(1 day, 22 hours ago)
Lords Chamber
Baroness Lloyd of Effra
That this House do not insist on its insistence on Lords Amendment 1B in respect of which the Commons have insisted on their disagreement; and do agree with the Commons in their Amendments 1E and 1F in lieu of Lords Amendment 1B.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Innovation and Technology (Baroness Lloyd of Effra) (Lab)
My Lords, I shall speak also to Motions A1 to E1. Given the developments that have taken place since the Bill was last debated by the House, I would like to take some time to set out the context of those changes. I therefore must ask for the indulgence of the House with regards to the length of my speech.
Before to turning to the specifics of the amendments in the name of the noble Lord, Lord Fox, I want to provide a general update. Throughout the passage of this important Bill, which delivers on multiple manifesto commitments, we have gone through careful deliberation, scrutiny and debate. Noble Lords will have seen my statement given to your Lordships’ House last week where I outlined how the Government had convened tripartite discussions with trade unions and business representative organisations. Those discussions were focused on finding a way forward on unfair dismissal. This is an issue which business and many in your Lordships’ House, including His Majesty’s loyal Opposition, told us was their number one priority. Solving it was the only means of breaking the current impasse between this House and the other place.
I am glad to report that we have secured an agreement between trade unions and business representative organisations on that issue which has unlocked a path to get this much-needed Bill on to the statute book without further delay. This is acknowledged in the joint statement made by business representative organisations involved in the negotiations, which accepts that any remaining concerns with the Bill can be dealt with in the regulations to come, which will be informed by open and transparent consultation. This negotiated outcome has now been debated and agreed by the elected House. We will, of course, debate it in detail this afternoon, but I ask your Lordships’ House to endorse the agreement reached by worker and employer representatives.
The success of these discussions sets a clear example of the benefits of working together in a tripartite manner. This commitment was front and centre of the Labour Party’s plan to make work pay, and I am pleased to see it in action as part of these discussions. We must not stand in the way of, and further delay, these long-promised improvements to workers’ rights.
As the recent agreement centres on unfair dismal, I shall speak first to Motion B and Amendments 120G to 120M tabled by the Government in the other place, and Motion B1 and the amendments to the Commons amendment tabled by the noble Lord, Lord Sharpe of Epsom, relating to unfair dismissal.
The Government’s amendments in lieu will reduce the qualifying period for unfair dismissal protections from 24 months to six months, all while maintaining existing day-one protections against discrimination and automatically unfair grounds for dismissal. To further strengthen these protections, the Government have also tabled amendments which will ensure that the qualifying period for unfair dismissal protections can be varied only by primary legislation and that the compensation cap for claims will be removed. That will remove both the 52 weeks’ pay and the £118,223 cap. In practice, few awards get anywhere close to these caps, with the median average award for unfair dismissal being £6,746 in 2023-24. Removing the cap would not impact the methodology for how an employment tribunal calculates these awards.
The amendments from the noble Lord, Lord Sharpe, would change the Government’s amendments and go against the negotiated outcome of discussions between the trade unions and business representatives in November. My colleague, Minister Dearden, confirmed the outcomes of these negotiations in the Commons when debating this element of the Bill on Monday. She said
“I was in the room as part of the negotiations with business representatives and trade unions … I can confirm that the compensation cap was discussed and agreed in the room”.— [Official Report, Commons, 8/12/25; col. 94.]
The Government believe that the current compensatory award caps incentivise claimants to construct complex cases which allege discrimination to access uncapped compensation. These types of claims are more complex and take longer for the tribunal to handle. Therefore, by our removing the compensation cap for ordinary unfair dismissal claims, this incentive will be lessened, making it easier for tribunals to reach a judgment more quickly and decreasing burdens on the system.
Following a helpful meeting with the noble Lord, Lord Vaux of Harrowden, I can confirm that we will publish an enactment impact assessment for the Bill as soon as possible once the Bill secures Royal Assent and prior to commencement regulations for the entire unfair dismissal package being presented to Parliament. The new impact assessment will be publicly available and include an assessment of the impact of the removal of the compensation cap. We are aware of representations made by organisations, including the British Retail Consortium and UKHospitality. The Government stand ready to engage with those and similar organisations to hear their concerns and answer their questions.
