Monday 21st July 2025
(2 days, 8 hours ago)
Lords ChamberEmployment Rights Bill 2024-26 View all Employment Rights Bill 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 113-III(a) Amendments for Report (Supplementary to the Third Marshalled List) - (21 Jul 2025)
21:15 - Division on Amendment 129 - Ayes: 106 / Noes: 140 - Amendment 129 disagreed.
21:40 - Division on Amendment 135 - Ayes: 92 / Noes: 130 - Amendment 135 disagreed.
“Review of the extent and impact of pay inequality(1) The Secretary of State must conduct a review of the extent and impact of pay inequality, with particular regard to the highest level of pay in comparison with the median and lowest pay in an enterprise, in large enterprises.(2) The review must be carried out no later than 12 months after the day on which this Act is passed.(3) The Secretary of State must publish the findings of the review within three months of its completion.(4) Large enterprises are those exceeding the medium-sized companies threshold under the Companies Act 2006.”Member's explanatory statement
This new clause requires the Secretary of State to conduct and publish a review of the impact of pay inequality in large enterprises.
Baroness Bennett of Manor Castle (GP)
My Lords, Amendment 127A in my name is a milder attempt to deal with the pressing issue of pay inequality and soaring executive pay in our society than the amendment I tabled in Committee, which was to provide for a 10:1 maximum pay ratio for enterprises. I hope this one has a slightly less inflationary impact on the blood pressure of the noble Lord, Lord Hunt of Wirral, while dealing with the excessive boardroom remuneration referred to by the noble Lord, Lord Monks, two groups ago.
The amendment simply seeks to put in the Bill a review of the impact of pay inequality in large enterprises, as defined by the Companies Act 2006—those with net turnover of more than £54 million, assets of £27 million and more than 250 employees. I hope that the Government will seriously consider this approach. It is not my intention to put this to a vote, but I want to be helpful to the Government here and offer them some constructive ways forward.
The noble Lord, Lord Katz, in part made the argument for this amendment for me in Committee when he said that:
“It is right that companies should be sensitive to wider workforce pay when setting pay for those in the boardroom and other senior leadership positions”.—[Official Report, 24/6/25; col. 201.]
However, suggesting that companies be sensitive is not really going to do it. That seems to be the Government’s position. I noted that the Water Minister, Emma Hardy, on LBC this morning, urged water company bosses to “read the room” and refuse huge wage hikes. Well, the room has been sending a very clear message about water company bosses’ pay for a long time and the voluntary approach has simply not worked.
We are talking here about the right of lower-paid workers not to be disrespected—insulted—by the soaring pay in the boardroom while they struggle to meet their basic needs, pay their bills and put food on the table. This is action that clearly needs to be taken, not just words of gentle encouragement.
As I said in Committee, the security and catering company Mitie, with a 575:1 ratio between its top-paid employee and the median employee, and a large number of low-paid workers, tops the High Pay Centre’s FTSE 350 companies hall of shame. I note that this month, the Labour Party postponed a London drinks reception for north-west MPs sponsored by Mitie after a backlash over the company’s employment practices. Unison had planned to picket the event. You have to question why it was ever planned in the first place.
A review such as the one proposed in the amendment could be a start towards the Labour Government generating policies such as those recommended by the High Pay Centre in its useful list of proposals—I recommend it to Ministers as a crib sheet, since the current Government were elected with so few policies of their own in place—such as all-employee profit-sharing or share ownership schemes. As the centre notes:
“One of the reasons why … the pay ratios between workers and CEOs are so wide is that CEOs receive large share-based payments in addition to their regular salary while workers do not … In France all companies are required to share an element of profits exceeding a set amount calculated using factors including taxable profits, net equity, wages and added value with their workforce”.
This has actually reduced inequality.
Another timely proposal from the centre, which again a review might throw up, is a cap on CEO-to-worker pay gaps for public service providers, such as water companies—here we have another way forward—or social care providers. The claim made by the noble Lord, Lord Katz, in Committee, that high pay means
“companies can compete for the best business talent in the UK and globally”,—[Official Report, 24/6/25; col. 202.]
certainly does not stack up in the water sector, if one looks at its outcomes. Fat cat pay has delivered only underinvestment, pollution and ill health for those unfortunate enough to have to rely on the services of the privatised companies.
