Employment Rights Bill

Baroness Noakes Excerpts

2nd reading
Thursday 27th March 2025 Lords Chamber

[Baroness Noakes (Con)]

My Lords, this is a very bad Bill for many reasons, and I will have to ration myself to just two areas.

First, the Bill is unequivocally bad for businesses and therefore bad for growth. It is not pro-growth to impose £5 billion-worth of costs on businesses. It would be pretty bad if this Bill existed in isolation, but it is not in isolation; it is part of a triple whammy which involves the jobs tax, which will add over £20 billion to private sector wage bills, and the national minimum wage increases, which will add many more billions.

The Government seem to have forgotten that they need private sector businesses to grow if they are to achieve their overall growth objective. The economic impact analysis which accompanied the Bill claims the possibility of a small positive impact on growth, but the probability is a big negative impact, as suggested by the OBR in its spring forecast yesterday. For that reason alone, the Government should have killed this Bill at birth. The country cannot afford it.

In response to the triple whammy, most businesses are expecting to raise prices and reduce pay increases and employee headcount. That will lead to inflation, lower employment, reduced profits and reduced taxes. It will create an environment in which businesses will not invest, thus hobbling another leg of the growth ambition. A key plank of the UK’s ability to attract inward investment has been the flexibility of our labour markets. This Bill destroys that competitive advantage. It is an economic disaster zone.

SMEs are particularly hard hit by this Bill. The economic impact assessment is clear about this. Of course, anything which is bad for SMEs is also bad for growth, but policies which bear down excessively on SMEs are particularly destructive to the foundations of the way we do business in this country. At the last count, there were more than 5.2 million micro-businesses with fewer than 10 employees and a further 220,000 small businesses with 10 to 49 employees. Between them, they have nearly 13 million employees. Why would the Government want to put this huge group of employees at risk? I will be looking at amendments to this Bill to protect SMEs from its excessive burdens, and I look forward to working with the noble Lord, Lord Londesborough, on that.

My second area of concern is that the Bill is bad for some significant employee groups. For example, people with a history of health-related absence and young people with no track record will be less attractive as employees because of day-one rights and higher sick pay. There are many people who value zero-hours contracts, but they may be deprived of that opportunity because employers will be trying to avoid the risks of getting involved in conferring rights to guaranteed hours. This Bill will make life worse for many who want to work.

There are many aspects of the Bill which will need to be explored in detail. Your Lordships’ House has a responsibility to ensure that the Bill, as a minimum, does no harm. That will be a difficult task because it has deep flaws, but we must try.