Examination of Witnesses
Enterprise and Regulatory Reform Bill
Graham Brady (Altrincham and Sale West, Conservative)
Welcome. Can I just ask the witnesses to identify themselves for the record and to say if there are any aspects of the Bill on which they do not feel qualified to comment?
Sarah Veale: I am Sarah Veale, head of the equality and employment rights department at the Trades Union Congress. Similarly, I am strongest on the employment rights and Equality and Human Rights Commission areas, but the TUC does have an interest in other aspects of the Bill, so I will do my best on those as well.
Iain Wright (Hartlepool, Labour)
May I just bring to the Committee’s attention that I am a member of the GMB union?
This is an enterprise Bill, designed to promote economic growth. In your view, do the provisions in the Bill help provide economic growth for this country?
Howard Beckett: In my view, they certainly do not. I was interested to hear plenty of the comments that came whenever the last attendees were giving their opinions. In my view, legislation has a number of purposes: it can either be effective or it can be considered in the round in relation to other legislation and what has been happening elsewhere. Alternatively, it can be a sideshow. This is not what small businesses need at all. Small businesses are crying out for credit lines and economic growth. They are not crying out for the facility to sack people willy-nilly. I should just say that, from Unite’s position, bad legislation equals bad legislation. Promoting bad industrial relations is not effective. We have examples all over the place in respect of good industrial relations and what they can achieve. Legislation should be there to balance inequality of arms between employers and employees, not to promote employers going down the line of bad industrial relations.
Sarah Veale: I agree with what my colleague has just said. There are one or two aspects of this Bill which support growth. We are particularly enthusiastic about the Green investment bank, although, if people want to ask further questions on that, I can go into a bit more detail about what we think are some shortcomings in the Bill—wasted opportunities, perhaps. Similarly to my colleague, I worry that the employment rights aspects of this start from the perspective of dismissing people, rather than from the perspective of trying to keep people in work and ensure that there is a constructive and productive relationship. To that end, we have some concerns about some of the drafting, and some of the absence of detail in some other areas. I am very happy to elaborate on that as we go through the different clauses.
Paul Kenny: I think the elements of the Green investment bank are very interesting. Part of the debate is, from the employers that I go round and talk to, on continuity of energy costs, which would be a really important thing for us to tackle. Not knowing exactly what you are going to be paying in 12 or 18 months’ time is very difficult and there is the ability to control the costs of some of that. I think that the issue is confidence. I also know that there were not any great answers to the Committee about how many jobs this particular element will create. I hope that the most important creative factor in the Bill will be the ability to get money to SMEs and other businesses to employ people and restore confidence. That seems to me the most practical and confident part of the Bill.
Iain Wright (Hartlepool, Labour)
Can I mention something specific, which is clause 51, dealing with the Equality and Human Rights Commission? That comes as a bit of a surprise. I am surprised that it is in an enterprise Bill. What are your views regarding clause 51?
Howard Beckett: I am sure Sarah will want to deal with that domain in respect of our contribution. It is a concern that the Bill has put together elements that do not seem to be natural sisters and brothers. It is a considerable concern that the Equality and Human Rights Commission should be looked at in the way that cutting it is progressive for society. That is not something we would support.
Paul Kenny: It is impossible to see how it does. If anyone can enlighten me, I would be grateful. The general duty on promoting equality and good relations seems to me an emphatic part of business. I do not understand why you would remove or seek to remove that responsibility. I think that is a retrograde step. I do not understand what it brings. I can see some damage but I cannot understand what it brings. We would be very much opposed to that.
Sarah Veale: I share that cynicism. I suspect this is something that has been loaded into the Bill because the Government wanted some primary legislation and this was a convenient place to put it. I agree with the comments made by my colleagues. I had the privilege of being on the transition committee that oversaw the three previous equality commissions going into the merged Equality and Human Rights Commission.
One thing that was particularly impressive was the cross-party support for the commission and the grounds on which it was established. That particularly applied to the “good relations” clause, which was a purpose clause in the legislation to ensure that the commission had in mind that it was there to promote good relations, not to take sides between one group and another. To that extent, the work of the EHRC has broadly been to assist business. It had a helpline, which sadly has been vastly contracted, that provided a lot of help for small businesses and others—employers and employees—in how to deal with what are sometimes the most difficult employment relations issues that companies have to face, to help them through the rather labyrinthine discrimination laws they come up against.
I know people will later talk about various employment rights issues and how these are particularly difficult when you have discrimination to handle. The currently constituted commission is well suited to that. I do not think that any of the proposed moves are going to make the commission more effective. They are punitive and politically motivated. It is deeply regrettable that there is an attitude of, “We will keep what we have to keep of the EHRC in order to comply with European and other international requirements.” That kind of cheese-paring attitude to what should be one of our proudest institutions is highly regrettable and certainly will not contribute to growth or the development of enterprise in the UK.
Iain Wright (Hartlepool, Labour)
My final line of questioning is about employment legislation. I shall mention some specifics. Clause 12 allows the Secretary of State to vary limits for compensation awards in unfair dismissal cases, and clause 14 concerns whistleblowing. Neither of those clauses had consultation before being included in the Bill. I have two lines of questioning. First, what do you think of the specifics of clauses 12 and 14? There is also a more general policy-making point. There is concern that there was no consultation on quite important employment rights. What are your views on that?
Sarah Veale: We knew about the whistleblowing clause, although no more detail than is in the Bill, and we have some concerns about that. We did not know about the proposal on compensatory awards for unfair dismissal. On that more specifically, we have a real worry that already the median award for unfair dismissal is pretty low—it is just over £6,000. Our particular concern about this proposal is that it is likely to bring down the award far more, and it will hit middle-income employees, professionals, in particular. There is a specific impact on those that we think any political party ought to be quite concerned about.
On whistleblowing, again, we understand the intention and accept that the Court’s decision has had unintended consequences for people’s contractual rights and in relation to misuse of the legislation, but our worry is that you are introducing a public interest test that is much tougher than the current requirement for reasonable belief that there has been an incident where someone feels compelled to blow the whistle. On health and safety issues in particular—where time is often critical—we fear that people will not feel confident to blow the whistle, when to do so could save the lives of fellow employees and members of the public. We very much urge the Government to look at the measure carefully and to think about redrafting it, so that you lower the standard of the test and, at the same time, remove the unintended consequence caused by the Court decision in the Sodexho case.