Finally, I note that, responding to the call for even higher executive pay from the UK capital markets task force—drawn from the City of London and big business—a letter written by 20 leading academics specialising in executive pay, corporate governance and economic inequality made a number of points, including that there is a very “questionable” link between
“higher executive pay and better business performance”,
that any claim that there is a
“shortage of capable candidates for executive roles should … prompt scrutiny of companies’ leadership training and development processes”,
and that the “opportunity costs” of high top pay have impacts
“in terms of … pay for low and middle income workers or investment in the business”.
It is interesting that polling by the High Pay Centre suggests that the overwhelming majority of the public think that CEOs should not be paid more than 20 times more than their typical employee. If the Government want to consider the politics of this, I point to the conclusions in the report, The Spirit Level at 15, by Professors Kate Pickett and Richard Wilkinson, which articulates many of the ways in which inequality strengthens far-right politics. Executive pay is only part of that story, but it is a very visible part. This amendment offers the Government a way forward to start to tackle that political problem, as well as the economic and social issues. I beg to move.
Lord in Waiting/Government Whip (Lord Leong) (Lab)
My Lords, I thank the noble Baroness, Lady Bennett of Manor Castle, for tabling Amendment 127A. Although it rightly raises the important issue of pay inequality, it effectively duplicates a review process that we are already undertaking.
It is undeniable that average salaries have stagnated. In fact, they have barely increased from where they were 15 years ago. Had wages continued to grow at the rate seen prior to the 2008 financial crisis, the average worker would now be over 40% better off. This is not just about stagnant wages; it is about persistent and deep-rooted inequalities.
The UK’s income inequality remains above both the OECD and G7 averages. In the financial year 2022-23, the richest 20% of the population received 44% of the UK’s gross income, while the poorest 20% received just 7%. The OECD has noted that higher inequality can lead to underinvestment in human capital and slower adoption of new technologies. It estimates that rising inequality between 1990 and 2010 resulted in UK output being nearly nine percentage points lower than it might otherwise have been.
As I said on day 2 on Report, in one of the world’s wealthiest nations, workers are still turning to food banks. Many cannot afford rent, let alone a mortgage. Morale is at rock bottom and motivation is vanishing. The noble Baroness is right: executive pay keeps climbing. In 2023 the average FTSE 100 CEO earned 118 times more than the median UK worker, up from 50 times in the late 1990s. This is not sustainable or fair.
The UK exhibits greater regional disparities in productivity, pay, educational attainment and health than many other developed nations. This Bill, by benefiting lower-paid employees most, will help reduce these disparities, not only in terms of income but in the quality of work experienced. Supporting this, analysis published in 2019 by the World Bank found that employment protections can play a significant role in reducing income inequality.
As I have previously outlined, we already have robust monitoring and evaluation mechanisms in place. By reinforcing the framework that supports our workforce, we are making work more secure and predictable. We are also putting more money into the pockets of working people by making wages fairer. I therefore respectfully ask the noble Baroness, Lady Bennett of Manor Castle, to withdraw Amendment 127A.
Baroness Bennett of Manor Castle (GP)
My Lords, I thank the Minister for his answer, although I have to express disappointment that none of the other Front Benches wanted to engage with the issue of high pay. The Minister very much acknowledged the issues around low pay and talked about robust monitoring and evaluation of high pay, but he did not speak about any action on it nor even about any plans for action on it. We have a real problem with the inequality that has seen those executives’ salaries—those fat cat salaries—rise and rise. As I said in my introductory remarks, there is an opportunity cost where those resources are going to that, as well as, of course, the sense in society that there is a deep unfairness and the Government are not doing anything about it.
I remain disappointed. This is certainly an issue that I and the Green Party will continue to work on but, in the meantime, I beg leave to withdraw the amendment.
Lord Hunt of Wirral
“(8) The provisions inserted by this section do not apply to small businesses.(9) For the purposes of subsection (8), a “small business” means an undertaking which employs fewer than 50 employees.”
Lord Hunt of Wirral (Con)
My Lords, in moving this amendment, I will also speak to Amendments 129, 131 to 134 and 145 in my name and that of my noble friend Lord Sharpe of Epsom. What we are talking about here is the extent to which the Government’s sweeping changes to trade union access rights, including the unprecedented extension of digital access, should apply to small businesses. These changes were introduced without any proper explanation on Report and they have generated serious concern, particularly for our small and medium-sized enterprises, which may suddenly find themselves subject to obligations they neither anticipated nor are equipped to manage.
These amendments have been directly endorsed by the Federation of Small Businesses, the principal organisation representing the voice of small employers right across the country. I quote from it directly:
“New growth and jobs in local communities rests squarely on our SMEs, which make up over 99 per cent of all UK businesses and employ around 16 million people—disproportionately recruiting those furthest from work.
