Lord Fox:

Moved by Lord Fox

Leave out from “House” to end and insert “do insist on its Amendment 1B.”

I thank the Deputy Speaker for his expert guidance. Your Lordships could be excused for a sense of déjà vu, perhaps because we are back in your Lordships’ House with the same issues we discussed on 28 October. They remain unresolved and, indeed, not addressed in any meaningful way.

Since the last very similar session of ping-pong, I have had an engaging meeting with the Lords Ministers and their officials, and I thank them for that meeting. The prospect of that meeting gave me a sense of anticipation. I expected some sort of legislative rabbit to be pulled out of the Government’s hat at that point, but no—there was nothing. At first, I thought something substantive was being concealed for tactical reasons, perhaps ready to be flourished in some dramatic prestige at the moment that pleased the Ministers. But it has become increasingly clear that not only is there no rabbit in the care of the Benches opposite but there is actually no hat. If there is a hat, it exists elsewhere, and for that I have some sympathy for the Ministers opposite, because they sit bare-headed at the moment, with nothing to offer.

Time has passed, however, and, if the Government’s position has not changed, what has? Well, the business environment has got worse. September saw negative growth in GDP, per capita productivity fell in the last quarter and unemployment rose to 5% as recruitment cooled. Yet this ping-pong represents a doubling down—but for what? The Government’s manifesto vowed to “make work pay”, and we agree with that. None of these amendments confound this. My Motion A1 does not in any way dent the worker’s right to convert zero hours to guaranteed hours. What it does is streamline the administration of that right. I explained last time that Motion A1 merely avoids unnecessary work, helping SMEs that have limited administrative capacity to get on with focusing on growing their business and, hopefully, creating more jobs. But, in the absence of an Amendment in lieu today, I will insist on this.

Moving on to the amendment of the noble Lord, Lord Sharpe—Motion C1—we have consistently raised concerns about seasonal work. I welcome the Minister’s careful description of the issues in the current legislation—the problem being, of course, that there is outstanding consultation and outstanding details that make it difficult. We are not 100% happy with the noble Lord’s drafting, but we feel that it is a starting point for further conversations of the nature the Minister just brought up. We will support Motion C1 if it is voted on. Sorting the impasse on these Motions and those in subsequent groups requires political gumption. In the end, I suppose it will be up to No. 10—I understand that it might be preoccupied with other issues at the moment.

I close with one last statistic, this time from the Work Foundation at Lancaster University. There are now 1.79 million people out of work and looking for a job. With economic inactivity stable at a staggering 21%, the number out of work appears to be rising not due to increasing inflow but rather due to limited outflow caused by difficulties in finding work. That is 1.79 million people. The Government did not address the arguments we put two weeks ago, and therefore they deserve the same response as last time. I beg to move Motion A1.

My Lords, as the noble Lord, Lord Fox, said, here we are, back again.

In the ping-pong debate last time, the noble Baroness, Lady Lloyd of Effra, stated:

“The Government have engaged extensively with stakeholders on their make work pay reform since August 2024. A major part of this engagement has been to seek the varied views of SMEs. As of 15 October, we had engaged directly with more than 250 stakeholders. This included 139 businesses, of which 75 were SMEs. This approach to engagement will remain throughout the various consultations”.—[Official Report, 28/10/25; col. 1246.]

I do not know whether the noble Baroness was serious in her comments or trying to assure your Lordships that the Government were listening—or was even, in the vernacular, “having a laugh”. She said that His Majesty’s Government have consulted 75 SMEs. Has she any idea how many SMEs there are in the UK? If not, I can assist her. There are some 5.5 million. I do not know which 75 SMEs she consulted—perhaps a random, or very selective, group. Every SME I have spoken to has many objections to the Bill. In fact, I have not spoken to one that is happy with the Bill, in part or in whole.

Certainly, one SME that the noble Baroness did not consult was that of a Mr Dunham, who I have never met, but who wrote to me on an unsolicited basis about the Bill. He wrote in his letter that Dunhams Washroom Systems is a third-generation, family-run manufacturer, based in Norfolk, which employs many local people, most of whom live within his community. He manufactures washroom systems for schools, public buildings and commercial clients across the UK and is proud to be a British manufacturer. He says:

“The Bill in its current form would impose unsustainable costs and compliance pressures that SMEs cannot absorb. It would reduce flexibility, make day-to-day operations harder, and force us to reconsider employment numbers and future job creation”.

In respect of Motion C1, he continues:

“For businesses like ours, which operate in the education sector with heavily seasonal demand during summer refurbishment projects, flexibility and temporary labour are essential. These proposals will make it harder to manage staffing and maintain employment during quieter periods. … We are also deeply concerned about the introduction of union involvement in SMEs. Our success depends on direct, open relationships with staff, built on trust and mutual respect. Imposing union structures into small businesses risks creating unnecessary conflict and breaking down these relationships. For SMEs like ours, this is not just an administrative burden”— as the noble Lord, Lord Fox, referred to—

“it fundamentally changes the culture that allows us to succeed and support our employees. … Finally, these changes will discourage hiring, particularly for young people and those without prior experience. Recently, we hired a teenager with no sales experience because he showed great attitude and potential. Under the proposed day-one unfair dismissal rights, we would not have taken that risk. These measures will make it harder for SMEs to offer opportunities to young people starting out in their careers”.

