing part-time staff—skilled staff. The only alternative will be to offer the work to additional temporary workers, depriving loyal, experienced and skilled employees of the opportunity to supplement their income at a time when they most need it. For a Government who I genuinely believe are committed to economic growth and supporting working people, surely this cannot be the intended outcome.

This amendment does not seek to undermine the Bill’s core objectives; indeed, it provides a number that at some point must be determined. By defining low-hours contracts as those requiring four hours per week—a single part-time shift—we create a clear boundary that protects vulnerable zero-hours workers while preserving valuable flexibility for those who genuinely benefit from it. Set at a reasonable level, this section of the Bill has a good chance of achieving its noble aim. Set it too high, and it will radically change the landscape of UK employment in a way that will be bad for employees and catastrophic for the service economy.

Some may argue that the threshold of four hours is too low. If the Government believe that a different threshold is more appropriate, I will welcome that discussion and debate, but that debate we must have. What is indefensible is the failure to include any threshold in the primary legislation. This is not a minor technical detail to be determined later; it is fundamental to the scope and impact of the Bill. If it is the Government’s intention to profoundly change the nature of and opportunities for part-time work in the UK, the Bill should be clear on this subject, allowing business and employees the time they will need to prepare for the change. By leaving this crucial definition to secondary legislation, Parliament is being asked to approve potentially far-reaching changes to our labour market without debate, scrutiny or consent.

I urge the Minister, if not to accept this amendment, at least to commit in Committee to including a clear definition of low-hours contracts on Report. If the low-hours threshold is set at the right level, the Bill will indeed succeed in addressing potentially exploitative practices—which, as noble Lords on the other side of the Committee have rightly pointed out, good employers want to be addressed as much as they do. The Bill can do so without dismantling the legitimate employment practices that work—for our economy, for our service industries, and, most importantly, for millions of working people across the UK. In that spirit, I commend Amendment 8 to your Lordships.

[Lord Fox (LD)]

My Lords, it is with some trepidation but some pleasure that I follow that speech. I rise to speak to Amendment 4, which is in my name, and to offer support to Amendments 7 and 15 in the name of my noble friend Lord Goddard, although he will speak to those on his own account.

Speaking on the previous group, I said that there should be a change in the polarity of the guaranteed hours offer from an obligation to offer to a more streamlined right to request. We have heard in the previous two speeches that the aim is for this offer to be made to people who want it rather than there being an obligation to make it to everybody, when we know for a fact that a large number of people who will get the offer will not want to take it up. It is unnecessary activity when there is plenty to do in business. It is a very simple principle, and I genuinely do not think it subverts the intention of the Bill, in the same way as I think the noble Lord, Lord Wolfson, was trying not to subvert the purpose of the Bill but to help it succeed while helping business at the same time. In a sense, that reflects the point I made before withdrawing Amendment 1. It is really asking the Government to have some understanding of how these things will be delivered on the ground, in the workplace. That is why the previous speech was so helpfully revealing.

I think that a large part of the early part of this Bill is designed to deal, in essence, with a number of employers who the Government have in the back of their mind as not doing the right thing and not achieving what we would all like to achieve. I understand that. Unfortunately, it is dragging the whole business programme, from microbusinesses right up to huge businesses, into a series of practices to crack those particular nuts. Later in Committee, my noble friend Lord Clement-Jones will introduce Amendment 318, which targets the sort of employer who I think the Government have in their mind as bad or exploitative. It would create, in essence, a new class of employee, the dependent contractor, which is in fact in many cases what we are starting to look at. It would sharpen the regulatory focus, particularly on some elements of gig economy employers, but avoid the heavy-handed approach that we are in danger of using with this Bill.

Amendment 4, and I think there are a couple of others that are very similar, would simply reverse that polarity to: if employees ask for it, the employer is obliged to deliver it. Some obligation on employers occasionally to remind their employees that they are entitled to ask for this would help the process.

As for the rest of the group, I will listen with interest to the noble Lord, Lord Sharpe, when he comes to his amendments. I think much of this will be addressed also when we get to the issue of freelancers and to the amendment tabled by my noble friend Lord Clement-Jones, so I imagine this is not the last time that we will have some elements of this discussion, but some sign from the Government Front Bench that they understand that something should and could be addressed in this area would be a good starting point.

[Baroness Lawlor (Con)]

My Lords, I rise to speak in support of Amendments 3, 6 and 9 in this group, tabled by my noble friend Lord Sharpe of Epsom and supported by my noble friend Lord Hunt of Wirral. I also support Amendment 8 tabled by my noble friend Lord Wolfson of Aspley Guise, but for different reasons. I will not speak on that, but I like the idea of a low-hours contract. I will speak about zero-hours contracts, because I do not believe they are getting a fair look in.

These amendments would give workers the right to request, rather than putting an obligation on employers to guarantee hours. I think they are worth while and worth supporting. In the labour market this year, there are 33.9 million people employed. Of them, 1.3 million are on zero-hours contracts. There has been an increase since 2000 of 805,000 people on this type of employment contract. This is 3.1% of employment in the UK. Most are young people in the 16 to 24 age group. This is a popular way of working; the figures speak to that. There has been far more significant an increase in this type of contract than in the overall type of working arrangements chosen by employees and their employers.

Much of the popularity lies in the flexibility on both sides. The evidence is that the majority of people on zero hours, 60%, do not want more hours, although some, 16%, do. Amendments that would allow an employee to request guaranteed hours as distinct from obliging the employer to guarantee certain hours seem more in tune with people’s wishes. Of those on zero-hours contracts, around 1 million are young people. However, 946,000 16 to 24 year-olds are not in employment, education or training; that is around 50%. Yes, people on these contracts may work fewer hours than other workers—I gather the average is around 21.8 hours a week compared with 36.5 hours for all people in employment—but is it not better that there are jobs which people want and can get, particularly young people who may not yet be in the labour market or who may have been thrown out of the labour market or left it for one of the many reasons we hear about it? I am afraid that it seems from the Government’s approach that they do not think so.

This Bill and Clause 1 must be seen in the overall context of the party opposite’s approach to labour market and economy reform. Not only is the NIC tax hike on the productive sector along with the decrease in the NIC threshold taking £24 billion out, affecting 800,000 businesses and their ability to employ people and offer opportunity to the 16 to 24 age group, but other costs have been piled high, one on top of the other, since the party opposite came to power. Of those employed in December 2024, 27.8 million were in the private sector and 6.14 million in the public sector. If employers are obliged to move to guaranteed hours, that will most likely serve to cut the number of people productively employed under these arrangements, with a corresponding decrease in output and growth. Surely these amendments speak for themselves, and a Government whose priority is to increase economic growth should accept them.

[Baroness Verma (Con)]

My Lords, I declare my interests as laid out in the register. I regret that I was unable to speak at Second Reading. As someone who has been an employer for over 40 years for various small businesses, and knowing that these amendments were coming up, I spent the weekend speaking to small and medium-sized businesses, particularly the small businesses in my home city of Leicester. All were very concerned about the impact that the Bill may have, if it becomes law, in providing a set amount of guaranteed hours.

I come from the home care sector—that is one of my businesses—which really does work on contracts in which we do not, and cannot, guarantee hours, simply because of the nature of the job. We do not know when people will require care or for how long, how long they will be in hospital for, or whatever. The hospitality sector is in exactly in the same place.

18:00

Although we all want to be great employers, enforcing things that employers will find incredibly hard to deliver will just stop employers taking people on. That will restrict the ability of those who want to work for only a few hours a week—for example, just to have a change from caring duties in their homes. The intention is right, as my noble friend Lord Wolfson said, but the outcome will be very detrimental to the business community, particularly to small businesses, which are, as we all know, the backbone of our country.

Bad employers will be bad regardless of what the Government bring in because they will find ways of circumventing the legislation that is being introduced here. There needs to be more thinking around what we want to see as greater flexibility. I firmly believe in flexible working, but I believe that should be a contract between the employer and the employee; it should not be for government to mandate what needs to be done.

[Lord Goddard of Stockport (LD)]

My Lords, I will speak to my Amendment 7 in this group, as well as my Amendment 15. I also apologise for not being able to speak at Second Reading. I am walking somewhat of a tightrope this evening. For 15 years, I was a senior shop steward for the GMB as a national negotiator. I also have my own company with 20 employees. I do not think that I will be able to cope with the ramifications of some of this legislation. Also, I have some guests up in the Public Gallery: they are small business men who employ people. Dinner could get quite difficult if I say the wrong thing in the next 10 minutes, which I hope I will not do.

My first amendment would set the initial reference period for the right to guaranteed hours to 26 weeks, to give flexibility to industries that rely on a seasonal basis for operating and employing people. It would also give greater flexibility to the labour market itself. When Members see this amendment, they automatically think of seasonal workers as fruit and veg pickers harvesting crops, but nothing could be further from the truth. Work has changed. We are now essentially a service-led economy, with no more enormous factories employing thousands of workers every day, producing goods to export across the globe, clocking in and clocking out, as I did back in the 1970s. Flexibility is the key, and work/life balance for many is crucial. The days of the nine to five are well and truly over, in my opinion, especially for small businesses. That flexibility is not only for the agricultural industries but for tourism, retail, hospitality and events—things that bind our country together.

We welcome this Bill. One could argue that it is 30 years too late; that was probably the time when unions were most under attack, when our beloved Margaret was in charge. Perhaps that was when people should have risen up, but we are where we are. However, the Bill should be proportional and reasonable; those are the two things that we would wish to persuade the Government to embrace, through not only some of our amendments but those of other parties. Reasonableness and proportionality are what we are proposing. We will support the Bill, but its architects must accept that the labour market has evolved. Flexibility for workers and protecting workers’ rights go hand in hand.

I will now speak to my Amendment 15. Other amendments in this group have rightly raised challenges regarding the right to be offered guaranteed hours. My Amendment 15 strikes a necessary balance between protecting workers and allowing flexibility for genuine short-term employment situations. This amendment would not undermine the main principles of the Government’s legislation. Instead, it would make a reasonable accommodation for short-term contracts while maintaining safeguards through proper disclosure requirements and strict time limits.

For seasonal workers, this amendment offers significant advantages. It would increase their employability, as businesses could confidently offer work during peak periods without complicated hour guarantees that extend beyond the season. Many seasonal workers prefer concentrated work periods with higher hours, allowing them to earn more money during these limited timeframes. Additionally, this flexibility would enable workers in industries such as tourism, agriculture and entertainment to secure multiple seasonal positions throughout the year, improving their overall financial stability. Many industries in our economy, including agriculture and education, are connected to seasonal events. We need this practical provision.

I urge the Minister to consider this amendment, or at the very least be cognisant of the challenges these seasonally dependent sectors face. If this legislation is designed correctly, we can arrive at a set of provisions that will protect workers while acknowledging the realities of our diverse job markets.

Finally, my noble friend Lord Fox and I met Amazon a couple of weeks ago in Portcullis House. Amazon employs 75,000 people in the UK and is not unionised. It has evolved its own democratic in-house solutions. I am not commenting on that, but it shows that, sometimes, legislation is not the only way to protect people at work, guarantee earnings and pay reasonable rates. That is the kind of bigger picture thinking that this Bill is missing.

[Lord Barber of Ainsdale (Lab)]

My Lords, this group of amendments deals with the hugely important issue of zero-hours and short-hours contracts. As the noble Baroness, Lady Lawlor, said, well over a million people in the UK work on zero-hours contracts. In sectors such as retail, it is also common for workers to have a small number of guaranteed hours but to work the equivalent of full-time hours.

These arrangements are not a win-win for worker and employer. More than eight in 10 zero-hours workers want regular hours of work. Without guaranteed hours, workers do not know whether they will be able to pay their bills or organise their caring responsibilities. The flexibility is invariably on the employer’s side. Research has shown that more than half of zero-hours contract workers have had shifts cancelled at less than 24 hours’ notice. Many experience being sent home mid shift and very few are compensated. The vast majority of those who ask for guaranteed hours are turned down, so I fear a right to request would not resolve that issue.

There is also significant evidence that employers do not use zero-hours contracts just as stopgaps but will often park workers in these insecure arrangements long term. Two-thirds of zero-hours contract workers have been with their employer for more than a year, and one in eight for more than a decade.

As well as causing financial uncertainty and disrupting workers’ private lives, this distorts workplace relations, with workers fearful of challenging inappropriate conduct in case it leads to them losing their work. Recent accounts of poor behaviour at McDonald’s branches, where zero-hours contracts are prevalent, included a 17 year-old reporting that she had been asked for sex in return for shifts. Also, when employers rely on zero-hours contracts, what incentive do they have to invest in skills? The answer is: little or none, with predictable consequences for productivity.

The Bill implements measures first developed by the Low Pay Commission, with the support of both trade union and employer-side representatives. An employer will have to offer a contract based on a worker’s normal hours of work in line with a 12-week reference period. That gives a clear indication of a worker’s usual hours while evening out peaks and troughs. Any period longer than that, such as 26 weeks, would simply allow employers to park workers on a zero-hours contract for a prolonged period.

The Bill contains powers for Ministers to specify the notice period for shifts that employers must give to workers and compensation for cancelled shifts, and these are an essential part of the package. Currently, workers on variable-hours contracts bear all the risk of any changes in demand, and they are usually low-paid workers who can ill afford the sudden changes to income.

In the House of Commons, the Bill was amended to ensure that those rights also apply to agency workers. That is crucial in order to close the loophole that could have led to employers hiring zero-hour staff by agencies and entirely subverting the intent of the legislation. I know the TUC would strongly oppose any amendment that would exempt agency workers or fixed-term contract workers on variable-hours contracts from these provisions.

Employers will still be able to put in place arrangements for coping with fluctuations in seasonal work—for instance, via fixed-term contracts. What will change is that workers will not bear alone the burden, in reduced wages, of sudden changes in demand. The current situation allows manifest injustices to take place. It is time that we level up the labour market.

[Baroness Verma (Con)]

My Lords, what will the noble Lord do when all those small businesses—I emphasise small businesses—start to close down because of this rigid approach to flexible hours?

[Lord Barber of Ainsdale (Lab)]

I say to the noble Baroness that I have more confidence in the adaptability of British businesses to cope with intelligent, progressive legislation like this to even up the labour market.

[Baroness Carberry of Muswell Hill (Lab)]

My Lords, I am sorry that I find myself disagreeing for the second time today with the noble Lord, Lord Fox, specifically on the proposition that the right to be guaranteed regular hours should be replaced by a right to request.

My noble friend Lord Barber reminded us that this proposal originally came seven years ago from the Low Pay Commission. In that room were nine commissioners, who produced a unanimous report. There were three independent labour market experts, three representatives of workers and senior representatives from the Federation of Small Businesses, the CBI and big business, and, as I say, the recommendation was unanimous. In that discussion, the Low Pay Commission considered, in the words of the noble Lord, Lord Fox, whether a right to request could operate more effectively than a guaranteed offer on the ground and in the workplace, and the conclusion was that a right to request would not be a better option. That was primarily because you would be asking workers who have the least power in the labour market—the most vulnerable workers—to assert their rights. As we have been reminded, the vast majority of those workers who at the moment request guaranteed hours are turned down.

Another problem, from my point of view, with the group of amendments that are suggesting that there should be a right to request is that they are all silent on the consequences of a denied request. That is a major problem with the propositions in the amendments. In this context, I suggest that a right to request is no effective right at all.

[Lord Hendy (Lab)]

My Lords, I have a small point on Amendments 7 and 11 to 13, which seek to extend the reference period from the current 12 weeks in the Bill to 26 weeks. Last year the Chartered Institute of Personnel and Development published some figures showing the number of workers who stayed in their job for a three-month period, which I take to be some 13 weeks rather than the 12 weeks in the Bill. Some 1.3 million workers worked for less than that period of time, meaning that under the Bill 1.3 million workers will never reach the end of the reference period in order to claim the right. The figures show that if the period were extended to 26 weeks, as the amendments propose, that would cover some 8.9% of all employees, which comes to 2.7 million workers. So the effect of those amendments would be to exclude a further 1.4 million workers from ever being covered by the reference period.

18:15

[Baroness Stowell of Beeston (Con)]

My Lords, I was not going to speak on this group but the noble Lord, Lord Barber, has painted a horrific picture of the impact of zero hours on some workers. For some people I know who have been on the receiving end of zero-hours contracts, sometimes it has been even worse. I know of people who have been required to turn up at work at 4 am for a shift and been sent home again at 5 am, so I know how bad this is. However, my noble friend Lady Verma makes a strong argument as to why just removing all the measures, which would happen by virtue of the Bill, would also have a detrimental effect.

So far, I have not heard from those on the other side a response to the argument put forward by my noble friend Lord Wolfson, which is that we have to find a way forward on this matter that addresses the employment rights issue, which the Minister has said is the purpose of this legislation, but also allows business to deliver the kind of economic growth that the Government are also saying is the purpose of the Bill.

The noble Lord, Lord Empey, is not in his place at the moment, but we have to take heed of the point that he made in the debate on the first group: we should not be in a situation where this is a stand-off. Hopefully, through some responsiveness and empathy from the Minister, we will find ourselves in a position where the Bill will not have a detrimental effect on business but will address the worst work practices, as described by the noble Lord, Lord Barber.

[Lord Fox (LD)]

My Lords, I think I am allowed to come back in Committee. I want to respond to the noble Baroness, Lady Carberry, because I probably did not articulate terribly well what I was proposing. I certainly was articulating a right to request, but I was also assuming there would be an obligation to meet that request, given certain thresholds that the noble Lord, Lord Wolfson, was talking about. It would not be an option for the employer as long as the request was within those thresholds. I suspect that is not what the noble Baroness thought I was proposing, and I just wanted to set the record straight.

[Baroness Coffey (Con)]

My Lords, I support Amendment 8. I commend my noble friend Lord Wolfson on his excellent speech, bringing the reality of employing so many people into the heart of this debate, along with the constraints and the concerns being raised, while still recognising that I understand why so many people consider casual work and zero-hour contracts to be particularly poor when people are trying to have certainty of employment over some time. I also support Amendments 7, 12 and 13—in essence, any amendment that refers to specifying the reference period in the Bill.

I say that because, when thinking of 26 weeks, I think in particular of the hospitality industry in coastal areas. There are a number of employers around the country who literally shut down their businesses, or move to a much lower level of needing people, at certain times of the year, and then, in the summer, are desperately trying to find people. We need to give flexibility. The 12 weeks simply does not recognise that, as has been referred to. It is perfectly usual for people to work at different points throughout the year, potentially in on annualised-hours contract, but varying the number of hours expected to match the demand of customers requiring a particular service. I fear that the 12 weeks does not address that sort of business.

Across the country, 2 million people work in the hospitality industry. It is one of our biggest industries, and for many families it is key to how they support their household income. For the flexibility that employers want, and—thinking of how many people lose their childcare at certain times of the year—for employees to have flexibility around their hours worked, bringing in casual staff is a key element in how employers keep those businesses going.