The Federation of Small Businesses (FSB) supports this amendment, which recognises the distinct nature and limited resources that small employers face when it comes to managing industrial relations in what in many cases are more like family units or teams, than big corporates.
They simply do not have the HR infrastructure or legal teams that big firms rely on to navigate complex union access procedures and negotiations. This amendment provides a necessary and vital safeguard by ensuring that SMEs are not automatically subject to trade union access requests or changes to recognition thresholds.
Our recent research found that 92% of small business employers are deeply concerned about the measures proposed in the Employment Rights Bill, with 72% specifically worried about the increased cost of compliance, such as the need for specialist HR or legal support. These figures further demonstrate the importance of maintaining proportionate, practical and measured safeguards, such as those contained within this amendment.
We hope that Conservatives and Liberal Democrats will back the amendment to delay these measures, and that the Labour Government will agree to it, to guarantee proper consultation, and assessment of the practical impacts on SMEs, and that Parliament considers these before Ministers turn on these provisions”.
I beg to move.
Lord Londesborough (CB)
My Lords, I support all the amendments in this group but will speak specifically to Amendments 129, 131 and 145 tabled by the noble Lords, Lord Sharpe of Epsom and Lord Hunt of Wirral, to which I have put my name.
Increasing the right of trade union access, as well as lowering the membership thresholds and the required percentages for action, is, as we know, applying right across the board, whatever the size of the business or organisation. It is Part 4 of the Bill, as the noble Lord, Lord Hunt, just highlighted, that is causing considerable alarm and nervousness among SMEs, particularly small, micro and family business owners. I know this through multiple meetings with business owners and the steady flow of emails into my inbox.
At this point I remind the House of my interests as a chair of, adviser to and investor in a range of small start-ups and scale-ups. One of the key issues that keeps being raised by entrepreneurs and business owners is workforce culture, performance and collaboration within teams, which are so vital to achieving productive, profitable and ultimately sustainable businesses.
These employers are not simply against any sort of unionisation of their workforce. In many cases they can see the merits, but they are very concerned about the enhanced provisions of access in the Bill and the potential impact on owner/employee relations, teamwork and, indeed, the increased time that will need to be devoted to changing induction paperwork, negotiating with staff and their unions, facilitating meetings and possibly having to work with the Central Arbitration Committee and the fair work agency, which will have the right of entry to their businesses and, indeed, to their records.
In an era when we as a nation desperately need to see real economic growth, especially per capita growth and productivity advances, this part of the Bill threatens to dampen those prospects and distract owners and management from this core mission. Among small businesses, there is also the danger of creating divisions unnecessarily between owner and workforce and, indeed, between members of the workforce itself. I know this is not the Government’s intention, but we run the risk of damaging these unique cultures that we see in start-ups and family businesses.
In short, whatever the Government’s rather confusing claims on consultation, the SME community—which, as we have heard, accounts for nearly 17 million jobs and £2.8 trillion turnover per annum—clearly does not feel that it is being heard, let alone consulted. Amendments 129 and 131, in particular, seek to address this, in what I believe is a considered and structured way.
First, we need to see structured and representative consultations across micro, small and medium-sized businesses, across the key sectors, and involving start-ups, scale-ups and family businesses, from those employing two to three staff to those employing 20, 50 or 150 staff. These are very different enterprises, not just in size but in stages of development.
Secondly, we need to see coherent impact assessments for each of these groups, not the one-size-fits-all approach that dominates so much of this Bill, and not just by size but by sector. From agriculture to technology and telecoms, they will be impacted in very different ways. As we have heard, SMEs will need time and fair notice—certainly not before April 2028—to be ready to deal with the potential consequences of these clauses.
None of this is unreasonable in my view. These amendments would help the Government to avoid damaging the SME ecosphere at a time when we need to proceed with care and caution, and especially if we want SMEs to be the engine of real economic growth.
Lord Moynihan of Chelsea (Con)
My Lords, I will speak to Amendment 130 in my name. It is purely an amendment to rectify a small perceived mistake in the legislation, whereby a trade union can, in theory, put in a demand to meet its members in a company immediately, without any delay or warning. This means that a company’s management must always be in fear of a sudden disruption to the company’s ongoing work.
I am sure that the Government did not intend to torment companies with this possibility. I have put forward this amendment with a view to giving the Government an opportunity to agree that some kind of advance notice—I am suggesting a delay between request and meeting of at least two days—is a good idea, and that the length of that advance notice should be put in the Bill.