Howard Beckett: Unite would agree with that. If any areas of the Bill required consultation, it was these two. The reality of the cap on damages is that it will affect professionals and those with pensions. Whenever you deal with pensions, you are aiming for employees who have been with a company for a long time. The point was made earlier that employers consider dismissal to be the last resort, which I accept with regard to good employers. The problem is that legislation can facilitate bad employers to take bad actions. It can facilitate a situation in which an employer inherits a company where he does not like an employee who has been there for a long time and then summarily dismisses them in the knowledge that there is a cap on it—that is, effectively, a no-fault dismissal. That is a big concern.
Whistleblowing is complicated and consultation is needed on it. To introduce new legislation without any facility for others to contribute to it is reckless.
Paul Kenny: On the Secretary of State’s involvement, I am not sure where that will lead. It is not entirely clear whether there will be interventions on individual cases. There will be lorry-loads of documents and appeals flying around, and you will need extra office space if we get to that ridiculous level.
Tribunals hear the facts of the case. They are balanced and do not always come out in favour of the respondent or the defendant. It just does not work like that. The first fear and danger is that the new levels will be used to downgrade the number of awards over time. That is a real concern—it looks like the thin end of the wedge. Secondly, they will, in many cases, undervalue the damage done to individuals.
You have to go back to the process of why industrial tribunals, which is what they were, were first thought of. It was originally a simple system. It has become very legalistic now, but it was supposed to be a simplistic system whereby people got an opportunity to see whether they had been unfairly treated and to receive recompense for that. It does not effectively work out that you can arbitrarily decide that, because someone who is really badly treated happens to work in a company that has only 25 employees, that, somehow, is worth a lot less than somebody who works for a company with 2,000 employees. It is about the nature of the injury.
Whistleblowing is an incredibly dangerous area to get into. Thousands of UK citizens—perhaps some of them from your own constituencies—have been blacklisted in the construction industry and it took years for people to have the courage to come forward. Any restriction of encouraging people to come forward to blow that whistle is damaging to freedoms. It is a dangerous route to go down. It goes in an opposite direction to that followed by places such as America, which is offering much larger rewards for people to come forward and blow the whistle to highlight corruption, particularly in relation to contracts. If the measure is designed to stop people telling the truth about lawbreaking, it is a misdirected approach.
Graham Brady (Altrincham and Sale West, Conservative)
We have up to an hour, which I hope will allow for more questions and answers rather than longer ones. I propose that we first take the two short sections on the Green investment bank and the competition aspects. I suspect there might be more focus on the employment aspects later.
Sarah Veale: As I said, we very much welcome it in principle, so I do not want this to come out as too negative, but our main concern is that the bank will initially not be allowed to borrow anything. I understand that it will be given £3 billion by the Government to start off with, but our calculations suggest that you would need something like £200 billion up to 2020 in order to ensure that the UK’s low-carbon energy infrastructure is given the support that it needs from the bank to stimulate growth and to actually achieve what it was intended that the bank achieve in the first place. We feel that the mandate will have to be quite tightly drawn, and we hope that subsequent regulation will do that to ensure that there is promotion of low-carbon technologies and that the money does not go off into high-carbon or other general infrastructure projects. In other words, it should be targeted where it is intended to be targeted.
We would also suggest that the particular sectors that would make use of this are crying out for capital. Conventional finance for this is not available much of the time, which is the whole point of having the bank. The bank needs to be able to tap the capital markets for funds to increase its ability to leverage private investment, which is presumably the long-term aim of all this.
The issues so far are of borrowing and of the lack of ambition in what is written in the Bill, and we hope that that might be changed, but we are basically pleased with it. We also note that the German state bank, which is the nearest equivalent, invested nearly five times as much as is proposed to be invested in the UK one, so that will not do much for our competitive edge in that particular area.
One other point, as I have the floor, is that we have some concerns about the bank’s public accountability and transparency. We would want it to be required to operate at the highest possible levels. At the moment, the legislation does not provide for any formal or public-facing view of how the bank is progressing and reviewing its development as a new institution. There are no requirements for stakeholder or public consultation, and we would urge the Committee to consider whether those sorts of safeguards should be put into the Bill.
David Mowat (Warrington South, Conservative)
Thank you for that. You are right that people say that we need £200 billion for infrastructure projects. I do not think that many people think all of that will come from the Green investment bank. There are other sources.
Mr Kenny, you mentioned that your members are concerned about energy prices. Do you see the Green investment bank helping with that?
Paul Kenny: I do not know. It may do. I was talking more in a lateral sense in that one of the biggest single issues for many of the employers that I deal with is their inability to forecast costs because of the energy markets. I have always been thinking of slightly different things than just the Green investment bank—although that may help in terms of the new technologies available and investment in changes—such as whether the market can be effectively stabilised, so that business could say, “In 12 month’s time, the price of fuel will be x.” That requires the Government taking a big stake in buying into the market and controlling the market a bit. That is what employers say to me on regular basis, but it is virtually impossible. Looking at some of the big logistics fleets, they can suddenly have a 10%, 15% or 20% increase in their fuel costs without warning, which directly impacts on their profitability and their ability to deliver goods to customers. They are pulling their hair out, and that is in some cases a bigger holdback for creating jobs than some of the other things that we have heard today.
Geraint Davies (Swansea West, Labour)
Do you feel that the money available to the Green investment bank should be focused on SMEs, local employment, and growth and not just generally focused on green issues, which could encourage international companies more? Should that be alongside a broader strategy for sustainable development that included positive procurement, again, for local jobs and a focus on green technology alongside an infrastructure plan? Is the Green investment bank something that is on its own and not really joined up and may not maximise the opportunities for growth in local economies?
Sarah Veale: The two things should clearly be joined up, and I do not think that they are mutually exclusive. I am not the world’s greatest expert on this at all, as I think I said earlier. I am very happy to supply the Committee with the TUC’s formal work on sustainable investment and so on, because I am sure there is an interest in that. There are economists in the TUC who know an awful lot more about this than I do, but, broadly speaking, the answer is both. It is important to do this with the small and medium-sized enterprise sector as well, but one would hope the two things could be done simultaneously and in a joined-up fashion.