There is another element that needs thinking through. While I appreciate that the Government seek to reduce the number of agency and bank workers in the NHS, let us not get away from the fact that, unfortunately, many NHS trusts are actually terrible employers. A lot of people leave or reduce their permanent contracts because they simply cannot get the flexibility that they need working in the NHS. That could be for caring reasons, for all sorts of people—it does not matter whether it is men or women; people provide care to their families and to their friends. I am concerned, and I intend to discuss further with NHS Professionals how this will impact on the NHS fulfilling its expectations for people right across the country. I appreciate that it is not simply NHS Professionals; many individual trusts have their own bank. That is intended to provide flexibility based on need, and recognises that simply not everybody can work the NHS shifts expected.

Thinking of the 26 weeks or the 12 weeks, I am also concerned that, at the other end of the Corridor, 650 Members of Parliament are all individual employers. They have to sign contracts, which are provided, but when people are ill or go on maternity leave, MPs can and do take people on through certain term contracts. I am concerned that there will be unintended consequences for the provision of services. As a real example, if you had to guarantee hours beyond when the employee came back, you could end up in a situation that you simply could not manage.

It is for those reasons that we need to think very carefully about the reference period when we are considering the different employment situations that small employers find themselves in, as well as the large sectors, such as hospitality and retail, which have already been discussed.

[Lord Sharpe of Epsom (Con)]

My Lords, Amendments 3, 6 and 17 stand in my name and that of my noble friend Lord Hunt. Before turning to the detail, I would like to frame the debate in its proper context.

At the heart of this issue lies the question of incentives. Much of the discussion around zero-hours contracts rightly concerns the security and well-being of workers. We must not lose sight of the fact that only a relatively small proportion of the workforce is employed on such contracts, or in other forms of temporary work. Many of these individuals are young people—as my noble friend Lady Lawlor illustrated in her very detailed speech—who are starting out in their careers. Others are disabled people, who may be able to work only a limited number of hours due to their personal circumstances. If we make the regulatory environment too rigid, we inadvertently create a disincentive to hire precisely these groups. We reduce the number of vacancies, reduce opportunities and end up harming those we most wish to support. Good intentions do not alone lead to good results. It is the incentives that lead to results.

I thank my noble friend Lord Moynihan and the noble Lords, Lord Fox and Lord Goddard, for their contributions in this group, and I will come on to others. My noble friend Lord Moynihan made a compelling argument to leave out this part of the clause altogether, because it is simply unworkable in its current form. I look forward to hearing what the Minister has to say in response.

I turn to the specifics of my amendments. Job security is vital, and there can be no disagreement on that point, but we have to recognise that guaranteed-hours contracts are not always practical or appropriate across all sectors of the economy. The principle that we wish to uphold is simple: autonomy. Workers themselves are best placed to judge their own circumstances and to decide whether a guaranteed-hours contract would suit their needs.

Research from the Chartered Institute of Personnel and Development, published in its report on zero-hours contracts, found that workers on such contracts often report a better work-life balance and higher well-being compared with other workers. This is an important reminder that flexibility, when genuinely chosen, can be empowering rather than exploitative.

Not every worker wants a rigid schedule. Young people, parents with caring responsibilities and disabled people may actively prefer the flexibility that variable hours allow. A one-size-fits-all approach simply does not reflect the realities of the modern labour market. Sectors such as retail, hospitality and tourism, and other seasonal industries, are heavily dependent on flexible staffing to meet seasonal demand. It is these very sectors that offer the vital entry-level opportunities to workers who might otherwise struggle to find employment.

Despite the Government’s understandable ambition to improve labour market fairness, the Bill as currently drafted risks reducing that flexibility rather than enhancing it. The automatic obligation placed upon businesses to offer guaranteed-hours contracts once certain thresholds are met would impose significant and disproportionate administrative burdens, even when the worker involved may have no desire to change their current arrangements.

The problem is particularly acute for larger employers, such as national retailers, as we have heard from my noble friend Lord Wolfson, who delivered an expert speech. They would be forced into a continual cycle of recalculations and offers, simply because an employee’s working patterns have shifted slightly. As my noble friend Lady Verma explained, that affects small businesses as well. In practice, firms would face a daily or weekly obligation to offer a new contract based on changing patterns, resulting in huge and unnecessary administrative costs. This would not only create inefficiency but would discourage businesses offering overtime and additional work voluntarily, thereby reducing opportunities for those who value flexibility.

The amendments I propose take a different approach. Instead of an automatic right to be offered a guaranteed-hours contracts, we propose a right to request a guaranteed-hours contract. It entirely respects the spirit of the Government’s intentions. As the noble Lord, Lord Fox, has already explained, it would impose the same the obligations on employers as the Government’s Bill. This would preserve the choice for workers, empowering them to seek greater stability when they wish, but it would avoid imposing blanket obligations on employers that may lead to perverse outcomes. The Government’s current drafting, with an automatic right to guaranteed hours, risks creating a bureaucracy that neither workers nor businesses have asked for.

On the subject of businesses, it is worth referring to the letter received from five employers’ organisations. For reference, those are Make UK, the CBI, the IoD, the Federation of Small Business and the British Chambers of Commerce. They say in that letter:

“Not every job can be made compatible with every possible need. This reform means businesses incur admin costs whenever an employee works variable hours. The result is that firms are discouraged from offering variable hours even when the flexibility is requested by workers, including voluntary overtime. The cost associated with administering and calculating contract offers on a rolling basis whenever staff work additional hours is also disproportionate and provides no clear benefit to workers”.


I could not have put it better myself.

There has been some reference on the other side, by the noble Baroness, Lady Carberry, to the Low Pay Commission, which met seven years ago. That ignores the fact that, over the last seven years, working practices more generally through the economy—whether on flexible-hours contracts or not—have changed very dramatically, partly as a consequence of the pandemic. I note that the FSB has now signed the letter which includes the quote I have just delivered, so it has clearly changed its mind.

I recognise that there may be an even simpler and more effective alternative to the right to request, which would be an automatic offer of a guaranteed-hours contract combined with the right for the worker to opt out if they so wish, so Amendment 17 introduces a worker opt-out mechanism. A qualifying worker may opt out of receiving a guaranteed-hours contract provided that the employer has provided clear written information about the guaranteed-hours system, the worker has given written notice in a prescribed form, and the employer reminds the worker at regular intervals, at least every six months, that they can opt back in at any time. Under that model, every eligible worker would be enrolled on to a guaranteed-hours contract after the reference period by default.

However, those workers who genuinely value the flexibility of their zero-hours arrangement—and there are many, particularly, as we have already discussed, young people, carers and so on—would have the right to decline the offer by providing written notice. This approach would strike a better balance, because it would ensure that guaranteed hours are the norm unless the worker themselves chooses otherwise, thereby protecting workers who might otherwise feel pressured not to request more security. Equally, it would avoid the unnecessary administrative burden on employers of offering contracts that in many cases would be rejected. We would be sparing businesses the cost and disruption of a process that delivers little practical benefit where flexibility is mutually valued by both employer and employee. It would ensure that the choice remains a real and continuing one, recognising that workers’ needs and circumstances evolve.

18:30

The Government have rightly said that they seek a labour market that is flexible and fair and works for everyone. These amendments deliver precisely that balanced, two-sided flexibility, preserving opportunity and autonomy for workers while sparing businesses disproportionate costs that could otherwise lead to fewer jobs and fewer opportunities.

My noble friend Lord Wolfson spoke with real authority and expertise on Amendment 8. I have to say, before I get into the meat of Amendment 8, that I wonder whether the noble Lord, Lord Barber, listened to what my noble friend said, because he pointed out, and I think I am quoting him correctly, that:

“Restaurants and shops simply cannot afford to have as many people working in February as they do in December”.

That is the motivating factor behind the extension of the reference periods: to iron out seasonal quirks.

For all the Government’s talk about providing clarity for businesses through these reforms, it is remarkable that the Bill as drafted fails to define “low hours” at all, despite introducing a raft of measures that depend on this very concept. This omission is not a minor drafting point; it goes to the heart of the Bill’s workability. It is crucial that the threshold for what constitutes a low-hours contract is set appropriately. If the threshold is set too high, we risk severely constraining businesses’ ability to adjust staffing levels in response to short-term changes in demand. This will increase administrative complexity, bring more workers unnecessarily into the scope of guaranteed-hours provisions and in doing so undermine operational flexibility, which is vital in sectors such as retail, hospitality, holiday parks and many others, as we have heard.

Conversely, if the threshold is set too low, particularly when combined with an excessively long reference period, businesses will face a constant churn of reassessing and amending employment contracts. This administrative burden would divert resources away from core operations, disrupt workforce stability and erode the very flexibility needed to respond to seasonal peaks, staff turnover and fluctuating consumer demand, particularly in the convenience and service sectors. Moreover, setting the threshold poorly could have serious unintended consequences for workers. There is a real risk that if the rules around low hours are unclear or overly restrictive, employers may be discouraged from offering low-hours roles altogether. That could shut out individuals from the workforce: those who, for very legitimate reasons, such as caring responsibilities, disabilities or study, may be able to work only for a limited number of hours per week. We should not inadvertently deny these workers opportunities to participate in the labour market.

In light of these concerns, we have tabled an amendment to define low hours clearly and appropriately:

“Clause 1, page 2, line 30, leave out from ‘for’ to end of line 32 and insert ‘four hours or fewer per week (“the minimum number of hours”)’”.

We believe that a four-hour threshold strikes the right balance, ensuring that truly minimal-hours arrangements are captured without sweeping in a wide range of normal part-time work or creating unnecessary bureaucracy. In legislation as significant as this, as we discussed at some length on the first group, clarity is not optional. Leaving concepts such as “low hours” undefined creates uncertainty for employers and workers alike. It opens the door to confusion and disputes, and ultimately undermines the stated aims of the legislation. I urge the Government to reflect carefully on this amendment. If their aim is truly to provide clarity and certainty for businesses and workers, there can surely be no good reason to leave this important definition to be sorted out later by regulations or, worse, by litigation.

I will speak briefly to Amendments 31 and 32 but firmly to my amendment to Schedule 1. This amendment seeks to remove the Secretary of State’s power to make regulations transferring the duty to offer a guaranteed-hours contract from the hirer to another party involved in the supply of agency workers. This power is both unnecessary and, I argue, undesirable. It risks creating confusion and uncertainty about where legal responsibility properly lies. In any employment or engagement relationship, it is vital that workers, whether employees, agency workers or freelancers, have clarity about who is responsible for their rights and protections. The Bill as currently drafted would allow the Secretary of State, through secondary legislation, to move the duty away from the hirer to some other party in the supply chain—perhaps an agency, perhaps another intermediary. This raises serious practical concerns.

First, the hirer is the party who exercises day-to-day control over the worker’s activities. It is the hirer who sets the hours, determines the workload and understands the nature of the work the individual is undertaking. The hirer is therefore best placed to judge whether the worker meets the qualifying conditions for a guaranteed-hours contract and to make a meaningful offer. Passing this duty on to another party, who may have no direct operational relationship with the worker, risks unfairness to the worker and administrative chaos for the employer.

Secondly, we must remember that many agency supply chains, particularly in sectors such as logistics, health and social care and construction, are already complex. Introducing additional legal uncertainty about who bears responsibility will not improve outcomes for workers. Instead, it risks creating disputes, legal challenges and a compliance minefield that ultimately harms both workers and businesses.

The Government may argue that the regulation-making power is simply a backstop or a flexibility mechanism, but such broad and loosely defined powers should not be handed over lightly, especially when we are talking about the fundamental rights and protections of working people. If there is a clear principle here—that those who control the work should be responsible for offering security of hours where appropriate—we should put that principle into the Bill, not delegate it out through regulations after the fact. Therefore, I urge the Government to consider this provision. Let us provide clarity and certainty for businesses and workers by ensuring that the duty to offer guaranteed hours remains firmly with the hirer, the party best placed to discharge it fairly and effectively.

Finally, I thank the noble Lord, Lord Goddard, for his Amendment 15. This amendment addresses an important gap in the current draft of the Bill, particularly for workers in industries such as hospitality, retail and other seasonal or temporary employment areas where fluctuating demand and short-term contracts are the norm. I believe it is vital to recognise that many workers in these sectors actually value the flexibility that comes with non-guaranteed hours. For some, the opportunity to accept irregular work, tailored to their availability and lifestyle, is not just desirable but essential. For students, people looking for part-time work and those balancing other commitments, this flexibility is often more important than the certainty of a fixed number of hours. I am particularly curious to hear the Minister’s thoughts on this amendment, as it seems to me to offer a practical and reasonable solution to the challenges posed by the Bill’s current provisions. The introduction of flexibility, in a way that empowers both the employer and the employee, can only enhance the working arrangements available to those in temporary or short-term roles.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank the noble Lords, Lord Sharpe of Epsom, Lord Goddard of Stockport, Lord Moynihan of Chelsea and Lord Parkinson of Whitley Bay, for tabling their amendments to the clauses on zero-hours contracts. I will begin with Amendments 7, 11 and 12, which seek to amend Clause 1 to set the initial reference period for the right to guaranteed hours at 26 weeks. They would also remove the power to define the length of the initial reference period in regulations, or would render it obsolete. I say to the noble Lords that the length of the initial reference period will be set out in regulations, and of course we will consult further on this issue, but it is expected to be 12 weeks—that is the figure we are currently thinking about.

The noble Lord, Lord Goddard, urged that the measures be proportionate and reasonable. We feel that our proposals as they stand are exactly that. I am grateful to my noble friend Lord Hendy for reminding us that 1.3 million people will never reach the reference period if it is 26 weeks, as their employment will not be that long. There is a very good reason why we should not extend the period.

We believe that 12 weeks is the appropriate length. It would be long enough to establish the hours that the workers regularly work while allowing qualifying workers to be offered guaranteed hours reasonably soon after they start a job, or after the right to guaranteed hours comes into effect. If the initial reference period was set at 26 weeks, workers in precarious and unpredictable work would have to wait six months to access their right to guaranteed hours. We believe this is too long in the current labour market circumstances.

Similarly, Amendment 13 would specify in the Bill that the subsequent reference period for the right to guaranteed hours is 26 weeks. The length and frequency of the subsequent reference periods will be set out in regulations. Subsequent reference periods may well be of a different length and frequency from the initial reference period. This is because, unlike the initial reference period, subsequent reference periods are not qualifying periods. Therefore, a different balance needs to be considered. It is necessary to set out both the initial reference period and subsequent period lengths in regulations to allow changes to reference periods to be made, for example in response to emerging evidence about how this novel right is working in practice or in light of evolving working practices. As I said, we intend to consult on the length and frequency of subsequent reference periods.

Amendment 9 seeks to amend Clause 1 to take workers on fixed-term contracts out of scope of the right to guaranteed hours. This could lead to avoidance behaviour, whereby employers move workers from open-ended zero-hours contracts to fixed-term zero-hours contracts. We also believe that workers on limited-term contracts lasting longer than the duration of the reference period should be entitled to a guaranteed-hours offer. This is because such workers may experience one-sided flexibility in the same way as those on permanent contracts.

I emphasise that the right to guaranteed hours will not prevent employers using limited-term contracts. Employers can make a guaranteed-hours offer resulting in a limited-term contract if it is reasonable for that contract to be of a limited term. For example, as has been mentioned several times, it might be reasonable to provide a worker with a limited-term contract only to cover the increase in retail demand during the Christmas period. If a limited-term contract is shorter than the initial reference period, then the worker would likely not qualify for a guaranteed-hours offer, but that would depend on the conditions as to regularity or number and whether it was reasonable for the contract to be of a limited term.

Amendment 8 seeks to amend Clause 1 to set the hours threshold in the Bill at a maximum of four hours a week. It would also remove the power to set the hours threshold in regulations. I listened carefully to the arguments, in particular from the noble Lord, Lord Wolfson, on the interests of part-time workers, but under this amendment workers who are guaranteed more than four hours per week would not be eligible for the right to guaranteed hours.

The hours threshold will be crucial to determining how many workers are included in scope of the right to guaranteed hours. It is partly intended to act as an anti-avoidance measure, preventing employers avoiding the duty to offer guaranteed hours by moving a worker on to a contract guaranteeing only a very small number of hours. Setting it to only four or fewer hours per week would mean, for example, that any worker with only five hours guaranteed per week would fall out of scope of the new provisions, even though they may experience unpredictable hours and income in the same way as other zero-hours workers. Similarly, if we were to set the threshold too high, it could have unintended consequences and impact the overtime arrangements of workers who already have sufficient predictability and security.

Additionally, given the novelty of these provisions, it is important that the Government retain the flexibility to amend the threshold in future, for example in the light of evolving work practices. I reassure the noble Lord, Lord Wolfson, and others that we intend to consult on the hours threshold, including the issues raised today, as part of the consultation. Including the threshold in the Bill at this stage would remove the opportunity to have that consultation and for unions, employers and workers to feed in their views.

18:45

[Lord Wolfson of Aspley Guise (Con)]

Would the Minister accept that having a maximum number in the Bill would be enormously important so that business can prepare for this? The number of hours set as the threshold will determine the number of employees who need to be dealt with. If it is 3% of our workforce, that will be one thing; if it is 50%, that will be another. While I accept that the Government need flexibility, would they at least consider setting a maximum number of hours in the Bill so that business can start to prepare now, as we will need to do if we are to have the systems in place in one year’s time to implement this Bill?

[Baroness Jones of Whitchurch (Lab)]

As we have said when other people have suggested fixed rates, we need to avoid unintended consequences or the gaming of those arrangements. I am inclined at the moment to resist what the noble Lord has said, but we can consider that further as the Bill progresses.

[Baroness Verma (Con)]

My Lords, in adult social care or care, you are at the mercy of people going into hospital or passing away and those hours suddenly becoming contracted. Where are the safeguards for the employers at that point? There is no guarantee that people will come out of hospital. You cannot wish more hours to happen; you are at the mercy of people wanting care. I do not understand how this will work in the care sector, so it would be really helpful to understand the Government’s thinking on that.

[Baroness Jones of Whitchurch (Lab)]

The same thing would apply as for seasonal workers, in the sense of that unpredictability. The Bill allows seasonal work to continue; fixed-term contracts can be an effective way for an employer to meet temporary or seasonal demands for work—

[Baroness Verma (Con)]

Forgive me; I thank the Minister for her patience. Seasonal work is incredibly different from care, which is about the elements around you. We cannot predict when somebody will fall sick, go into hospital for long or short periods or pass away. It is a very different discussion point. I want us to be mindful, in thinking about the overall picture, of how certain sectors fit in.

[Baroness Jones of Whitchurch (Lab)]

Obviously, we want all sectors to have the right facilities for them. I am not sure whether the noble Baroness is talking about home care or the care home sector. Perhaps we can have a conversation outside; I will attempt to set up a meeting with her, because I do not want to be misconstrued.

