Employment Law (Businesses)

Ed Davey Excerpts

Wednesday 3rd November 2010 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)]

I congratulate the hon. Member for Skipton and Ripon (Julian Smith) on securing this debate, which is very timely in the light of the ongoing debate on growth strategy. It gives me an opportunity to reassure him that since taking office as a Minister, I have spent quite a large amount of time on beginning the employment law review. I think he will understand that I am not able to give the details of that review until we publish the consultation document, which I expect to happen early in the new year. Obviously, we have to discuss this with colleagues around Government. When we do publish it, he will see that it is the first stage in reviewing employment law, but that we are tackling one of the key concerns of employers, particularly in small and medium-sized enterprises, in a balanced and pro-growth way.

I assure the hon. Gentleman that this Government have an absolute commitment to creating the best possible business environment, so that the UK economy can recover and grow and the private sector can prosper in the long term. We have made it very clear that private sector jobs are where we see the big growth happening as we tackle the budget deficit.

[Gavin Williamson]

Does my hon. Friend agree with the words of Lord Young this week? He said that fewer employment regulations would always stimulate more employment.

[Mr Davey]

I had the pleasure of meeting Lord Young in my office earlier this week to begin our work together. I said many things to him, but I did not say that when I was studying economics at night school at Birkbeck, I had the pleasure of studying under Professor Snower, who, as I am sure the hon. Gentleman is aware, developed the theory of insider-outsider analysis. That states that when we are thinking about employment creation, we should always remember the outsiders—the people who are unemployed. One of the great things about taking a more robust approach to employment law is that it will help job creation. That is good for businesses, of course, but it is also good for the unemployed. Those who are elected to this House to represent the unemployed must remember that ensuring that they have work is an important part of what this Government are about.

A flexible labour market that strikes the right balance between the rights of individuals and the needs of business is an essential part of our economic framework. The hon. Member for Skipton and Ripon rightly said that things have slipped in recent years, but we still compare favourably with our international competitors. However, more can be done, particularly given what has happened in recent years.

I am aware that many business people are wondering about possible changes to employment legislation. I offer them this reassurance: the coalition understands how tough it has been for them over the past two years, as companies of all sizes have had to fight their way from the deepest recession in 60 years. We will not do anything that makes that continuing task more difficult. We are certainly not in the business of weighing companies down with more regulation and higher costs.

Achieving lasting economic growth is a core priority in the years ahead, and that can come only from the private sector, so we want to make this country one of the best places in the world to start and expand a business. That means dismantling the barriers to growth and improving the regulatory and legal frameworks for business, including employment law.

Good workplace relations improve productivity and help businesses run more efficiently, which enables them to stay competitive and boosts long-term resilience. I am sure that as the hon. Gentleman runs a small business, he is very much aware of that. In our review of employment law, we are trying to see how we can offer maximum flexibility for employers and employees in a competitive business environment. We want to ensure that we have the balance right, so that employment laws do not inhibit businesses from growing.

As part of that review, we are reflecting on what business groups have said to us about the cost and complexity of employment legislation, including on resolving workplace disputes and the employment tribunal system. Where we can make legislation easier to understand, improve efficiency and reduce unnecessary burdens, we will. I am very keen to meet some businesses from the hon. Gentleman’s constituency in due course. I have met a number of business representative organisations, which have given me an awful lot of ideas to mull over, and I assure him that we have been listening to them.

Getting people back into work and helping them stay there is at the heart of our plans for Britain’s economic renewal. That is why we are committed to creating a more flexible employment system that allows people to balance their work and family commitments. Millions of people have responsibilities outside work, whether raising a family, caring for an elderly or sick partner or serving their community. If we help people manage their lives and stay in employment, we can avoid losing the skills, talents and energy of millions of people from the UK economy. There is good evidence from companies already operating flexible working patterns that they deliver real benefits to the bottom line. Those benefits include increased productivity because staff are focused on the job; lower turnover because workers feel valued by their employers; and reduced absenteeism because people can reorganise their day when the unexpected happens.

The coalition agreement raises the possibility of extending to all employees the right to request flexible working. I have been talking about the coalition agreement to employers and their representative organisations. The hon. Gentleman asked why we had extended the practice to include parents with children up to the age of 18 before the wider review, on which we shall consult, and the wider implementation of the coalition policy. When we considered the matter, we found that the cost to business was nil. In fact, it made things simpler.

The way in which the previous Government introduced the right to request flexible working, with different rules for different employees, confused business. So, simplifying the system was just a small step. When we talked to businesses, they seemed to understand and appreciate that. Clearly, one reason why many business organisations are ready to engage in the debate about extending to all employees the right to request flexible working is that it would simplify the system. We want to do that in a way that responds to practical experience of that right to request.

During the recession, it was interesting to see—this also came out in some recent CBI evidence—that there was a greater acceptance of flexible working by employees. A number of firms found that their employees were more willing to take pay cuts and operate on reduced hours and so stay in work, thus keeping the business afloat. We saw a much better engagement at the work place. That is why a number of employers and their organisations are saying that flexible working is one of the better things that came out of the previous Government.