Howard Beckett: Similarly, Unite would be happy to provide a written response to this, because it is a very important area. It is unfortunate that certain aspects overlap in respect of this Bill and the areas of expertise. Certainly, it would be our view that procurement filters down, so the importance of a procurement policy filters down to small businesses. It would also be our view that any resource in respect of trying to create credit funds should not be limited and should have its primary focus in getting out to small businesses.
Neil Carmichael (Stroud, Conservative)
I am not a member of the GMB. The Green investment bank is obviously geared towards encouraging investment in new technologies, new sectors and so forth. One would suppose that that would require a relatively flexible labour market so that we could see fluidity in terms of jobs and employment. Do you think that this legislation provides that?
Howard Beckett: I certainly do not. Not to get into an area that is not particularly my expertise, although I am quite happy to get into it in a written response, but we have countless examples of how we work with employers to provide flexible arrangements and to work with employers for the gaining of new contracts. I could name employers. Unite’s role in respect of Vauxhall in Ellesmere Port is presumably well known to you. We have great relationships with employers such as Gist, E.ON and Nestlé—large employers who look on their relationship with Unite as being a furtherance of their HR and not as something that is a competition. The problem with this legislation is that it does not promote good relations between employees and employers, or between employers and unions. It tries to create an environment of conflict, which is damaging to industrial relations, to flexibility and to business.
Sarah Veale: The only thing I would add to that is that there are a number of very productive and successful green reps in workplaces—union reps who specialise in the promotion of environmental and green issues—and I would not want that to be overlooked. Often in the workplace, people will put their names forward to become representatives of unions, or representatives possibly outside the trade union-organised sector, and they provide invaluable ideas and help. Exactly as Howard said, they work with employers in a flexible way, which is quite often overlooked. The trouble with the Bill is that it appears to start with the conflict and work backwards, rather than starting in the workplace, looking at what is good and encouraging more of that. That is what we would want to see in terms of growth in this area, as in others.
Paul Kenny: I think your question was: does it create a flexible work force? There are some things in the Bill that I think we are going to say some positive things about, and I hope we get to those. However, there was a recent survey by the OECD or somebody, which showed that out of the top 36 richest countries in the world Britain ranked 35th in terms of its labour laws. We are not overburdened with labour laws, so let us try to put it into perspective.
The truth of the matter is that, as Howard said, during the recent difficulties we concluded incredible labour changes to major household companies such as JCB, which kept them afloat. They were incredible changes, which showed the flexibility of the British work force and the ingenuity of the management and the union. We just concluded massive deals with Asda Walmart. I think it is the first time anywhere in the world that anyone has agreed a collective bargaining agreement with Asda Walmart. There are lots of good, positive stories that show that you can create growth and flexibility. You do that, effectively, by taking people with you.
The problem about the Bill is that effectively it focuses on conflict. That is one of the big difficulties and the big deficits. If you take somebody on and employ them, basically within 12 months, which presumably will be two years at some stage, you can effectively decide that it is not working out. If you do that, truthfully speaking it is not the employee that has made a mistake; it is the employer, because the employer actually offered the job. Sometimes people make mistakes and it does not work out. Beyond that point, people who have worked for years actually have rights, but it takes years to get those rights in employment tribunals. Maybe they are not performing, and you look at a whole range of issues—whether training, performance or whatever—and you deal with that under capability procedures that already exist.
A third area is, of course, when people break works rules or break their contracts, and there are procedures and disciplinary procedures. That is actually a system in which good managers manage—that is the truth of it. Of course, in any system, there is going to be a difficulty, but to design a whole piece of legislation to remove rights from the vast majority of working people is not the answer; the answer is actually to be smarter in how you handle people. I do not think that flexibility in the market is the key issue; the key issue is actually getting procedures that are fair to people.
Graham Brady (Altrincham and Sale West, Conservative)
I am confident that we will get back to those issues. Does anyone have a final question on the Green investment bank? No, so perhaps we will move on to the competition aspects? If there are no questions on that, we are now on the employment aspects.
Chris Ruane (Vale of Clwyd, Labour)
Earlier, we heard from the Institute of Directors that the third biggest issue facing the British economy today is employment regulation. I was quite surprised about that, and I asked for the statistical back-up, which Mr Ehmann is going to provide. However, the BIS small business survey shows that the level of concern of businesses about regulation overall is 6%, so concern about employment regulation is within that 6%. BIS says that it is not all that important; the Institute of Directors says that it is the third most important thing to their members. Where would you factor it in? Where would you rank it in order of priority for the British economy and growth? What is the threat to the British economy from employment regulation?
Howard Beckett: I heard that comment from a previous contributor, and I just do not accept it. I think it is fictitious, to be honest. In a previous life, prior to being legal director of Unite, I was a small business man—I had about 150 employees—and employment regulation did not appear on the scale anywhere in respect of that. Quite the contrary—as a small business man who invests in training and promotes the loyalty of staff, you understand that good employment practice leads to good business. It is not something you can dissect: you cannot, on the one hand, be a bad employer of individuals and then, on the other hand, be a good business man. It does not work like that as a small business. You have to be good at what you do; it is in the round.
I just do not accept that it appears in the scale for a small business man anywhere. In reality, you are concerned about maintaining the loyalty of the staff you have who are high achievers within your business, and to do that you need them to value their security of employment. In my view, if I was an employer, I would be telling the employment federation not only that it does not appear on my scale, but that it is incredibly damaging for me.
Howard Beckett: Well, I would be telling it that it is damaging, because the promotion of loyalty between employee and employer is an important industrial relation, and to bring in legislation that damages that relationship between an employer and employee can ultimately only lead to the damage of a business. I just do not accept that it appears in the scale anywhere.
Sarah Veale: I think the BIS evidence is very important because it is objective. It was done with the help of academics, and it was commissioned by BIS for all the right reasons. I worry about any survey that has been conducted by an organisation that obviously has an interest. I am not particularly criticising the IOD for that, but I think you have to look at the question that was asked. You can lead people into reaching particular conclusions about something. If you suggest that there is a problem, they will tend to respond, if it is your organisation, in a way that backs up what you are trying to say, so I would take those sorts of contributions with a pinch of salt, I must say.