Amendments 10 and 31 seek to amend the Bill so that agency workers do not have a right to guaranteed hours. We are determined to ensure that agency workers who seek more certainty of hours and security of income are protected. Some workers choose agency work because they value flexibility, but they can also experience one-sided flexibility in the same way as other workers. Failing to include agency workers in the scope of the Bill could also see employers shift to using more agency workers to avoid the zero-hours measures altogether. As with other eligible workers, agency workers who prefer the flexibility that agency work provides would be free to turn down the guaranteed-hours offer.

After public consultation, the Government brought forward amendments to the Employment Rights Bill so that hirers, agencies and agency workers are clear where responsibilities will rest in relation to the new rights. However, we recognise that some measures may need to apply in a different way to agency workers because of the tripartite relationship between the end hirer, the employment agency and the agency workers. The Government will consult further and continue to work in partnership with employers’ organisations, the recruitment sector and trade unions to develop the detail of regulations in a way that avoids unintended consequences for employment agencies and hirers.

Amendment 32 seeks to remove from the Bill the power to place the duty to make a guaranteed-hours offer on the work-finding agency, or another party involved in the supply or payment of an agency worker instead of the hirer. We included this power in line with the responses to the Government’s consultation on applying zero-hours contract measures to agency workers. Responses from stakeholders were split about whether this new duty should lie between the hirer, the agency or another party in the supply chain. We are clear that, as a default, the hirer should be responsible for making the offers of guaranteed hours because they are best placed to forecast and manage the flow of future work.

However, given the unique and complex nature of agency worker relationships, which vary in different parts of the economy, the power is required to allow the Government flexibility to determine specific cases in which the responsibility to offer guaranteed hours should not sit with the hirer. For instance, this could be the case with vulnerable individual hirers who receive or procure care from agencies—I am not sure whether that is the point to which the noble Baroness referred earlier—where instead the agency might be in a better position to offer guaranteed hours. We are aware of the importance of this power and the impact these regulations could have on agency workers, hirers, agencies and others in the supply chain. For this reason, this power will be subject to the affirmative procedure, ensuring both Houses of Parliament get further opportunity to debate its use.

[Baroness Neville-Rolfe (Con)]

Can the Minister talk us through the agency question a little bit more? If you need emergency care, you go to an agency and it finds you someone, then you pay a very large sum of money for agency care. Is the Minister suggesting that in future, and considering the ups and downs, the agencies will have to guarantee those who are involved in emergency care these very high salaries, which they will have to pay, even if they do not find clients? Is that how she thinks it will work out in practice? Is it enough to say it is going to go into regulations, when this is so important for the care sector and emergency care?

[Baroness Jones of Whitchurch (Lab)]

I was making the point that this has complications because there are some people who are individual hirers. Some people get benefits to employ people directly, so it is not always done through a third party. That is why we need to have clearer rules about this. I am happy to write to noble Lords or explain this in a little bit more detail if that helps.

[Baroness Verma (Con)]

The problem with direct payments is that you are making the person who receives the payment into the employer. They are usually individuals who are looking after their own care; they will not have the facilities to go through the quagmire of rules and regulations. I say this just to give some assistance.

[Baroness Jones of Whitchurch (Lab)]

I take that point. I was attempting to explain in my description, which I obviously need to develop a little bit more, that we understood some of those issues and are trying to find a way through it.

Amendments 3, 4 and 6 seek to change the model for the right to guaranteed hours from a right to be offered to a right to request. We have debated this at some length. These amendments would mean that a qualifying worker experiencing one-sided flexibility would need to make a request to their employer to access their right to guaranteed hours. Noble Lords underestimate the imbalance of powers that employees in this circumstance face. The noble Baroness, Lady Lawlor, mentioned young people, which is the group that is likely to be the most intimidated by having to request guaranteed hours. Therefore, we are attempting to make sure that these rights are balanced in a proper and more effective way.

I am grateful to my noble friend Lady Carberry for reminding us that the Low Pay Commission also looked at a right to request and, understandably, rejected it for exactly that reason. It understood that the people in those circumstances had the least power in the labour market and would therefore, quite rightly, feel intimidated about coming forward. She also raised the issue of what happens if the request is denied. I know the noble Lord, Lord Fox, attempted to address that, but I do not know that the amendments necessarily do so. The noble Lord, Lord Sharpe, says that employment has changed since those days. I would say that employment has become even more unpredictable and unreliable. Nothing that the Low Pay Commission said—or indeed that I said—addresses the potential exploitation which the commission identified. There is an imbalance, and it is very difficult for people to come forward and make that request; that is why we are insistent that it is done in the way that we have suggested.

After receiving an offer, the workers would then be able decide whether to accept it, based on its specific terms. That would empower the worker to decide for themselves, having seen the offer on the table. This addresses the point that some people do want to work flexible hours, and we understand that.

Amendment 15 would allow workers on limited-term contracts of four months or less to voluntarily waive their right to guaranteed hours. We believe that workers should be able to retain the flexibility of a zero-hours contract or arrangement if they wish, which is why those who are offered guaranteed hours will be able to turn them down and remain on their current contract or arrangement if they wish. This amendment would add an additional opt-out mechanism for workers that could create needless confusion for both employers and workers.

Amendment 17 would provide workers with the ability to opt out of receiving guaranteed-hours offers. We understand the importance of workers being able to retain the flexibility of zero-hours contracts or arrangements if they wish, which is why those receiving a guaranteed-hours offer will be able to turn it down. However, to ensure that all qualifying workers will benefit from the legislation, all workers should be able to receive a guaranteed-hours offer. We want to ensure that employers and workers are starting from a position of equal bargaining power. Therefore, through the Bill we have allowed for employers and unions to collectively agree to opt out of the zero-hours contract measure, if they agree. Unions can make these deals based on their knowledge of the industry and a holistic view of what is best for the workers. We feel it is more appropriate than individual workers opting out of receiving offers. After receiving an offer, qualifying workers would then be able to decide whether to accept, based on their individual circumstances.

Finally, Amendment 2 would remove from the Bill the right for qualifying workers to be offered guaranteed hours. We think that all employers should be required to offer their qualifying workers guaranteed hours, as this is the best way of addressing one-sided flexibility in the workplace and ensuring that jobs provide a baseline of security and predictability.

Without guaranteed hours, workers do not have any form of certainty as to their earnings, making it difficult to apply for credit or a mortgage, to rent a flat, to plan for major events, or even to manage their day-to-day life expenses. As I have previously iterated, those who are offered guaranteed hours will be able to turn them down and remain on a current contract or arrangement if they wish. We believe that this is the right balance. I therefore hope that I have persuaded noble Lords not to press their amendments.

[Lord Sharpe of Epsom (Con)]

The Minister is relying a great deal on the fabled consultation that we are going to have. Can we have some idea of when that consultation is likely to take place? Can I suggest that it perhaps takes place before we get to Report, because it will iron out a great many of these arguments? The Minister asserted that some businesses have supported the 12-week reference period. Can she say which ones?

[Baroness Jones of Whitchurch (Lab)]

The Bill sets out, in a number of ways, that there will be regulations that will be consulted upon. This goes back to the issue of when that consultation will take place, but there is a framework for that set out in the Bill which should cover that point.

[Noble Lords]

And the second point?

[Baroness Jones of Whitchurch (Lab)]

As I said, I read out the names of a number of businesses that are broadly supportive, but we have not gone through clause by clause asking which particular pieces of the Bill they are supporting. However, businesses that are household names are in support of the Bill.

[Baroness Verma (Con)]

My Lords, very quickly, large businesses may be able to be supportive. Could the Minister name any small business that she has come across that supports this?

[Baroness Jones of Whitchurch (Lab)]

Again, there is a list of SMEs that support the basis of the Bill. I do not think it is going to help anybody if we go back and ask them for the specifics of whether they agree with each clause. The fact is that they agree with the direction of travel and a number of businesses, big and small, are already carrying out many of these practices, so it will not be unusual to them. This is about good employment practice and I am sure a lot of businesses will support it.

19:00

[Lord Moynihan of Chelsea (Con)]

My Lords, the debate on this group of amendments has been invigorating and useful. I thank all those noble Lords, in particular, the Minister, the noble Baroness, Lady Jones, who have contributed to it.

My noble friend Lord Wolfson of Aspley Guise commended the intention of the Bill to counter the ill effects of zero-hours contracts, which his company does not use. I honour his intent and indeed his extraordinary contributions to the nation’s employment and its economy in general. I note that he tended to agree with my proposal overall, in respect of the dysfunctionality of this clause. I would be happy if the wording of the clause, if it is incorporated into the Bill, incorporated his wording but removed the rest of the clause from the Bill.

The noble Lord, Lord Fox, who does not appear to be in his place, spoke to Amendment 4, which, in the case that Section 27BA is retained in the Bill, switches the origination of a flexible-hours discussion from employer to employee. Clearly, this is a more sound and flexible approach, although I of course cannot go along with his later statement that he meant there to be an obligation on the employer to provide what the employee demanded.

My noble friend Lady Lawlor spoke movingly on the many things this Government have already done to depress economic activity and said—better than I—how this clause would make things much worse. She added the crucial point that the ill that this clause purports to address is in fact a good, much preferred by the majority of those working flexible hours.

My noble friend Lady Verma spoke with the authority of one who has great experience as an employer. She implored the Government to get their nose out of what should be a more relaxed and less formal relationship between employers and employees. The Government should pay her heed. My noble friend Lady Coffey spoke forensically about the wreckage this clause would create in the hospitality industry and also, very worryingly, in the NHS. Over and again, we heard noble Lords speak about the need for flexibility; this clause creates the opposite.

My noble friend Lord Sharpe of Epsom pointed particularly to the appalling outcomes this clause will create on the numbers of youth unemployed. Earlier, my noble friend Lady Meyer mentioned French youth unemployment at 19.2%. Have the Government any clue how that occurred? They did not intend that to happen, obviously. They do not want one in five of their youth unemployed who are seeking work. It occurred from precisely the sort of legislation that the Government are proposing to introduce here. Do we really want our youth unemployment to be one in five of those wanting to be employed? That is what I mean by outcomes rather than this notional and very generic idea of fairness—because it is not fair, either.

The Minister confirmed that the reference period will be in the legislation. This is welcome news, but it would have been better were it in the draft legislation right now, so that we could debate it right now—the time that we are supposed to be debating it. The Minister showed an impressive ability to wade through the latest iteration of what is an extraordinarily complex proposed set of rules, but creating and explaining such rules misses the entire point. This Government believe that “We know best” and therefore that if we create this perfect machine, these wonderful processes, all will be well. They do not know best; the market knows best and the market should be left to itself to sort out most of these matters. I urge the Minister to heed the words of the noble Lord, Lord Wolfson, and the noble Baroness, Lady Verma, to provide clarity as soon as possible and to provide flexibility in the way that they have just urged her.

The Minister sought to provide clarity on agency workers. With respect, her words did not reflect reality. Let us take as one random example the interim management sector. These individuals take jobs to fill gaps that suddenly appear in a company, to fill the period before a permanent replacement can be found. The appointment of an interim manager may last a day or it may last a year, depending entirely on events that will only be happening in the future. To guarantee hours for these individuals is, quite frankly, entirely impossible. That is just one of many different sectors and different possible examples, as the noble Baronesses, Lady Neville-Rolfe and Lady Verma, made clear just now.

I remain convinced that the outcome of this clause, if passed into law, will be significantly fewer—not more—jobs. Having said which, there are of course other ways of improving this clause if it is not removed entirely. These are ways that my noble friends and the noble Lord, Lord Fox, have offered with their own amendments, the vast majority of which I have indicated that I agree with, not least after listening to the experienced voices of business from these Benches.

To conclude, the removal of flexibility from employers cannot possibly be a good thing. The more employment flexibility that is created in an economy, the more creative are the ways that entrepreneurial employers find to grow the economy, to create more jobs, to improve living standards and indeed to provide the Government with more tax revenues to meet the depressingly larger and larger commitments that this Government continue to take on. Having said all of which, I reserve the right to bring this amendment back on Report. In the meantime, I beg leave to withdraw it.

Amendment 2 withdrawn.

Amendments 3 and 4 not moved.

Amendment 5

Moved by

[Baroness Noakes]

5: Clause 1, page 2, line 9, after “employer” insert “, other than a small and micro business,”
Member’s explanatory statement
This amendment, along with another in the name of Baroness Noakes, takes small and micro businesses (and similarly sized undertakings) out of the ambit of Part 1 of the Bill.

[Baroness Noakes (Con)]

My Lords, I rise to move Amendment 5 and will speak also to Amendment 124 in this group. I thank the noble Lords, Lord Londesborough and Lord Vaux of Harrowden for adding their names to the amendments. The noble Lord, Lord Vaux of Harrowden, was hoping that we would be progressing rather more rapidly during Committee. Unfortunately, he has now had to leave us, but he has assured me that he remains fully committed to the principles behind these amendments.

Amendment 5 seeks to amend new Section 27BA of the Employment Rights Act 1996 as inserted by Clause 1 of this Bill so that the new right to be offered guaranteed hours will not apply to small and micro businesses. Small and micro businesses should not be dragged into any of the changes made in this part of the Bill, which is why I tabled the more extensive exclusion in Amendment 124. The Public Bill Office would not let me table that amendment at the beginning of Part 1, which is what I wanted to do, but it suggested Amendment 5 as a mechanism to enable us to have an early debate on the impact of the Bill on small and micro businesses. It is such an important issue that it has already arisen in the speeches of several noble Lords on the other two groups that we have debated, so now is a good time to have an initial debate on small businesses.

My blanket Part 1 exclusion—in Amendment 124 —applies to small and micro businesses. I have used the definitions in the Small Business, Enterprise and Employment Act 2015, so that a “small business” is one with fewer than 50 staff and a “micro business” has fewer than 10 staff. The 2015 Act also encompasses other types of undertaking, so small charities et cetera would come under that definition.

I have some considerable sympathy for Amendment 282 in the names of my noble friends Lord Sharpe of Epsom and Lord Hunt of Wirral, which is also in this group. It is similar to mine, but it instead also covers medium-sized companies, which are those with between 50 and 250 employees. I believe that the greatest harms done by this Bill will be to those at the smaller end of the scale, because they have the fewest management resources to cope with the kinds of burdens that the Bill will inflict on large swathes of our business community. I am not opposed to my noble friends’ amendment, but if we could see where the biggest harm would be, it would be at the very smallest end.

According to the latest Department for Business and Trade statistics, there were 5.5 million businesses in total, employing nearly 28 million employees. The micro-business segment—those with up to 10 employees —accounts for 95% of the total number of businesses, 5.2 million. However, 4 million of them do not have any employees. The rest—1.2 million businesses—have over 4 million employees between them. So we are talking about businesses with an average size of three employees; these are very small operations.

The 220,000 businesses that have between 10 and 50 employees have 4.3 million employees in total. The average for this category—small businesses—is around 20 employees, so it is still a very small operation. The rest, large and medium-sized businesses, account for only a bit over 1% of the business population—that is the number of businesses—but they employ 53% of the workforce.

If my amendment—to take Part 1 out of scope for small and micro businesses—is accepted, it would still apply to private sector businesses employing around 15 million employees, plus, of course, the 6 million employed in the public sector. It would not apply to around 1.4 million businesses with around 8.3 million employees.

The Government’s economic analysis cites a figure of 13 million employees who would be excluded for small and micro businesses, but that seems to include the 4 million businesses with no employees, which I have assumed are things such as sole traders, who are not actually employed. If the Minister responding to the amendment has any better analysis of the numbers, I would be grateful if he would write to me, because I find them a little confusing.

The Government’s assessment of small and micro businesses shows that five of the nine largest measures and two of the four medium-sized measures have a disproportionate impact on small and micro businesses. I am genuinely astonished that the Government would even contemplate bringing forward measures which are so disproportionately skewed in terms of harm to small and micro businesses. Those that have the biggest impact are found largely in Part 1 of the Bill.

Several noble Lords have already raised the problems that the Bill will create for those small businesses, and at Second Reading a number of noble Lords spoke to exactly the same issues. At the weekend, I went back to the closing speech of the Minister, the noble Baroness, Lady Jones of Whitchurch, at Second Reading. She did not even refer to the problems for this important sector of the economy; she talked about business more generally, but not about the small and micro businesses, or even the medium-sized businesses, that will be impacted.

19:15

The Government’s economic analysis is pretty superficial; it does not give very much meat on the bone for the impact on small businesses. The Government say that they do not want to create a two-tier workforce and that they believe that exempting smaller businesses from the provisions of the Bill would reduce incentives for businesses to grow. I do not believe that either of those reasons has any substance to them.

Let us start with the claim about a two-tier workforce. The Minister will be aware that we already have all sorts of tiering in our workforce. Perhaps the biggest divide is between public sector and private sector workers, where those in the public sector get pretty generous defined benefit pensions, which became unaffordable for the majority of the private sector over the last 30 years. Even where the private sector does provide pensions, there is a lot of variation in whether employers provide the minimum required under automatic enrolment or more generous contributions to defined contribution schemes. There are also other divides: people who work for large corporations typically get maternity and paternity rights and sick pay in excess of the statutory minimum, or they may get access to benefits such as private healthcare which smaller companies simply cannot afford. We should be in no doubt that tiering is alive and well throughout our labour market.

Turning to incentives to grow businesses, I fear that the Government’s almost complete lack of business knowledge shows through. I acknowledge that cliff edges or thresholds can affect business behaviour, and that can affect growth. The most egregious example is probably the VAT threshold of £90,000, which actively discourages very small businesses from even bothering to grow. At a much higher level, we can see threshold effects in bank capital which positively discourage smaller banks from wanting to grow to be medium-sized banks. However, I am far from clear that there would be a significant threshold impact if we exempted small and micro businesses from Part 1, with all its bureaucracy and regulation. The vast majority of the businesses employing those 8.3 million people will be operating nowhere near the threshold of 50 employees. Most of them—almost all of them—could double or treble in size without hitting the threshold. The very small number that might be drawing up plans to take them past the 50-employee mark would of course factor in extra regulatory costs, such as complying with this employment Bill. However, if this Bill were the factor that stopped a business from growing through the 50-employee threshold, the chances are that the business plan itself would be a weak one.

This Bill will have massive impacts on millions of small businesses which are nowhere near the 50-employee threshold. If that does not negatively impact growth, it will be a miracle. I also particularly worry about scale-ups and start-ups, but, fortunately, the noble Lord, Lord Londesborough, who knows far more about them than me, will—I hope—be speaking about them in due course. In the meantime, I beg to move.

[Lord Londesborough (CB)]

My Lords, I rise to speak to Amendments 5 and 124 in the name of the noble Baroness, Lady Noakes, to which I have readily added my name.

Before I get stuck into the detail, I should perhaps offer an apology for comments that I made at Second Reading, when I compared this Bill to a giant vampire squid sucking the life out of our economy. Although this metaphor generated considerable media coverage, it prompted several eagle-eyed members of the public to point out that the vampire squid is no bloodsucker as it eats only dead organic material. It turns out that I inadvertently picked the only mollusc that does not eat live prey, so I stand corrected and apologise to the marine life community for this oversight.

