Employment Law (Businesses)

Debate between Gavin Williamson and Julian Smith

Wednesday 3rd November 2010 Commons Chamber

[Julian Smith (Skipton and Ripon) (Con)]

I am delighted to have secured this debate on the effect on businesses of proposed changes in employment law. I am particularly delighted that it will be conducted under your chairmanship, Mr Speaker, as I still have my L-plates on: this is only my second speech to Parliament.

When I was a small business owner, dealing with employment law took more time than any other management responsibility—literally hundreds of hours. Since the election of the Labour Government in 1997, employment laws and regulations, ranging from enhanced maternity and paternity rights to the minimum wage, have been piled on to British business. For the employer, particularly for the many small to medium-sized businesses that create the majority of jobs in my constituency, that has meant major additional cost in both time and money. The intense focus on employee rights has ended up with the employer spending a huge amount of time ensuring that he is abiding by the law; it has made him wary of the consequences of even the most innocent error.

Under the previous Government the cumulative effect of employment law was to change the playing field fundamentally, leaving employers feeling defensive rather than confident about hiring people and managing their staff. I remember, a few years ago, having a quiet chat with a young member of my staff who had been playing on the internet for days on end. The following day, I had a call from her mother saying that if I did not follow correct disciplinary procedures the family barrister would be in touch. The quiet chat and the informal word of warning became formalised under Labour. Employment became a transaction.

Even John Hutton, the former Business Secretary, admitted that things had gone too far. In 2008, he said:

“Exercising the right to work ultimately depends on getting the right balance in employment law. Having a multiplicity of employment rights won’t amount to a great deal if you can’t get a job in the first place.”

[Gavin Williamson (South Staffordshire) (Con)]

Having employed people in the past, I know that there is often a real fear of taking on new staff because if one does not get it right first time, the consequences of trying to get rid of a member of staff can be costly to the business. Does my hon. Friend agree that this puts lots of small and medium-sized businesses off expanding?

[Julian Smith]

My hon. Friend is absolutely right. A close friend of mine is starting a new business and she told me the other day that her business adviser suggested she should hire people on short-term contracts to avoid the pitfalls of having permanent staff. At the key moment when we need hundreds of thousands of new jobs, the advice to a budding entrepreneur is to avoid permanent staff if they can.

According to the World Bank’s “Doing Business” report, employing workers in the UK has become harder every year since 2007. The report shows that UK labour market flexibility has slipped down the international league table from 17th in 2007 to 35th in 2010. The UK is now behind many European countries, including Switzerland and Denmark, as well as Australia, Canada, the United States and others, on labour market flexibility.

Even those figures do not take into account the effect on small businesses of the sheer worry about these burdens or of the realities of a world in which Britain will be under increasing pressure to compete for internationally mobile business jobs. Small business owners worry about this stuff. That is why they are good at what they do—because they are worriers. By putting so many worries and concerns around the key assets of their business—staff and people—Governments have forced them to spend less time on their businesses. Tom Bannister, who runs the Coniston hotel near Skipton, does not have an HR department, so each employment change that comes from this House takes him away from running his hotel and outdoor centre. We need hard-pressed owner-managers such as Tom to be lying in bed at night worrying about things like the spa development he is currently considering rather than whether they have dealt adequately with the “protected characteristics” of their employees as determined by the Equalities Act 2010.