We all agree that business is the engine of economic growth and the ultimate creator of jobs. Therefore, we all in this House must be agreed that helping business accomplish its ends is important. The Government want the economy and jobs to grow—they have told us so repeatedly. They do not want companies worrying unnecessarily about sudden disruptive swoops from the union. We can see at once that there are many circumstances where a request to meet immediately just would not work. Imagine, for example, the air traffic controllers having to suddenly down tools. Imagine a complex, just-in-time process of many interlocking parts suddenly being interrupted, with an appalling domino cascade of interruptions and failures as a result. Imagine a complicated safety audit being disrupted.
I am sure that the Government have no intention of this and I imagine that the Minister will tell us that it is not at all the intention. However, while it might not be the intention, the opportunity is there in the Bill for the trade unions to act in this way. Therefore, why not, in the Bill, prevent that opportunity?
We all agree that untrammelled regulation is a “boot on the neck” of business—we were assured that that was the case just last week by the Chancellor of the Exchequer herself—yet here in Clause 50 we have yet another regulator, not the first one that we have discussed that has been created for the Bill, with fining powers. Last week, in the same Bill, it was the FWA; now, we have the Orwellian-sounding central arbitration committee, again with fining powers.
Lord Moynihan of Chelsea (Con)
Noble Lords should read the Bill. Payments will be made if the Central Arbitration Committee decides that a request to meet was unfairly refused. I checked it all this afternoon. I did not really expect noble Lords to challenge me on it.
Lord Davies of Brixton (Lab)
I think the reaction from noble Lords was to the use of the word “Orwellian”. No one is questioning the facts; it is the suggestion that a central arbitration commission is Orwellian.
Lord Moynihan of Chelsea (Con)
My Lords, a central arbitration commission might not be Orwellian but I feel that a Central Arbitration “Committee” is. We can agree to disagree on that, but the word “committee” is in the actual name.
Imagine how all this will be taken by the neck on which this regulatory boot is going to be placed by the Bill. All my amendment does is suggest some small limit to when a trade union might announce the date on which it wishes to meet its members. That would provide a proper, proportionate and fair way of giving both sides, company and union, what they need. Indeed, the delay would actually help the union, by allowing it to find a time when more staff were present for the mooted meeting.
The Bill gives the union three months in which to complain if management refuse the proposed time to meet. Surely if three months can be given to the union, two days is not too much to ask for the employer to consider any such request.
Baroness Lawlor (Con)
My Lords, I support my noble friend’s amendments. There are good reasons to exempt small businesses, which make up the backbone of our productive economy, from the measures in Clauses 55 and 56, both for the statement of trade union rights and for trade union access.
We know, as we discussed in Committee, how rapidly trade union membership is falling, and that it has fallen particularly in the private sector. We know that, although it has gone up in the public sector, it still represents a much smaller proportion of trade union members than in 1995, when statistics began. Small and medium-sized businesses account for 99.8% of our productive economy. If we impose additional compliance costs on 1.16 million micro businesses of up to 10 employees and on 4 million sole traders, we are saddling them with the kind of compliance costs to which noble Lords have already referred.
I wholeheartedly support my noble friend’s amendments to exempt the majority of small, tiny and medium-sized enterprises from the compliance costs of furnishing a letter and the costs—indirect, perhaps—of access arrangements for trade unions, when there may be no trade unionists in the workforce of these small, entrepreneurial businesses.
Lord Leigh of Hurley (Con)
My Lords, I rise briefly to mark that this is the moment—21 July, at 8.59 pm—when the Labour Government are going to put such unreasonable demands on small businesses that they will all come together and say, “This Government are not our friend. This Government are distracting us from growth, from employing more people and from productivity”. Just as small businesses are getting over Making Tax Digital, Covid and tariffs, this legislation will do irreparable harm. I wanted to make that point because I assure noble Lords that there will be future reference to this very moment.
Baroness O'Grady of Upper Holloway (Lab)
My Lords, I too will be brief. I thought it might be helpful to inject a bit of balance into the debate. Noble Lords might recall that in Committee I spoke of how often there are positive voluntary agreements between employers and unions about access, because everybody recognises that in a modern, civilised society, workers should have the right to speak to a trade union. It is their choice whether to join, but it ought to be seen as a basic right to be able to meet a union at the workplace. In my experience, very often you go in and have a cup of tea and you get a chance to meet the workers, who will make up their own minds about whether they want to join.