As far as the Bill goes, I make no apology. I will focus on Part 1 and its impact on our all-important start-ups and scale-ups. We have 35,000 scale-ups in the UK, contributing £1.6 trillion to the UK economy annually; that is more than 50% of the value of the whole of the UK’s SME economy, despite these companies making up less than 1% of the SME population. They are crucial because they represent the most dynamic element of our economic growth: they create jobs at the fastest rate, promote their staff at the fastest rate and attract significant investment.

I should declare my interests as set out in the register: I chair, advise and invest in a range of start-ups and scale-ups, and it is their lived experience that informs my comments, along with my own years as a micro, small and medium-sized employer.

Working for scale-ups and start-ups is both demanding and rewarding. Entry-level jobs tend to pay less than average and have considerably fewer benefits than average, but progress more rapidly in terms of pay, bonuses and promotion, with such employees often becoming equity stakeholders. Scale-ups thrive on flexibility and a performance culture—something that Part 1 of this Bill seems to ignore.

Another important group sitting within the small and micro sector is family businesses employing fewer than 50 staff, the majority of them having fewer than 10 employees. These businesses often have only one member of staff covering each responsibility, and their HR has to be covered by the owner or the senior manager. Subjecting these groups to the full battery of clauses and schedules in Part 1 of this Bill is, I believe, disproportionate, costly, distracting and growth-sapping.

On the subject of costs, the Bill’s impact assessment suggests a burden of an extra £5 million per annum for all employers and admits that this will disproportionately fall on small and micro-businesses, as the noble Baroness, Lady Noakes, just outlined. However, that is a crude estimate and appears to have been drawn very narrowly. It fails to assess the invisible costs of complicated recruitment, performance reviews, dismissals and the general administration of HR. The smaller the business, the greater the distraction from core activities, tying up key leadership and management time in less productive areas. In plain language, this means lost output.

Recruitment is critical for small and micro-businesses and is set to become far riskier in an already difficult climate. Part 1 of this Bill threatens to complicate probation, performance reviews and dismissal for fair cause. Day one rights and dismissal constraints will deter risk-taking and reduce employment opportunities at entry and graduate levels, especially in middle and senior management. It will encourage employers to hold on to bad hires and to promote mediocre or underqualified ones.

Flexible working, shift changes and guaranteed hours have already been covered in the previous group, so I will not duplicate, other than to say that this is a special problem for small and micro-businesses, especially those that rely on part-time workers and shift patterns. The hospitality sector is a prime example.

I shall finish by countering the Government’s expected response to this group of amendments: that there should be no exemptions as these new employment rights should apply universally across the economy, and that we should not create a two-tier workforce. Although I understand the thrust of that argument, it does not reflect the real employment market. SMBs, as we have already heard, cannot compete with large businesses when it comes to pay scales, training, promotion opportunities and a whole range of benefits, including pensions. Indeed, most have no HR function, let alone department, and that reflects their size.

However, what SMBs do have to offer is a friendly working environment; greater flexibility than average; a stakeholder culture, whether that is reflected in equity or in identity; and the fact that every role in their organisation is a critical part of the business, leading to strong employee loyalty and identification. Applying to small and micro-businesses consisting of five or 10 staff the very same employment rights that are applied to multinationals such as Amazon, which employs 75,000 people in this country, will do serious damage to our jobs market. That is why I wholeheartedly endorse these amendments.

[Viscount Trenchard (Con)]

My Lords, I rise to speak briefly in support of Amendments 5 and 124, so ably spoken to by my noble friend Lady Noakes, and well supported by the noble Lord, Lord Londesborough. I also support Amendment 282, which I expect will be addressed by my noble friend Lord Sharpe or my noble friend Lord Hunt.

The impact on the smallest businesses will, as stated by my noble friend Lady Noakes, be great. The cost to business of implementing the Bill could be as much as £5 billion, according to the noble Baroness, Lady Jones of Whitchurch. She said that this would be a transfer to the lowest-paid segment of the workforce. I do not think that that would be the result. My noble friends’ amendments would mitigate the stifling effect on small businesses that the Bill will have.

Small and micro-businesses are already struggling with the additional costs of the increases in employers’ national insurance contributions introduced two weeks ago. It is small and micro-businesses that most need flexibility in the nature of the employment models they can offer workers. Putting such businesses into a straitjacket will remove employment opportunities for many of those who prefer flexible-hours contracts, and even for the many young people who actually quite like zero-hours contracts, or who would at least rather that such opportunities existed than not—which will otherwise be the consequence of enacting the Bill. My noble friend Lady Lawlor spoke convincingly on this matter in the previous group.

Part 1 of the Bill will prevent many small businesses taking the risks inherent in adding a new business line or expanding the size of their operations. I hope that the Minister will carefully consider the strong arguments made for the exemption of small and micro-businesses from these measures. In that way, the Government might achieve their declared aim of transferring value to the lowest-paid segment of the workforce.

19:30

[Lord Leigh of Hurley (Con)]

My Lords, it is a great honour to follow my noble friend Lady Noakes and the noble Lord, Lord Londesborough. My noble friend and I worked on the Small Business, Enterprise and Employment Act, which I am pleased has provided good use here on in. Of course, she has a most distinguished business career, not just, as we all know, in very large financial services companies but as my president at the Institute of Chartered Accountants, where she interacted with many small and medium-sized businesses. The noble Lord, Lord Londesborough, and I spent the turn of the year discussing the Bill and its ramifications.

I speak as someone who takes a particular interest in SMEs, for reasons I will explain. I am, of course, in full support of this small group of amendments—as are, I think, all business representative bodies. The FSB, which is the UK’s largest employer group, has said that this will

“wreak havoc on our already fragile economy”.

We have had survey after survey: 1,270 companies were surveyed. Two-thirds of them said that they will curb hiring, and one-third said that they would reduce staff as a result of this Bill. The aforementioned Chartered Institute of Personnel and Development discovered that 25% of its members will be considering lay-offs as a direct result of this Bill. The Institute of Directors called it

“a sledgehammer to crack a nut.”

As I mentioned, I am particularly close to the SME sector, not least because, in 1989, I started a small business with one partner and one assistant. I should therefore declare an interest that I still own a chunk of shares in that small business, which, when we started, was called Cavendish Corporate Finance and is now Cavendish plc. At this point I normally take a pot-shot at the Labour Front Bench as not having any business experience to talk of—certainly not in the other place—but I have to be much more deferential in this Chamber, not least because the noble Lord, Lord Leong, two years after I started Cavendish Corporate Finance, started Cavendish Publishing, except, of course, that he had much greater success than me. According to Wikipedia, in his first year made £250,000 profit, which is very impressive, because in my first year I lost money, so I have to be suitably deferential. None the less, I am sure the noble Lord will remember those formative years of starting a business, when one was focused on nothing else but that business. Clearly, we desperately need people to do the same as the noble Lord and me: to take the risk, start a business, have a go and then employ people.

The decision to employ a person is a very big one. It is the toughest decision for the first person, but it is still tough for the second, third, fourth and fifth. As it happens, we now have 220 people employed at Cavendish, but it took a long time to get there and we had to merge with a number of other companies so to do. For many years my small business would have been covered by my noble friend Lady Noakes’s exemption, and it would need it because, to take on people in a small business, you are recruiting someone not just to do a job of work but to join your culture and your aspirations, and to fit in. Sometimes it works and sometimes it does not, and when it does not you have to make difficult decisions to make changes. The fact that we are now allowed to let people go relatively easily encourages people such as me to take a chance and employ someone where I would not otherwise do so.

I am very worried that this Bill will lead to a reduction in business growth and, in particular, in employment. Its main burdens will be borne by small businesses. I think the Minister cited five companies that she said were broadly supportive of the Bill. All but one were larger companies, and one was actually the Co-op—I am not sure that entirely counts. Another was IKEA, but I would be very grateful if the Minister could cite the support from IKEA, because I cannot find it. The SME sector realises that the financial burden that the Bill imposes of some £5 billion will largely fall on it, and it is very worried. So the first issue is financial.

The second issue is operational. SMEs do not have an HR department. They simply do not have the facility to wade through this enormous amount of legislation about how they are supposed to treat their staff. The only way round it is, of course, to deploy an agency at great expense to advise and consult every time there is any HR issue, and it is just another cost for businesses which are, for the most part, feeling pretty fragile, and much more fragile after the horrendous NIC increases that are being imposed on them.

The third hammer blow is that those business just will not hire. They just will not take the risk of hiring new employees, which will, of course, restrict their growth, because the only way a business can grow is to recruit new people with fresh blood, fresh ideas and fresh reach. It is impossible for a business to grow without making hires.

Fourthly, the Bill will make businesses risk averse. The Institute of Chartered Accountants in England and Wales has specifically said that this will make businesses risk averse in all their decisions, because of the extra risks that are imposed on those businesses by the Bill because of the costs and burdens they have to undertake.

Lastly, the fifth problem with the Bill is the lack of consultation. It has been rushed through to meet the 100-day deadline and, as a result, there has not been proper consultation and we are wading through a vast number of amendments that we are trying to get our heads round.

For all those reasons, one accepts that the Bill is in the manifesto and that it has to happen—it is in, in many ways appropriate that it does—but please can we leave out the SME businesses that will struggle with this Bill? Maybe we can bring it in later, suitably amended, but not now.

[Baroness Neville-Rolfe (Con)]

My Lords, I think the Government would do themselves a great deal of good if they made special arrangements for small business. They are well precedented: we have the VAT threshold, the employment allowance and the small business audit, and it would be a powerful addition to their forthcoming White Paper or Green Paper on small businesses.

Everyone knows that I often speak in favour of small business and have very good relations with the Federation of Small Businesses, so I obviously support the expert trio of my noble friend Lady Noakes and the noble Lords, Lord Londesborough and Lord Vaux of Harrowden, who we should listen to. To put it simply, either we need some special arrangements for small businesses, or—and it might be even better—we need changes to the Bill to remove the bureaucratic provisions that are going to get in the way of success; to look at the lack of flexibility and remedy it; and to avoid the inevitable huge increase in tribunal cases and the overuse of delegated powers. I encourage the Minister to think creatively in this important area.

[Baroness Verma (Con)]

My Lords, I also support these amendments from my noble friend and other noble Lords. It would be really helpful if the Government took a hard look at this. I spoke to coffee shop owners over the weekend, and to a very small business that is trying to manufacture British products in this country. They are all very worried about how they are going to cope with the burdens that will be placed on them.

It may well be useful for the Government to go back and look at whether they can make an exception for small businesses up to a certain number of employees—maybe three, maybe five and at least for those that have no ability other than to reach out and pay for very expensive advice, which often they cannot afford. These small businesses are at the heart of our high streets in local communities. They add value and are familiar to customers. The very small business—the micro-business, but particularly businesses with 10 employees or less—should be exempt from this Bill.

[Lord Ashcombe (Con)]

My Lords, it a pleasure to support my noble friend Lady Noakes and the noble Lords, Lord Londesborough and Lord Vaux of Harrowden, on Amendment 5 and their other amendment.

Small businesses and microbusinesses form a vital component of our national economy. These enterprises, while often agile and innovative, are particularly vulnerable to regulatory and financial pressures. Like all businesses—I should declare that I work for a very large American insurance broker—these enterprises have had to absorb the recent increases in the national minimum wage and adapt to the changes in national insurance contributions legislation. However, unlike larger businesses, they often lack the structural resilience and financial buffer to absorb such changes with ease. The impact on them is therefore disproportionate. This amendment proposes a sensible and measured opt-out for SMEs from additional obligations stemming from the proposed changes to zero-hours contracts—specifically, the move towards tightly prescribed guaranteed hours. As the Government’s own impact assessment acknowledges, these reforms are likely to have a disproportionate cost on small businesses and microbusinesses. I stress that this is not speculation but is drawn directly from the Government’s impact analysis.

Small businesses and microbusinesses span a wide range of sectors, but many are embedded within the UK as world-renowned creative industries that bring global acclaim and substantial economic benefit to this country. Many are driven by the energy, passion and commitment of individual entrepreneurs and small teams. I have had the privilege of speaking with several such business owners during the course of this Bill, and a recurring concern has emerged: the smaller the business, the harder it is to digest and manage such legislative change. Some have gone so far as to tell me that they are considering closing their operations altogether. That is a deeply troubling prospect. It is no exaggeration to say that measures such as these, if applied without nuance, risk undermining the very entrepreneurial spirit that we so often celebrate in this House.

There seems to be a regrettable habit forming on the Government Benches of legislating in ways that hinder rather than help the economic engines of this country. This approach is not conducive to national growth. It is not conducive to competitiveness. It is not conducive to job creation. It is certainly not conducive to easing the burden on the Exchequer—quite the opposite. Driving small businesses to closure will reduce tax receipts and increase demand for state support. We need to encourage investment, not chase it away.

Can the Minister explain clearly why this legislation must apply so rigidly to a critical sector of our economy? Why must we impose further burdens on the very businesses that we rely on so much for our innovation, employment and growth? Is there no room for proportionality and no scope for recognising the distinct challenges that are faced by the smallest enterprises? What I have said applies, to a great extent, to the middle-sized companies mentioned in Amendment 282, tabled by my noble friends Lord Sharpe and Lord Hunt of Wirral.

I leave your Lordships with a quote from the Spirit of Law by Montesquieu:

“Commerce … wanders across the earth, flees from where it is oppressed, and remains where it is left to breathe”.

[Baroness Lawlor (Con)]

My Lords, I support the amendments tabled by my noble friend Lady Noakes and the other amendments in this group. I do so as an employer, and my interests are declared in the register.

I am a very small employer, in a not-for-profit company. I am therefore one of the microbusinesses to which my noble friend Lady Noakes has referred—those which have zero to nine employees. I echo what the noble Lord, Lord Londesborough, said: smaller businesses will find it very difficult to afford the costs which this Bill will impose upon them.

Small businesses and the employers in them are not the adversaries of those we take on. Many small businesses, including a number in the digital sector, are start-ups—some started in that garage, about which Hermann Hauser once spoke. They build up their teams and develop by commitment. Each member of the team taken on is an asset—not just an expensive potential asset but a cost to begin with, in time and in the compliance of dealing with every member of the workforce. Such businesses do not have large HR teams or sometimes any HR teams. There is a cost in the salary and in trying to keep the employee by continuing to raise the salary as often as one can. There is also a cost in the investment of time.

19:45

Noble Lords have spoken about the culture of the small business. A great deal of time is spent on training, inducting, encouraging, sharing enthusiasms and building on a new employee’s talents and skills—all of which must be found and nurtured; they do not grow on trees. This is particularly so with young people entering the workplace for the first time, even the most able graduates. To induct each employee costs money. It costs a salary, it is a potential investment, and it costs time. An employer needs to build on the relationship. The way to do that, and to keep that investment and make it productive, is to move as a market economy moves—to reflect salary levels, to reflect pay and conditions, and to do what can be done to afford the best workforce you can to develop your product and compete.

If the measures in this Bill go through, many small businesses and microbusinesses will not be able to do what others have done—namely, grow rapidly and develop exponentially—as we have heard. There is a very strong case for exempting small businesses, particularly micro-businesses, as has been proposed. I hope that the Government will listen.

[Baroness Coffey (Con)]

My Lords, I too support Amendment 5. Without small businesses growing and taking on people, we will not achieve the outcomes that the Government have set for getting more people into work. I referred in a debate on an earlier group to the 80% target.

I am conscious of what happened with the Kickstart scheme. We particularly encouraged small businesses to participate in the scheme and to consider the opportunity of an extra pair of hands, giving them the confidence that they could grow their business and employ people, often for the first time. That was an important step in thinking about how to minimise risk in the first instance. A considerable proportion of people were offered permanent jobs as a consequence.

That first step of taking people on is often the hardest for many small businesses and microbusinesses. That is why I would be even happier if this amendment was altered on Report to make it solely for microbusinesses, not just small businesses, as that first step is one of the hardest.

We already have thresholds in many other employment practices. We already have thresholds about things that connect with pension contributions, and other financial thresholds have been referred to. But this is about having the courage to take on people. You may decide to expand your services, whether in the care sector or elsewhere, as you do not want to let clients down, but you need to make sure that you can guarantee quality support to your clients. That is one of those uncertain things when we discuss a wide range of the amendments to Part 1 of the Bill.

There are other opportunities where I will raise the issues impacting small businesses in the Bill, but overall we should take the successful approach of previous Governments, including Labour Governments, of keeping small businesses out of this area. The impact assessments talked about mitigations they plan, but there is no mention of what those mitigations may actually be, and that level of uncertainty is one of the things that will hold back growth, which we are led to believe is the number one mission of this Government. I fear that without some of the exemptions, we will not see that growth coming in our UK industry.

[Lord de Clifford (CB)]

I rise in support of the gist of these amendments with regard to small businesses. I declare my interest as the owner of a medium-sized business with 130 employees, so it would not apply to me. But the burden on small businesses, certainly of Part 1, will seriously restrict their ability to grow and have the courage to take that step of employing people. I certainly think that micro-businesses should be exempted from a lot of these burdens. As we go through Part 1, we need to keep those micro-businesses in our thoughts.

[Baroness Kramer (LD)]

My Lords, I am channelling the noble Lord, Lord Fox, who has been called away. He, on behalf of these Benches, cannot accept a two- tier workplace in regard to employment rights, which obviously form the content of this Bill, so we will not be supporting these amendments.

[Lord Hunt of Wirral (Con)]

My Lords, I am very grateful to the noble Baroness, Lady Kramer, for setting out the position so clearly, but I am particularly grateful to my noble friend Lady Noakes because, as a result of her moving the key Amendment 5, we have had a remarkably positive debate about what I believe is the lifeblood of the UK economy, namely the small and medium-sized business sector. The noble Lord, Lord Londesborough, of course, is a great authority on all this, and it was good to hear from the noble Lord, Lord de Clifford, as well.

When we reflect for a moment on the speeches that have been made in this debate—apart from that of the noble Baroness, Lady Kramer—we have not had any contributions from the Government Benches. But, as my noble friend Lord Leigh of Hurley pointed out, the most important contribution will be made by someone who really does understand. The noble Lord, Lord Leong, knows all about small businesses, and I am thrilled and delighted that he is summing up the debate because he understands what so many of my colleagues have tried to point out. The noble Baroness, Lady Neville-Rolfe, said that bureaucracy can get in the way of success. Look at the amount of rules and regulations and bureaucracy.

I agreed with all my noble friends, including my noble friend Lord Ashcombe when he pleaded for a sensible and measured response. We all want to see bereavement leave—all good employers allow for bereavement leave. We want to see rights established very clearly, but my noble friend Lady Verma pointed out that if we impose them on the small and medium-sized sector in the way that my noble friend Lady Noakes outlined, three, four or five employees will suddenly have to deal with all this legislation.