[Craig Whittaker (Calder Valley) (Con)]

Does the Minister not agree that while the right to request flexible working is great for business, what inhibits them from implementing such things is the huge cost, the red tape and the bureaucracy that have been created around employment law? When I met two business men from my constituency today, I was alarmed to hear how a large corporate company—not a small and medium-sized enterprise or a sole trader—had instructed its managers to manage out people from the bottom of the business, because they were inflexible at times when they needed their work force to be flexible. Is the Minister aware of the practices that are starting to occur because of the huge cost of bureaucracy and burden on business?

[Mr Davey]

One of the objectives of the employment law review—I hope that the hon. Gentleman will see this when we publish it—is to try to begin to turn that tide. I hope, as I continue with my remarks, that the hon. Gentleman will begin to see that sense of direction.

In the coalition agreement, we have tried to ensure that we can assist families and employers to get the right balance between work and home. Quite rightly, child care is no longer seen as just the mother’s responsibility. Fathers are playing an increasingly significant role in caring for their children, with more than 90% of fathers taking time off around the births. The hon. Gentleman will know how important that is for families and for the development of children. The Prime Minister is particularly keen to encourage such a practice.

We are planning to introduce a new system of flexible parental leave. The current system of 52 weeks ‘maternity leave and two weeks’ paternity leave is completely unbalanced and does not meet the needs of modern families. Additional paternity leave goes some way to providing parents with greater room for manoeuvre over how they balance their working and caring responsibilities, but it still constrains parents’ choices and reduces employers’ flexibility. We believe that our proposals will be more welcome to employers because of the increased flexibility that they provide.

The hon. Member for Skipton and Ripon asked why we were introducing the additional paternity leave now, when we plan to introduce shared parental leave later. That is a fair question, which I considered carefully. However, when we examined the matter, we noted that the regulatory regime was not quite as burdensome as he implied in his speech. Employers do not have to implement the system unless and until someone applies for additional paternity leave. The regulatory impact assessment that accompanies the measure suggests that that would affect under 1% of employers a year. Although that might be a burden on those employers, the way in which we propose to introduce the measure means that it will be relatively light, even for the small number of employers who have to use additional paternity leave before the shared parental system that we plan to bring in is introduced.

Another reason that weighed heavily on my decision to proceed with the measure is that its passage through the House and removing the regulation would entail some cost to businesses. However, more important, it will provide some serious lessons from employers who have to administer additional paternity leave, enabling us to get shared parental leave right. It is a sort of pilot, and without it, we would lose the lessons from it, creating a danger that, when we implemented shared parental leave, we would not do it in an optimal way. I therefore hope that the hon. Gentleman understands that, although it was a difficult decision, it made sense for employers, and that is why we went ahead.

[Julian Smith]

I thank the Minister for his detailed response. Does that mean that he might buy my idea of a holiday in 2011 so that the pilot can happen and the new law is not introduced during a crucial period for British business?

[Mr Davey]

I can confirm that I want a holiday next year, but although I have some sympathy for the hon. Gentleman’s suggestion of a holiday for employment law, it would be impossible. Under EU legal obligations, we must implement some employment law next year. For example, the agency workers regulations come into force in October 2011. We would contravene our obligations under EU law if we did not implement them. Of course, additional paternity leave also comes into effect.

Although we are committed to ensuring that we review employment laws and take businesses’ considerations into account, as the hon. Gentleman said in his speech, some items are legacies from the previous Government. We had to think carefully about them, but our judgment was that we could not not introduce them.

The hon. Gentleman mentioned the claim by the Institute of Directors that we are gold-plating the agency workers directive. I met representatives of the Institute of Directors and discussed the matter in detail. I asked for the reason why they thought that and for their legal advice. We fundamentally disagree with the organisation on the matter. I assure the hon. Gentleman that we have no intention of gold-plating the agency workers regulations. We inherited them. He knows that the directive finds its legal basis in the social partner agreement between the CBI and the TUC. He also knows that that agreement, to which the CBI signed up on behalf of British business, introduced a 12-week exemption. When I discussed with businesses how we could look at implementing the agency workers regulations, I asked whether, if the social partners did not like what we were doing, they would be prepared to risk losing the 12-week exemption. Businesses made it absolutely clear that the 12-week exemption was critical to them above anything else. We therefore decided that, to ensure that we did not lose the exemption that the CBI had won, we had to proceed to implement the agency workers regulations.

I had hoped, in discussions with the CBI and the TUC, that we could reach an agreement on ameliorating some of those regulations in a way that would benefit workers and employees as well as employers. I tried very hard to achieve that, but I was unfortunately unable to do so. However, I can reassure my hon. Friend that we worked very hard. If he reads my ministerial statement on the issue carefully, he will get the flavour of the frustration that I felt in being unable to go further, but as he said, we inherited that measure. We tried our best to ensure that it is not as damaging as it could otherwise be. We will now engage with employers and trade unions on the guidance for the implementation of the regulations, which is an important step.