Lord Hannan of Kingsclere (Con)
My Lords, last week the chairman of the junior doctors—or, now, resident doctors—committee of the BMA put out a tweet saying, “You do not have to tell your employer if you are striking”. I thought of that as I listened to the noble Baroness, Lady O’Grady, talking about how reasonable, collaborative and useful this union participation was. There is a difference between people wanting to work together and people seeking to inflict maximum disruption, as is plainly the case in the doctors’ strike. I have to say, by the way, that the Secretary of State for Health in another place has made the same point that I have: he thinks it is extremely disruptive and has said all the right things about it. But can we really blame the BMA or any other union for walking through a door that is being so ostentatiously unbolted with the passage of this legislation?
I do not want to get into a Second Reading speech, but I agree with my noble friend Lord Leigh of Hurley: we have done extremely well with low unemployment, unlike almost every other country in Europe. With the financial crisis and Covid, we have had structurally low unemployment because of a flexible labour market. That is beyond this amendment, but I do not see how anyone could reasonably oppose the amendment just put forward by my noble friend Lord Moynihan of Chelsea. If we are in a world of wanting to be collaborative, it seems to me that informing an employer before coming and organising in that company is a matter of minimal courtesy. It seems to be an oversight in the legislation, and I hope that Ministers will at least be able to concede that point.
Lord Goddard of Stockport (LD)
My Lords, I have to say that this is probably the most difficult summing up from our group of all the amendments throughout Committee and Report, because I can see the merits of both sides of this argument.
On the one hand, the noble Lord, Lord Hunt, is quite right. We are naturally suspicious of any new amendments on Report, as they have not had consultation or examination. Having said that, as a group, we have to be consistent, and our approach is that SMEs need the most support. They are the people who are the most insecure and who email me more than anyone else, and so you might think that I would be minded to support these amendments.
However, on the other hand, these amendments, in our view, would create the two-tier employment situation which we have consistently opposed throughout the legislation. I have stood here night after night saying that I cannot agree with amendments because we want one set of legislation for the entire SME sector. A two-tier arrangement would throw more upheaval and uncertainty on small SME businesses, leading them to wonder whether or not they qualify and whether they are in or out.
On balance, and probably for the first and only time in this Chamber, if this issue is pushed to a vote, our group will, unusually, abstain. That does not mean that I am not supportive of the thought behind the amendments, but we feel very strongly that there could be unintended consequences. The legislation should be clear, concise and uniform. This would cloud it a little, as it is looking for a two-tier arrangement. On balance, we are unable to give this group of amendments our full support tonight.
Lord Leong (Lab)
My Lords, I am grateful to all noble Lords who have spoken. I may not agree with some of the sentiments of some noble Lords, but I have listened to all the arguments in the last few years, such as when minimum wage was debated. The scaremongering that businesses will go bust does not hold water with me.
We are not anti-business; you cannot find someone more pro-business than me. I have started businesses and been a small business person myself. I strongly believe that this Bill works for workers and for business.
Before I address the amendments in the names of the noble Lord, Lord Sharpe and Lord Moynihan of Chelsea, let me say this: the Government are committed to supporting SMEs. We accept that they have been subject to a challenging operating environment and global uncertainty. That is why the Government have set up the new business growth service, to streamline access to support, and why the new strategy will span key areas, including access to finance, market expansion, business capability development, entrepreneurship, and the creation of a strong and stable business environment. In combination with our industrial strategy, trade strategy and, I hope, our SME strategy, which will be published shortly, it is a key part of this Government’s plan for change to encourage growth and put more money in people’s pockets.
Let me turn first to Amendments 132, 133, and 134. We introduced a streamlined route through the Central Arbitration Committee, which was established in 1975. It is a decision-making process for model access proposals to ensure that genuine and reasonable requests for access are not subject to unnecessary delay, while maintaining appropriate safeguards where complexity or dispute remains.
Regarding Amendments 129, 131 and 145, we believe that strong trade unions are central to tackling issues of insecurity, inequality, discrimination, enforcement and low pay across the economy. Right of access is key to this. The access framework allows for flexibility for SMEs. Unions and employers can negotiate an access agreement and employers may challenge proposals they consider unsuitable. Where an access agreement cannot be agreed, the CAC determines whether access should be granted, and this decision will be guided by matters prescribed by the Secretary of State.
On Amendment 128, the intention behind this measure is to ensure that all workers are informed of their legal rights at work without imposing undue burden on employers. Making it a requirement for employers to inform workers of their right to join a trade union is about fundamental fairness and transparency. Too many people, especially in low-paid or insecure jobs, do not know that they have this right. We are not telling anyone to join a union; we are simply making sure that they know it is an option. Just as employers are expected to inform staff about health and safety rules or their right to paid leave, they should also be clear about the right to union representation.