Let us remind ourselves of the importance of small businesses. As several of my colleagues pointed out, at the start of last year there were 5.45 million small businesses with up to 49 employees, making up a staggering 99.2% of the total business population in the UK. We are talking about a massive sector, and therefore we have to worry and concern ourselves about the effect of the Bill. As the Federation of Small Businesses put it, in its current form the Bill risks becoming nothing short of a disaster for small and micro-businesses.

The noble Baroness from the Liberal Democrat Benches spoke about a two-tier workforce system, which those Benches object to. But as my noble friend Lady Noakes pointed out, we do in fact have tiering alive and well throughout the UK economy. It is not trying to impose one size fits all; it is recognising that over 99% of businesses in this country are small and cannot possibly cope with the burden of this Bill.

It just so happens that I already have a quotation from the noble Lord, Lord Leong, which I readily move to. We have heard from the Government on multiple occasions that they are committed to supporting SMEs and ensuring that they are not burdened with excessive costs or red tape. The noble Lord, Lord Leong, made a very important point during the passage of the Product Regulation and Metrology Bill:

“we do not want to burden SMEs with additional regulatory or financial cost”.—[Official Report, 25/11/24; col. GC 138.]

What wise words: we would love to hear those words from him again tonight. He will realise that the reality of this Bill is starkly different. The only thing this Bill seems to do for SMEs is to burden them with additional regulatory and financial costs. It is incredibly difficult to reconcile the Government’s stated intentions with the actual impact this legislation will have on small and micro-businesses across the country.

I know that my noble friend Lord Sharpe of Epsom and I have Amendment 282 in this group, but I do not want to go into it. I was taking the old Companies Act definition, and I do not need to go into all the findings of the Bolton committee and all those who have sought to define this, because I think my noble friends have done a great deal to define small and medium-sized enterprises.

We just need to know what the Government intend to do to alleviate the burden on small and micro-businesses. The impact assessment has highlighted the significant challenges that these businesses will face in implementing these reforms, and at the moment there is no adequate plan to support them.

I would like to ask the Minister these questions. First, will he please outline what the three main expected benefits of this Bill will be for small and micro-businesses? Secondly, how will the Government support small businesses in complying with the provisions of this legislation? What kind of guidance, training and resources will be made available to ensure that these businesses can navigate the new regulations without inadvertently falling foul of the law? Finally, can the Minister provide an assessment of the risk of unintentional non-compliance by small businesses? What steps are the Government taking to mitigate this risk and ensure that these businesses are not unduly penalised as a result of a lack of guidance in the legislation?

The Government have not consulted the small and medium-sized sector. If they have, can we please have a great deal more detail on what their conclusions were? If they have not consulted, will they please do so now?

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

My Lords, I thank all noble Lords who contributed to this group of amendments with such passion. The noble Baroness, Lady Noakes, together with the noble Lords, Lord Sharpe and Lord Hunt, tabled several amendments—Amendments 5, 124 and 282—that seek to remove micro-businesses and small and medium-sized businesses from the scope of large sections of the Bill.

20:00

First, it would not be right or fair to exclude these small businesses and the people who work for them from some of these rights and entitlements. That would be the result of Amendment 282 and I am sure this is not what most noble Lords want. This amendment would, for example, disapply the changes that we are making to strengthen statutory sick pay, such as removing the waiting period. Our changes to the SSP waiting period stand to benefit employers through increased productivity, all while reassuring employees that they should not feel forced to struggle through work when they are unwell.

Similarly, Amendments 5 and 124 together seek to take small and micro-businesses, as defined in the Small Business, Enterprise and Employment Act 2015 mentioned by the noble Baroness, Lady Noakes, out of the scope of Part 1 of the Bill. Doing so would result in employees of these businesses unnecessarily missing out on important protections against sexual harassment, as well as day-one rights against unfair dismissal. I will come to day-one rights in a moment. The noble Baroness’s amendments would also prevent employees of small business and micro-businesses accessing the new entitlement to bereavement leave that we are establishing.

The noble Lord, Lord Hunt, asked what government support is available to SMEs. All I can say is that the Government are offering massive support. We are committed to supporting micro-businesses, and small and medium-sized businesses, which are the backbone of the UK’s economy. Many noble Lords have stated that and I totally agree that they are engines of growth.

The Department for Business and Trade already provides existing offers that small businesses may wish to access. This includes the business support service, the network of local growth hubs across England and the Help to Grow: Management scheme, which helps owners of small businesses to improve their leadership, performance and management capabilities. Financial support is also available through the government-backed British Business Bank, which aims to improve access to finance to help businesses to invest and grow.

I will touch on implementation. We are committed to extensive consultation. I know that this word has been used many times this evening, but we want to consult as widely and broadly as possible to ensure that this legislation works for employees and employers of all shapes and sizes alike. We anticipate this meaning that the majority of reforms will take effect no earlier than 2026 and be done in a way that means that time-pressed SMEs will not be overburdened. We know that the more that we can say about the future implementation timing of these measures, the better employers, workers and trade unions will be able to plan and prepare for them. The expert and detailed insights and feedback gained from consultation so far have been invaluable in getting this legislation right.

At this juncture, I declare an interest. I thank the noble Lord, Lord Leigh, for sharing my publishing career with colleagues here. I have had a career in business of more than 45 years, founding and cofounding several business ventures. I learned a lasting truth: thriving teams drive lasting success. I remember, with emotion, the pride when I hired my first employee and, later, my first hundred and then my first thousand. Each was a milestone on a journey built by people. Without these people, I would not be here and would not have run those successful businesses.

Before my appointment to the Government, I had the privilege of mentoring, advising and serving as a non-executive director to start-ups, scale-ups and publicly listed companies. A lesson from my late father, also a businessperson, guided me throughout. He said, “Happy staff, healthy profits”. That principle has been my compass through both prosperous and very challenging times.

People are the heartbeat of every single enterprise. When we value and invest in them, business and society flourish, so I really look forward to bringing this passion and experience to this Bill.

Business groups often default to warning about economic damage whenever stronger worker protections are proposed. I do not need to remind noble Lords that we saw this with the minimum wage in the late 1990s and with shared parental leave more recently. In hindsight, many of those reforms had either neutral or positive effects on growth and employment. I also gently remind noble Lords, with respect, that, by framing the Bill as an economic catastrophe, business lobbies are deflecting from the more basic truth that certain business models, especially those heavily dependent on insecure, low-wage labour, might have to adapt or change if the law passes.

Before I conclude, I will answer some of the questions asked by various noble Lords. The noble Baroness, Lady Noakes, asked about the analysis of micro-businesses. According to the latest Department for Business and Trade business population estimates, 9 million employees, which is almost 40% of the whole private sector, work in small businesses and micro-businesses. There are around 124,000 people working for a business of one employee excluding owners and partners, while there are around 275,000 people working for such businesses if owners and partners are included.

The noble Lord, Lord Leigh, asked about IKEA. IKEA is very supportive of the Government’s plan to make work pay. It issued a statement on 1 April this year supporting the increase to the national minimum wage, as part of the Government’s agenda to make work pay. This underscores business’s support for the Government’s approach. There are obviously clear evidence-based benefits from tackling such issues.

[Lord Leigh of Hurley (Con)]

With respect, the statement that was issued on April Fools’ Day seems to be in support of the minimum wage, not of the specific clauses in the Bill.

[Lord Leong (Lab)]

I thank the noble Lord for that, but IKEA is pretty supportive of the overall intention of the Bill and of the national minimum wage, which is obviously outside the scope of the Bill, such as what we are doing on zero-hours contracts, other short-term contracts and all that. I will write to the noble Lord with further details on the various clauses that it supports.

Various noble Lords asked about the impact assessment. The benefits of the Bill that were published by the TUC show that even modest gains from reforms to workers’ rights will benefit the UK economy by some £13 billion. Opposing this, the impact assessment says that the costs to business would be some £5 billion or 0.4% of employment costs. The benefit is huge, and economists have done research on this.

I cannot agree more with the noble Lord, Lord Londesborough, who says that start-ups and scale-ups definitely generate employment. It is absolutely right that we have to support them and I strongly believe that the Bill does support them.

Various noble Lords mentioned day-one rights and difficulty in recruiting employees. Remember that, when you run a small business, yes, it is very competitive to employ your first employee: sometimes you have to compete with the big companies in matching salaries or even benefits. I believe passionately that the Bill puts SMEs on a level playing field with large companies, where they can offer the basic benefits in the Bill.

Sometimes we asked: why are we excluding SMEs because it is so difficult for employers to recruit, and why should employees in SMEs not get day-one rights? My answer is: why not? Why should they not get day-one rights? As I said, they are the people who work for the owners, for the owners to make the profit. Without them, the owners will not have a business, so it is very important that they are supported and I believe strongly that good businesses provide fantastic support to their employees.

[Lord Ashcombe (Con)]

My Lords, I am not sure that it is the difficulty in recruiting that is the real problem for small and micro businesses; I think it is the fear of recruiting. That is a really different point.

[Lord Leong (Lab)]

I thank the noble Lord for that. I might turn that around and say that, if I am looking for a job, I have a choice of big or small companies. I am taking a chance and a risk working for a very small company. I am not sure whether that company will last. That risk works two ways. I strongly believe that most people work for companies not because of what the company does but because they look at the owner or the founders and whether they want to work with such people. At the end of the day, the employees will also be taking a chance on the employer.

[Baroness Verma (Con)]

My Lords, there is a huge difference between a large business—and its culture and the ability to respond to all the new burdens that will be placed on it—and a small business. The Minister himself said that a happy business and happy employees add to a good bottom line. The problem is that, if an employer is so burdened by so many things to comply with because it is a small employer, that happiness is soon going to disappear. All I think that all noble Lords around the House are asking is that we ease the burdens for small and micro-businesses by removing not the rights but just the burdens.

[Lord Leong (Lab)]

I thank the noble Baroness for that. There are other additional responsibilities, not only in terms of HR. A company that sets up needs to have IT support and payroll support. How many SMEs have their own IT department or payroll department, let alone an HR department? There will be big businesses that will be providing services to support SMEs. The whole argument is about responsibility: basically, when you set up a business, you have all these responsibilities, and this is part of those responsibilities.

[Baroness Verma (Con)]

My Lords, I do not want to labour the point but, if the Minister were to speak to the small businesses that people like us are speaking to, I think they would really argue that these are huge implications for them.

[Lord Leong (Lab)]

I thank the noble Baroness. I will not hold the House for too long, because I think the dinner break is coming up, but I will obviously meet up with her to talk further on this.

To conclude, the Government believe that having an entitlement to fair, flexible and secure working should not be reserved for those people who work for large companies. It is fundamental that our “make work pay” reforms, including those in this Bill, apply across all employers. Any exceptions to this provision based on the size of the business would create a two-tier labour market, with some workers facing fewer rights, entitlements and protections. This would reduce the talent pool from which SMEs could attract employees, as I mentioned earlier. This in turn would lead to an uneven playing field between employers of different sizes and reduced incentives for small businesses to grow. I therefore ask the noble Lord, Lord Sharpe, to withdraw Amendment 282 and the noble Baroness, Lady Noakes, to withdraw Amendments 5 and 124.

20:15

[Baroness Noakes (Con)]

My Lords, I think the Minister will find that the only amendment that can be withdrawn at the moment is Amendment 5. The others have not been reached on the Marshalled List.

I thank all noble Lords who have taken part: the noble Lords, Lord Londesborough and Lord de Clifford, on the Cross Benches, and all my noble friends who have spoken in this debate. Between them, they have communicated the very special issues that arise for smaller businesses right at the beginning of their life, when those early decisions are made about taking people on as they grow, and the risks and opportunities that come thereafter. I do not think that the Minister has begun really to internalise all the additional impositions that the Bill will place on that group of people.

I have a couple of small points. The Government’s economic analysis says that there are 13 million employees in small and micro businesses. I may not have been listening carefully to what the Minister said in response to my question on the numbers, but I did not hear him mention 13 million. I am hoping that I can get an analysis of where that 13 million comes from in due course. That is probably the most straightforward of the questions that arise.

The important thing here is that small and micro-businesses are very prevalent in our communities and involve really small numbers of people in their businesses, and it is a question of understanding what effect the additional imposition of the rights that are being conveyed in the Bill will have on their businesses. Small businesses, as the noble Lord said, know that they are about people and that their whole success or failure depends on the people they get and the people that they can develop to grow with their business. But they also need significant flexibilities because, when you are that small, you need to be able to cope with the situations that arise in relation to those small numbers.

I do not think any small businesses are trying to get out of treating their employees with respect and developing them as suits their particular business, but it appears that the Government feel that you can impose the measures such as those in the Bill across the whole of the business community and just rest on platitudes such as, “Oh, well, the direct costs on business are going to be outweighed by the productivity gain”. That productivity gain is not peer-reviewed research; there is no evidence that there is a causative link between giving extra employment rights and getting any productivity. That has not been examined in detail, so it is wrong to keep asserting that the Bill will result in that.

But, importantly, the issue is what is relevant to different categories of business. I and my noble friends, and my colleagues on the Cross Benches, have been trying to convey the particular issues that small businesses encounter and need to be protected from. I had rather hoped that the noble Lord, Lord Leong, with his background, would have understood that and would have understood the need for those small businesses to have some degree of understanding from the Government Benches and not be told, “Well, of course they have to have payroll and IT; they’ve just got to go and get all those things”. We are talking about the wealth-creating segment of our economy. Not everyone is going to be growing fast, but some of them are, and some of them are going to be growing a lot. If we harm those, we harm the economic potential of our country, and that is what we have been trying to argue.

I am sorry that the Government are not in listening mode today. I am hopeful that they might be prepared to listen further, especially if they genuinely engage with the representative bodies that represent the smaller end of the business scale, because I believe that the Bill needs to take some account of the special circumstances in which small and micro-businesses find themselves. But obviously, today I will withdraw Amendment 5.

Amendment 5 withdrawn.

Amendments 6 to 13 not moved.

House resumed. Committee to begin again not before 9 pm.

Palestinian Authority Prime Minister Visit

Tuesday 29th April 2025 Lords Chamber

Statement

20:20

[The Minister of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)]

My Lords, with the leave of the House, I will now repeat a Statement made in the other place earlier today by Minister Falconer. The Statement is as follows:

“Yesterday, at the invitation of the Government, the Palestinian Authority Prime Minister, Dr Mohammad Mustafa, visited the United Kingdom. Prime Minister Mustafa was accompanied by Minister of State for Foreign Affairs Varsen Aghabekian and Minister of Health Dr Maged Abu Ramadan. The Prime Minister and Foreign Secretary both held meetings with Prime Minister Mustafa yesterday and I was delighted to meet him again this morning. This visit reflects the UK’s steadfast support for the Palestinian Authority and the Palestinian people at this critical juncture in the Occupied Palestinian Territories.

During the visit, we reaffirmed our unwavering commitment to advancing a two-state solution as the only pathway to achieving a just and lasting peace in the Middle East, where Israelis and Palestinians can live side by side in peace, dignity and security. We are clear that the Palestinian people have an inalienable right of self-determination, including to independent statehood.

This Government are committed to strengthening our bilateral relations with the Palestinian Authority. The PA is the only legitimate governing entity in the Occupied Palestinian Territories, and it is important that Gaza and the West Bank are reunified under its authority. The UK is clear that the PA must have a central role in the next phase in Gaza. The UK is also clear that there can be no role for Hamas in the future of Gaza. We have been clear: Hamas must immediately release the hostages and relinquish control of Gaza. Israelis must be able to live in security next to their Palestinian neighbours, and 7 October must never be repeated.

The Foreign Secretary and Prime Minister Mustafa signed a landmark memorandum of understanding to enhance the bilateral partnership between our two Governments. The memorandum of understanding established a new framework to guide and enhance the strategic partnership and high-level dialogue across areas of mutual interest and benefit, including economic development and institutional reform.

As part of our meetings with Prime Minister Mustafa, we discussed the gravity of the situation in Gaza, the West Bank and east Jerusalem. We condemned the appalling suffering of civilians in Gaza and agreed on the urgent need for a return to a ceasefire in Gaza, with the release of hostages and unblocking of aid. Only diplomacy, not more bloodshed, will achieve long-term peace.

We also shared our alarm at the heightened tension in the West Bank. We reiterated our clear condemnation of Israeli settlements, which are illegal under international law and harm the prospect of a future Palestinian state. We called for an end to settlement expansion and settler violence. We are also clear that Israel must release frozen Palestinian Authority funds.

Prime Minister Mustafa outlined the essential reforms that the Palestinian Authority is currently undertaking. The UK fully supports the implementation of the much-needed reforms, including through providing technical assistance. These reforms will strengthen financial sustainability and economic development, enhance the transparency and efficiency of governance and service delivery and promote peaceful coexistence with neighbouring countries. As part of our MoU, the Palestinian Authority underlined its commitment to delivering its reform agenda in full as a matter of priority.

As part of this visit, we also announced a £101 million package of support for the Occupied Palestinian Territories. This will be directed at humanitarian relief, support for Palestinian economic development and strengthening Palestinian Authority governance and reform.

As the Foreign Secretary made clear, we will not give up on a two-state solution, with a Palestinian state and Israel living side by side in peace, dignity and security. This visit is a significant step in strengthening our relationship with the Palestinian Authority—a key partner for peace in the Middle East—at this critical moment.”

20:25

[The Earl of Courtown (Con)]

My Lords, I thank the Minister for repeating the Statement and I welcome the meeting held yesterday between the Government and Prime Minister Mustafa. We on these Benches are clear that an effective Palestinian Authority is vital for lasting peace and progress towards a two-state solution in the region. The Palestinian people deserve the dignity and stability that statehood can bring, and there should be a negotiated settlement leading, as affirmed by the Minister, to a two-state solution, with a safe and secure Israel living alongside a viable and sovereign Palestinian state.

I welcome the efforts made by the Government to continue the work of the previous Government in reaching this outcome. I note the memorandum of understanding signed by the Foreign Secretary and Prime Minister Mustafa, which enshrined their commitment to advancing Palestinian statehood as part of a two-state solution. Building and maintaining rapport with partners in the Palestinian Authority is essential, but we need to make sure that the recognition of a Palestinian state comes at a time that is most conducive to the peace process. Recognition cannot be the start of the process. Hamas is still being fought in parts of Gaza, and Israeli hostages remain in captivity. Ensuring that Hamas is no longer in charge of Gaza and removing its capacity to launch attacks against Israel are essential and unavoidable steps on the road to a lasting peace. Does the Minister agree with this position? Does she see recognition as the culmination of a process rather than its beginning?

In the immediate term, we must prioritise getting the hostages out and getting more aid in. That is crucial for making progress towards a sustainable end to the current conflict. The previous Government produced clear proposals for getting aid into affected areas and put them to the Government of Israel. They included the delivery of aid through Ashdod and Erez, as well as Kerem Shalom and the Jordan land corridor. Israel made a number of significant and welcome commitments on these points, as well as on approving further forms of aid, but fulfilment of those commitments is vital. Will the Minister please update the House on what discussions His Majesty’s Government are having with partners in Israel to ensure that these obligations are met?

