New workers’ rights plan is anti-business and will harm growth, critics warn

The Government’s new workers’ rights legislation is anti-business and will undermine economic growth, critics have warned.

Shadow business minister Lord Hunt of Wirral argued that Labour’s 299-page Employment Rights Bill should be called the Unemployment Bill, as it will over-burden companies and reduce hiring.

The proposed new law includes a right to guaranteed hours, cracking down on zero-hour contracts without the offer of work, as well as introducing new restrictions on “fire-and-rehire” processes when employees are let go and then re-employed on new contracts with worse pay or conditions.

The Bill also strengthens trade unions and gives workers certain “day one” rights, like sick pay, paternity leave and the right to request flexible working.

Lord Hunt, who served as employment secretary in John Major’s government, told peers that trade unions “all but brought the country to its knees” in the 1970s and that the Bill is set to undo successive Conservative governments’ work to redraw the social contract between employers, employees and trade unions.

As peers debated the Bill in its second reading in the House of Lords, Lord Hunt predicted that it will result in a stagnating economy and worse outcomes for the very people the Government is trying to help.

The Tory frontbencher said: “Their own declared primary mission is economic growth, and yet they’ve put forward a policy that actively undermines it.

“This Bill is not only anti-business, in my view it is anti-worker. If it passes in anything like its current form, it could be more appropriate to call it an Unemployment Bill.

“The measures in this Bill will make it harder for existing businesses to thrive and near impossible for new ones to emerge.

“The result: a stagnating economy, diminished opportunities and worse outcomes for workers right across the country.

“The only growth this Bill would deliver is growth in industrial strife, growth in administrative costs for business, growth in uncertainty and, ultimately, growth in unemployment.

“Unless it can be seriously improved, we will oppose this Bill all the way in the best interests of the working people of this country.”

Entrepreneur and start-up investor, Lord Londesborough, agreed, claiming that the Employment Rights Bill represents “another vampire squid sucking the life out of our economy”.

The independent crossbench peer highlighted warnings from the Office for Budget Responsibility (OBR) that the Bill may have an overall negative economic impact.

He said: “This Bill is fundamentally misguided, out of date and out of touch and will wreck the spirit of enterprise.

“It will damage jobs, productivity and wages across both the public and private sectors – and that’s not just my view, but the OBR’s.

“The impact assessment claiming the Bill will have a net positive impact on growth is guilty of fantasy economics, suggesting its authors have little feel for or experience of creating jobs, developing careers or even meeting payroll.”

However, Labour peer Lord Davies of Brixton argued the workers’ rights legislation would, in fact, help bolster economic growth.

He said: “Economic growth depends on the workers. It depends on them having good conditions of work.

“It depends on them having security, and that’s why this Bill is in favour of economic growth.”

Treasury minister Lord Livermore said that Labour’s plan will put more money in people pockets and give them the security to spend it.

He said: “We are confident that it will result in ordinary working people having more money in their pockets, but also having the security to spend that money, because they don’t have to worry from week to week whether or not they will be in work or how many hours they will get.”

The OBR said it had not yet been able to take account of the Employment Rights Bill in its forecasting as there was not enough detail available on the policy.

However, in its forecast released on Wednesday, it said regulations which “affect the flexibility of businesses and labour markets” are likely to have “material and probably net negative, economic impacts on employment, prices, and productivity”.

As well as flagship changes around issues like “fire and rehire”, zero-hours contracts and “day one” rights, the Employment Rights Bill also introduces a new statutory right to bereavement leave and a duty on employers to prevent sexual harassment at work.

A Fair Work Agency would enforce this package of measures “by bringing together” existing authorities, according to a Government explainer.