Baroness Lawlor (Con)
Will the Minister agree that it is a bit heavy-handed to require an employer to furnish a new employee, at the same time as giving them the agreed terms and conditions of employment letter, with a statement on their right to join a trade union? I cannot see that that is proportionate.
Lord Leong (Lab)
It is just like any other right that employees expect, such as health and safety, annual leave and all that. The right to join a union does not mean that they have to join a union; it is still their choice. It is a small step that empowers workers and supports a fairer and more balanced workplace.
The statement of trade union rights will be provided at the start of employment, alongside an existing written statement of particulars already required under Section 1 of the Employment Rights Act 1996 and at other prescribed times. Given that it builds on an established process, we believe that this measure places minimal burden on employers, including many small businesses. We will consult on the practical details of Clause 55 before this is set out in secondary legislation.
On Amendment 130, the right to access is a complex policy and will involve detailed practical consideration. We will therefore provide for the operational details of a responsible and regulated access framework in secondary legislation. Ahead of doing so, we will publicly consult on the operational details this autumn, including on model access terms that the CAC must consider reasonable for both employers and unions to comply with, and the appropriate amount of notice a union must give before access takes place. Consulting before setting out these operational details will ensure that we cater for a variety of scenarios and workplaces and will ensure that these measures are fair and workable in practice. We believe that providing for this operational detail now, ahead of consultation, would be premature. I therefore respectfully ask the noble Lord, Lord Hunt, to withdraw Amendment 128.
Lord Hunt of Wirral (Con)
My Lords, I say with great regret that the response we have received today is totally unconvincing. At no point throughout the progress of the Bill have Ministers offered a satisfactory explanation as to why sweeping changes to trade union access rights, including digital access, were introduced on Report in the other place, with no consultation, no impact assessment and no regard for the realities facing small and medium-sized businesses. There has been no clarity whatever regarding how these measures will work in practice.
How right the noble Lord, Lord Londesborough, is to stress that there has been no recognition of the burden they will place on the thousands of small and medium-sized employers across the country. There has been no proper answer to my noble friend Lord Moynihan of Chelsea, who was supported by my noble friends Lady Lawlor and Lord Leigh of Hurley. I have no need to reply to the noble Baroness, Lady O’Grady of Upper Holloway, as she was shot out of the water by my noble friend Lord Hannan of Kingsclere. All I will say is that there has equally been no proper consideration of the broader impact these changes could have on the labour market, particularly on hiring, retention and business confidence, at a time of economic uncertainty.
I regard the noble Lord, Lord Goddard of Stockport, as consistent, but I disagree with him fundamentally. I hope he will issue a detailed explanation to the Federation of Small Businesses as to why he has felt unable to follow its guidance that there has to be a recognition of the special needs of small and medium-sized enterprises. I can well understand that the arguments that the noble Lord, Lord Londesborough, introduced in support of Amendment 129, together with Amendments 131 and 145, provide a simple and proportionate safeguard. Given the seriousness of these issues and the complete lack of justification for how this has been handled, I shall seek to test the opinion of the House on Amendment 129, but, in the meantime, I beg leave to withdraw Amendment 128.
Lord Hunt of Wirral
“(c) may not be made if the employer in question is a small or medium-sized enterprise.”Member's explanatory statement
This amendment and others in the name of Lord Sharpe of Epsom provide that a trade union cannot give an access request if the employer is a small or medium-sized business, unless the Secretary of State has provided for this in regulations. Such regulations (where they affect small or medium-sized businesses) may not be made before 6 April 2028, and without prior consultation and publication of an impact assessment. They also provide that the Secretary of State must consult and publish an impact assessment prior to making regulations to vary the required percentage.
Lord Sharpe of Epsom
Member’s explanatory statement
This amendment and others in the name of Lord Sharpe maintain the existing 10% membership threshold for union recognition applications by removing provisions that would have allowed this threshold to be modified through secondary legislation.
Lord Sharpe of Epsom (Con)
My Lords, I rise to speak to Amendments 135 to 143, all in my name and that of my noble friend Lord Hunt of Wirral. When this power first appeared in the Bill, the Minister in the other place, Mr Justin Madders, admitted that the Government had not even decided whether they were intending to use it. First, they said there would be no consultation, then they changed their minds. That is not a serious way to make laws; it is confused and confusing, especially for, as ever, SMEs, which are, as we have discussed many times during the passage of the Bill, in a state of uncertainty about the basic rules governing their own workplace.