We are clear that Hamas cannot ever have influence in Gaza again. It is therefore important that the Palestinian Authority commits to undertake serious, measurable and tangible reforms on education, welfare policy and democracy to strengthen resilience against this threat in the future. Will the Minister update the House on what work the Government are doing with Palestinian Authority to advance progress in these areas? Can she assure us that these are discussed in talks with partners in the authority? Progress on this issue needs a collaborative approach and we are also clear that, just as the Palestinian Authority must act, so must Israel. That means releasing frozen funds, halting settlement expansion and holding to account those responsible for extremist settler violence.

We want to see a sustainable end to the conflict in Gaza, the release of the hostages and more done to get humanitarian aid to innocent Palestinian civilians. We welcome the steps taken by the Government to work with the Palestinian Authority and hope that they will continue our work to reach a lasting solution and a future in which Hamas will never have a place.

[Baroness Janke (LD)]

My Lords, we too welcome the meeting of the UK Government with the Palestinian Prime Minister Mustafa and his colleagues. We also welcome the memorandum of understanding, and the restatement of commitment to the two-state solution and the involvement of the Palestinian Authority in the future of Gaza, as well as the strategic partnership based on economic development and institutional reform. This is a forward-looking development. It does, however, raise some questions, particularly of commitment. What discussions have the UK Government had with the United States on the centrality of Palestinian involvement in the future of Gaza? In the light of the remarks made by President Trump, it does not look to be a very deliverable proposal.

The atrocities being committed in Gaza on civilians, many of them women and children, together with the systematic destruction of the health system, continue to shock the world. There is no fully functioning hospital in Gaza despite the indiscriminate bombing and shooting of Palestinians and the devastating injuries that result. Can the Minister say whether future progress on the memorandum of understanding may require the UK to stop arming Israel to carry out indiscriminate killing and destruction in Gaza?

What commitment did the UK Government make to Prime Minister Mustafa to do all in their power to end the blockade of humanitarian aid into Gaza, where, after 50 days of blockade, supplies have run out and civilians, including large numbers of children, are starving to death, even though supplies of crucial food and water are readily available over the border. [Interruption.] I hear that I am being heckled from a sedentary position. I believe that this is not in order in this House. We heard reports from the humanitarian agencies in Gaza that there is not even enough water to make formula food for babies, and that babies are dying as well. The noble Lord may shake his head; if he has evidence to the contrary, I would like to see it.

In the light of the deliberations of the ICJ, will the UK Government commit to abiding by the court’s judgment? Commitment to the two-state solution will be worth little if further action of the Israeli Government should be to annex the illegally occupied West Bank. In the light of statements made by Israeli Ministers Smotrich and Ben-Gvir and increasing violence supported by the IDF, what are the UK Government doing to ensure that this does not happen? In the light of the accelerating violence, will the UK sanction further violent settlers?

The Labour manifesto contained a commitment to recognise the Palestinian state, but the Government have so far failed to do so. In 2014, the House of Commons voted to recognise the Palestinian state, and the state of Palestine is recognised as a sovereign state by 148 of the 193 member states of the United Nations, or just over 75% of all UN members. The Government have said that they will recognise Palestine when this is most conducive to a peace process, but if not now, can the Minister say what factors must change for this to happen? We read that France is planning recognition at the June reconstruction conference, and international momentum is now growing. The UK risks missing a crucial moment to support a just resolution and recognise its own responsibility in the history of the current context.

The meeting and its outcome are to be welcomed, but a very significant sign of good faith would be for the UK to recognise the inalienable right of the Palestinians to have their own internationally recognised state and homeland. I hope that the Minister will restate the Government’s commitment on this fundamental principle, and that we will see action on it in the near future.

[Baroness Chapman of Darlington (Lab)]

My Lords, I welcome the support that we have had from both Front Benches for the two-state solution, and the support for the meeting that was held.

I have to say that we agree with the Front Bench opposite on the issue of recognition. Our position has been consistent, in that we will recognise Palestine as part of a process at a moment when we judge that it is most conducive to peace. I do not think that is now. It may be, as I was asked, the culmination of a process, or it may come at some point within a process. As noble Lords have said, it would be a significant step. It is something you can do only once, so it is important that you pick the moment to do it, at a time when you will have the greatest impact.

On the blocking of aid, the denial of essential humanitarian assistance to the civilian population is appalling. Access to aid is an area where our international humanitarian law assessments continue to raise concerns about possible breaches. Blocking goods, supplies and power entering Gaza risks breaching international humanitarian law. It should not be happening, and we are doing everything we can to alleviate the situation. The Foreign Secretary continues to raise these issues with his counterparts, including most recently at a meeting with the Foreign Minister on 15 April. We continue to call publicly and privately on the Government of Israel to abide by their international obligations when it comes to humanitarian assistance to the population in Gaza.

I was asked about our ministerial engagement with the US. Since hostilities resumed, the Foreign Secretary has spoken to Secretary Rubio, special envoy Steve Witkoff, the Israeli Foreign Minister, the Israeli Minister for Strategic Affairs, the EU high representative and the UN emergency relief co-ordinator, Tom Fletcher. We are using every piece of influence that we can to try to get aid reinstated; we think the humanitarian situation is dire and getting more serious by the day, so we will continue to do that.

We are working on technical assistance with the Palestinian Authority. I met with the Finance Minister last week, and I know these are serious people trying to do the right thing in incredibly difficult circumstances. It is important that we continue to support people who want to see a peaceful resolution and a two-state solution, and I am glad that we are able to do what we can there. We have secured just over £100 million in aid to support that work but, as of today, the main concern that we all have is getting the remaining hostages released, reinstating the ceasefire and ensuring access for aid back into Gaza.

20:38

[Baroness Foster of Oxton (Con)]

My Lords, on 5 and 24 March I asked the Minister to clarify details of the oversight in place to monitor the £41 million of UK taxpayers’ money that we had donated for humanitarian aid to UNRWA. I am still none the wiser. I now note that after this meeting a further £101 million is being given to the Palestinian Authority, a corrupt organisation that supported the 7 October attacks on Israel, that has no control over Hamas or the several terrorist groups on the West Bank, and that has done nothing to call for the release of the 59 hostages—which is a war crime—or the laying down of weapons by Hamas. So when will the Minister provide the House with the information that I have twice requested? How can this Government justify donating a further £101 million to that terrorist-supporting organisation? Finally, where exactly would the proposed Palestinian state be located?

[Baroness Chapman of Darlington (Lab)]

I genuinely do not think the tone of that is at all helpful to what we are all trying to achieve here, which is peace and a two-state solution. Perhaps the noble Baroness is not seeking a two-state solution, I do not know. We do not recognise her characterisation of the Palestinian Authority. I met with them myself last week, and I would encourage her to do that should she wish to educate herself about this.

[Baroness Foster of Oxton (Con)]

My Lords—

[Baroness Chapman of Darlington (Lab)]

I am answering the question that the noble Baroness asked. The reason we are donating aid is that children are starving and people are being displaced. Around 90% of the population has been displaced and aid is needed. We encourage Israel to enable that aid to reach the people who need it, and to do that immediately.

[Baroness Levitt (Lab)]

My Lords, I welcome the Statement from the Minister and the action of the Government, particularly in signing the memorandum of understanding, which advances the issues that we face every night on our televisions. I associate myself with the comments made by the noble Baroness across the Chamber about the humanitarian issues that are happening as we speak. There is immense human suffering taking place. I welcome the emphasis that the Government have now placed on beginning to tackle that.

My noble friend the Minister has pre-empted a number of the questions I wanted to ask about what we are doing to work internationally to try to lift what is, in effect, a blockade on help and assistance going to the Palestinian people. Therefore, can she give us more information about the £101 million that has been shared with the Palestinian Authority? In stark contrast to the previous contribution, I think it will be welcomed broadly across the country as recognition of the suffering that we are witnessing and of the investment the Palestinian people properly deserve. Can the Minister share with the House in future the progress of that spend and communicate to the Palestinian Authority and Prime Minister Mustafa the support that they have in this Chamber? We recognise the plight of the Palestinian people and that the best way to solve these immense problems, as the Minister said, is shared understanding.

[Baroness Chapman of Darlington (Lab)]

I thank my noble friend for her question, her long-standing interest in this topic and the thoughtful way she goes about raising these issues. We have announced funding recently, but this comes after the money that was announced for the OPTs in 2024-25. This included £41 million for UNRWA, providing vital services to civilians in Gaza.

In answer to the question about why we are providing this support now and to the Palestinian Authority, I invite noble Lords who are concerned about this to consider who it might be that would be leading this work in Gaza if it were not for the people who are currently doing it. They are mostly technocrats who had other roles, who have come back and want to do the right thing by their population. They are deserving of our support. The reason we have had to put additional aid in is, frankly, the absolutely desperate situation that civilians—who have had no role in any of the violence—find themselves in.

[Lord Bellingham (Con)]

My Lords, I welcome the Minister’s Statement and the Government’s announcement of the aid package. Would the Minister agree that most of the Israeli settlers in the West Bank have contributed significantly to the local economy, farming, small businesses and enterprise? However, if you believe in the two-state solution, as the Minister has mentioned on four occasions—my noble friend also mentioned it on four occasions, and I support it strongly—then surely the logic is that these settlers must accept that their future lies certainly as residents, and maybe as citizens, of a Palestinian sovereign state. What representations have HMG made to the Israeli Government on this point?

[Baroness Chapman of Darlington (Lab)]

Our position is that the settlements are illegal under international law and harm prospects of a two-state solution. Settlements do not offer security to either Israel or Palestinians. The settlement expansion and violence that we see has reached record levels. The Israeli Government seized more of the West Bank in 2024 than in the past 20 years, and we think that is completely unacceptable.

[Lord Evans of Rainow (Con)]

Given that Israel’s peace agreements with the UAE, Bahrain, Egypt and Jordan have all been the product of direct negotiations between the relevant parties, does the Minister agree that this model has a proven track record of delivering peace and security in the region, and that unilateral declarations will not resolve the Israel-Palestinian conflict?

[Baroness Chapman of Darlington (Lab)]

I am generally not in favour of diplomacy by declaration. I think that the right way to go about this is negotiation, and we encourage all parties who either involve themselves directly or may have influence over the parties who are involved to encourage the reinstatement of the ceasefire and peace and negotiations to proceed, as the noble Lord says.

[Lord Leigh of Hurley (Con)]

My Lords, I declare an interest as chairman of Jerusalem Foundation in the UK, and, as such, that I was in Jerusalem earlier this month. To pre-empt an answer the Minister might give me: yes, I have been to Ramallah; yes, I have talked to the Palestinian Authority; and yes, I have talked most recently to east Jerusalemites. The east Jerusalemites I have talked to specifically state that they have no confidence in the Palestinian Authority, many of whom voiced support for Hamas’s actions. Was this raised with the Prime Minister at the meeting? Likewise, they have no confidence in a PA that have lost control over large parts of the West Bank—we now find that Jenin is, in effect, controlled by Iranian support. Was this raised with the Prime Minister, and what assessment have HMG made of its impact?

[Baroness Chapman of Darlington (Lab)]

These issues are raised. I do not think anybody is trying to pretend that the Palestinian Authority are functioning as a normal Government would like to—how could they? We are not naive about this. The point is, if not the Palestinian Authority, then who? If you believe in a two-state solution, there will need to be some form of governance at some point—we hope in the near future. The assessment of this Government, His Majesty’s Opposition, the Liberal Democrats and many others in both Houses is that working to build a relationship with the Palestinian Authority—to increase their capacity and make them into the competent Government that we want them to be—is the best option that we have at this stage.

[Lord Goodman of Wycombe (Con)]

This visit took place against a background of considerable domestic tension over events in the Middle East, sometimes, though not invariably or even mostly, between British Jews and British Muslims. Can the Minister tell us what discussions she has had with her colleagues in the Communities Department about the means of easing those tensions? If I may add a rider, what discussions has she had with the department about tensions between our Indian-origin communities and Pakistan-origin communities over the very serious situation relating to Kashmir?

[Baroness Chapman of Darlington (Lab)]

That is a really important question. I speak regularly about this issue to our Faith Minister in the Department for Housing, Communities and Local Government , my noble friend Lord Khan. It is a sad fact that we see international events played out on our streets, in our schools and in communities in this country. Whereas debate and free speech are completely legitimate, we are concerned about some of the more abusive behaviour and victimisation that has taken place, and the rise in Islamophobia and antisemitism. We work very closely across departments to make sure that we are doing what we need to do. It is not something that we used to see quite as much as we do today, and we see it played out in our politics, for reasons that we can all try our best to understand. It is very important that the noble Lord raised that and reminds us about it.

[Lord Murray of Blidworth (Con)]

My Lords, I thank the Minister for repeating the Statement, in which I noticed the following sentence:

“Prime Minister Mustafa outlined the essential reforms that the Palestinian Authority are currently undertaking”.


Can the Minister help us by identifying what essential reforms he referred to?

[Baroness Chapman of Darlington (Lab)]

There are many reforms, as noble Lords can imagine, that the Palestinian Authority know that they need to make. The conversations that I have had have centred on their need to develop their ability to manage money responsibly and how they raise money and accesses funds to be able to deliver the services that they are going to have to deliver in the future. That may feel like high-ambition work from where we are today, and I think they would accept that, but we have to start somewhere, and it is right that we are providing the assistance that we are.

[Baroness Foster of Oxton (Con)]

My Lords, on the Minister’s comments regarding my questions, we on this side of the House are here to scrutinise what the Government are doing, as was the case when we were in power as a Conservative Government. The Minister may not like what I said, but it is factual. To infer that I said what I said because I have no knowledge of the region or perhaps have never visited or met the Palestinian Authority—which I have; I have been visiting Israel over the last 50 years—I find rather offensive, frankly. She may not have the facts at hand to reply to the questions I asked on oversight of the amount of money that the taxpayer is putting into UNRWA, and now this latest £101 million, but it would nevertheless be a courtesy to say that she will write to me or at least inform the House of the details that I have asked for.

[Baroness Chapman of Darlington (Lab)]

My Lords, if I wanted to write to the noble Baroness, I would have said that I was going to write to her. It is up to her to challenge me—I am here for that; I enjoy it and that is what I want to do—but it is up to me to decide whether I like what she says or not.

[Lord Bellingham (Con)]

My Lords, I would like to take the question I asked a bit further. If we accept that the settlers have contributed a great deal and invested heavily, what is the ideal outcome? Is it that they are forced to move if we have a Palestinian state, or would it be better if they stayed and worked with a new Palestinian Authority at some stage in the future, maybe a long way off? It is our avowed mission and wish to see this two-state solution take place.

[Baroness Chapman of Darlington (Lab)]

Yes, it absolutely is. I am careful not to make comments that might pre-empt or get ahead of negotiations. That would not be a good idea for me as a Minister. The issues that the noble Lord raises are incredibly important and he is right to raise them, but they are probably best dealt with through a process of negotiation, which I hope we can enter into sooner rather than later.

[Lord Austin of Dudley (Non-Afl)]

My Lords, the central problem in the progress we all want to see in the peace process and the two-state solution that the Government and the Opposition are committed to has been Palestinian terrorism, its attacks on Israel and Israel’s concerns about its security. As I understand it, section 4 of the MoU details security co-operation between the UK and the Palestinian Authority. Can the Minister tell us more about what confidence the Government have in the Palestinian Authority’s capacity to address the growing threat posed by Palestinian extremist groups and terrorists in the West Bank?

[Baroness Chapman of Darlington (Lab)]

My noble friend asks about the capacity and capability of the Palestinian Authority. It is fair to say that it does not today have the capability that he describes, and I do not think it would claim to. That is why we have set about this work on long-term security in the region and the understanding that the Palestinian Authority needs reform. Our support is designed to help it address the very real challenges, which I think we all recognise, through concrete reforms. That includes democratic renewal, widening civic space, improving accountability and transparency and fighting corruption. He is right to make that point; that is why we are undertaking the work that we are.

[Lord Leigh of Hurley]

My Lords, within our mutual aspiration for a two-state solution at some time—and it will be a long time in the future—clearly a big key is education. One of the things that really vexes and troubles the Jewish community in the United Kingdom is evidence of Palestinian textbooks that incite violence and encourage antisemitism. There are schools in Jerusalem which are the reverse of this. For example, there is the Hand in Hand school, financed by British financiers, in which half the pupils are Arab and half are Jewish, and they work together. Was the issue of these textbooks discussed in the meeting with the Prime Minister and, if not, can it be raised, because it is so important?

[Baroness Chapman of Darlington (Lab)]

I am familiar with this issue. I do not know if it was specifically mentioned at the meeting, but I do know that it is raised regularly by Ministers because we recognise the concern around it.

20:55

Sitting suspended.

Employment Rights Bill

Committee stage
Tuesday 29th April 2025 Lords Chamber

Committee (1st Day) (Continued)

21:01

Amendment 14

Moved by

[Lord Leong]

14: Clause 1, page 4, line 2, at end insert—
“(8A) Subsection (8B) applies where—(a) a worker’s contract or arrangement requires an employer to make work available to a worker for a number of hours, and(b) some or all of those hours may be made available either on days falling within a reference period or on days falling within another period (all of the days on which the hours may be so made available together forming “the longer period”).In subsection (8B), “the unassigned hours” are the hours that may be made available at any time during the longer period as described in paragraph (b).(8B) Where this subsection applies—(a) subsection (3)(a)(ii) is to apply as if the contract or arrangement required the employer to make work available to the worker during the reference period for the apportioned number of the unassigned hours (in addition to any other hours that the employer is required to make available to the worker during the reference period);(b) “the apportioned number” of the unassigned hours is—Image-1where—H is the number of the unassigned hoursD1 is the number of days in the reference period that fall within the longer periodD2 is the number of days in the longer period.(8C) Where there is more than one longer period in relation to the same reference period, subsection (8B) is to be applied separately in relation to each longer period.”Member's explanatory statement
This amendment makes provision, for the purposes of proposed section 27BA(3)(a)(ii) of the Employment Rights Act 1996, about the calculation of the number of hours for which an employer is required to make work available to a worker during a reference period in cases where hours might be made available in that period or another period.

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

My Lords, I beg to move government Amendment 14 and shall speak also to government Amendments 23, 25, 26, 30, 34, 35, 39, 40, 41 and 45 to 61. I reassure the Committee that these are technical amendments brought about as a result of very welcome scrutiny of the Bill.

The amendments incorporate technical and clarificatory adjustments, close loopholes to safeguard policy functionality, and resolve uncertainties to ensure the measures are comprehensive and will accurately deliver the policy intent set out in the plan to make work pay, delivery of which was a clear manifesto commitment of this Government. They do not introduce new policy; they simply ensure the Bill works to achieve its intended aims effectively. Making technical amendments to the Bill in this way is an entirely appropriate and ordinary part of making good legislation.