He speaks on behalf of many, if not all, SME owners and directors when he points out that the Employment Rights Bill threatens competitiveness and could even drive offshoring of labour abroad.

The Minister is closely associated with Sir Tony Blair and, I believe, served on The Tony Blair Governance Initiative. Labour’s plans to strengthen workers’ rights risk harming jobs and hurting growth, as Sir Tony Blair has personally warned. His former think tank said that the controversial day one protections against unfair dismissal would make it more expensive and riskier to hire workers. The Tony Blair Institute said that the “extreme”—its word, not mine—reforms threaten to undermine the critical strength of the British economy. It says that they would erode business confidence to hire and ultimately undermine growth. It is not too late. I urge the Government to reconsider.

My Lords, I shall speak to Motion C1—but before I do so, I say to the noble Lord, Lord Fox, that I am in complete agreement with the speech that he made on Motion A1. To recall the words that he used before, the Government were put on notice that they needed to come forward with a solution, but solution there is none. Requiring all businesses to offer guaranteed hours to every worker, including those who do not want them, imposes an unnecessary administrative burden, and one that falls, as my noble friend Lord Leigh of Hurley has just pointed out, particularly heavily on small businesses. It also sits uneasily with the Government’s stated intention to reduce the regulatory load on businesses by 25%. Should the noble Lord, Lord Fox, choose to test the opinion of the House, he will have our support.

On Motion C1, the Government have to recognise that seasonal work is fundamentally different in nature from permanent or year-round employment, and defining it clearly in statute will ensure that this Bill, as well as any future legislation, properly reflects the realities faced by seasonal industries. Seasonal businesses operate within narrow windows of opportunity; their labour needs rise sharply and predictably at various times of the year, then fall away again. Without a clear and credible definition, there is a risk of uncertainty both for employers trying to comply with the law and for workers trying to understand their rights.

We on these Benches have spoken to many seasonal businesses, large and small, and they remain concerned about the potential impact of the Bill and the absence of a framework that recognises the specific characteristics of seasonal labour. If the Government are not prepared to accept this Amendment, we will test the opinion of the House.

My Lords, I thank noble Lords who have contributed to the debate today. Let me start by recapping the reason for this measure.

There is a moral case to press ahead with ending exploitative zero-hour contracts. We aim to rebalance the scales so that all the risk associated with insecure work is not placed on workers. By our doing so, work will become more secure and predictable, saving workers in some of the most deprived areas up to £600 in lost income, strengthening the foundations that underpin a modern economy and increasing productivity, rather than the obverse.

On business engagement, we have indeed engaged with businesses and consulted them, both directly and through federations that represent a large number— hundreds and thousands—of small businesses. We will continue to do so as we implement all the measures in the Bill. We are committed to full and comprehensive consultation with businesses big and small and will arrange focus sessions with SMEs specifically to look at the practical implementation, understand any challenges and make sure that we give the right guidance.

I want to reflect on the point about business regulation and the 25% target. We have established a baseline for the administrative burden; the 25% target is about ensuring that regulation is proportionate and efficient and works for business. It is not about blocking regulation that is needed to deliver the Government’s priorities. We want to implement the Bill in a way that delivers the intent as efficiently as possible. For example, the fair work agency will consolidate the functions of the Gangmasters and Labour Abuse Authority, the Employment Agency Standards Inspectorate and the Director of Labour Market Enforcement into a single body, so we are reforming as we go ahead with all these measures, and we believe that, fundamentally, this is about balance.

The noble Lord, Lord Hunt, raised the issue of seasonality. Let me reassure noble Lords that the Government are fully conscious of the need to take account of fluctuations in seasonal demand, while ensuring that workers are not left holding all the risk. Under the Bill, there are several ways that an employer could approach seasonal demand while upholding the new rights, depending on circumstances. I set out some of those in my Opening Speech, but they could be limited-term contracts or guaranteed hours in various ways, such as an annualised hours contract. We think it is important to continue to consult on seasonality.

On growth, we have seen huge progress in foreign direct investment and trade agreements. We are very keen to continue to promote the economic prospects of the country, which is fundamental to improving the productivity of the labour market. In conclusion, I thank noble Lords for their contributions today and I look forward to further discussions on these issues.

Before the Minister sits down, she said that she had consulted representative bodies of industry and commerce, by which I assume she means the FSB, the IoD and the CBI. Can she give us a flavour of those conversations, and identify any organisation that has given wholehearted support to the Bill?

Of course, we have had many discussions and there have been amendments during the passage of the Bill as a result of some of the consultation we have had with all social partners. We made amendments to the Bill on Report in respect of fire and rehire and the school support staff negotiating body—all sorts of changes or amendments have been made through the consultation process. We have also set out a clear plan for implementation, so that each milestone is there and there is a consultation before that, so that all businesses, large and small, can have the right amount of time to prepare and to get the guidance they need to implement these measures.

My Lords, I thank the Minister for her response. I very much welcome the objective that she set out of reducing red tape. I remind her that the Bill contains 170 statutory instruments. In my experience, every statutory instrument leads to at least one regulation, so perhaps when next she stands up, she can commit to retiring at least one regulation, if not two, for each one that the statutory instruments bring in on the tail of the Bill, if indeed it ever becomes an Act.

The Minister also talked about a moral duty in respect of zero hours. I share that moral duty. Nothing in Motion A1 resiles from that moral duty, and on that basis, I would like to test the will of the House.

Ayes 296, Noes 147.

Motion A1 agreed.