If the membership threshold was reduced to 2%, as the Government appear to envisage, in a company that employs 250 employees, it would require only five members in the bargaining unit to request a ballot. That would mean that a union could gain bargaining authority over workplace conditions, pay and leave arrangements for the entire bargaining unit based on the explicit support of a tiny number of employees. This raises questions about whether such an arrangement adequately reflects workforce preferences, particularly for employees who may value direct engagement. That potentially creates a situation in which unions may submit many speculative requests for recognition, with little depth of membership in a proposed bargaining unit. The process comes at a cost to the employer of both managing and arranging access and facilities, and to the Central Arbitration Committee for supervising these potentially speculative ballots.
I really think this speaks for itself; there is not a huge amount to say in addition, although I would note that the noble Lord, Lord Hendy, talked earlier about workplace democracy. Whatever it is, it is not this, so I beg to move.
Lord Lucas (Con)
My Lords, I have Amendment 144 in this group. We discussed the same amendment in Committee. If we do not have a number, it means that, essentially, one employee could trigger union recognition. Surely that is not something we should impose on small businesses.
Baroness Lawlor (Con)
My Lords, this set of amendments is a proportionate response to the Bill’s Schedule 6 to ensure that we have clarity in the Bill for all parties about the threshold to be met in respect of a union seeking recognition to conduct collective bargaining on behalf of a group of workers making a request for recognition. As matters stand, employers, unions and employees know that the threshold for recognition is 10%. This is established under Schedule A1 of the Trade Union and Labour Relations (Consolidation) Act 1992, on trade union recognition for the union or unions seeking recognition to be entitled to conduct the collective bargaining on behalf of a group of workers.
The 10% threshold is set out in paragraph 36 and reinforced throughout Schedule A1 in the subsequent paragraphs that my noble friend’s amendments seek to reinstate. That includes paragraphs 45 and 51 on competing applications, paragraphs 86 to 88, and paragraph 14 on applications. As your Lordships know, this Bill substitutes the words “the required percentage”, including for paragraph 45 on the validity of applications. We know that the required percentage may be 2%, but it has become almost a euphemism for whatever a Minister may decide post consultation and impose via statutory instrument in whatever circumstances we may imagine. It may be that the union masterminding the Birmingham bin chaos, which finds its members fleeing to another union, wants the Government to get a 1% or 0.5% figure in the instrument—or else it would withhold its support from the Labour Party.
Lord Fuller (Con)
My Lords, I will speak to all the amendments in this group. I approach it from the perspective that democracy is always about cherishing minority views and making reasonable allowances, with the proviso that the minority do not hold the majority over the barrel. If you allow the minority a veto or special qualification to enforce their narrow view of the world, it encourages extreme views and intransigence. If you give somebody a veto, do not be surprised if they use it. The effect of the Bill is perhaps to give minorities significantly lower than the 10% threshold a perverse incentive to exercise that veto. That is not good for the individual or the employer, and I believe that it is not even good for the unions, because it potentially weakens their members’ mandate.
I speak from the perspective of somebody who has negotiated the local government pay deal for many years as part of the national joint committee, alongside the noble Baroness, Lady Taylor. My experience is coloured by the knowledge that in local government there are three different unions involved—UNISON, Unite and GMB—and it is a complicated negotiating environment. It is hard enough to get consensus with three unions in the mix, still less with 10—but that is where the Bill is taking us.
If we do not accept these amendments, it will place the employers in the invidious position of choosing between various unions. The lower the threshold, the greater the incentive to fragment the union landscape—the Judean People’s Front phenomenon—and, in so doing, weaken the benefits of sensible recognition and union power. I cannot understand why the brothers are so keen to reduce the 10% threshold. Why should the employer be placed in an impossible position to arbitrate between warring unions, jostling for position and preference by allowing each to assert rights that they should be agreeing among themselves?
These amendments will not weaken the thrust of what the Government are trying to achieve, but they would provide the certainty of a materiality threshold that would otherwise allow the unintended consequences of negotiation chaos—too many cooks being allowed to spoil the broth. That would disadvantage the employee by reducing the negotiating power of the majority; disadvantage the employer by making it hard to negotiate with unions with sufficient critical mass; and, for the union movement, value fragmentation and the pursuance of special interests over building consensus.
Once more, we have an opportunity to ask the Government to support sensible and measured amendments that will help them achieve their purpose. To resist would risk delivering the opposite, and not for the first time.