What has particularly irked us about this whole debate about regulation and the economy is that, if you look at reputable organisations such as the OECD, which has done huge amounts of longitudinal survey work, it is quite obvious that there is no demonstrable causal link between economic performance or the propensity of employers to grow their businesses and the amount of employment regulation that is around. Not only that but, if you come back to the UK and look for some causal links, and if you take the qualifying period for unfair dismissal as your example, when it was reduced—whenever it was; when the Labour Government first came into power—in 1998 or 1999, it in fact had completely the opposite effect to what business organisations were saying. Employment levels shot up, and if it had any causal link, it was completely the opposite of what they were suggesting. I suspect that that will always be what happens. There will not be any demonstrable causal evidence to show that there is a direct link between the two, so it is worrying to start putting legislation into a Bill that appears to be based largely on perception rather than on any serious economic evidence. That is certainly the case if there is a lack of any such evidence or, in our view, no positive evidence to suggest that you need to do these things in order to make the economy improve and businesses grow.
The TUC would be 100% in favour of doing anything to incentivise business and to make the economy get back to where it should be. We are absolutely unconvinced that there is any evidence that weakening employment regulation, which, as Paul said, is pretty basic and low level in the UK, will make any demonstrable difference in that sense. I worry that this has become an iconic political issue, which gets tossed around between political parties and sometimes between unions and industry, without people looking at the actual evidence.
I encourage members of the Committee to look at the real hard economic evidence, which does not suggest that there is that kind of causal link at all. If you listen to small businesses—we do that and we have good relations with the small business organisations—and go out and talk at mixed meetings organised by ACAS and so on, what you hear is an enormous amount of woe about capitalisation. Small businesses worry about other regulations, such as planning regulations and other such things. In the TUC, we are instinctively in favour of good regulation and minimal regulation as long as it is effective and properly enforced. We are not in favour of piling on the red tape for the sake of it. We listen to the economic argument.
Andrew Bridgen (North West Leicestershire, Conservative)
Following on from that, I have two questions, and I will accept a yes or no answer. Does the panel believe that the huge increase in employment legislation over the years is acting as a disincentive to employers to take on extra staff and therefore lowering economic growth, and that this legislation has a disproportionate effect on small and micro-businesses?
Sarah Veale: Obviously, small businesses have less resource in terms of HR departments; you would be silly not to accept that. Of course it is more difficult to cope with things such as maternity legislation if you do not have an in-house HR department that has people who understand it all. So, that is obviously the case. Again, as long as the same protections are there, we are quite relaxed about having ways of enforcing it that are suitable for the particular business. As long as the individual employment rights are not weakened simply on the basis that the business is of a particular size—that the size of the business is not the relevant determinant of the level of protection that you give somebody. It is flexibility with a basic core.
As I have said before, I am not convinced that the increase in employment protection legislation has really made any difference. I say that because most of it does not impinge on business unless something goes wrong. I am talking about a business that is well run broadly speaking, that has employees who buy into the business, who are broadly content and who will not be after pursuing the employer on what technically they might be able to pursue them on. It is only when they are disgruntled that they start looking for issues on which to pursue the employer. In a sense, it is a bit of a chicken and egg situation.
What I want to do is to encourage, through the use of ACAS, businesses to have systems that are discussed with their employees and that their employees broadly buy into and have been talked to about, whether through unions or, more likely in the small business sector, direct conversations. Once people are broadly happy within the parameter in which they are operating and they feel that it is fair, you will not have this sword of Damocles hanging over you.
What happens is that small businesses and others who do not have the benefit of in-house HR will often reach for legal advice at a point where they absolutely do not need it. Often it is when there is a dispute that could be settled by someone saying, “Come into my office. Let us start at the beginning again and talk this through.” Both sides calm down—this is where ACAS comes in again. The trouble is they work from the basis that it will end up in the tribunal and therefore they need a lot of expensive legal advice to put in all sorts of protective systems that will protect them against things that are not going to happen if, basically, they are getting things right and they are engaging with their work force.
Howard Beckett: I would agree with that. The legislation unfortunately promotes bad practices rather than good practices, and that is the danger with this, and it needs to be taken in the round. I am sure that we will move on to protective conversations in a bit, but that is the danger with the legislation. At the moment, we are talking to organisations that believe in workplace resolution. We have no incentive to see matters end up in the tribunal. It is a costly process for us in respect of representation of members and not something that we promote; we promote workplace resolution. Albeit that we have organised workplaces to promote that, we believe that those practices are good practices, even for small businesses.
At the moment, you are dealing with legislation that allows employers two years to work out whether their business model is correct in respect of working out whether the employment of somebody will make them a profit, and whether that person is suitable for their organisation—how they mix with other employees. That is the safety level employers have at the moment—two years. They do not need to be encouraged to go down the line of bad practices, such as protected conversations, and we do not need to go down the line of effectively no-fault dismissals because of a cap on damages. We need to promote good workplace relationships.
Paul Kenny: Can I just say that I do not see the link? While a lot of this legislation was flowing through, either domestically or from Europe, the number of jobs in the economy was growing pretty rapidly, so it does not look like there is a connection. I have not seen any evidence—I would be interested to see the evidence—but it is more to do with jobs growing with demand in the economy, because jobs are clearly linked to the economy, not hire and fire on demand. That does not stimulate the economy.
We have agreements with companies with under 10 employees up to 200,000, a pretty wide range of issues, and from my discussions it is exactly as Sarah said. The real problem at the bottom end is a lack of resources to deal with certain issues, and two elements. First, there is a whole army of consultants who surf this system, making vast amounts of money and frightening the death out of people at times when a very simple solution is available. That is why the ACAS system and conciliation can be a very useful starting point, but I would like to see it go much further. What those companies need is back-up and support from ACAS, so that they do not have to get engaged in a whole range of outside bodies who are charging them the earth and giving them advice because it is in their interests to make the system go longer and longer. What you want are quick resolutions. You want problems solved, not more meetings arranged. The problem there, one of the previous speakers—from small business, I think—said is that ACAS will need more resources. But that would be an investment, because that is what people are crying out for. They need that back-up and support, because a lot of this legislation can sometimes be a mystery if you do not have somebody who can tell you dead straight what it is.
Ian Murray (Edinburgh South, Labour)
We have had a lot of evidence before the Committee commenced, but also during the previous two sessions, about ACAS being under-resourced for the early conciliation. Indeed, given ACAS’s own figures, it may cost it somewhere in the region of £10 million to deal with the increase in cases to 44,000. I think everyone is fairly comfortable that the early conciliation process is a step forward, if it is done properly. Is there a danger that it could be undermined?