Our impact assessments will set out how we will review the Bill and any secondary legislation that follows. Implementing the Bill will take several years, and its full effects will not be realised until long after Royal Assent. That is why our monitoring and evaluation framework will ensure that the real-world impacts are tracked and used to inform future policy decisions.
We will also publish post-implementation reviews to assess the impact of the implemented policies. These will typically occur five years after the legislation comes into force. Additionally, the dispute resolution stakeholder taskforce, which includes business representative organisations and trade unions, is looking at the likely impact of the full suite of measures in the Employment Rights Bill on employment tribunals, including the removal of the compensation cap. I can assure noble Lords that findings from the impact assessment on the removal of the compensation cap will be taken into consideration by the taskforce. This taskforce will help the Government to develop reform measures to ensure that the current system, including ACAS, is more efficient and resilient so it is better equipped to respond to future changes.
I now turn to Motion A and the government Amendments 1E and 1F, and to Motion A1 and Amendments 1G and 1H, which were tabled by the noble Lord, Lord Fox, relating to zero-hours contracts. I take this opportunity to thank the noble Lord, Lord Fox, for his contributions throughout the passage of the Bill. Our conversations have been constructive and productive. While others have sought to oppose measures in the Bill outright, we have appreciated his efforts to understand and accommodate our chosen policy approach while ensuring that the Bill is deliverable in a manner that works for employers and employees alike.
We agree that security of work is of the utmost importance, and it is clear that we align on needing to protect workers from precarious employment. We also agree that future arrangements must not place excessive burdens on employers. We will do this by working with businesses and other stakeholders on the detail of the zero-hours measures, which will be set out in future regulations.
We have tabled an amendment in lieu in the other place which will place a statutory duty on the Secretary of State to consult before exercising powers to set the length of the initial and subsequent reference periods. This consultation will conform to best practice and ensure that all stakeholders can contribute and shape how reference periods are set in regulations. The amendments in the name of the noble Lord, Lord Fox, seek to set the subsequent reference period at no less than 26 weeks. I can reassure him that our amendment places a statutory duty to consult on this detail. As part of the consultation, there will be adequate opportunity for him and others to feed in their representations on the length of subsequent reference periods before the detail is set in regulations.
We recognise that there is a strong business interest in this issue, given the new responsibilities that businesses will have under this part of the Bill, and we are committed to working with them, unions and stakeholders ahead of the necessary secondary legislation. It is important we get the detail right, and we cannot do that without consultation. It would not be appropriate for us to pre-empt that exercise and, therefore, I cannot support the noble Lord’s amendment. However, I look forward to hearing what he says on the matter, and I hope he will agree that our proposed approach is fair, workable and balanced, ensuring that the Government can implement their manifesto commitment with the input of key stakeholders.
Motion C and Amendments 48E and 48F, tabled by the Government in the other place, relate to seasonal work. The Government are fully aware that for some employers, work fluctuates throughout the year. The consideration of seasonal work is built into the right to guaranteed hours provisions and embedded in the Bill. There are several ways in which the employer can approach seasonal demand. In the other place, we tabled a further amendment in lieu, placing a statutory duty on the Government to consult before making these relevant regulations, including with representatives of seasonal workers and representative bodies of employers with seasonal workers.
Therefore, before any such regulations are introduced, employers, trade unions and other parts of civil society with interests in seasonal work will be consulted. This will ensure that they have their say and can directly influence the policies set out in the regulations, enabling the flexibility and security that are needed for the seasonal work sector. I thank the noble Lords on the Front Bench opposite and the noble Lord, Lord Fox, for their engagement on this issue. In our engagement, we provided indicative examples of how the relevant provisions would apply to different types of seasonal worker. I have shared these in an all-Peers letter to noble Lords which we hope will further contextualise these points.