On Amendment 14, as the Bill is drafted, workers on annualised contracts—or other contracts where the hours are guaranteed over a period longer than the reference period—that have a total number of guaranteed hours of work but little detail as to their allocation may fall out of the scope of the right to guaranteed hours. This is because the worker would be on neither a zero-hours contract nor a contract guaranteeing a certain number of hours over the reference period. It is the case even if they would otherwise be eligible. Workers may therefore fall out of the scope even if they are guaranteed only a very small number of hours over a year.

On the other hand, workers on annualised hours contracts who have a sense of when their hours will be worked may fall into scope of the right to guaranteed hours if they have a certain number of hours guaranteed during the reference period. This is not our policy intention—workers on annualised contracts may experience one-sided flexibility in the same way as those on weekly or monthly contracts. As the Bill is drafted, there may also be a perverse incentive for employers to place workers on to annualised hours contracts guaranteeing a very small number of hours with no indication as to when they should be worked to avoid being in scope of the right to guaranteed hours.

Amendment 14 will ensure that the policy works as intended and expected and will act as an anti-avoidance measure. It makes provision to determine what the minimum guaranteed hours are in the relevant reference period by providing a calculation method to find the apportioned number of any unassigned hours under the contract for that reference period.

Amendments 49 to 57 add grounds on which a dismissal would be automatically unfair. A dismissal would be automatically unfair where an employee was dismissed for bringing a complaint to an employment tribunal that they were wrongly issued a notice by their employer stating that their guaranteed hours offer had been withdrawn or for alleging the existence of any circumstance which would constitute a ground for bringing such proceedings. Adding these grounds aligns with the approach taken where a worker is unfairly dismissed for taking a claim to an employment tribunal on other grounds relating to the right to guaranteed hours. All employees deserve protection from unfair dismissal. These amendments will ensure that employees who make a claim in an employment tribunal on any of the grounds related to the right to guaranteed hours will be protected from being dismissed as a result of making such a claim. Consequential amendments have been tabled to amend the right not to suffer a detriment for workers and agency workers to ensure consistency when referring to the proceedings that can be brought or referred to and that could lead to that detriment.

Amendments 25, 26, 34 and 35 relate to the movement of shifts for the purposes of payment for workers for shift movement at short notice. These amendments make technical changes to the definition of the “movement” of a shift. This is to provide for situations where a shift is split in two or more parts, or where a part of a shift is moved with the result that the shift ends later than it otherwise would have but the start time remains the same. For example, a worker could have a 9 am to 5 pm shift changed at short notice to 9 am to 12 pm and 4 pm to 9 pm. In this case, it is right that a payment for a short-notice change is granted given that the worker may have already incurred costs for plans associated with the shift, such as childcare or other care arrangements.

Amendments 30 and 40 make technical changes relating to payments for shifts that have been cancelled, moved or curtailed at short notice where an exception applies. Where an exception applies—meaning that the employer is not required to make a payment for that changed or cancelled shift—the employer must provide the worker with a notice so they are aware that they will not receive a short-notice payment and why. The notice must be given to the worker within a certain amount of time, which will be specified in regulations. This period may be shorter than the deadline for making payment, which will also be specified in regulations. Under the current drafting, even if they make the payment despite an exception applying, the employer still has to provide an exception notice if they make the payment after the deadline for giving a notice. The amendments change this so that employers do not need to provide a notice if they pay the worker within the deadline for making the payment. The same applies in respect of work-finding agencies and agency workers.

Amendment 23 aligns the wording used in Clauses 2 and 3. To be eligible for the right to short-notice payment, workers must be on a contract of a specified description, if they are not on a zero-hours contract or arrangement. This is referred to in Clause 2 as a contract

“that requires the employer to make some work available to the worker”.

We are adding the same description into Clause 3 to ensure that this is included in the provision.

Amendment 39 is a minor and technical amendment that corrects a cross-reference to align paragraph 23(5) of new Schedule A1 to the Employment Rights Act 1996 with new Section 27BR(3) of the same Act, both inserted by this Bill. This concerns the duty to give notice where an exception applies that means that no payment is due for a shift that has been moved, cancelled or curtailed at short notice. The amendment ensures that, for both directly engaged workers and agency workers, only the requirement to give an explanation in the notice of exception does not require the disclosure of information where that would contravene data protection legislation or breach a duty of confidentiality, or where the information is commercially sensitive.

Amendment 45 signposts at Clause 6 the definition of “work-finding agency” in Clause 4. This minor and technical amendment adds the definition of “work-finding agency” to the interpretation section in new Section 27BZ2, with other definitions used for that part. It does this by referring to its meaning in new Section 27BV of Part 2A of the Employment Rights Act 1996.

Amendments 46, 58 and 61 amend Schedule 6 to the Insolvency Act 1986, Schedule 3 to the Bankruptcy (Scotland) Act 2016 and Section 184 of the Employment Rights Act 1996 so that employees can receive short notice payments in the same circumstances as they receive other wages on the insolvency of their employer. When an employer goes insolvent, outstanding wages due to employees are treated as preferential debts—or preferred debts in Scotland. Amendments 58 and 61 ensure that outstanding short notice payments are also treated as preferential or preferred debts.

Amendment 46 enables employees to obtain payment of unpaid short notice payments from the Secretary of State in the same circumstances as they receive other wages under the scheme created by Part 12 of the Employment Rights Act 1996.

Amendment 59 amends Section 202 of the Employment Rights Act 1996 to ensure that information does not have to be provided and will not be disclosed to a tribunal or court under the zero-hours provisions where a Minister is of the opinion that such disclosure would be contrary to the interests of national security.

Amendment 60 amends Section 206 of the Employment Rights Act 1996 to ensure that, in the event of a worker’s death or the employer’s death—or the death of another respondent in the case of agency workers—tribunal proceedings under the zero-hours provisions can still be instituted, continued or defended as appropriate by a personal representative of the deceased.

Amendments 41 and 47 amend Section 12A of the Employment Tribunals Act 1996 and the provisions on short notice payments for agency workers in order to enable employment tribunals to impose financial penalties on all types of respondents in claims brought under the zero-hours provisions where there are aggravating circumstances.

Amendment 48 amends Section 16 of the Employment Tribunals Act 1996 to include payments for cancelled, moved or curtailed shifts in scope. This ensures that regulations can be made to enable benefits to be recouped where a worker has not received such a payment and so has had to claim benefits, and the tribunal has then ordered the employer or work-finding agency to make the payment. The amendment also ensures that regulations can be made so that benefits can be recovered from all types of respondents in claims brought under the zero-hours provisions—for example, in respect of the payments that are compensation for loss of wages.

These amendments seek to prevent workers receiving double award where their rights have been breached and ensure that employers and other respondents do not benefit from breaching these rights. I therefore beg to move these amendments.

[Baroness Coffey (Con)]

My Lords, I rise to speak to this group of government amendments. I am surprised that the Minister made the assertion that they are all technical. Amendment 53, for example, extends the types of dismissal that will be regarded as “automatically unfair”. That is not a technical amendment; it is an extension of what is already considered potentially controversial in being added to the Bill in this way.

There are other amendments in this group that really concern me in their drafting. Multiple amendments leave out several lines of the previous Bill presented to this House and the other House and then leave the employment tribunal and the employer to get into the detail. For example, Amendment 52 states:

“It is immaterial … whether or not the proceedings were, or would have been, well-founded provided that the agency worker acted in good faith in bringing the proceedings or alleging the existence of the circumstance”.


I ask the Minister, what has changed? Why do we now have an employment tribunal group which has to decide whether the actor worked in good faith? They will not necessarily need to know what the Government proposed before, but it would be very helpful to understand why significant parts of the Bill on the operation of the employment tribunal are being changed at this stage.

21:15

I appreciate that there are fewer people in the House at this point and we have already discussed important matters today, but in my government career, one of the most informative roles I had was, as Deputy Leader of the House of Commons, being on the Cabinet committee that looks into legislation, the Parliamentary Business and Legislation Committee. By the way, the Leader of the House of Lords and the Government Chief Whip in the House of Lords are on that committee. The purpose of the committee is to go through legislation, particularly the Leader of the House of Lords and, at the other end, the Lord Privy Seal. It is designed because those offices of state are there not only to represent the Government in Parliament but to represent Parliament in government. I have already made the point that we have moved from an initial 149 pages of legislation to, now, 299 pages of legislation—never mind all the amendments coming in—and not lots of scrutiny at the other end; I am not criticising the Commons because, unfortunately, it has evolved over quite a few decades that a lot of the work gets left to this Chamber. But even then, we see how that process has evolved as strongly flawed, because with the Bill having doubled in size from when it was originally presented, the statements made about whether it contravenes human rights and the impact assessments are all from October. Very minor changes were made in March. Nothing else has had an impact assessment. Even then, the impact assessments are almost irrelevant, because they more or less say, “Well, we don’t really know how to do this; we’ll get into that decision when we get into regulations, or we consult”.

This is really bad. I cannot believe that a Cabinet committee has allowed this Bill to evolve in the way that it has, apart from the message given by the Deputy Prime Minister—by the way, it is an office I have held myself, admittedly for a lot shorter time than the current Deputy Prime Minister. Nevertheless, it should matter to the Deputy Prime Minister and it should matter to the Cabinet committee how they are drafting legislation. For a start, we are already deleting stuff that has been put in at various stages along the way in order to put in, I suggest, even more nebulous words. That really concerns me about this approach.

There is a lot in this Bill that is genuinely novel. The Minister has referred to that, and I understand her point when she has been answering, “Some of this is novel, so we can’t put it on the face of the Bill”. But that is why there is anxiety. There is already anxiety from outside, never mind from inside this House. For what it is worth, it is not being directed personally at the Ministers in this Chamber—I have been in their shoes myself before, so I appreciate their position—but the Government need to think carefully. I understand that there are even more amendments coming—which they are bound to be, because this Bill has been written in haste. I can imagine that OPC has been working assiduously, as have been the policy officials and others, to try to address some of the challenges that we face.

However, I want to put on record how frustrated I am. I have not been a servant of this House for long, but I am trying to be an active participant and am frustrated on the House’s behalf at how it feels it is being treated at the moment. Candidly, the Government do not need to restore the trust of Members in my party, but they do need to restore the trust of businesses and put in place updated impact assessments so that they know what we are facing into. It is critical to their mission of growth, having spent an election doing X, Y and Z, and keeping a number of their promises, that, if they really want to see this country prosper, they need to keep business engaged and involved—and not just with the token consultations that we have. I have seen them on some of the amendments that we have done—perhaps not the ones we are specifically talking to now—where they are saying, “Yeah, we’ve heard the consultation, but we don’t agree, stuff it”, even though two-thirds of businesses are saying, “We think this is really bad”.

In the spirit, though, I would appreciate an answer, to get an understanding of Amendment 53, on why these measures are deemed to be added to the unfair dismissal.

[Baroness Kramer (LD)]

My Lords, as everyone knows, I am very new to this piece of legislation. I do not know whether “shambles” is a parliamentary term, but 27 amendments at this point, after going through the other House and now coming to this House, is completely unacceptable. A Bill needs to be developed virtually to its finish point before it enters the legislative process, not be continuously revived as it travels on through. That is not the way these Houses are meant to operate.

I was struggling to follow the Minister as he described this, not because he is unclear but because he is tackling such complexity within these regulations. I am going to go back and say to the team that they will have to read Hansard multiple times and then keep double-checking the amendments to have a feel for what is going on here. These are not just technical; it is reasonably obvious that they are not. Will we at the very least get a detailed code of conduct? People outside these Houses will have to apply all of this and will need real clarity. I work with employment tribunals, admittedly on whistleblowing issues, and I am incredibly conscious that this is the kind of thing that leads to them being flooded with even more cases—and employment tribunals are a part of the court system that does not have that capacity.

I ask that the Government rethink whether there are areas where the Bill is inappropriate or undeveloped and somehow find a way to bring all those issues very rapidly to the attention of parliamentarians. This is no way to carry out legislation, to ask us to apply sensible scrutiny when it is impossible to get to the bottom and the root of what is being presented to us.

[Lord Murray of Blidworth (Con)]

My Lords, I agree with the noble Baroness, Lady Kramer, and my noble friend Lady Coffey. It is frankly not acceptable for the Government at this stage in a Bill to lay this many amendments of this magnitude to the policy in the phase of the Bill as it is travelling through the upper House. These measures will receive no scrutiny from the elected House. It is frankly not constitutionally proper to use this method. It should be used for only minor and technical amendments, and by no measure can these proposals be put into that category. The Government should be very ashamed about this. Frankly, the correct way of proceeding would be to withdraw the Bill and start again, and to lay this entire Bill back before the Commons so that it can be properly scrutinised in accordance with our conventional norms.

[Lord Sharpe of Epsom (Con)]

My Lords, I thank the Minister for his detailed introduction to the amendments in this group. As he was speaking, I thought that he had inadvertently highlighted the mind-boggling complexity of what employers are up against when dealing with this Bill. I did hear all the words but, to paraphrase a famous comedian, I was not entirely sure that they were necessarily in the right order.

As my noble friends Lady Coffey and Lord Murray, and the noble Baroness, Lady Kramer, have pointed out, the Government tabled these 27 amendments only a few days ago. Perhaps they are simply technical amendments, but I am afraid I am inclined to agree with the other speakers that they do not appear to be so. I will just pick a few items at random from the Minister’s speech. If amendments involve national security, insolvency and the death of a claimant at an employment tribunal, these are matters of substance; they are not technical at all.

This is not the way to do business in this House. The last-minute approach is symptomatic of a much deeper issue, which is the lack of care and due diligence when it comes to this Bill. It is rushed, it is poorly thought-through, it has been inadequately consulted on, and it is one that these Benches will scrutinise to the fullest possible extent.

We have to ask why the Government have still not tabled any amendments to address the concerns of businesses regarding the changes to zero-hours contracts in this Bill. These are not niche or minor concerns; they go to the heart of how businesses—especially, as we have been discussing all evening, small and seasonal employers—operate.

We have heard already some of the germs of the future scrutiny that these amendments can expect to receive in depth. We will not oppose them today, but we of course reserve the right to revisit them at a later stage, when we have had time to digest them and read the Minister’s comments in much more detail.

On a personal note, I read Amendment 14 with mounting horror. It induced a minor heart flutter because it reawakened memories of a particularly unsuccessful algebra exam I took when I was about 16. I would be very grateful if we could have a minor health warning on any future amendments of that type.

[Lord Leong (Lab)]

I thank all the noble Lords for their contributions. Some noble Lords raised concerns about the number of amendments tabled by the Government, and I would like to reassure the Committee that these really are technical amendments, brought about as a result of welcome scrutiny of the Bill. They are entirely appropriate and an ordinary part of making good legislation. I remind noble Lords that we had tons of government amendments when we debated the Procurement Bill recently, so this is not unusual.

I will answer some specific points raised by noble Lords. The noble Baroness, Lady Coffey, asked about Amendment 53. This is one of a number of technical amendments designed to ensure that the Bill operates as it was intended to operate. As an example of how technical they are, Amendment 53 seeks to amend new Section 104BA because we realised that it was not clear that Section 104 of the Employment Rights Act 1996 already ensured that dismissal in such cases was automatically unfair.

The noble Lord, Lord Murray, mentioned scrutiny. There will be technical regulations tabled at a later stage, or during the course of this legislation, and the House will have every opportunity to scrutinise these through the affirmative procedure. There will be time for noble Lords to scrutinise delegated powers and this Bill.

[Lord Murray of Blidworth (Con)]

The Minister appears to be saying that the House’s deficit in scrutiny can be made up by the fact that we can scrutinise secondary legislation. As the Minister will be well aware, the last time this House negatived a statutory instrument was, I think, in the 1970s. It is an all or nothing: either we agree to a statutory instrument or we do not; we cannot amend a statutory instrument. The Minister will surely agree that, realistically, this is not an avenue for scrutiny.

[Lord Leong (Lab)]

I take the noble Lord’s point, but I am sure he will appreciate that, when he was a Minister, a number of statutory instruments were placed before the House and we had every chance to scrutinise them. There is a question over whether noble Lords want to table whatever options are open to them, but the whole objective is that the House will be able to scrutinise regulations as well.

I refer to the point about algebra from the noble Lord, Lord Sharpe. I had to read three times the formula in Amendment 14 to understand what it actually means. I will try to explain in plain English what we are trying to achieve with H times D1 over D2.

To qualify for guaranteed hours, a worker’s existing guaranteed hours need to be lower than the threshold and the worker needs to work more than the guaranteed hours in the reference period. That condition does not work for someone whose guaranteed hours may or may not fall entirely in the reference period, such as someone on an annualised-hours contract with no clarity on when those hours fall.

21:30

This amendment takes the worker’s guaranteed hours and calculates them pro rata to the length of the reference period. That number of apportioned hours is used as a notional number of guaranteed hours during the reference period. In that way, these workers can be treated on a fair basis with workers whose guaranteed hours clearly fall within a reference period. Therefore, it is clear whether the worker works in excess of their reference period hours and whether they fall within the scope of the right to guaranteed hours. I hope that is clear; I will get my officials to write to noble Lords.

These amendments incorporate technical and clarificatory adjustments to ensure that the measures on zero-hours contracts in the Bill are comprehensive and will accurately deliver the policy intent set out in Labour’s Plan to Make Work Pay, the delivery of which was a clear manifesto commitment of this Government.

[Baroness Kramer (LD)]

Before the Minister sits down, could he answer my question on whether or not there will be a code of practice? I can see many businesses struggling their way through all this stuff. I think his attempt to clarify the complex algorithm illustrates the need for such a code very powerfully.

[Lord Leong (Lab)]

I thank the noble Baroness for her question, which I have written down. In response to an earlier grouping, my noble friend the Minister said that the Government would publish detailed guidance on the government website, which I hope will give some clarity on that.

Amendment 14 agreed.

Amendment 15 not moved.

Amendment 16

Moved by

[Lord Parkinson of Whitley Bay]

16: Clause 1, page 4, line 9, at end insert—
“(10A) In making regulations relating to the duty to offer guaranteed hours under this section, the Secretary of State must have regard to the nature of the work and operational characteristics of different sectors, including but not limited to sectors with irregular or seasonal work patterns.(10B) Specifically, in sectors where work schedules are inherently variable and unpredictable, such as the theatre sector, the Secretary of State shall consider the concept of Available Hours, which reflects the actual hours an employer can reasonably offer workers based on the known operational needs of the sector, without imposing undue rigidity on employers or creating unfair advantage or disadvantage for workers.(10C) The Secretary of State must by regulations issue specific guidance on how employers in sectors with variable work patterns may meet their obligations to offer guaranteed hours, while taking into account the fluctuating nature of work, the distribution of available hours, and the need for flexibility to accommodate the unique operational demands of the sector.”Member's explanatory statement
This amendment ensures the Secretary of State considers sector-specific work patterns, like those in the theatre industry, when regulating guaranteed hours.