Sarah Veale: I had the privilege of serving on the ACAS council for seven and a half years, so I am familiar with how good it is at managing within quite tight resource. Obviously, there is a fear that it will not do as well as it could. I do not have any fear that it would be unable to do what will be required of it under the new PCC system. I do feel that it could do it a lot better if it had some more resource, possibly allocated to them specifically, maybe pump-priming for the first two or three years of this. It will get complicated. You have such things as employment tribunal fees coming and there are going to be difficult issues for employers and unions about how that interrelates with the ACAS procedure in the early stages of the tribunal procedure, and to get all this working properly.
I think we are all instinctively in one place about the importance of solving things in the workplace and not going into the tribunal, but ACAS would do it much less well on a relatively tight budget. I do not underestimate its abilities, though, to do a very good job with what it has got. I am sure it would, quite rightly—I would not like to second-guess the ACAS council—want to make this a big priority, because this is bread and butter stuff for them. As Paul said, though, it obviously does need more money. If we want this to work, I urge the Business Department to consider at least a one-off pump-priming grant to ACAS to concentrate specifically on getting this right. This, in the Bill, unlike a lot of the rest of it, is actually—potentially—going to be of assistance in terms of growth, especially to the small business sector which needs ACAS for advice work, probably rather more than the larger companies do.
Howard Beckett: The problem with this potentially is that almost a quarter of those who are dismissed are out of work for 12 months or more. Ultimately, employment tribunals are about compensating people for lost income, primarily—90% of it, in any event—so the problem with ACAS being under-resourced is whether it just puts an additional delay in the process and takes longer for those who have been unfairly dismissed to receive a resolution in respect of that. If you asked most contributors in respect of employment tribunals, everyone would agree that trade unions do not prosecute vexatious cases. We act effectively as a filter of cases ourselves, and it is only those cases that have merit that we proceed with. I do worry that an organisation—even as well meaning as ACAS is—if under-resourced, either will not be able to perform the job, which will mean lots of delays, or will find its task has become a check list. We will reach a situation in which what was well meaning in respect of conciliation processes is ineffectual and loses any impact as a result. So I do worry about resources as a rule, yes.
Paul Kenny: To bring that particular element in and to make it work for small employers and for many people who do not have trade unions to give them advice, it has to be resourced. In a sense, this is just putting smart money into solving problems effectively at the first available opportunity. There is a fair chance that if we invest effectively in it, it will deal with a lot of those issues and avoid some of the long, protracted legal disputes that exist. That seems to me to be a smart thing to do, but the question is whether people are going to do it or not. There is no point hanging your hat on a conciliation peg if you do not fund it. The previous trials showed that there were lengthy delays—when ACAS trialled this—and there were some problems with some people who were using it for the first time. There would be a bedding-in system, but I think that it is definitely one of the elements of the Bill that we should actually give a bit of support to.
Julian Smith (Skipton and Ripon, Conservative)
Congratulations on Ellesmere Port. I think that all of you do important work, in different ways, on employment relations. There is a concern, however, that on the comments that you are making on very small businesses—on micro-businesses—that just by the very nature of your organisations you do not have experience of speaking to employers or employees within those bodies. Could you just describe for us this afternoon your level of contact with small companies—I define those as having from two or three to 100 people—or what meetings you are having, either with employees or employers?
Howard Beckett: Vast really. Obviously, as for any membership organisation, we have a number of ways in which members can join us. They can join us through an organised workplace, in which case, by definition, it is more likely than not to be a medium-sized or large employer. But they also join us online, and they quite commonly join us online because they are fearful of what their employment rights are and they do not have any access to employment advice. In our experience, in Unite, we have more than 400 officers who come from work places and are extremely familiar with them and with the operation of HR. Daily they are dealing with employers, and dealing with them to reach resolutions.
Paul Kenny: I am going to have to check that. I knew there was a “but” coming in your question somewhere: “You are doing a great job, but—”. My experience is in coming up from the shop floor, working in many small establishments and for a number of big companies as well. We have a union that is 620,000 strong—and growing, I might say—and 50% of our membership is in the private sector. We are acutely aware of some of the problems. I would not know what the specific level is, but I would guess we have probably 15% to 20% of people who are working in companies of fewer than 100 people—I would say that is about it, but I will certainly go and check and provide the figure to you. How do we know? Well, those people participate in all the activities of the organisation and, clearly, we get to see and interact—I do not do it as much now as general secretary, but I do make a point of making sure that I meet as many employers as I can—because obviously it is not just the business, but it is as well to find out what their concerns are. I would say that our interaction is directly with employees, but also with the employers, but on the real bread-and-butter issues rather than on the macroeconomic issues.
Julian Smith (Skipton and Ripon, Conservative)
Can I ask a second question supplementary to that? You have all talked passionately about the need for informal mediation and workplace discussion in resolving disputes. Do you think that it is right that ACAS needs to seek the permission of an employee in order for ACAS, during mediation, to contact the employer? If you think that that is right, could you say why?
Sarah Veale: The problem with mediation is that it would never work if it is perceived—it is all about perception—to be inequitable and somebody feels that they have been shoehorned into it. By definition, it will not work. It is a process that has to be inclusive. It is right that the employee should be consulted and involved in it, or it will simply backfire.
Howard Beckett: It is right, and Sarah’s explanation is correct. This is about a trust process. Mediation is a highly skilled form now. Obviously, it is something that we are anxious that our officers are daily improving on in respect of their own skills, so that they understand that relationship. But mediation, whenever you get to your point of conflict, is all about trust. The idea that ACAS could contact an employer without an employee’s knowledge would break that trust. ACAS would be in an invidious position, unable to perform its tasks. More importantly, going forward, it would make our members less likely to interact. Without naming the industrial disputes that this has been relevant for, in the most difficult of industrial disputes—the most high profile—the role of mediators in respect of resolution of those disputes has been eye-opening for me personally, and that has come about in respect of the trust from both sides in respect of the independence of the mediator.
Howard Beckett: I presume that ACAS is thinking more about how its role will develop going forward. It is natural for ACAS to see itself in many ways as almost becoming a new employment tribunal if this is going forward, and clearly ACAS will be making lots of representations that would presumably result in it asking for more funding. I think that it needs more funding, anyway. If I was talking to ACAS here and now, I would be telling it that that is a mistake. It would be a mistake that would cause difficulty for us to interact with it or promote our members to interact with it, and I think it would find that it is a mistake whenever it is dealing with individuals also.