My Lords, I will speak principally to Motion B1 in my name. The Government’s introduction of a six-month qualifying period, one that can be amended only through primary legislation, was, I am happy to acknowledge, a very welcome concession and we thank the Government Benches opposite for it. Angela Rayner spoke of disruption, but the truth is that this House was simply doing what it is supposed to do and what it does best—scrutinising legislation diligently and ensuring that our small businesses and our young people retain at least some chance of building a bright future. Those are our vested interests.
However, what followed was the very opposite of proper scrutiny. Without consultation, assessment or, as far as we can tell, any precedent—and without even the courtesy of signalling the change to either House—the Government brought forward at the 11th hour a wholly new measure to abolish entirely the compensation caps for unfair dismissal. These issues had not been discussed at any earlier stage in the Bill’s passage. The constitutional implications of introducing major new policy at ping-pong are profound. This is not responsible government; it is unnecessary, inappropriate and constitutionally troubling.
Motion B1 in my name accepts almost all of the Government’s amendment. It seeks only a modest and responsible safeguard that the Government conduct a review of the compensation limits before abolishing them. I acknowledge that an impact assessment has been promised after this becomes law, but what use would that be? It would already, by definition, be somewhat redundant.
This is not obstruction. It is the bare minimum that a competent Administration should undertake. When Tony Blair increased the cap in 1999, there was consultation. When the coalition Government introduced the 52-week cap in 2015, there was consultation. Why should this Government be exempt from the same cross-party accepted standards of good practice? The Government claim that this change reflects an agreement between business groups and trade unions but I wonder whether this is true.
Neil Carberry, chief executive of the Recruitment and Employment Confederation, was explicit. He said:
“For the employer side of the table last week ‘lifted’ did not mean ‘abolished, right now’. We agreed that the 52 week cap should go—protects ordinary workers better—as part of the deal that retained the qualifying period. We anticipated a further discussion about the future of the cash cap, too. But the decision to go for abolition, now is political”.
The Federation of Small Businesses said on Times Radio this week: “In the agreement between us as business groups and the unions, we agreed that there would be a lifting of the cap. We didn’t suggest it would be both caps abolished. So that’s broader than the agreement, and it helps a very small number of very, very rich people working for corporates”.
When those alleged to have agreed to this package say plainly that they did not agree to abolish both caps, the government rationale collapses. It is rumoured that there are minutes of these various meetings and, to clear all this up, perhaps, I ask the Minister whether that is the case and, if it is, will they place a copy of the minutes in the Library?
Let us also have a look at the possible practical consequences of this. The Government appear not to have considered even the most basic scenarios. For example, what happens when a board is faced with an underperforming CEO on £1 million or more? Today, many boards reach a clean exit. Notice is given, a payment to cover the maximum unfair dismissal award is made and a swift settlement is agreed. It allows the organisation to move on. But under an uncapped regime, the entire risk changes. Will a board now be expected to conduct a full six-month performance improvement plan, offer formal warnings, objectives, documented support and staged reviews, simply to reduce the risk of defending a seven-figure tribunal sum? In answer to the question from the noble Lord, Lord Fox, the incentives have now changed, so we would expect behaviour to change. They will now be incentivised to use the tribunal system, even if they were not in the past.
Let us consider a particular bête noire of your Lordships’ House: the water company executives, those who have overseen sewage being pumped into our rivers and seas. Are these individuals really now to be entitled to multimillion-pound payouts for so-called unfair dismissal? Is that the policy intention? Are noble Lords opposite truly comfortable becoming the party defending corrupt water bosses, while ordinary claimants are pushed further back in the queue? This policy is a recipe for the rich and a wrecking of justice for working people.
On Motion C, we are glad that it has taken the persistence of the Official Opposition to ensure that the Government now concede the need to consult our farmers and our other seasonal businesses. After the jobs tax, the tax on family farms and the business rates increase that are crushing the hospitality and retail sectors, and with the construction sector shrinking at the fastest rate since the pandemic, it is rather vital that such industry concerns are taken seriously.