Lord Goddard of Stockport (LD)
My Lords, in Committee we tabled several amendments resisting this reduction from 10%, and the reason for doing that was that we think that is the existing and fair threshold. To go to 2% is not being done for the reason that the noble Lord, Lord Fuller, says, which is about competing unions and getting the one with the lowest threshold, but for a different reason.
When we have had these arguments, in Committee and tonight, the fall-back position of the Ministers and other speakers is, “Well, they don’t have to join a union—they don’t have to be in a union”. I was in the GMB—I do wish people would not list Unite and the other one, and put the GMB third; please put the GMB a bit further up the pecking order next time. But the point of the story that I am trying to tell noble Lords is that although the Minister says that you do not have to join a union, by reducing this to 2% from 10% you are effectively stacking the deck. You are setting them up there. If you believe that trade unions are free to join or not, and there is a threshold and it is 10%, that is your principle, and that has stood for years. Why, then, in employment law do you need to move that down to 2%? What brings you to that number? There is an obvious reason for that number, is there not?
On the unintended consequences again—it becomes a mantra, but I will say it very quickly—in small and medium-sized businesses employing 10, 15 or 20 people, they need only two, three or four people to say, “We want to join a union” for it to become complicated, with HR and all the other unintended consequences. So 10% is a reasonable threshold. The Government have given us no reason why they want to change it from 10% to 2%. They should leave it at 10%; leave the status quo. If the noble Lord, Lord Sharpe, decides to press his amendment tonight, my depleted troops will be supporting him in the Lobby.
Lord in Waiting/Government Whip (Lord Katz) (Lab)
I thank all noble Lords for the short but focused debate we have had on this set of amendments, moved and spoken to by the noble Lord, Lord Sharpe of Epsom. I particularly pay tribute to my fellow GMB member, the noble Lord, Lord Goddard of Stockport.
As I set out in Committee, we believe that current thresholds pose too high a hurdle in modern workplaces, which are, as we know, increasingly fragmented. We want therefore to be able to consider whether the 10% membership threshold on application should be reduced in future. The reason why a range of 2% to 10% has been chosen is that, in 2020, the previous Government reduced the threshold that triggers information and consultation arrangements from 10% to 2% in the workplace, so what the Bill proposes aligns with that. But, to be absolutely clear, we want to consult before making any decisions on whether we should bring forward secondary legislation and by how much the threshold should be varied, if at all. We will consult businesses—including, of course, small and medium-sized businesses—as part of that consultation process.
Should we decide to bring forward secondary legislation in the future, that legislation will be subject to full debate in both your Lordships’ House and the other place. We will carry out an impact assessment at that time that will consider impacts on businesses, including, as before, small and medium-sized businesses.
I want to reassure all noble Lords, and the noble Lord, Lord Sharpe, in particular, that, whatever the application percentage in the bargaining unit is or may be, the fact remains that unions would still need to obtain a majority of a bargaining unit in a trade union recognition ballot. That point is fundamental to the misconception that is coming from the Benches opposite about what this part of the Bill does or does not do. To be clear, this is not, to address the point of the noble Lord, Lord Fuller, the “tyranny of the minority”; in fact, it is absolutely contrary to that point. This is ultimately about a trade union having to win a majority.
Experience has shown that this is not easy to achieve. The union will have to make a good case to persuade the majority in the bargaining unit to vote for recognition in a recognition ballot overseen by an independent, qualified person. It is in the trade union’s interest to be confident that it can win a majority in the ballot, otherwise it would still be prevented, as is currently the case, from applying for another statutory recognition ballot in the same bargaining unit for three years. That is why it is highly unlikely that a union will apply for statutory recognition when there is only one worker who is a member of that union. Indeed, if experience tells us anything, it is that it is highly likely that trade unions will continue to focus their efforts on larger workplaces where there is greater bang for the organising buck.
The union recognition process is generally consensual, and that is a good thing. In the nine years from 2017 to 2025, only 375 recognition applications have gone to the CAC. Close to half of the 1,476 recognition applications received since 1999 were withdrawn by unions at various stages of the recognition processes, in many cases because the parties have reached a voluntary agreement for recognition. The confrontation that has been set up by some speakers from the Benches opposite is a chimera; this is not the reality of organised workplaces. Given that, I ask the noble Lord, Lord Sharpe of Epsom, to withdraw Amendment 135.
Lord Sharpe of Epsom (Con)
I am grateful to the Minister for setting out the context in a bit more detail, but I am afraid I am not entirely persuaded. I would like to test the opinion of the House.