Paul Kenny: The whole process that we are talking about is the conciliation process. It is important that we do that. My view is that you are rolling out something completely new here. It would be much better to give it a chance and then to look at that and see how effective it is. Rather than damage the reputation of ACAS as conciliators by just saying this is a compulsory element, I think sometimes in life it is better to try to get people to co-operate. It may well be a suck-it-and-see situation.
Geraint Davies (Swansea West, Labour)
I have two quick questions on different issues. First, people will know that the construction industry is now very much on its knees, and therefore I wonder whether you agree with me that introducing constraints on whistleblowing at a time when there is not much work about and people are cutting costs is more likely to lead to industrial injury, and therefore the dilution of whistleblowing could have disastrous consequences. Secondly, on the issue of equality and human rights that was referenced a while ago, people will also know that in the public sector some 60% of employees are women, and indeed a fairer proportion of people are from ethnic communities, so reductions in the headcount there—700,000 is the latest objective of the Government—have consequences. If those people are looking at other employment issues such as maternity rights and so on, do you think, in the round, that reducing the influence of equality and human rights in terms of employment is a retrograde step?
Howard Beckett: It is a retrograde step. I am sure Sarah will want to deal with that in more detail. There is obviously a variety of unions here involved in the construction sector particularly, but we do have a large membership in the construction sector. We have considerable problems over blacklisting, which Sarah referred to earlier. We also tragically have deaths in the construction industry. One death is terrible. Sarah will have the precise detail but I think that 171 people died last year in the construction industry. This is about legislation promoting good practice.
When we legislate in respect of whistleblowing, we are not dealing with action taken vexatiously by people. It is not a measure that small businesses need to protect themselves in order for growth. We are talking about the most extreme circumstances where people who have been blacklisted lose their entitlement to work for years and years. Or alternatively, families suffer bereavement as a result of breaches of health and safety regulation.
The only point I would make is that I would absolutely support Sarah’s previous point: we are not after regulation for its own sake. We are only after effective regulation. Trade unions believe in collectivity as the workplace resolution, not in essence regulation. We need good regulation not regulation for its own sake. The problem with this legislation is that it goes against good regulation.
Sarah Veale: I would add to that on the construction industry point. I would have thought that most employers—I cannot imagine any not agreeing—would rather have an ill-founded whistleblowing, which could be dealt with and the issue addressed. If it turned out there was no present danger, then fine, that is the end of that. They would rather have that than have the possibility of damage to life or limb or long-term ill health being perpetrated on the work force or public.
This legislation had cross-party support when it first came in. Nothing would have been done about this, if it had not been for that one unfortunate case in the employment tribunal where there was an interpretation that allowed the legislation to be opened up rather more than it could have been, to allow contractual claims that were not really anything to do with whistleblowing, to use the legislation mischievously. The Bill is right to look at that but I think it has gone too far. I do not think there will be too much loss of pride in rowing back a bit and saying, “No, we do not want those risks in the construction industry or anywhere else for that matter. We do want to address the problem. Let us have another look at the drafting of this to ensure that we do not inadvertently fatally weaken the legislation.”
I completely agree on the Equality and Human Rights Commission. There are particular impacts of the current recession on protected groups: women and BME communities. The current rate of unemployment among young men is three times as high for young black men as for young white men. That is statistically the fact of the matter. The importance of institutions such as the EHCR is that they can do overall investigations into why that might be the case, with no fingers pointing. They are not out there to get anyone, but they can devote their resources to looking into what lies behind all this, and whether at some point there is some help that could be given to employers or in the public sector where the majority of these people are employed, to get things better, to create more employment opportunities, to improve training opportunities.
The TUC feels strongly it is one of the midwives of the new commission and was very much involved in the work of the predecessor commissions. They did work on disability hate crime, tricky workplace issues to do with interracial tensions and handling all those dilemmas when you have sexual orientation legislation as well as religion and belief. There are conflicting views among employees. What do you do in a large company? What on earth do you do in a small business, if you have two people in the same place who loathe each other? You do not know what to do; you are not quite sure how the law works. It is so much better if you can pick up the phone and speak to someone who knows what they are talking about and will give you dispassionate, good, one-to-one spoken, dialogue-based information, which will help you to get beyond the problem, keep them both in employment, because they are probably both good employees, and avoid having to go to the tribunal on ugly and difficult issues.
We feel that the amount of money that is going to be saved by what is happening to the commission is so minimal as to make no difference in a larger sense. The damage that will be done by these measures, and by some of the other areas of contraction in equality law, is going to be much greater than they are worth. They will have a negative effect, almost entirely. It is very hard for me to sit here and think of any positives that are going to come out of what the Government are proposing to do to the Equality and Human Rights Commission. I cannot think of any reason other than political spite, quite honestly, which is disappointing when the whole thing was set up originally with cross-party support.
We should not be having these discussions at all, really. I do not think there was any need to create this legislation on the EHRC. The Equality Act 2010 was settled; the Equality Act 2006 was settled and this is just unnecessary meddling, which could have hugely damaging consequences. I suspect that a lot of small businesses will very much come to regret, when they peel away the political rhetoric, the fact that they will not be able to get this kind of assistance based on the EHRC’s duty to promote good relations, which is what it is there for. Stripping away those powers and reducing the size of the commission is just petty and spiteful, and will reduce the kind of expertise that it had within it.
Paul Kenny: I will just deal with blacklisting. This is a real issue. You talked about the construction industry, so I will confine my remarks to that. People in the industry have been blacklisted simply on the basis that they were noted attending a public meeting. The information officer recently seized about 3,500 files that had been compiled on people within the construction industry, some of whom had asked health and safety questions and so on. The idea that you have got good employers who treat people fairly and comply with the relevant laws of the land, including health and safety laws, and yet other people will go to extreme lengths to stop employing people who may ask those questions, is unfair to the employers that actually do comply. In some senses, we are bending the bow towards those who have something to hide, rather than supporting those who comply with the law of the land.
There are thousands of UK citizens on that list. People have come in here and you have asked them for facts about what will create jobs. I can tell you that these are facts. The Government have the names and addresses of those people. They are facts about weakening whistleblowing. It is unlikely that we would have got to the bottom of this and found out who was responsible had it not been for the ability of an employee to speak out at a tribunal.