On Motion D1, I agree with the noble Lord, Lord Burns. He has been entirely reasonable and constructive throughout these discussions. The noble Lord has engaged with the Government in good faith, seeking sensible middle ground rather than conflict. It is precisely because his approach is so measured that the position taken by the noble Lord, Lord Collins, opposite is so remarkable, because it was the Collins review of 2014 that argued that the old model of automatic political fund enrolment was no longer acceptable. It was the Collins review that insisted that workers must give explicit individual opt-in consent before contributing to political activity, and which championed transparency, choice and the principle that democratic legitimacy cannot rest on inertia. We agree with the noble Lord, Lord Collins; dare I say that he is U-turning, and is possibly not the first on those Benches to do so?
In our previous debate, the Minister suggested that the recent wave of industrial action somehow demonstrates that the existing legislative framework is inadequate. The rise in strikes in 2022 and 2023 occurred against a backdrop of the sharpest inflation shock in 40 years, global economic turbulence during and after the pandemic, and the profound wage erosion that followed the peak of the Russia-Ukraine conflict. These are extraordinary economic circumstances, not failures of the Trade Union Act 2016. In 2017, 2018 and 2019—the first full years after the Act was implemented—working days lost to strike action fell to historic lows. In 2018, the 273,000 working days lost represented the sixth-lowest annual total since records began in 1891, according to the ONS. Industrial action in the public sector was at its lowest sustained level for decades.
I turn to recent events. Just over a week ago the BMA announced yet another round of industrial action. These strikes will undoubtedly put patients at risk and place even greater strain on our already overstretched National Health Service. Let us also recall that it was the Government’s own Health Secretary who accused the BMA of behaving like a cartel—and you cannot negotiate with a cartel. We have all heard, purely through the most reputable Westminster whispers, of course, that there may be a measure of tension within the Government on this—a hint of disagreement between the Health Secretary and other Ministers, perhaps even the Prime Minister himself. I would never suggest that Ministers are briefing against one another or that competing ambitions are shaping policy, but the murmurings grow louder by the day.
The Government have a splendid opportunity this afternoon to dispel all such unhelpful chatter. They can prove to the House, and perhaps even to themselves, that they are a united operation. They can put all doubts to rest with one simple gesture, by accepting what we are calling the Wes Streeting amendment before your Lordships today. His Majesty’s Official Opposition remain firmly and unapologetically on the side of Britain’s businesses, large and small.
My Lords, I will speak to Motion D1. In recent years, there has been an extraordinary and significant interest in what has become known as choice architecture. This was popularised by the book Nudge and by one of its authors, Richard Thaler, who received the Nobel Prize for Economics in 2017, partly for his work on it. One key point which is so relevant to the issues I have been raising is that he highlighted that when individuals are presented with a choice, any default option has a very important influence on their decision and should be taken into account in designing the process of choice.
My previous amendment aimed to eliminate the impact of the default option, in one direction or another, when members wish to take advantage of the right not to pay the political contribution. It proposed that new members should be required to make an active choice between two options displayed on the application form: to pay or not to pay. This would eliminate the need for a default option, and potentially reflect more closely the true preferences of members. This proposal has not found favour in the House of Commons: clearly, the Government and the trade unions with political funds want to influence the decision of members in favour of paying the political contribution. They want as many members as possible to pay the contribution, and of course I understand the motivation.
Lord Pannick (CB)
My Lords, there is one short point that the House should bear in mind in relation to Motion B1. There is already no cap on the award of compensation in employment tribunals for race discrimination, sex discrimination and disability discrimination cases. The House may therefore think that the concerns that have been expressed about the impact of the removal of the cap are perhaps rather exaggerated.
Baroness Lloyd of Effra (Lab)
My Lords, I thank all noble Lords for their contributions today. This continues the robust discussion that we have had throughout the passage of the Bill.
I come first to some of the constitutional points, or those that go to the way that we do business. As I outlined in my opening speech, the tripartite talks and the amendments resulting from them were context- and Bill-specific. They were really a demonstration of the way in which we listened very clearly to the views expressed in this House through many exchanges, which led to a very productive tripartite discussion. However, they are very context- and Bill-specific. The noble Lords, Lord Vaux and Lord Cromwell, will be familiar with discussions with the Leader of the House on how she and other Members would like to conduct business more regularly.