[Gavin Williamson]

In a former life as a potter, I remember talking to my German colleagues who were porcelain manufacturers. They said that their Government, who were very enthusiastic to introduce regulations, would always sit down with them and talk about how they would minimise the effect of European regulations.

I should like to point out what a disgrace it is that Opposition Members care so little about creating jobs. We are dealing with their legacies. I urge the Minister to do all he can to resist the urge of the European Union to stifle our creativity in business.

[Mr Davey]

My hon. Friend is very prescient, because I was about to talk about the European dimension of employment law. As hon. Members know, that is the genesis of a lot of employment law in Britain. In particular, I wanted to focus on a short-term issue with which I am dealing. The hon. Member for Skipton and Ripon did not mention it, but it speaks very much to the thrust of his remarks.

What problems would British business and Britain face if the amendments to the pregnant workers directive passed in the European Parliament on 20 October were implemented? British MEPs from all parties voted against the amendments, but unfortunately and slightly unexpectedly, there was a small majority in favour of them. The amendments would impose considerable additional costs on many member states when their economies can least afford them. For the UK, the bill would be at least £2.4 billion a year, doubling current spending in that area. That is simply unacceptable. The European requirement for full pay during maternity leave that results from the European Parliament amendment is a red line for the Government. We will now work hard in the Council and with member states that share our views to oppose the Parliament’s proposal. That may not give the hon. Gentleman the holiday he wants, but it will hopefully give him some reassurance that we will work hard to stop the system getting worse.

I should stress that the Government are committed to playing a strong and positive role with our European partners, so that we are equipped to deal with the challenges and opportunities thrown up by an increasingly open and competitive global economy, but the EU must adapt to those challenges and opportunities. The priority needs to be growth and global competitiveness, not introducing more employment regulation. In future, UK Ministers will get involved earlier and more strategically in EU policy development, and we will push to embed smart regulation within the policies of the European Commission, Parliament and Council.

By that, I mean that we want to ensure that proper impact assessments are made of new proposals for regulations by the Council, the Commission and the Parliament. No such assessments are made by the Council at the moment, despite an inter-institutional agreement in 2004; the Parliament’s impact assessment are poor, to say the least; and the Commission’s are only just improving. I am determined that we push hard on that, because the decision to try to stop over-burdensome regulation has already been taken by the EU but not implemented.

We will make it a priority to challenge restrictive practices and strive to ensure that the employment law framework is flexible, proportionate and based on the principle of subsidiarity. As I said, the framework needs to take into account the whole labour market—not only those who already have jobs, but people who are trying to get back into work. To do that effectively, it is important that we move beyond stale debates on issues such as the working time directive and the opt-out, and instead recognise, and respond to, the changing nature of work and the structural economic problems that exist across Europe. The Government will defend our opt-out, because we believe that it is an essential protection for many employers and employees throughout the country. However, the agenda of the working time directive is an agenda from the past, and we need to get real about the challenges facing Europe’s economy. Against the backdrop of the problems facing Europe’s economy, it is neither fair nor sensible to force people to work less than they would choose if the decision were left up to them. It is time that we all recognised that fact across Europe.

The EU has talked the language of better regulation for a few years now, but it has not been translated into action. We have to ensure that EU institutions put this into practice, take impact assessments more seriously and consider other smart regulatory options, including effective screening of proposals for their impact on businesses to ensure that their growth is not stunted. Our job is to help companies start up and grow, by working with our partners in Europe and creating the right business conditions here at home.

On the issue of the default retirement age, which the hon. Gentleman raised—and which was raised with him in an intervention—it was a coalition agreement, entered into willingly and enthusiastically by both sides. We are now consulting on it and I urge him and businesses that are concerned about the abolition of the default retirement age, to respond to that consultation. We will listen, but when the Chancellor made his Budget statement earlier this year he said that we would go ahead with abolition. When we implement that, we want to ensure that we do so in a way that businesses find easy to manage, given the need to performance-manage employees. I sometimes get a little frustrated when businesses say that they use the default retirement age to get rid of people who, in their opinion, are not very good. That is not good management of staff and they should performance-manage more effectively. Many employers have campaigned for the abolition of the default retirement age, and no longer have one in their policy, because they believe in better performance-management of their staff. That is better for their businesses, because staff are more productive as a result. I will probably have to disagree with the hon. Gentleman on the default retirement age and pray in aid the Chancellor in support of my case.

A carefully calibrated framework of employment law, which balances the needs of employers with the rights of individuals, is an important part of the picture. As we work on the detail of our proposals in the months ahead, we will come up with a blueprint that gets that balance right. We are not about to make life more difficult for companies, especially small firms, still feeling the aftershocks of the worst recession in 60 years, so we will not tie them up in red tape or weigh them down with new regulations.

I recognise that we still have a way to go before we achieve our ambition of making Britain one of the best places in the world to start and grow a business, but we will get there, and we will do it by working in partnership with employers—getting our economy growing again to create jobs and secure prosperity in the years ahead.

Question put and agreed to.