Lorely Burt (Solihull, Liberal Democrat)
I totally accept the points that Sarah Veale has made about how a good employer with a good, positive culture will result in fewer industrial tribunal claims. Although I also take your point about employers surveying themselves, I speak to a lot of businesses—particularly small businesses—which are fearful of vexatious claims. There is definitely a sense that we need to take much more effective action on this. Do you think that a requirement to consult before going to tribunal is a good thing both for employers, to encourage them to be less fearful about taking on new employees, and for employees?
Sarah Veale: The answer to that, obviously, is yes. I reiterate what Howard said about us having no interest in pursuing litigation. It costs us money, and we at the TUC train trade union officers and reps to understand that if you end up in the tribunal, you have failed. The aim is to get employment relations back to where they should be; to protect your member’s job—why would you want one of your members to become unemployed?—and to try to make sure that any systemic issues that are underlying that particular dispute are being dealt with properly.
The point about vexatious is that that term has been much misused. There is a legal term “vexatious,” and an absolutely minuscule proportion of claims that go to tribunals really are vexatious. A claim is much more likely to be misconceived, where somebody thinks that they have an employment right that they do not have—through no fault of their own—or they feel, because they are passionate about it, that they really have been badly treated and they want to have their say. It is difficult to prevent those sorts of cases from going into tribunals. The tribunals already have pretty good pre-hearing procedures to deal with genuinely weak claims. We notice that the deposit into court has gone up, the amount that you can ask somebody to put into the court has already gone up and the costs awards have gone up to £20,000, so there are already systems that can deter weak cases. The tribunals can also declare someone to be a vexatious litigant and push them out, if that is really what they are.
The point is that you have to allow people in a democracy to go to court, if they have a genuine belief that their rights have been breached and the other processes have not shown that it is a weak, ill-founded or vexatious claim. If you take that away, I think ultimately it will not do employers any good. As Paul said earlier, you do not want employment relations to be governed by fear and mistrust. Exactly as you say, they should be governed by the opposite.
Again, we come back to these old friends of ours—the consultants. My feeling is that a lot of small businesses are wound up by consultants on health and safety issues. They are told that if they do not have a £3,000 risk assessment, they will almost certainly end up in court being sued for zillions of pounds. In fact, particularly if they have a union, they can do a perfectly good risk assessment without all that expert input, which will assure the insurance companies that they are compliant, and they will not end up in the courts anyway. The trouble with consultants is that they are invidious, and I accept that it is difficult because in a free market you cannot stop people trying to make money. I hesitate to suggest that we start to try to regulate, but there really is an issue with consultants who go round putting the fear of God into employers.
You can understand it; you are new in business and someone who sounds as though they know what they are talking about—they might have a law qualification—says, “If you don’t do this, this, this, this, this and this, you will end up in a tribunal, and here’s what will happen”, when all those things are very unlikely. It is the wrong way round. If they are going to spend money on getting help, they need to spend money on people who will work with them to develop good employment relations and get things right, not on the law and the other end of the telescope. I broadly agree with you, but I am trying to reiterate those points that we are all trying to put across today.
Howard Beckett: I would agree that consultation is good. We would prefer to see it happen in the workplace, but I disagree with the whole tenor of the question. I took it that the question presumes that employers talking to you are expressing a concern in respect of employment rights and the taking of claims, and that is preventing them from bringing on new employees. I do not accept that. There is everything that Sarah said, but just to reiterate, an employer has two years of security before anyone can make a claim against them in respect of unfair dismissal or redundancy. I just do not accept it.
Perhaps employers—the ones who you are talking to—just do not understand what they need to understand, but with my experience interacting with businesses in my current role and previously, I do not accept that employers do not take on people who they think ultimately will make them a profit for fear of the fact that they have only two years to dismiss the person. I do not accept it.
Paul Kenny: If you say to somebody, “Do you think that you want more training?” invariably the answer is yes. If you say—and I hear it all the time—“Do you think that there are too many regulations?” the answer is yes. Then when you say, “Which regulations are you talking about?” you invariably get a blank expression. It is a perception, and as a small business man said earlier, it is people’s gut reaction.
There are vexatious cases—no question about it. Howard made the point that when they come through the system, unions have incredibly good systems to ensure that no union-supported cases going through to tribunal fit into that category. You will know and I know that sometimes a case can be decided on the balance of the evidence that a witness gives or the impression that a witness gives in evidence, so it cannot always be perfect. The truth of the matter is that the relevant number of those cases is small.
That does not mean that I am dismissing the point you make about the fears of employers. To go back to that point, they effectively need support, explanation and backup from a simple, recognised body, which is where ACAS can be so important, so they do not have to rely on paying thousands of pounds to outside people whose interest is in pursuing and prolonging the issue rather than getting it settled.
Eric Ollerenshaw (Lancaster and Fleetwood, Conservative)
I want to ask a question along that line. In the spirit of conciliation, I presume that you will agree that solving the problems in the workplace is the solution. But what I am trying to find out is whether you accept that, as the FSB says, 400,000 tribunal cases a year is a massive cost on business in terms of money and time. Mr Kenny talked about consultants. Is it just down to consultants that we have got to that state of affairs, or where is the problem?
Howard Beckett: I personally do not accept the figure that was quoted previously. I wrote to the Department for Business, Innovation and Skills, and was given the figure of 260,000, I think, as being the accurate figure. I do not accept the figure of 400,000. I am not sure why it jumped by almost 50%, but there you go.
When I looked at the figures, I saw that there had been a decrease recently in respect of cases that were taken to tribunals, and that it had decreased year on year. When I looked at the figures to see what explained an increase around 2008, it is probably better explained by an increase in equal pay cases, and an increase in working directive cases. I do not think it is explained by an increase in unfair dismissal cases. The stats just don’t show that. We are on a different track here.
Do I believe that that is a massive cost to business? Well, going to a tribunal has a cost. How do I believe that that cost is best resolved? By promoting good standards in respect of employers and not by promoting bad standards. We must remember that in respect of all of this cases that get to tribunals are cases in which someone believes that they have been unfairly dismissed, and the tribunal must make a decision on that. We are talking about someone’s basic human right to proceed with an allegation that they have been unfairly dismissed.