I will address some of the points made. Again, coming back to the nature of it all, these were discussions between business representative organisations, trade unions and the Government. Specifically on the question of the minutes, there are Civil Service contemporaneous notes of the meetings, but they have not been shared with participants or more widely. We think that it would be impolite and inappropriate to share the meeting notes without the agreement of those who attended the meetings. The Government’s statement and update on the Employment Rights Bill, released on 27 November, and the subsequent Written Ministerial Statement laid in both Houses provide the public summary and conclusion of that meeting. Although it was a slightly different process, we laid that Written Ministerial Statement as soon as we could to give as much clarity as possible to the House on the developments that were happening, which were, as I said before, in response to concerns raised here.
On the question of lifting or removing, that is indeed something that I have also given some thought to. The word “lift”—lifting embargoes; lifting bans—is used very commonly in that manner to mean “remove”. When asked this question in the other place, my colleague, Minister Dearden, confirmed the outcomes of the negotiations and said
“I was in the room as part of the negotiations … I can confirm that the compensation cap was discussed and agreed in the room”.—[Official Report, Commons, 8/12/25; col. 94.]
I was not in the room and I therefore give weight to the comments that she made on that.
To address the comments and interventions made by the noble Lord, Lord Vaux, and my noble friend Lord Barber, this is, in total, a pragmatic way forward. The opposition amendment would not enable us to move forward because it would remove the cap and replace it with the report. It is not something that can be encompassed, and we should continue with the package as negotiated; it is not consistent with the agreement that was reached and which we have brought to your Lordships and encapsulated in the Bill. I just underline that it is not something that we can accept.
Points have been made about the actual substance of the cap. The noble Lord who spoke just before me made the extremely pertinent point that there are already areas of the law that have uncapped areas, and we do not think that removing the cap will mean that compensatory awards will necessarily increase in the way that others have set out. Tribunals have well-established ways of calculating the compensation that might be awarded for particular types of losses resulting from unfair dismissal. As the figures cited today show, those methodologies lead to awards that are, on average, under £7,000. Employment tribunals will continue to focus on claimants’ actual losses when determining awards. I think that some of the fears are unwarranted but, in any case, we will publish the impact assessment and we will engage with business organisations continuously. The last month has shown how productive it can be to engage with business organisations and trade unions together to advance all the measures here. I think that I have dealt with all the points made by Members on the cap.
I come on to the political funds and the question of whether it is an active choice or whether we are trying to restrict people from making an active choice as to whether to contribute to a political fund. When joining a trade union, new members are taking an active choice to voluntarily join a collective organisation that has decided, via a democratic ballot of members, to establish a political fund. We do not see these as two distinct decisions—a decision to join a democratic organisation that has a political fund and a decision to opt in to a political fund—but one active decision. I remind noble Lords that all we are proposing to do is to restore the position as it was for 70 years—I will perhaps not give quite as much detail as my noble friend—before the Trade Union Act 2016 came into force. This simplifies the political funds process to ensure that a balance is struck between protecting trade unions from administrative burdens and ensuring that members continue to have a choice on whether they wish to contribute to a political fund.
Crucially, we agree with the noble Lord, Lord Burns, that members who, for whatever reason, choose not to contribute, should and will be able to do so easily and without detriment, and can exercise that right to opt out of contributing. We will continue to require trade unions to make new members aware of their right to opt out of the political fund. The unions will have to explain to members on the application form that opting out will not affect other aspects of their membership and they will not face any disadvantage. Members will be able to easily inform unions of their decision to opt in or out, including by post, email, completion of electronic form or by any other electronic means.