[Lord Parkinson of Whitley Bay (Con)]

My Lords, in moving Amendment 16 in my name, I offer my apologies for not being able to be present at Second Reading, although I followed the debate that your Lordships had then, as I have today’s debate, particularly the earlier group on zero-hours contracts.

I also offer my thanks to the Society of London Theatre and UK Theatre, which represent some 500 of the UK’s leading theatre producers, venue owners, managers and performing arts centres, and with which I had the honour of working closely when I was Arts Minister, for raising the issue that underlies my amendment and for discussing it with me in some detail. I stress that those organisations welcome many of the measures in this Bill and share the Government’s ambition to eliminate exploitative practices, but they have flagged their concerns with the provisions relating to zero-hours contracts, which are integral to operations in theatre and other live performing arts, and which presently operate in a way that delivers fairness, flexibility and inclusion for the sector and the brilliant, creative people who sustain it.

I am sure, by the end of proceedings on the Bill, that the Minister will have tired of special pleading on behalf of every sector of the economy, but theatres operate under a unique set of pressures, including the stark new pressures that I saw them confront during my time in government—from the bleak months of Covid-19 to the rising costs of energy and materials following the inflationary effects of that pandemic and of the illegal invasion of Ukraine.

The effects of that turbulence—rising costs and falling real-terms income—mean that theatres must work harder than ever before to balance the necessity of making a profit with long-term investment and their sincere commitment to delivering social good. The arts hold a mirror up to our society and help us to understand the human condition—a value that cannot simply be measured in ticket sales and bottom lines, important though those are.

In particular, as major employers of a casual workforce, theatres have to manage highly irregular and unpredictable staffing needs while supporting and valuing their workers, without whom theatre simply could not happen. As one of the organisations which sprang up during the pandemic put it in its very well-chosen name, freelancers make theatre work.

The proposals in the Bill as currently drafted, regarding the right to guaranteed hours for casual workers, risk upsetting the delicate equilibrium by which the theatre sector operates, balancing commercial viability with social value, long-term investment with short-term realities, and the demands of an irregular calendar with a commitment to fairness for its workforce. Although I am glad to see that the Government have amended the Bill in the ways we have just debated in the previous group and will debate when we look at further government amendments which follow—particularly, in this instance, to allow collective agreements to override the new statutory right—the mechanism set out in new Section 27BW does not fully solve the problem and is unlikely in practice to provide the safeguards that this cherished sector needs.

Theatre’s operating model is inherently shaped by irregular programming, seasonal variation and periods of closure. Those aspects are baked into the way that theatre works and are part of what makes it so dynamic and diverse. Notwithstanding the well-known mantra that the show must go on, theatres do not operate continuously. Even long-running productions experience periods of closure, known as dark weeks, when no performances can be staged and no box office income is generated. The opening of a major new production might require up to 12 weeks to load in sets and equipment and to undergo technical rehearsals. These help productions to dazzle us with ever-more ambitious technical wizardry, and are rightly the stuff of separate award categories for lighting, sound, set design and more.

Short, planned closures, typically for at least a fortnight each year, are needed to carry out essential inspections and to ensure that buildings remain safe and compliant for those who enjoy visiting them. That is particularly important in heritage venues, which receive heavy footfall but only modest and irregular investment. I pay tribute to the work of the Theatres Trust and others who champion the value and plight of historic theatres, concert halls and other cultural buildings across the country, and acknowledge the pressing capital needs of our cultural estate, particularly at a time when many of the boilers, roofs and windows that were funded by the first wave of National Lottery funding some quarter of a century ago are all reaching or long passing the natural time for an upgrade.

Sometimes, of course, these periods of closure are needed without much warning at all, as I saw during my time as Minister, when I had occasion to learn, along with most of the rest of the country, what reinforced autoclaved aerated concrete was. The noble Baroness, Lady Thornton, from the Benches opposite, and I were both at a very enjoyable performance of “The Witches” at the National Theatre, which had to be halted midway because of a breakdown of the Olivier’s revolving stage. I am very pleased that the last Conservative Budget helped the theatre to fix that before its 60th birthday year was over.

The sad fact is that performances can be cancelled at short notice for a variety of reasons, most of which are beyond the control of the theatre operator and staff. I have mentioned two egregious examples already—the pandemic and the need for health and safety in the face of things such as RAAC—but many other external challenges beset theatres from time to time: severe weather causing leaks or other damage which requires repairs, external events such as power cuts, or industrial grievances from other sectors having a knock-on effect. I am sure it is not betraying any state secrets to say that one of the few COBRA meetings I was called to attend as Arts Minister was to discuss the effects of the train strikes on our theatres and other parts of our night-time economy, which lost audiences and vital income as a result.

Of course, there are those unforeseen incidents which come like the theatrical deus ex machina. Last year, for example, a touring production of “Chitty Chitty Bang Bang” was brought to a halt when the eponymous vehicle, “our fine four-fendered friend”, was damaged during the get-out at one of its venues. The repairs to the vehicle took several weeks, leading to the cancellation of all performances during that period. That meant that other venues which had booked the production received no income and were unable to programme another show at such short notice.

During times such as these, there is, quite simply and unavoidably, no front-of-house work available. Guaranteeing hours during periods like that, as the Bill requires, would mean paying staff when no work exists, placing enormous pressure on theatres’ and other arts venues’ already very tight operating budgets. That is the reason for my Amendment 16.

The proposed right to guaranteed hours assumes that organisations operate with consistent demand and regular staffing patterns. That is not the case in theatres or, as we heard in previous debates, in many other businesses and organisations. Theatres’ scheduling requirements and therefore their staffing needs shift weekly—sometimes daily. Guaranteeing fixed hours based on short-term patterns of work, as the Bill proposes, would introduce a level of rigidity that threatens their entire staffing model.

The aim of my Amendment 16 is to urge the Government to acknowledge the unique dynamics of theatre and of the arts sector more broadly, and to adopt a more realistic framework, which will be beneficial to many sectors beyond theatre and the performing arts. UK Theatre has suggested the concept of “available hours”, which I have reflected in my Amendment 16, referring to the actual hours that an employer can collectively offer workers in a given period. This approach would allow for the equitable allocation of work while remaining responsive to the volatile nature of theatre operations.

It would also reflect the desires of the staff who value the flexibility that theatre work currently affords them. Many of those who work front of house do so to support other careers or responsibilities; as noble Lords noted in our debates in relation to other sectors, people have many family or caring burdens. But theatres particularly attract front-of-house staff who want a flexible job, perhaps because they are creative freelancers balancing work with auditions, because they are students are still learning their trade, or because they are retirees and theatre lovers seeking fulfilling part-time work or seeking sociable evening, but not night-time, working hours—rather unlike your Lordships’ House.

The theatre sector’s sincere understanding of its workforce is rooted in over a century of constructive and collaborative industrial relations with the trade unions in the sector, whose names are almost as well-known as those of some of their famous members: Equity, BECTU, the Musicians’ Union and the Writers’ Guild of Great Britain. Their symbiotic relationships have produced agreements which are highly tailored to this unique sector. These strong union relationships and robust collective agreements already guarantee protections such as minimum calls, notice periods and compensation for cancelled shifts.

The recent amendments to the Bill include a provision under new Section 27BW which allows certain rights, such as the proposed right to guaranteed hours, to be excluded through a relevant collective agreement. But such an agreement must explicitly exclude the statutory right and include clear replacement provisions. Retaining this flexibility would now depend on being able to negotiate its exclusion.

Without that flexibility, the Bill before us risks creating structural unfairness, entrenching advantage for a small number of workers at the expense of wider opportunity, undermining long-standing and vitally cherished industrial relations, and damaging the ability of theatres to take creative risks, maintain their heritage buildings and serve the community. What is intended as a protection could in practice become a barrier to access and inclusion. I am sure that is not what the Government want to see, so I hope the Minister will agree to look at this carefully and to discuss it with me, with UK Theatre, the Society of London Theatre and many others from the world of the arts to make sure that the Bill delivers for those cherished sectors. I beg to move.

[The Earl of Clancarty (CB)]

My Lords, this amendment points up the need for a nuanced approach tailored to industry requirements. This is the first particular instance we have in the Bill of its potential effect on the creative industries, which will crop up again—I assure the Minister—as the Bill progresses. I congratulate the noble Lord, Lord Parkinson of Whitley Bay, on introducing this amendment. I hope the Minister will look carefully at the SOLT/UK Theatre briefing, which is highly informative and measured and demonstrates well the wide degree of flexibility required for the employment of, for instance, front-of-house staff in theatres.

We often take front-of-house staff in theatres and cinema workers for granted, but they are the backbone of these organisations. They could not run without them. In my experience, they are unfailingly polite and helpful and often highly knowledgeable. A fair number, as the noble Lord, Lord Parkinson, said, have jobs in other areas of the creative industries, which highlights the complexities of working relationships in this sector.

The briefing from SOLT/UK Theatre is, of course, the view from the employers, and the solution has to have the support of all stakeholders, including the workers themselves. According to The Stage,

“actor Nicola Hurst, who is also a duty manager … at Southwark Playhouse, said … she had turned down permanent contracts multiple times … as they could never offer her the flexibility she needed to pursue her creative work”.

She speaks for many in this sector when she says:

“I have colleagues and friends working at all levels in the theatre industry, from fringe to the West End, and for all of them, zero-hours contracts are essential to support themselves between creative jobs, and often, to bolster fees from a tragically underfunded sector”.

21:45

However, in the same breath, there is another view. Mention needs to be made of the upset caused to front-of-house staff by the cancellation of the Royal Exchange Theatre in Manchester’s production of “A Midsummer Night’s Dream” last autumn. It may have been an unusual and fraught event: nevertheless, one worker said that front-of-house workers who were not paid for that period were “disproportionately” impacted by the cancellation. So the number of hours that are expected to be worked over a period needs, at the very least, to form some kind of a benchmark if it is not to be addressed by compensation.

In its briefing on the Bill, BECTU states:

“The complex nature of employment and engagement relationships across the creative industries means that the impacts of the Bill on creative workers will differ widely. While many will benefit, the anomalous status of some creative workers could see them inadvertently pushed out of rights”.

BECTU specifically cites front-of-house theatre workers and cinema workers as potentially being pushed into self-employment—losing, of course, what rights they had previously. There is also the danger that jobs are lost because the workforce is rationalised, or in certain cases that this becomes another factor in an organisation’s collapse, with a loss of those job opportunities.

Much of this seems to be an unknown, which begs the need for a detailed impact assessment of the creative industries. My noble friend Lord Freyberg has put down an amendment to that effect that we will hear later in the Bill. Such an assessment should be a deep dive into the differing kinds of jobs and work status in this sector. The amendment from the noble Lord, Lord Parkinson, was introduced only on Friday, belying its considerable importance to the creative industries. I hope that he will bring it back on Report, because we need time to hear differing views from the full range of stakeholders on this issue.

[Lord Berkeley of Knighton (CB)]

My Lords, I was prepared to put my name to this amendment because I believe that the whole nature of the creative industries, and theatre and festivals in particular, depends on flexibility. Let me give noble Lords an example. When I joined the board of the Royal Opera House, there were in place at the time union restrictions which meant that several operas in the repertoire would go beyond them because they could not possibly fit into that time. The unions and management got together and worked out a flexibility that would allow operas—Wagner’s, for example—to go beyond the hours without penalising people. It is a give-and-take situation. The arts need the flexibility that the noble Lord, Lord Parkinson, is suggesting in his amendment, and I simply rise to endorse it.

[Baroness Kramer (LD)]

My Lords, I am going to stick with being very brief. We have had three exceptionally powerful speeches. Amendment 16 is, in a sense, tackling a subset of a debate that this Committee has already had on Amendment 7 in the name of my noble and good friend Lord Goddard. I hope that the Government are beginning to accept that not all work comes in steady flows; it can have peaks and troughs and be disrupted by events way beyond anybody’s control. I hope that the Minister is going to take this away and work out how the current drafting needs to change in order to make the necessary allowances, whether it is for theatres, festivals, farmers or food and drink. A whole series of activities that experience those irregular patterns must be incorporated into this Bill.

[Lord Hunt of Wirral (Con)]

My Lords, I agree with the noble Baroness, Lady Kramer, that we need to brief as we have debated this area already. But we do have a great debt of gratitude to my noble friend for bringing forward this amendment. He was, of course, a distinguished Minister for the arts. I do not think people have yet recognised the dangers of one size fits all.

We are very grateful to the noble Earl, Lord Clancarty. I join with him in wanting a detailed impact assessment, particularly for the instance he gave of front-of-house workers. I do not believe that the effect on creative industries has been properly assessed so far as this Bill is concerned, and, as the noble Lord, Lord Berkeley of Knighton, said, there is a need for flexibility.

The theatre industry has only just now recovered—or perhaps it has not yet recovered—from the effects of the Covid-19 pandemic. The last thing it needs now is to be hit by this crude instrument of a Bill, which makes no allowance for the unique nature of the work that it does, and the flexibility that is necessarily inherent in how it delivers for audiences. I really do want to hear from the Minister the extent to which theatres—the larger groups, such as ATG and Delfont Mackintosh, but also small and independent theatres—have been consulted. To what extent have they been consulted about the effects of this Bill?

I will finish off with five questions for the Minister. First, does the Minister accept that the right to guaranteed hours as drafted risks reducing work opportunities for the very people it claims to support, such as students, carers, disabled workers, et cetera? Secondly, can the Minister explain how theatres and other seasonal or project-based employers are meant to reconcile guaranteed hours with programming closures, touring breaks or production gaps?

Thirdly, what modelling have the Government done to assess the potential job losses or reduced shift allocations that could result from this policy, and will they please publish that modelling? Fourthly, why have the Government ignored the clear expert evidence submitted by the Society of London Theatre and UK Theatre to the Public Bill Committee? Finally, does the Minister seriously believe that this legislation embraces inclusion and opportunity for the creative sector, when the sector itself is warning that it will do precisely the opposite?

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, I thank the noble Lord, Lord Parkinson, for tabling Amendment 16, which would require the Secretary of State to have regard to sector-specific work patterns when making regulations relating to the right to guaranteed hours. I am grateful to all noble Lords for their contributions and for highlighting the sometimes unique employment practices that occur in the creative sector and, in particular, the theatre sector.

In response to the noble Lord, Lord Hunt, I would say that we have engaged extensively with the Society of London Theatre and are happy to carry on doing so. We appreciate that some sectors—including the theatre sector, which is highlighted in the noble Lord’s amendment—do have fluctuating demand across the year.

This is a sector that I know all noble Lords recognise we need to support, for all the reasons that the noble Lord, Lord Parkinson, said, particularly for social value reasons. We therefore want to take note and make it right for the sector.

I reassure the Committee that flexibility is already built into the Bill to address issues of seasonal demand. There are several ways under the Bill that an employer could approach that issue while upholding the new rights to guaranteed hours depending on the circumstances, particularly by using limited-term contracts where that is reasonable. Those who are offered guaranteed hours will be able to turn those down and remain on their current contract or arrangement if they wish. Furthermore, through the Bill we have also allowed for employees and unions to collectively agree to opt out of the zero-hours contract measures. Unions can make these deals based on their knowledge of the industry and with a holistic view on what is best for their workers.

We will ensure that the needs of different sectors are considered when we come to design the regulations. We will continue to work in partnership with employers across the different sectors, their representatives, the recruitment sector and the trade unions to develop those detailed regulations, and we will provide clear guidance for both employers and workers in advance of implementing these measures.

The amendment from the noble Lord, Lord Parkinson, had a new concept of available hours for sectors with varying seasonal demand. We would push back on that issue. It could risk creating a two-tier guaranteed-hours framework for workers in sectors with more or less seasonal fluctuation. We believe that the reference period provided for in the Bill will ensure that qualifying workers are offered guaranteed hours that reflect the hours that they have previously worked.

I hope that, in that short contribution, I have been able to persuade the noble Lord that we are aware of the issues and are on the case. We feel that there is considerable flexibility in the Bill as it stands. We are happy to have further discussions. As we have heard from noble Lords, there are a range of issues and a range of options here, so there is not just one way of solving this problem. We are happy to get round the table and talk some more. We feel that, as the Bill is currently designed, it answers the concerns that are being raised with us, but we are happy to talk further. I therefore hope that, on that basis, the noble Lord will be prepared to withdraw his amendment.

[The Earl of Clancarty (CB)]

The Minister talked about the reference period. SOLT would like to see a longer reference period because a year is much more of a real time length than 12 weeks. Is that something that the Government would consider at all?

[Baroness Jones of Whitchurch (Lab)]

We have previously had a debate on the nature of reference periods, and that is something that we are going to consult further upon. If we are going to have a discussion, let us have a discussion on that as well, and I will see if I can reassure noble Lords on that matter.

[Lord Parkinson of Whitley Bay (Con)]

My Lords, I am grateful to the Minister, particularly for the willingness she has just indicated to continue discussions. SOLT and UK Theatre updated their briefing on the Bill in the light of the amendments that the Government have brought but they retain some concerns about the amendments in this area, so I am sure that they and others across the arts sector will be glad to continue to discuss it with the Government as they continue to write the Bill as it is before us.

I am grateful to the noble Lords who have spoken, especially the noble Earl, Lord Clancarty, and the noble Lord, Lord Berkeley of Knighton, at this late hour; their championing of the arts knows no temporal limit. I am grateful to them for staying to express support for this amendment. I should say that I am much attracted to many of the amendments that the noble Earl, Lord Clancarty, and the noble Lord, Lord Freyberg, have tabled later in the Bill on the need to consider its differential impacts on certain sectors. I look forward to the debates we will have those.

I am grateful too to my noble friend Lord Hunt of Wirral for his generous remarks. I am happy to say that the UK’s theatres have indeed bounced back well from the pandemic. Last year, more than 17 million theatregoers attended a show in the West End alone—an 11% increase on pre-pandemic levels. In fact, the West End outperformed the Premier League, attracting 2.5 million more attendees. As we have just finished a long Bill on football, perhaps we ought to spend a bit more time on the things that people go to in greater numbers.

However, the sector remains precarious. As the noble Earl, Lord Clancarty, said, the people who are that smiling welcome at front of house are often taken for granted. During the pandemic, we saw how challenging it was for them, especially when enforcing some of the Covid restrictions. They deal with exuberant, sometimes well-oiled audiences, and during that time they had to explain to people why they had to sit two metres apart or wear face masks, or why the show had been cancelled or much delayed. They perform a vital role in welcoming people to theatrical productions, orchestral recitals and much more. As the noble Earl said, that relates just as much to cinemas and many other cultural venues. The UK Cinema Association has provided a helpful briefing on the Bill and its impacts on our cinemas.

I am grateful to noble Lords who have taken part in this short but important prelude to the other debates that we will have on the creative industries and the cultural sector, and I am grateful to the Minister for her willingness to continue to discuss these matters with those organisations. On that basis, for now, I beg leave to withdraw the amendment.

Amendment 16 withdrawn.

Amendment 17 not moved.

House resumed.

House adjourned at 10.01 pm.