The relevance of the figure is how many of those cases were successful, and how many were unsuccessful. That shows the importance of it. But you have dealt with your concern by increasing the limit from one year to two years in respect of unfair dismissal. You have built into the process your safety net for what you perceive to be the problem. I don’t, but you have built it in. Going down the line of then promoting bad practice to cope with it is just not right.
Sarah Veale: I would add that there is a problem perhaps particularly with small businesses not being aware of all the various avenues they can go down, and I hope we will come on to compromise/settlement agreements in a moment. Compromise agreements are a way of legally compromising someone’s employment tribunal claim. They are used by unions, and they are used by law firms. I think a lot more awareness building is needed out there so that small firms in particular know what is available to them, and in relatively simple terms what procedures they need to follow if someone’s performance is not what it should be. It is not nearly as difficult as I think people fear it will be.
Paul Kenny: The figure I have is closer to yours, Howard, but whatever it is, it is a lot.
Equal pay cases are an important factor in this because they ran into tens of thousands. In my union, there were something like 35,000. They had to be registered, and that comes on to another point. Time limits are very strictly enforced, and even while trying to get a settlement, the cases have to be put in. If they are not, and you are an adviser, as a union would be deemed to be, the union effectively becomes responsible. People have learned through experience that it is better to lodge the claim than to risk continuing discussion or looking for conciliation and then suddenly realising you are two days out of date. Of the cases lodged, it would be better to look at how many were settled, how many were withdrawn, and how many finally ended up inside the system.
Another element that would really help is that tribunals are under pressure to get cases dealt with, and I understand that. Lots of people want to get them out of the way. But not everyone always wants to do that. There are cases when the parties are still talking over complex issues involving sometimes many hundreds of employees, and are effectively pushed into litigation, so there should be the ability, when both parties agree, to effectively adjourn it for a period. I have practical experience of when that has occurred when neither we nor the employers wanted to go to court, but we were effectively forced into that situation instead of being able to find a resolution separately, which we were both committed to doing.
Another thing is that lawyers in some parts have picked up easily that this is an interesting way of looking for a living. It is a sad fact that, while trade unions provide a service for free as part of someone’s membership, other people have been surfing the system in order to find ways and means of entering cases and making money out of the system and out of both the employer and the employee.
Graham Brady (Altrincham and Sale West, Conservative)
We have five minutes. I will call two colleagues who have not yet had an opportunity to ask questions to this panel. I also have a list of colleagues who would like another bite of the cherry, but I doubt that we will have time for that.
Graham Evans (Weaver Vale, Conservative)
We all agree that Britain has to pay its way in the world. We face highly competitive, dog-eat-dog competition throughout the world, and we need a highly skilled, flexible work force. What would you say to a young entrepreneur who starts up a small business with the prospect of good business growth and whose focus means that he has put his house on the line and taken risks? What would you say to him about growing his business? How would you convince him to take organisations such as yours on board? In other words, why would anybody take a third-party organisation such as yours into their growing business? Can you justify your role with growing businesses and jobs in the 21st century?
Sarah Veale: The problem is that we are anxious to get our points across in relation to a couple of issues in the Bill. In response to your question, there is a lot of documentary evidence from the TUC and others about the add-on that trade unions bring to a business in terms of encouraging productivity and good relations.
If I may be so incredibly cheeky, we have a principal worry—this relates to your question—about the clause on compromise agreements and settlements. We are all in favour of that instinct, but our worry is that you are entering territory that has not been explored before. There is a worry that this is getting into Beecroft-lite territory, whereby if people were not given rights to be properly represented in those conversations, or to at least seek legal or professional advice—as is the case with a compromise agreement before you sign off—you will end up in huge difficulties, with employees being bullied and with unintended consequences. There is a particular fear that if you have a claim relating to discrimination and you are not given the kind of advice that you should have been given before you sign away your rights, the Government themselves, by introducing legislation that did not safeguard people’s rights, would be in contravention of a whole range of different international and European legal requirements. I know that that is slightly off the question, but it is important.
Howard Beckett: I would say to a young entrepreneur who is starting up a business, “Good practice with your employees is good practice with those you do business with, so make sure that you adhere to good practice. By having a representative in the workplace, you can promote good practice.” I would also say to him, “Good luck in finding a bank that will give you credit,” because I would not be able to find one if I was trying to start up.
Paul Kenny: I would say, “How can I help?” Unions have a whole range of skills, such as legal and business skills, and they can provide help for the self-employed. We can provide all sorts of agreements that would help. We could do a whole range of things, so my opening line would be, “How can I help you?” Establishing a relationship with that entrepreneur—that small business man—could turn their company into one that employs 10,000 people. That is incredibly good for my business.
Ian Murray (Edinburgh South, Labour)
I have two questions and will make them quick, because time is running out. First, I was interested to read Mr Beckett’s views of the Bill. You have expressed the opinion that the new settlement agreements and what the Secretary of State announced on Second Reading, as well as the Secretary of State’s ability to make an arbitrary decision to restrict compensation in an unfair dismissal to whichever level he wishes between median earnings and three times earnings, are fundamentally related to compensating no-fault dismissal, particularly by the back door. Could you give us some examples of that? If you cannot do so in the time remaining, will you write to the Committee to give us an idea of your thought process?
Howard Beckett: I certainly could, but our point is that this Bill needs to be taken in the round. It comes at a time when trade union facility rights are being reduced and when there are other attacks on trade unions. We need to ask whether this is about promoting good relationships, or is it about promoting an exit route for those who indulge in bad relationships? For me, it is about promoting that exit route.
There are areas of the Bill on which there has been no consultation. My fear in respect of the settlement is that it will become, effectively, a no-fault dismissal. If an employer knows that there is a maximum compensation that they can give to somebody, they will know that they can indulge themselves in whatever bad practices they want. Protective conversations and without-prejudice conversations are two different things. The Court has decided what in a conversation should remain without prejudice, and it is not discriminatory elements. The idea of a protected conversation overlapping into what is clear discrimination and of that not being allowed to be told to a tribunal at a future stage is high-risk stuff. Our position is that industrial relations are about a balanced relationship between the employee and the employer.
Graham Brady (Altrincham and Sale West, Conservative)
I am afraid that that brings us to the end of the time allotted for the Committee to ask questions to the witnesses, whom I thank on behalf of the Committee. There have been some requests for written submissions, for which we would be grateful.