I was asked about the guidance or regulations in this area. The Secretary of State will be under a duty to issue the guidance within three months of the relevant section coming into force. This guidance will set out expectations as to how quickly unions should action opt-out notifications and will state that unions should, as a matter of best practice, give effect to opt-out notices at the earliest feasible opportunity. This will help to ensure that unions action the opt-out notices promptly. As I stated earlier—I can commit to this again—the guidance will also be clear that opting out must be properly available and practically possible for members who wish to exercise that right. We want to make sure that members are able to opt out in that way, and the guidance will be clear on how that is effected. On the question of the rebate, that will be effected at the earliest time possible once the opt-out notice has been given.
On the question of ballot thresholds, I noticed the attempt to recontextualise the recent year’s industrial action, but the fact is that a threshold of 50% has not led to less industrial action. All strike action recently has taken place with a turnout of more than the 50% threshold, so we do not think that this will inhibit good industrial relations. In fact, we think that the 50% level is unnecessary. It is inhibiting the democratic right of union members and unions to demonstrate their will. It does not take place in other areas—for example, local government or parliamentary elections. Therefore, we do not think it should continue. However, to reiterate, we will not repeal the 50% threshold until we have assessed the impact of e-balloting. The Secretary of State will have to have regard to the impact of that, and he will lay a Statement explaining what the effect of e-balloting is before the 50% threshold is rescinded.
To conclude, we now want to move forward with purpose, guided by our manifesto commitment to work constructively with stakeholders.
My noble friend is coming to the end. We should hear her remarks and then we will go to the votes.
Baroness Lloyd of Effra (Lab)
I emphasise again that the Government’s convening of recent discussions and our willingness to compromise on the issue of unfair dismissal should signal to parliamentarians and stakeholders that we want to get this right. I emphasise that the Government’s work on this agenda is far from over. There will be opportunities for further debate and scrutiny, and I look forward to these discussions. I therefore hope that noble Lords will join business representatives and trade unions in supporting the position reached in recent discussions and backing the Government’s Motions today.
Lord Fox (LD)
My Lords, there was a moment when I was engulfed in shame that I had misunderstood the difference between median and average. Fortunately, the noble Lord, Lord Hendy, distracted your Lordships quite quickly, so I have recovered.
Nobody in this House is pretending that this is perfect. We are at a point of pragmatism and, I remind your Lordships, at the third round of ping-pong. The noble Lord, Lord Vaux, has made some important points. All of us go into this. If it was perfect, I would press Motion A1 and I would want to keep on iterating. I know that now is the time for this Bill to pass. Therefore, I beg leave to withdraw Motion A1.
Baroness Lloyd of Effra
That this House do not insist on its insistence on Lords Amendments 23 and 106 to 120 in respect of which the Commons have insisted on their disagreement; and do agree with the Commons in their Amendments 120G, 120H and 120J to 120M in lieu of Lords Amendments 23 and 106 to 120.
Baroness Lloyd of Effra (Lab)
My Lords, I have already spoken to Motion B. I beg to move.
Motion B1 (as an amendment to Motion B)
At end insert “and do propose Amendment 120N as an amendment to Commons Amendment 120G and Amendments 120P to 120S as amendments to Commons Amendment 120H—
My Lords, in view of the manifest constitutional impropriety on display, I do not think we have a choice. I beg to move Motion B1.
Baroness Lloyd of Effra
That this House do not insist on its insistence on Lords Amendment 48B in respect of which the Commons have insisted on their disagreement; and do agree with the Commons in their Amendments 48E and 48F in lieu of Lords Amendment 48B.
Baroness Lloyd of Effra
That this House do not insist on Lords Amendments 72D to 72H, to which the Commons have disagreed; and do agree with the Commons in their Amendments 72J and 72K in lieu of Lords Amendments 72D to 72H.
Baroness Lloyd of Effra
Moved by
That this House do not insist on its insistence on Lords Amendment 62 in respect of which the Commons have insisted on their disagreement; and do agree with the Commons in their Amendment 62E in lieu of Lords Amendment 62.
Baroness Lloyd of Effra (Lab)
My Lords, I have already spoken to Motion E. I beg to move.
Motion E1 (as an amendment to Motion E)
Moved by
Leave out from “House” to end and insert “do insist on its Amendment 62, and do disagree with the Commons in their Amendment 62E in lieu of Lords Amendment 62.”